Much has already been written about the FTC’s new proposed rule on non-competes.  As reported by my own colleagues in our Employment Law blog, the FTC’s proposed rule would prohibit employers from: (1) entering into or attempting to enter into a noncompete with a worker; (2) maintaining a noncompete with a worker; or (3) representing to a worker, under certain circumstances, that the worker is subject to a noncompete. The rule would apply to independent contractors and anyone who works for an employer, and it would require employers to rescind existing noncompete agreements and actively inform workers that they are no longer in effect.  It's a big deal.

As all of us working in the advertising and marketing law space know, contracts with influencers and other talent usually contain exclusivity and non-compete provisions. Brands do not want their spokespeople, whether in tv ads or on social media, to be out there promoting competitive brands too. Does the FTC’s proposed rule have any implications for such provisions too? The answer is maybe.

First, the proposed rule, even if it goes into effect as is, would not cover the most common type of exclusivity provision in influencer and talent agreements: the prohibition on working for competitors during the term of the agreement. (BTW, that “if” in the previous sentence is a big one, given the tsunami of objections the proposed rule has already received, including from one of the FTC’s own Commissioners, who commented that she was “dubious that three unelected technocrats have somehow hit upon the right way to think about non-competes, and that all the preceding legal minds to examine this issue have gotten it wrong.” Ouch!)

Although the definition of “worker” in the proposed rule is broad enough to cover influencers and other talent, even if they’re treated as independent contractors (in fact, even if they’re volunteers or interns), the definition of a prohibited non-compete clause is one that “prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.” (emphasis added). In other words, on its face, the proposed rule only covers prohibitions that extend beyond a person’s current employment, affecting her ability to work for someone else after her current employment ends, not prohibitions that are limited to the term of employment.  As the commentary accompanying the proposed rule states, “The Rule would not apply to concurrent-employment restraints—i.e., restrictions on what the worker may do during the worker’s employment.”  Therefore, a contract that bars an influencer from working for competitive brands during the term of her contract would not be covered by the proposed rule. 

However, a contract provision in a talent agreement that seeks to extend that bar past the term of the contract could be vulnerable. Such provisions are not so uncommon, particularly in deals with high end talent. Readers may recall the highly publicized situation of the actor who appeared in commercials for one telecom company over several years, and then “switched,” and worked for a competitor shortly thereafter. Tails on exclusivity provisions seek to prevent that scenario. Drafters of such provisions will have to carefully consider the proposed rule, with some hard thinking about how to structure the term of the agreement: does it cover only a services period? The usage period?  What if the talent is still receiving payments?

Even if a relatively limited number of influencer and talent provisions are potentially vulnerable under the current proposed rule, the FTC’s policy arguments behind the proposed non-compete ban should also be kept in mind, as they may provide grounds for extending the proposed rule further in the future.  But is the FTC likely to care about influencers and actors in commercials? On first blush, despite the FTC’s expansive commentary accompanying the proposed rule-making – citing examples about workers ranging from sandwich makers and security guards to ophthalmologists and tech executives – one may not consider such classes of workers as meriting a lot of attention and protection. Plus, an influencer or celebrity talent can probably work for companies in other sectors even if prohibited by contract from working for a brand’s competitors for some period post termination.  

But, there are a lot of people earning their living (or trying to) as “influencers” and such workers are certainly on the FTC’s radar, albeit usually for other reasons (like making sure they perform their services in compliance with the Endorsement Guides).  Moreover, probably only a small percentage of them are earning significant incomes from their services. Which means that, like gig economy workers, influencers and other creative industry workers, and the contracts that govern them, may also attract the FTC’s interest if the FTC perceives that an imbalance of bargaining power is adversely affecting both the workers themselves and competition in the industry.  

For now, brands can rest easy about the proposed rule, at least as it affects their most typical types of deals with influencers, but it's not too soon to consider how such deals may need to evolve in the future if the FTC expands its focus.