Professional Athletes & Labor Disputes: A Primer for Legal Sports Fans

August 16, 2012
By Thomas Major, Esq. on August 16, 2012 12:05 AM |

Collective bargaining agreements intersect with antitrust law and labor law. The Sherman Antitrust Act ("Sherman Act") Sections 1 and 2 concern restrains on trade and monopolization. These sections act to prevent monopolization, promote competition and protect consumer welfare. The National Labor Relations Act ("Wagner Act") provides for the right to form, join and assist labor organizations, the right to bargain collectively through representatives chosen by the workers and the right to engage in concerted activities like picketing and strikes.

In the world of professional sports, a league such as the NHL is not deemed a single entity but a collection of firms. Looking to the Sherman Act alone, when the teams combine to make an unreasonable restraint on trade, in which the net effect is anti-competitive and effects interstate commerce, the Sherman Act is violated. However, labor law's Clayton Act, which exempts labor unions from being coined combinations, creates the statutory exemption through which all labor unions are lawfully created, including the player unions in the NFL, NHL and NBA. Additionally, judicially created non-statutory labor exemptions allow leagues and employers to combine and not fall under the Sherman Act. Not surprisingly, all of the judicial exemptions concern the collective bargaining process.

The use of statutory and non-statutory labor exemptions to the Sherman Act allows players, owners, leagues and employers to combine to negotiate collective bargaining agreements. This ability is integral to creating a marketable, profitable and successful "product" --- high level competition. The horizontal restrains which the Sherman Act typically defeats are necessary to make the product available and protect the integrity of sport.

The National Labor Relations Board determines the issues which are subject to negotiation, defining the scope of the collective bargaining agreements in professional sports. The mandatory subjects of bargaining are wages, hours and terms and conditions of employment. The Board has exclusive jurisdiction over National Labor Relations issues and the federal and state courts heavily defer to its determinations.
The current talks in the NHL flow from the stark value and profit discrepancies seen from team to team across the league. For example, in 2010, the New York Rangers were worth $507 million dollars and earned $41.4 million dollars, while the Buffalo Sabres were sold for $156 million dollars and lost $5.6 million dollars. These numbers call into question the professional hockey "product" produced by the NHL, the assumption being that a less valuable team would be unable to pay for talent and facilities on par with the valuable teams. The end result would be a hockey league producing the sought after high-level hockey competition product only when the valuable teams play against one another. However, quite the contrary, in the 2009-2010 season the Rangers met the Sabres two times, losing both 2-1 and 5-2, respectively.

It can be argued that the league would be better off with all of the teams having strong financial footing for venue renovations (i.e. MSG), ticket price reduction, better marketing pitches for TV rights negotiations, increased sales of merchandise, and the like. However, the current call for revenue sharing and player price caps, all in the name of equality among the teams in order to produce a better professional hockey competition product, fails to take into consideration the Moneyball/Tampa Bay Rays/Jeremy Lin/1980 USA Hockey effect that great management, heart and athletes playing for more than just money can have on the product. Some might argue that such an effect adds more to a sport than TVs at each seat or whatever that thing is that they built in Marlins Stadium.
The labor law exemptions give the players and employers the ability to combine to negotiate in good faith without violating that Sherman Act. However, just as the unique nature of sport makes horizontal restraints necessary to create a level playing field, the unique nature of sport also requires room for the exceptional and unimaginable which can't be predicted or planned.