A UK Lawyer’s View Of The 2011 US Sports Lockouts- Kevin Carpenter

March 13, 2012

Both the National Football League (‘NFL’) and the National Basketball Association (‘NBA’) spent much of 2011 in protracted legal wrangling’s between the respective leagues (specifically the team owners) and their players as regards Collective Bargaining Agreements (‘CBAs’). The media has made much of the West Side Story-esque posturing between the two sides in eventually reaching agreements in both sports, but little has been written of the interesting legal issues underpinning the disputes, particularly for non-US lawyers and sports fans.
The NFL and NBA operate on the principle that no one team or franchise should dominate their sport for a prolonged period of time and so have a level playing field, or what I prefer to call a state of  ‘competitive equality’. The essential commercial and legal mechanism in place to achieve competitive equality is that the players are owned by the individual leagues/team owners with agreements made through collective bargaining. These CBAs are essentially the blueprints between players and the owners. This is in complete contrast to the model in European sport.
CBAs are a mechanism in US sports that ensure harmony between labour (employment) law and antitrust (competition) law. The relevant laws are:
• Sherman Act of 1890 – makes illegal “every contract, combination in the form of a trust or otherwise, or, conspiracy, in restraint of trade”;
• Norris-La Guardia Act of 1932 (‘NLGA’) – permits employees to organise as a collective bargaining unit, therefore allowing the employer to negotiate a contract that governs all covered employees as one unit; and
• National Labour Relations Act of 1935 (‘NLRA’) – guarantees employees the right to form a labour union and requires employers to deal with a duly-elected union as the bargaining agent for the employees – the two unions are the NFLPA and NBPA.
A doctrine known as the ‘non-statutory labour exemption’ has developed through case law that protects the product of collective bargaining from attack under anti-trust law.
The unique factor in the NFL’s success is that approximately 60% of its total revenue is generated centrally and distributed evenly among the 32 teams. The main bone of contention in the NFL dispute, therefore, was how this revenue should then be split between owners and players. For the NBA, however, the owners wanted a number of fundamental changes made to the league: a ‘hard’ salary cap, a diminishment in player compensation and the end of the guaranteed contract (among others).
In the case of the NFL CBA drama, the players made the first move seven days after the existing CBA had formally expired, by decertifying the NFLPA using the required process through the National Labour Relations Board (‘NLRB’). In response, the owners decided to institute a lockout, this being the withholding of employment by an employer from its employees for the purpose of either resisting their demands or gaining a concession from them. To add to the legal complexity, nine NFL players filed an antitrust case alleging that the lockout constituted an illegal group boycott, as well as a number of anti-competitive restrictions in violation of the Sherman Act. The league argued the ‘non-statutory labour exemption’ was designed to shield the entire bargaining process from antitrust scrutiny and so must extend to the current dispute.
Ultimately, the courts found in favour of the NFL, meaning the decertification did not have the effect the players believed it did. The final judgment was criticised in some legal quarters for being contrary to the legislature’s intention when the NLGA was originally passed. The unfortunate consequence of the ruling means any employer can lockout employees, even in violation of other federal antitrust laws, to pressure employees into accepting worse terms. Following this, and after 132 painful days of negotiation, mediation (which largely failed for both disputes) and court actions, the lockout finally came to an end on 25 July 2011, in time for the new season, after the NFLPA ratified a new agreement via a vote.
With expiry of the NBA CBA due at midnight on 30 June 2011, after hours of fruitless negotiations since the beginning of the year, the NBPA filed a complaint with the NLRB accusing the league of negotiating in bad faith by failing to provide critical financial data and repeatedly threatening to lockout the players. On 1 July, the owners officially began a lockout, and little of note then happened until 2 August, whereby the league hardened its stance further by filing two claims, one being a federal lawsuit and the other at the NLRB. Despite threatening to decertify, the players chose to maintain the union until the latter stages and pursue their case using labour rather antitrust law, which they clearly saw as a source of potential leverage. The NLRB was never a real factor in the NFL lockout for two reasons; first both the players and owners chose to focus their efforts on court actions challenging the lockouts, and secondly the lucrative contracts the league had with TV networks meant the networks had to pay for games even if they were not played!
Throughout the NFL dispute only one game was cancelled, the exhibition Pro Bowl Hall of Fame game, the same cannot be said of the NBA; the first six weeks of the regular season were cancelled. These cancellations created issues for many stakeholders in the sport including the league itself, the players and the fans. All stakeholders were losing out, but the cancellations made it clear both sides were more interested in ‘winning’ than compromising. One may see this as selfish, particularly given that by 25 October it was estimated that around 400 jobs had been lost across the NBA as a direct result of the lockout. Thankfully, on 26 November a gentleman’s agreement was entered into, paving a way for the new CBA. Some say the owners have done very well out of the final agreement with it doing little more than fattening their purse strings at the expense of the players.
The special exemptions from antitrust law that exist for US sport through labour law are similar to what, especially at the European level, has been justified in certain cases as the ‘specificity of sport’. The application of this principle has always been highly controversial in seeming to allow courts and tribunals to come to rulings that fly in the face of the applicable law as it is written and intended. What is for certain, is if some of the legal elements binding the players to the league were in place for sports in other jurisdictions (including the UK), such as salary caps and revenue sharing, then I, for one, would find many sports a more attractive competitive spectacle.
The full three-part article is available here.

