Lessons from Conan’s Non-Compete Negotiations
The Conan O’Brien/Jay Leno imbroglio of the last couple weeks appears to be winding to an end. According to reports from TMZ, Conan will receive a $32.5 million dollar payout but sit on the bench and not start a new show until September. The rumor is he will start a new show with Fox.
There has been speculation that Conan had a non-compete agreement with NBC. Jay Shepherd points out in his blog that it is unlikely the non-compete was governed by California law because it would be unenforceable:
And California, as many of you know, prohibits noncompetes. Section 16600 of the California Business and Professions Code makes employment-related noncompetes — like the one Conan reportedly has — void.
Unfortunately, his contract with NBC is not available on line, but let’s assume Conan had an enforceable non-compete under Texas law. (There are a whole bunch of reasons why it’s not, but give me some latitude.) What can Conan teach us? Bottom line, negotiations never end. Conan’s failure at NBC actually created leverage for him in negotiations. NBC wants Leno back in hopes that he will drive up ratings but is tied to Conan who waited for years for Leno’s departure. Conan isn’t going to go back to the later time spot, who knows what his contract says about that. So NBC elects to pay him off. Much of the money is salary he would have earned in the interim anyway, and he agrees to stay on the sidelines for a few month. Win win, or so it seems.
The typical employee is not Conan and the typical employer is not NBC. But, when an employer is facing a departing employee with a non-compete that may be unenforceable it’s time to think outside the box to see if some other type of resolution can be reached. Maybe an agreement to stay away from certain customers or stay out of the industry for a shorter time – be creative. The same goes for the employee. This won’t always be appropriate but it beats significant legal fees, expedited discovery, and temporary injunction hearings.