Collective Bargaining in American Sport
By Nandan Kamath
Collective Bargaining is a mechanism involving discussions and negotiations between one or more employers and the representatives of the group of employees, with a view to determine mutually agreed upon terms and conditions of employment and other affiliated matters. Although collective bargaining has had its presence almost in perpetuity in the labour industry all across the world, its advent into the realm of the sports industry is a relatively modern phenomenon. The development of this cumulative system of barter and its peculiar characteristics in the American sports system is examined in this learning module.
Reserve Clause and Rozelle Rule
In its formative years, the sports industry in the U.S. faced numerous difficulties towards constituting a player union strong enough to represent the interests of the fraternity with conviction. It was the non co-operation and the eagerness of the employers/ team owners to extract favourable contracts and deals and maintain their superiority in negotiating transactions that to a large scale contributed to the failure of instituting player enterprises. In addition, players could not seek recourse in the National Labour Relation Board, an entity established to enforce the provisions of the National Labour Relation Act 29 U.S.C.A. or the Wagner Act, as the Board did not consider sports as a vocation making worthwhile contributions to the economy.
In particular, team owners and management preferred inserting the “Reserve Clause” and the “Rozelle Rule” in player contracts. The “Reserve Clause”, which was more prevalent in Baseball than other sports, restricted the player from signing a contract with other teams on the completion of the previous contract. On the other hand, the “Rozelle Rule”, which was more common to American football, provided for the player’s former club to be reasonably compensated by the new club before the player could be transferred. In Flood v. Kuhn [407 US 258 (1972)], baseball player Curt Flood challenged the “Reserve Rule” when he was assigned to an ill performing club after a very successful stint with the St Louis Cardinals. The Supreme Court of the United States noted that the “Reserve Clause” was an inconsistent and illogical provision, and a decision to annul it would fall under the legislative powers of the Congress and hence could only be remedied by the Congress. On the recommendations of the Court, the Congress passed the Curt Flood Act of 1998, which though did not abolish the ‘restraint of trade’ exemption, limited its scope, albeit to a negligible extent.
n Smith v. Pro Football, Inc. [593 F 2d 1173 (D.C. Circ 1978)], a college athlete approached the District Court of Columbia Circuit after the National Football League refused to declare him a free agent even though he wasn’t drafted until the 17th round. At that time, it was a common practice for draftees to be released if they were not drafted in the first 10 rounds of the NFL Draft. The plaintiff alleged that the draft system that existed in 1968 was an unreasonable restraint of trade and in violation of the provision of the Sherman (antitrust) Act. He contended that he was unable to negotiate a better deal for himself because of the existence of the draft, which resulted in a monetary loss to him when he received a lesser amount as compensation after his neck injury which proved to be fatal for his football career. He argued that had he been declared a free agent he would be able to negotiate a better contract which would provide for “injury protection clause,” i.e., a clause guaranteeing payment for the full term of a player’s contract even if he should be incapacitated.”
The District Court that heard the case recorded that the NFL draft was not unreasonable, but it observed that the number of rounds included in the draft was not only inconsistent, but also anti-competitive in both its purpose and effect. The court held that the NFL draft constituted a group boycott (concerted attempt by a group of competitors at one level to protect themselves from competition from non-group members who seek to compete at that level) as the NFL clubs concertedly refuse to deal with any player before he has been drafted or after he has been drafted by another team and was thus a per se violation of the Sherman Act of 1890. Further, the court held that the draft, tested under the ‘rule of reason’, was an unreasonable restraint as it was significantly more restrictive than necessary. This judgment has been highly debated and it is the opinion of various experts that the Draft does not amount to a group boycott, as the NFL teams are not competitors in the pure sense wherein they wish to drive the other clubs out of business. It is quite the opposite in reality as the teams require the presence of other teams, as the league and the sport would collapse in the absence of competitors. However, as a consequence of this judgment, the number of rounds of the draft has come to be restricted in US professional sport leagues. Although each sport varies, generally no more than 10 rounds are permitted in US sport.
Collective Bargaining Agreements
ith passage of time, well organised and structured confederations that represented the entire sport rather than a few individuals or groups came into existence, thereby bolstering efficient and fair collective bargaining between players and their employers. The sports industry by then had made an extensive impact on the economy on account of the large scale investments made in it by private and government bodies coupled with compelling rise in revenues. This systematic assembly of the players as unions and the prosperity of the sporting enterprise proved to be advantageous to the players on multiple fronts as it also enabled them to come under the umbrella of the National Labour Relation Act and the National Labour Relation Board. Examples of such incorporations are the National Basketball Players Association (‘NBPA’), National Hockey League Players Association (‘NHLPA’), National Football League Players Association (‘NFLPA’), etc. The establishment of these associations and their recognition as player representatives reinforced the ability of the players to effectively negotiate with their employers/team owners and formulate what are appropriately called the Collective Bargaining Agreements (CBA).
