Laurie Baddon writes:
It has been a tough couple of weeks for Sinclair Broadcast Group, Inc. First, news broke that its anchors were required to read an identical script cautioning viewers about “fake news” and questioning the integrity of media organizations. Now, reports claim that Sinclair’s employee agreements may make it too expensive for these anchors to quit due to liquidated damages provisions in their contracts. While we have not reviewed the alleged Sinclair employee agreements, the news raises some important issues for employers to keep in mind when creating employment agreements, especially in California.
Some reports indicate that the Sinclair agreements allegedly require employees to pay as much as 40% of their annual compensation to the company in liquidated damages for leaving before the term of their contract expires. While employers may protect themselves from the costs associated with an employee voluntarily leaving their employment prior to the expiration of the contract term, it is rare for liquidated damages to be so high. When employment agreements include liquidated damages for an employee voluntarily quitting prior to the expiration of the contract term, the parties will agree on an amount related to the employer’s cost to recruit and train a replacement. Requiring an employee to pay 40% of their annual compensation in liquidated damages is steep and sounds more like a penalty, which courts would likely disfavor.
The agreements also allegedly contain a clause that Sinclair may fire an anchor who suffers a disability. At first glance, without more context, this looks to be problematic as well. Although it is not unheard of for employee agreements for high-level executives (or in this case for anchors) to include a clause that the employment relationship may be terminated due to the employee being “permanently” or “totally” disabled; this usually means that the employee is unable to perform the essential functions of the position, even with reasonable accommodations, for a specified period, such as 90 consecutive days or 180 days in any 365-day period. Nevertheless, it is extremely important that employers consult with counsel and are cautious when including these clauses to not conflict with state and federal law.
Additionally, the Sinclair agreements allegedly contain non-compete clauses. While non-competes may be enforceable in other states, they are likely to be void in California. This should serve as a reminder of how imperative it is for employers to tailor agreements and policies to the specific jurisdictions in which employees work.
It is important to keep in mind that the issues raised by the Sinclair agreements are rare. The vast majority of employees in California will likely never see an employment agreement like the Sinclair agreements because most employees are “at-will” meaning they can terminate their employment for any reason at any time just as the employer can terminate the employment relationship for any non-discriminatory reason at any time.
In any event, with Sinclair looking to acquire some additional 215 stations across the country, there may be a whole lot more new employees reviewing, scrutinizing, and publicizing the Sinclair agreements. It will be interesting to see how much push back Sinclair will get.
Laurie Baddon is an associate in the firm’s Labor & Employment Department, based in its Los Angeles office.