Both the National Football League (NFL) and the National Basketball Association (NBA) spent much of 2011 in protracted legal wrangling’s between the respective leagues (specifically the team owners) and their players as regards Collective Bargaining Agreements (CBAs). The media has made much of the West Side Story-esque posturing between the two sides in eventually reaching agreements in both sports, but little has been written of the interesting legal issues underpinning the disputes, particularly for non-US lawyers and sports fans.

The NFL and NBA operate on the principle that no one team or franchise should dominate their sport for a prolonged period of time and so have a level playing field, or what I prefer to call a state of  ‘competitive equality’. The essential commercial and legal mechanism in place to achieve competitive equality is that the players are owned by the individual leagues/team owners with agreements made through collective bargaining. These CBAs are essentially the blueprints between players and the owners. This is in complete contrast to the model in European sport. 

CBAs are a mechanism in US sports that ensure harmony between labour (employment) law and antitrust (competition) law. The relevant laws are:

• Sherman Act of 1890 – makes illegal “every contract, combination in the form of a trust or otherwise, or, conspiracy, in restraint of trade”;

• Norris-La Guardia Act of 1932 (‘NLGA’) – permits employees to organise as a collective bargaining unit, therefore allowing the employer to negotiate a contract that governs all covered employees as one unit; and

• National Labour Relations Act of 1935 (‘NLRA’) – guarantees employees the right to form a labour union and requires employers to deal with a duly-elected union as the bargaining agent for the employees – the two unions are the NFLPA and NBPA.

A doctrine known as the ‘non-statutory labour exemption’ has developed through case law that protects the product of collective bargaining from attack under anti-trust law.    

The unique factor in the NFL’s success is that approximately 60% of its total revenue is generated centrally and distributed evenly among the 32 teams. The main bone of contention in the NFL dispute, therefore, was how this revenue should then be split between owners and players. For the NBA, however, the owners wanted a number of fundamental changes made to the league: a ‘hard’ salary cap, a diminishment in player compensation and the end of the guaranteed contract (among others).

In the case of the NFL CBA drama, the players made the first move seven days after the existing CBA had formally expired, by decertifying the NFLPA using the required process through the National Labour Relations Board (‘NLRB’). In response, the owners decided to institute a lockout, this being the withholding of employment by an employer from its employees for the purpose of either resisting their demands or gaining a concession from them.

To add to the legal complexity, nine NFL players filed an antitrust case alleging that the lockout constituted an illegal group boycott, as well as a number of anti-competitive restrictions in violation of the Sherman Act. The league argued the ‘non-statutory labour exemption’ was designed to shield the entire bargaining process from antitrust scrutiny and so must extend to the current dispute. 

Ultimately, the courts found in favour of the NFL, meaning the decertification did not have the effect the players believed it did. The final judgment was criticised in some legal quarters for being contrary to the legislature’s intention when the NLGA was originally passed. The unfortunate consequence of the ruling means any employer can lockout employees, even in violation of other federal antitrust laws, to pressure employees into accepting worse terms. Following this, and after 132 painful days of negotiation, mediation (which largely failed for both disputes) and court actions, the lockout finally came to an end on 25 July 2011, in time for the new season, after the NFLPA ratified a new agreement via a vote. 

With expiry of the NBA CBA due at midnight on 30 June 2011, after hours of fruitless negotiations since the beginning of the year, the NBPA filed a complaint with the NLRB accusing the league of negotiating in bad faith by failing to provide critical financial data and repeatedly threatening to lockout the players. On 1 July, the owners officially began a lockout, and little of note then happened until 2 August, whereby the league hardened its stance further by filing two claims, one being a federal lawsuit and the other at the NLRB.

Despite threatening to decertify, the players chose to maintain the union until the latter stages and pursue their case using labour rather antitrust law, which they clearly saw as a source of potential leverage. The NLRB was never a real factor in the NFL lockout for two reasons; first both the players and owners chose to focus their efforts on court actions challenging the lockouts, and secondly the lucrative contracts the league had with TV networks meant the networks had to pay for games even if they were not played!

Throughout the NFL dispute only one game was cancelled, the exhibition Pro Bowl Hall of Fame game, the same cannot be said of the NBA; the first six weeks of the regular season were cancelled. These cancellations created issues for many stakeholders in the sport including the league itself, the players and the fans. All stakeholders were losing out, but the cancellations made it clear both sides were more interested in ‘winning’ than compromising. One may see this as selfish, particularly given that by 25 October it was estimated that around 400 jobs had been lost across the NBA as a direct result of the lockout.

Thankfully, on 26 November a gentleman’s agreement was entered into, paving a way for the new CBA. Some say the owners have done very well out of the final agreement with it doing little more than fattening their purse strings at the expense of the players.  

The special exemptions from antitrust law that exist for US sport through labour law are similar to what, especially at the European level, has been justified in certain cases as the ‘specificity of sport’. The application of this principle has always been highly controversial in seeming to allow courts and tribunals to come to rulings that fly in the face of the applicable law as it is written and intended. What is for certain, is if some of the legal elements binding the players to the league were in place for sports in other jurisdictions (including the UK), such as salary caps and revenue sharing, then I, for one, would find many sports a more attractive competitive spectacle.

The full three-part article is available here.

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Kevin Carpenter is a trainee solicitor at SJ Berwin. He is also an Executive Contributor at LawinSport.com. His principal piece to date was on match fixing across the world in all sports titled, ‘Match Fixing – the Biggest Threat to Sport in the 21st Century?’  An updated version of this article is to be published in the International Sports Law Review in May 2012. He recently published a piece on recent racism allegations and the role of the criminal law in sport for the World Sports Law Review.

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