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Shortly after they left the radio waves and went independent, the hosts of a podcast that could transform U.S. labor law received a letter in the mail from their former employer.
Cumulus Radio, a multimillion-dollar national media conglomerate that owns the station where they used to broadcast, demanded that the Dallas-area talk hosts immediately “cease and desist” production of “The Dumb Zone,” arguing that they were in violation of a clause in their contract that barred them from competing with their former employer for six months if they ever left.
Jake Kemp, 37, and Dan McDowell, 54, then read the letter aloud on their show, jokingly calling it a piece of “reader feedback.” Kemp said he thought the company’s letter was initially sent by accident to his old address, so the two started imagining an unrelated podcaster who had to stop his show after getting a letter intended for them.
“So now some guy is stopping his podcast?,” McDowell said, as the two laughed. “That sucks.”
McDowell and Kemp became minor celebrities in North Texas as the hosts of a similar show, “The Hang Zone,” on KTCK-AM — “The Ticket” — before resigning amid a contract dispute with management in July. When McDowell and Kemp ignored the cease-and-desist letter, the company sued.
Until this year, Cumulus would have been likely to prevail. But in May, one of President Biden’s appointees to the National Labor Relations Board published legal guidance finding that overly broad “noncompete” agreements can violate federal labor law. Issued by the agency’s general counsel, the guidance does not yet have the force of law. But because Democrats hold a majority on the NLRB, it suggests a major change in federal policy may be on the way once the panel takes up the matter.
And that is giving hope to McDowell and Kemp, who are seeking to have the lawsuit be one of the first test cases for the new interpretation. At stake is not just the future of the co-hosts’ musings about the Dallas Cowboys schedule and Disney casting controversies, but also the status of millions of other workers across the country affected by noncompete clauses that many economists believe unfairly restrict workers’ options.
“This case, or one like it, could set the precedent that noncompete clauses often violate federal law,” said Charlotte Garden, a labor law expert at the University of Minnesota Law School who reviewed “The Dumb Zone” hosts’ case for The Washington Post. “If that happens, it would be a huge deal for workers across the country, because it would create one uniform standard where employers need to show they have a special need for a noncompete, and not just a generic desire to not have their employees work for competitors. The implications for workers would be enormous.”
Sharon Block, a professor at Harvard Law School who previously worked for the Biden administration in the White House Office of Information and Regulatory Affairs, also reviewed the case for The Post.
“The hosts of ‘The Dumb Zone’ are not, in fact, being dumb,” Block said. “Part of having agency in your own economic life is being able to take your skills, join with your co-workers, and bring them to where you think they’re best utilized — and in this case the hosts were being sued because they were trying to do that.”
The case could also help shape Biden’s economic legacy. Even though Congress has blocked the labor movement’s top priority, a bill that would make it far easier to unionize, Biden has used the levers at his disposal to try to reverse what Democrats see as more than a half-century of declining worker bargaining power.
As part of that effort, several federal agencies have tried limiting businesses’ influence over their employees. At the Federal Trade Commission, Biden appointee Lina Khan has aggressively sought to crack down on corporate mergers that many experts believe reduce options for workers to bargain for better wages. The Consumer Financial Protection Bureau, led by Biden appointee Rohit Chopra, has launched probes into products that leave workers unwittingly financially indebted to their employers.
Antitrust regulators propose banning noncompete clauses for workers
The National Labor Relations Board, meanwhile, has announced new penalties for companies that illegally fire unionizing workers, tried to ban mandatory anti-union meetings, and issued a rule to create a new type of mandatory union recognition. Its attack on noncompete agreements, issued by general counsel Jennifer Abruzzo on May 30, follows similar promises Biden made during his 2020 campaign. While economists during the Obama administration were divided over whether and to what extent noncompetes should be banned, Biden pushed hard against them, giving a speech in 2017 devoted to criticizing how they were distorting the economy.
“This has become a foundational part of Biden’s economic agenda,” Ben Harris, a former economic adviser and senior official in the Treasury Department in the Biden administration, said of the NLRB’s noncompete guidance. “The work he was doing on this in 2017 is the precursor of what is happening now.”
Roughly 30 million workers collectively lose as much as $300 billion a year in wages due to noncompete agreements, according to the Federal Trade Commission. (The FTC has proposed its own ban on noncompete agreements, but it is not due out until next year and will likely face immediate legal challenge.) Evan Starr, a University of Maryland economist, has found that as much as 18 percent of the labor market is covered by a noncompete agreement.
