Sinclair workers face cost to leave; broadcaster, which owns KATV in Little Rock, puts teeth in contracts

NEW YORK -- After Sinclair Broadcast Group drew widespread criticism for having news anchors read a statement taking aim at the integrity of other U.S. media outlets, many wondered why some of the company's journalists didn't just quit.

The short answer is the cost may be too steep. According to copies of two employment contracts reviewed by Bloomberg, some Sinclair employees were subject to a liquidated damages clause for leaving before the terms of their agreements were up: one that requires they pay as much as 40 percent of their annual compensation to the company.

While they were also subject to a six-month noncompete clause and forced arbitration, three current and former Sinclair employees said it was the potential financial penalty that had the greatest effect on those thinking of quitting. Under the clause, there is a specific window of time during which employees can give notice. One employee who requested anonymity because he wasn't authorized to speak publicly said the clause's limitations are the reason he hasn't quit. An ex-employee who also requested anonymity said both the noncompete clause and the damages clause dissuaded her at first from looking for work elsewhere.

Multiple employment lawyers said the damages clause wouldn't turn up in most employment contracts. "They are pretty rare -- for ordinary workers at least," said Peter Romer-Friedman, an attorney at Outten & Golden LLP, a labor law firm.

But they are more common in the broadcast industry, specifically when dealing with on-air talent. The clause serves to protect companies from costs associated with replacing an anchor who suddenly leaves, for example. Yet at Sinclair, at least some employees who never appeared on television were still required to sign such contracts, the former employees said.

Hunt Valley, Md.-based Sinclair couldn't be immediately reached for comment.

Sinclair Broadcast Group Inc. owns Little Rock's KATV, an ABC affiliate.

The company owns or operates 193 TV stations in more than 80 markets across the country and reaches an estimated 38 percent of households. Last month, it had anchors read a script about what the conservative broadcaster's owners characterize as "false news" at other media outlets. A video montage posted over the weekend by Deadspin showed dozens of Sinclair anchors saying such "false news" is "extremely dangerous to our democracy."

"The critics are now upset," Scott Livingston, the vice president of news at Sinclair, wrote in a Monday memo to employees that was provided to Bloomberg. "There is a lot of noise out there about our company right now, and what is lacking in that analysis is something we constantly preach; context and perspective."

The broadcaster is currently seeking approval from President Donald Trump's administration to buy Tribune Media Co., which would give it a presence in most U.S. households. Trump on Monday hailed Sinclair as "far superior" to NBC and CNN, which have been a constant target of the president's scorn. (The administration meanwhile has sued to stop AT&T Inc.'s purchase of CNN parent Time Warner.)

Whether the damages clause can stand up to legal scrutiny is an open question. It must have some connection to company expenditures, multiple employment lawyers said. "It would be reasonable if it had something to do with training costs or replacement costs or a particular investment that was made in this particular employee," said Kathleen Peratis, another partner at Outten & Golden.

But even for employees who might have a solid case, the practical reality is daunting. Those who want to challenge such a clause would likely have to hire a lawyer, which isn't cheap -- especially if the litigation drags on. Plus there's another complication: Those employment contracts which have a forced arbitration clause.

Renato Mariotti, an Illinois prosecutor who is running for state attorney general, said it's possible courts would view a financial penalty "as a way for the employer to create a noncompete in an improper way."

Business on 04/04/2018

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