The fundamental aspect of a CBA is the period for which it would be in force and for which the parties would be bound by the terms. The CBA also includes provisions for extension on its expiry and, in the alternative, also provides leeway to the parties to negotiate fresh terms and conditions for the formulation of a new agreement. Thus, it gives the parties a choice to either continue with the existing specifications or discuss new ones and compile a redesigned arrangement. Another important aspect of a CBA is the revenue sharing between the players and the league owners. In the American sport industry, the trend has been to accord a higher percentage to the players on the basis that they not only carry the weight of the sport on their shoulders but are also the face of the game as well as their teams.
Another customary inclusion in the CBA is the salary cap, which spells out a particular limit on salaries which all the teams and clubs necessarily have to follow. This salary cap could be in the form of a ‘soft’ salary cap or a ‘hard’ salary cap. The salary cap is inserted so that the teams stay within a prescribed limited allowance allotted to all and do not pay inordinate salaries to players thereby ensuring fair competition in the game, as every team would then have a chance to recruit good players who – because of the cap -would not be confined to clubs with a higher spending capacity. However, there are certain exceptions in the form of a ‘luxury tax’ in certain sports which allow the teams to exceed the predetermined amount. This practice was largely seen in the NBA wherein the team owners would pay a luxury tax on the surplus amount spent on salaries, thereby allowing some rich clubs to hire the best athletes. This practice however, has been widely condemned, as it seen as detrimental not only to the spirit of the game but also to the economical status of the smaller teams.
Apart from dealing with the players’ salaries, CBAs also deal with player performance bonuses and the quantum of these bonuses, and other performance-related incentives. It is also a regular practice of negotiating parties to determine in the CBA the amounts entry-level players (youngsters who join the league by way of Draft) could command as salaries and performance bonuses. The parties also usually incorporate details regarding the length of their initial contracts keeping in mind the age of the athletes.
Another important aspect that is universally discussed and thereafter incorporated in the CBA is that of the ‘Draft’ system that brings these entry-level players into the league. The nature of the ‘Draft’ system is peculiar to each sport and is determined by the players and the league owners keeping in mind these specifications. In addition to participating in matches conducted by the respective leagues, the CBAs also make provisions for the participation of players in international competitions such as the Olympics and World Cups.
The CBA generally gives details regarding ‘Restricted’ and ‘Unrestricted’ free agency of players and the conditions surrounding free agents including their deadline for signing contracts and other related activities. In order to ensure that the terms of the CBA as have been agreed between the parties survive the tenure for which the agreement has been entered into, the CBA usually has a stipulation to that effect which prevents the players from renegotiating the terms during such period. The CBA also lays down the structure and the nature of the sporting competition, conditions regarding the number of games to be played, the length of the Training Camp, the maximum number of pre- season matches a team can play, and the like, to secure the smooth running of the league season.
CBAs also make provisions for the formation of joint committees and organisations that feature the franchises, the league as well as the respective Players Unions. These organisations carry out numerous activities in the form of discussing and making recommendations inter alia on matters affecting the broadcast and marketing policies and initiatives, as well as overseeing the utilization of funds designated for the benefit of retired players.
Another aspect that the CBA makes specific provisions for is the issue of the image rights of the players and the endorsement and licensing carried out by the players, franchises, the league as well as the players associations. It is a general practice for the CBAs to provide the guidelines which any endorsement or licensing activity that is carried out by any party needs to adhere to in addition to prescribing restrictions when it comes to utilizing the image of any player or franchise so as to ensure that neither the player nor the franchise gets a raw deal or gets entangled in something unwanted.
With the advent of doping in sport and the usage of performance enhancing substances by players, strict provisions to counter the use of performance enhancing drugs are usually incorporated in the CBA. CBAs cover not only when and how often the tests for performance enhancing substances would and should be conducted, but also determine the penalties to be imposed on any player tested positive for a banned substance. The nature and the severity of the penalties vary from case to case and would also be in line with the local anti doping laws. The issues mentioned above are general ones that are commonly embodied in a CBA. However, the more specific details differ with each league and are also subject to the relationship that the league owners and the players’ association share.
Though the practice of Collective Bargaining has proved to be very effective and fruitful in the U.S., it has also led to entire seasons of professional sport being cancelled. The U.S. experiences and historical developments are likely to have many lessons for the Indian sport industry given that the growth of healthy players’ unions is inevitable, which will, in turn give rise to the need for effective bargaining between players and private team owners.
© The Sports Law & Policy Centre