Wednesday, May 19, 2010

Review of Labor Relations in Professional Sports

On Friday, April 14, 2010 I attended The Chicago Bar Association Sports Law Committee Meeting titled "The state and future of management-player relations in the National Football League". The Sports Law Committee put together quite an impressive pro-NFL Players Association ("NFLPA") panel: Nolan Harrison III and Thomas J. Heiden to talk about the current labor strife in the NFL.

Nolan Harrison III is a former NFL defensive lineman. Harrison played college football at Indiana University and was drafted by the Raiders in the 6th round (146 overall) of the 1991 NFL Draft. Harrison played for the Los Angeles/Oakland Raiders (1991-1996), the Pittsburgh Steelers (1997-1999), and the Washington Redskins (2000). Check out Nolan Harrison III's blog and tweets.

Thomas J. Heiden is a partner at Latham & Watkins LLP, check out his impressive biography.

As a backdrop to the current NFL labor dispute, the speakers talked about major sports lockouts and strikes since 1980:

NFL Strike of 1987: NFL players went on strike at the start of the 1987 NFL regular season, which resulted in Week 3 of the 1987 NFL regular season getting canceled. At issue in the strike was free agency, drug testing, pensions, and minimum salaries. The owners used replacement players for Weeks 4 - 6. The NFLPA decertified (until 1989) and ultimately returned to work after striking for less than a month.

MLB Lockout of 1990: The MLB owners locked out the MLB players from spring training in 1990 for a little more than a month. At issue in the lockout was revenue sharing, minimum salaries, and roster size. Ultimately the minimum salaries were raised from $68,000 to $100,000.

MLB Strike of 1994-95: The MLB players went on strike August 12, 1994. At issue in the strike was revenue sharing and the salary cap. MLB is the only major professional sport in the United States that enjoys an antitrust exemption. Congress threatened to strip MLB of their antitrust exemption, which jump-started negotiations. The MLB owners tried to impose a salary cap but a federal court ruled against the owners. The strike lasted 232 days (August 12, 1994 to until April 2, 1995) and lead to the cancellation of the 1994 World Series (the first time since 1904).

NBA Lockout of 1998-99: The NBA owners locked out the NBA players in the 1998 off-season. At issue in the lockout was the salary cap, free agency, rookie pay scale, and minimum salaries. The NBA owners got the players to agree to a salary cap so the owners ended the lockout, which lasted 202 days and shortened the 1999 NBA season.

NHL Lockout of 2004-05: The NHL owners locked out the players before the 2004-05 NHL season. At issue in the lockout was the salary cap and revenue sharing. Ultimately both sides agreed to a salary cap but the lockout wiped out the entire 2004-05 NHL season and created a huge public relations nightmare for their already rapidly dwindling fan base.

Current NFL Labor Dispute:
With all of that as window dressing, here is how the current NFL labor disagreement has played out. From 1993 to 2006 the collective bargaining agreement ("CBA") between the NFLPA and the NFL owners was extended five times. In March of 2006, the NFL owners voted 30-2 (Buffalo and Cincinnati voted against) to extend the CBA.

The CBA contained an "opt-out" clause that the NFL owners exercised in May of 2008. By opting out, the 2010 season became "uncapped" meaning it will be played without a salary cap or salary floor. Although there are some restrictions like the "Final 8 Rule" that keeps owners from spending millions on free agents, it is the lack of a salary floor that should really worry NFL players. Some owners said they are going to cut their payroll in half from 2009 to 2010, so the uncapped year will not result in players getting showered with money as originally anticipated. If the NFLPA and the NFL Owners don't come to a new agreement, the last official thing on the NFL calendar is the 2011 NFL Draft.

How will things play out? Who knows, but the NFL has a great thing going. Although baseball claims to be America's Pastime, the NFL is the most popular professional sport in the United States. Every red-blooded man that likes sports watches football on Sunday. If there is a work stoppage that might all change.

Whether players and owners like it, the average American views a labor dispute between players and owners as millionaires fighting with billionaires. With the recent economic downturn, the NFL can ill afford to alienate fans at the height of its popularity.

For football to be played in 2011, the NFL players are going to have to make concessions. The NFL owners get paid a reported $4 billion under their current television deal whether or not football is played in 2011. That means although it would be devastating to the NFL if some or all of the 2011 NFL season was canceled because of the labor disputes, the owners are able to wait out the players. The players won't get paid a dime without games being played while the owners will get paid billions.

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