After Sinclair Broadcast drew widespread criticism for having 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 term of their agreement was 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 non-compete clause and forced arbitration, three current and former Sinclair employees said it was the potential financial penalty that had the greatest impact on those thinking of quitting.
Under the clause, there is a specific window of time during which employees can give notice. One current 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 non-compete 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, 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, Maryland-based Sinclair couldn’t be immediately reached for comment.
The company owns or operates 193 TV stations in more than 80 markets across the country and reaches an estimated 38 percent of households. This weekend, 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 memo to employees Monday 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 the Trump 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. “If it’s just a blanket calculation that applies to everyone no matter what, it’s probably vulnerable.”
A second woman now employed by Sinclair who also requested anonymity said she wasn’t fully aware of the damages clause and its ramifications until someone pointed it out. She worried about needing a lawyer if she quit.
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.
Like many employment contract clauses, the very existence of a damages clause could deter employees, said Beth Barrett Bloom, a Seattle based employment lawyer at Frank Freed Subit & Thomas. “If reporters aren’t willing to test them, then they are effective.”
Renato Mariotti, an Illinois based 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 non-compete in an improper way.”
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