After Sinclair Broadcast Group Inc. 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.
Short answer: 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% of their annual compensation to the company.
They were also subject to a six-month noncompete clause and forced arbitration. But three current and former Sinclair employees said it was the potential financial penalty that had the greatest impact on those thinking of quitting. Under that clause, there's 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. A former employee who also requested anonymity said both the noncompete 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.
The company has sought to enforce the liquidated damages clause. On Oct. 13, it sued James Beaton, a former employee of Sinclair station WPEC News 12 in West Palm Beach, Fla., for breach of contract. The company requested $5,700 in damages, as well as other related costs, according to a copy of the complaint filed in state court.
Beaton, who worked as a reporter for the CBS affiliate, said that while he was at the station, he was ordered to do "man on the street" interviews that he felt were politically biased. "I'd ask loaded questions like, 'How much do you disagree with Obama this year?'" he said. "It was disguised as real journalism. But I'm a Republican, and I was still pissed by it."
Beaton quit in 2015 to start a public-relations firm, leaving the news industry entirely, he said. Lawsuits against broadcast news employees who jump to rivals aren't unusual, but litigation against those who start another career is. He said Sinclair offered to settle its lawsuit three months ago for $1,700 but demanded he sign a gag order promising not to talk to the media about Sinclair. "I told them to go jump in a lake," he said.
The company owns or operates 193 TV stations in more than 80 markets across the country and reaches an estimated 38% of households. Last 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, vice president of news at Sinclair, wrote in a memo to employees Monday. "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."
Beaton had a different view. "What we saw over the weekend is classic Sinclair," he said. "Those reporters and anchors are waking up, and they're humiliated and feeling depressed." He added: "They don't want to face the lawsuit that I'm facing."
The broadcaster is seeking approval from the Trump administration to buy Tribune Media Co., which would give it a presence in most U.S. households. President Trump on Monday hailed Sinclair as "far superior" to NBC and CNN, which have been a constant target of his scorn. (The Trump administration, meanwhile, has sued to stop AT&T Inc.'s purchase of CNN parent Time Warner Inc.)
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 current employee of 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 probably would have to hire a lawyer, which isn't cheap — especially if the litigation drags on. Plus there's another complication: those employment contracts that 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 LLP. "If reporters aren't willing to test them, then they are effective."