The restrictions often apply to low-wage employees who do not appear to possess trade secrets that should prevent them from working for a competitor — fast-food workers, construction workers and hospitality staff, according to the Economic Policy Institute, a left-leaning think tank.
“It is remarkable how many people it covers,” said Alan Benson, a professor at the University of Minnesota’s Carlson School of Management. “You hear stories from employers that noncompetes are necessary to protect trade secrets — that’s the big argument for them. But you have people in these lower skilled jobs that don’t really possess any trade secrets. That’s the crux of the issue.”
Abruzzo’s memo argues that noncompete pacts violate federal protections for workers to engage in “concerted activities” to improve their working conditions, unless there are “special circumstances justifying the infringement on employee rights.” Business groups say that guidance goes too far, although the memo only applies to workers who are not considered “supervisory” employees.
“While the memorandum is dressed up to look like a compelling legal analysis, it rests on highly questionable legal grounds, and the myriad cases it cites in support of the proposal have little or nothing to do with non-compete agreements,” Glenn Spencer, senior vice president at the U.S. Chamber of Commerce, which has vowed to fight the rules, wrote in a memo.
But unlike some of the administration’s initiatives that have been struck down by the courts, the noncompete guidance might prevail. State and federal courts “must defer” to the NLRB’s judgment on issues in its jurisdiction, according to a 1959 case upheld this year by the Supreme Court, despite its conservative majority. If the NLRB’s board backs the guidance of its general counsel, then all other workers who want to work for — or start — a competitor to their previous employer should be protected by that ruling, even if challenged by their employer in state court, said Matt Bruenig, a labor attorney who filed “The Dumb Zone” hosts’ petition to the NLRB and is the founder of the People’s Policy Project, a left-leaning think tank.
“There would be nothing to stop everyone else in the country with a noncompete clause from doing the same thing,” Bruenig said. “Because at that point all you have to do is quit your job, point to the NLRB case — and you’re golden.”
Bruenig said the suit against the hosts of “The Dumb Zone” perfectly reflects the kind of corporate overreach that the NLRB’s guidance is intended to stop. “Their contract clauses make it so these guys have no outside option — they cannot really leave the employer without facing huge legal backlash,” Bruenig said. “You’re bound to the employer, and you effectively cannot leave without permission.”
For McDowell and Kemp, the stakes are personal. As the hosts of “The Hang Zone,” the two laid-back radio personalities garnered a devoted local following. McDowell went to every training camp for the Dallas Cowboys for the last two decades. Kemp listened to The Ticket growing up with his dad driving to and from basketball practice, before getting his break after interning for the station in 2003.
This spring, McDowell and Kemp started negotiating a new contract with Cumulus. The parties were far apart over numerous issues, with the hosts saying they were particularly frustrated by the company’s refusal to raise the pay of junior employees on their team, who they say earned as little as $27,000 per year, as well as noncompete agreements that they say these junior employees signed. Cumulus alleged in filings that McDowell and Kemp were always planning on starting an independent broadcast, which the hosts deny, and also violated their contracts by publicly criticizing the company on their show.
Cumulus did not return a request for comment.
Like other talk-radio station owners, the company has been challenged by the rise of independent podcasting, with sites like Patreon now boasting of more than 6 million paying subscribers. In a filing to investors last year, the radio firm referred to “agreements with on-air personalities with large loyal audiences in their individual markets … to protect our interests in those relationships,” because losing those employees could hurt revenue.
That challenge appears real. Since launching their podcast in late July, “The Dumb Zone” hosts have amassed more than 4,000 subscribers on Patreon, each paying $6.90 per month. They have talked in recent episodes about whether or how mermaids would tan, the induction of NBA legend Dirk Nowitzki into the Naismith Memorial Basketball Hall of Fame, how the phrase “leave room for” became associated with dessert and which male celebrity the heterosexual male hosts would have sex with, if they had to pick one.
“There are some options opening up. We don’t know where we’re going to take it, but we’re going to start with this. This is us talking — pretty rudimentary. I think that’s a word,” McDowell said on the hosts’ first episode. “We got things to say. We want to talk.”
Source link: https://www.washingtonpost.com/business/2023/09/25/noncompete-labor-law-dumb-zone-podcast/