BY:Michael I. Rudell
(Originally published in the Entertainment Law column in the New York Law Journal, February 26, 1999.)
Television networks and local stations consider it important to have successful news programs. To achieve this, they attempt to build the visibility and reputation of their reporters and include provisions in contracts that hinder talent from moving freely to the competition. In a recent decision, a reporter obtained a preliminary injunction enjoining her former employer from enforcing one such provision – a restrictive covenant that prohibited her from appearing on any commercial television station in the same broadcast area for one year following the end of her employment.1
Sue Nigra had spent nine years at station WTEN-TV in Albany, having worked her way up from a secretary in the newsroom to a full-time reporter and weekend anchor. In the last year of her agreement with WTEN dated June 1, 1996, she received compensation of $31,500 and was offered by WTEN $34,000 and $36,000 for the first and second year, respectively, of a proposed new two-year agreement.
The agreement between Nigra and WTEN provided that the station could terminate the relationship without cause on 45 days written notice prior to each anniversary date. WTEN also could terminate the agreement at any time without notice for “cause” as determined by the station at its sole discretion. Further, the agreement provided that regardless of whether WTEN terminates the agreement or the employee does not renew the agreement with WTEN at the salary that WTEN offers, for a year thereafter the employee may not work for nor appear on any commercial television station (including cable, closed circuit or pay television) that broadcasts or transmits to any place within the Albany-Schenectady-Troy area unless the broadcast presence there is incidental to a national presentation.
Nigra, who wished to stay in Albany, had received a conditional offer from another station in that market for compensation of between $60,000 and $70,000. WTEN maintained that if Nigra did not accept its offer and wished to pursue her career in broadcasting, she must do so outside the Albany-Schenectady-Troy broadcast area. Nigra applied for a preliminary injunction enjoining WTEN from enforcing the restrictive covenant contained in the employment agreement or in any other way interfering with her contractual relations with any commercial broadcasting station.
WTEN argues that the non-competition clause is not a coercive device used to depress wages, but is designed to protect its legitimate business interests. It alleges that Nigra’s appearance on another channel would cause WTEN irreparable harm due to the reporter’s popularity, wide-ranging experience in everything from state government news to changes in local healthcare. It argues that the plaintiff has “extensive knowledge of the local scene and has established invaluable contacts and sources” and that there is “simply no candidate that possesses the same knowledge of the local scene or the unique mix of qualities and characteristics” that she possesses. Furthermore, she maintains a following of many loyal viewers who would follow her to another channel.
The decision notes that in order to prevail on a motion for a preliminary injunction, the moving party has the burden of demonstrating by clear and convincing evidence that 1) it will likely succeed on the merits of the action, 2) it will suffer irreparable injury absent the issuance of a preliminary injunction and 3) the balance of the equity is in its favor.
In discussing the likelihood of plaintiff’s succeeding on her claim, the Court indicates that once the term of an employment agreement has expired, the general public policy favoring robust and uninhibited competition should not give way merely because an employer wishes to insulate itself from competition for a former employee. In support of this position it cites ABC v. Wolf,2 noting that it is well established that restrictive covenants that tend to prevent an employee from pursuing a similar vocation after termination of employment are not favored by the law.
The decision indicates that anti-competitive employment agreements, therefore, are enforced only to the extent necessary to protect the employer from unfair competition that stems from the employee’s use or disclosure of trade secrets or confidential customer lists or where the employee’s services are unique. Here, defendant does not allege that Nigra will use trade secrets or confidential customer information, but relies on the uniqueness of her services to justify enforcement of the restrictive clause. However, in assessing plaintiff’s likelihood of success, the Court notes that “unique services” is a very slim reed which has never actually served as the sole basis for judicial enforcement of an anti-competition clause.
WTEN alleges that plaintiff will be able to compete with it, but has failed to establish that such competition will be unfair. Conceding that plaintiff undoubtedly has learned a great deal of her craft while first volunteering and then working at WTEN, the Court indicates that the station has not demonstrated any inherent unfairness in permitting her to compete with it by appearing on another station after being unable to negotiate a satisfactory new contract with it.
The Court next weighs the legitimate business interest that WTEN might have in the anti-competition clause against the unreasonable injury that enforcement could inflict on the plaintiff. Although WTEN denies using the anti-competition clause to depress salaries by forcing its employees either to accept a low salary or leave the region, it does not deny that the clause has such an effect. “Assuming that there is some legitimate business interest to the anti-competition clause, WTEN has failed to establish that it is reasonable or necessary for it to require plaintiff to work for half the salary that other television stations would pay her, or leave this area where she was raised and her immediate and extended family still lives, or leave broadcasting.” Rejecting defendant’s argument that plaintiff is not irreparably harmed because she always can leave the area and work elsewhere, the Court concludes that plaintiff has established irreparable harm.
The decision next discusses whether the balance of the equities is in the plaintiff’s favor. The question is whether it is more unfair to plaintiff to drive her out of work or the region than it is to defendant if television viewers who value Nigra’s reporting more than defendant does switch stations along with her. WTEN concedes that plaintiff more than met its requirements during her years of employment with the station. Now by reason of her unwillingness to accept its offer of employment at an amount far below the market rate, WTEN seeks to render her unemployable in her area of experience and expertise in her home region. Although understandable, the station’s desire to insulate itself from competition is simply not a ground for sustaining a non-competition agreement.
Thus, the Court concludes that the balance of the equities is in favor of the plaintiff.
Accordingly, the Court grants Nigra’s application for a preliminary injunction pending final determination of the action, from enforcing the restrictive covenant contained in the employment contract between the parties or in any other way interfering with the plaintiff’s contractual relations with any commercial broadcasting station. The parties have since settled the action. The issues raised in this case are hotly debated between networks and stations on the one hand and agents, attorneys and unions that represent talent on the other. The American Federation of Television and Radio Artists has given a high priority to contesting non-compete clauses. Recently, Massachusetts passed a bill that specifically bars such clauses in the broadcast industry of that state. AFTRA representatives in other cities have indicated that they intend to press for legislation similar to that passed in Massachusetts.
The form agreements used by the television networks customarily do not contain a non-competition clause, but do provide for a matching right. Thus, if the network advises the talent prior to the expiration of the agreement that it wishes to negotiate for that talent to remain with the network following the expiration of the current term, then for a period of time (usually ninety days to six months) following such expiration, the network will have the right to match any offer in the broadcasting industry which is made to that talent. At times the network will provide that the terms of such offer must be in writing and signed by the offeror.
Talent representatives complain that such a clause places an enormous practical barrier in the way of a person who wishes to accept another offer for employment following the expiration of his or her contract. The networks argue that they have a significant investment in the training and promotion of an anchorperson or reporter and that this matching right is necessary for them to be able to protect that investment.
Because of the high stakes involved in the news operations of stations and networks, we can expect to see a continuation of the heated discussions that surround this subject.
1 Nigra v. Young Broadcasting of Albany, Inc., 676 N.Y.2d (Sup. 1998)
2 52 N.Y.2d 394. This case was the subject of two prior columns which appeared in this space: March 11, 1981 (Vol. 185, No. 47) and May 13, 1981 (Volume 185, No. 92).