The Role of Decertification in NFL and NBA Collective ... · PDF fileTHE ROLE OF...

A C C S P O R T S & E N T E R T A I N M E N T C O M M I T T E E L O S A N G E L E S , C A L I F O R N I A

F E B R U A R Y 1 3 , 2 0 1 3

THE ROLE OF DECERTIFICATION IN NFL AND NBA COLLECTIVE BARGAINING

Presented By:

Anthony B. Byergo

OVERVIEW

• A brief history of collective bargaining in professional sports

• The collision of labor law and antitrust law … and its impact on NFL and NBA labor relations

• The unions’ “decertification strategy”

• Brady v. NFL – did anything change?

• Alternatives to the current paradigm

A BRIEF SUMMARY OF A LONG HISTORY …

• Labor Relations in Professional Sports Has Been Characterized by:

→ Strikes

→ Lockouts

→ Litigation

By contrast, in most industries, strikes and lockouts are relatively rare -- occurring in less than 2% of negotiations


• NFLPA • Formed in 1956

• First collective bargaining agreement in 1968

• Formal certification in 1970

• Strikes/lockouts (1968, 1970, 1974, 1982, 1987, 2011)

• Landmark player antitrust litigation against league

• Radovich (1957)

• Mackey (1976)

• McNeil (1989)

• Brady (2011)


• NBPA • Formed in 1954

• Recognition in 1964

• Lockouts in 1995, 1996, 1998-99, 2011

• Landmark player antitrust litigation against league

• Robertson (brought in 1970, settled in 1976)

• NHLPA • Formed/recognized in 1967 (predecessor in 1950s)

• Strikes/lockouts in 1992, 1994-95, 2004-05 (entire season), 2012-2013


• Contrast with MLBPA • Formed in 1953 and first agreement in 1968

• In season strikes in 1972, 1981, 1985, 1994-95

• Spring strike in 1980 and lockouts in 1973, 1976, 1990

• No antitrust litigation • MLB held exempt from antitrust laws in Federal Baseball Club (1922),

Toolson (1952), and Flood (1972)

• Other arbitration and litigation • Kansas City Royals Baseball Corp. v. MLBPA (1976)(upheld arbitrator’s

decision limiting “reserve clause” and declaring Messersmith and McNally free agents)

• “Collusion” Cases -- Final settlement of $280 million for players relating to allegations of owner collusion in free agent signings under 1985-1987 agreement

A BRIEF PRIMER ON COLLECTIVE BARGAINING

• Unions are recognized or certified as the exclusive bargaining agent for an “appropriate bargaining unit” of employees

• Duty to bargain • Requires employers to meet at reasonable times and places for

purposes of trying to reach an agreement

• Subject to “good faith” requirements measured by the “totality of the circumstances” at the bargaining table

• No duty of either party to make concession or agree to the proposals of the other party

→

A BRIEF PRIMER ON COLLECTIVE BARGAINING

• Parties have the right to exercise “economic weapons” • For unions – the right to strike after expiration of prior contract

• For employers – the right to lockout and/or (after impasse in the negotiations) implement the terms of its last, best, and final offer

• “Multi-employer bargaining” • Participating employers coordinate efforts, but are bound to the

process and agree to be bound by the same ultimate collective bargaining agreement

ANTITRUST LAW AND THE “NSLE”

• Antitrust law • Broadly prohibits monopolistic practices and collusive “restraints of

trade” that are contrary to competition among competitors

• Classic example: Market competitors agreeing on product or service prices to charge customers

• But also applies in the labor market:

• Not permitted to agree on wages and benefits

NSLE: NON-STATUTORY LABOR EXEMPTION

• Tension between labor law and antitrust law

• Labor unions and union activity • By its nature, monopolistic, collusive and in restraint of trade

• But, protected by “statutory” labor exemption (Section 17 of the Clayton Act)

• Multi-employer bargaining • By its nature, collusive and in restraint of trade

• Protected by “non-statutory labor exemption” recognized by the Supreme Court


• “Non-statutory labor exemption” protects employer actions (whether agreements with a labor union, or among each other) if: (1) the restraint on trade primarily affects only the parties to the collective bargaining relationship,

(2) the agreement concerns a mandatory subject of collective bargaining, and

(3) the agreement sought to be exempted is the product of bona-fide arm’s length bargaining.


• Mackey v. NFL (8th Cir. 1976) • NFL maintained “Rozelle Rule” providing for compensation determined

by commissioner in the event of free agent movement

• Court held that rule was not product of “arm’s length bargaining” with NFLPA so not protected by NSLE

• Court further held that the Rozelle Rule was an “unreasonable” restraint of trade under “rule of reason” because it was more restrictive than necessary for legitimate business purposes

• Powell v. NFL (8th Cir. 1989) • NFL maintained previously bargained system of first

refusal/compensation for free agency after expiration of CBA and impasse in negotiations

• Court holds that NSLE applies after expiration of prior CBA and impasse in negotiations


• Brown v. NFL (S.Ct. 1996) • NFL implements terms of “last, best, and final” offer in setting salaries

for practice squad players

• Court holds that NSLE applies to implementation of “last, best, and final” offer provided: • Conduct took place during and immediately after negotiations

• Conduct grew out of and was directly related to the collective bargaining process

• But court left open the question of when NSLE might end • Ends when “sufficiently distant in time and circumstances from the collective

bargaining process,” citing cases suggesting NSLE ends: • At “collapse of the collective bargaining relationship, as evidenced by

decertification of the union”

• If an “extremely long impasse” and “defunctness” of multi-employer unit

• Specifically declines to set the boundaries, however

THE UNIONS’ DECERTIFICATION STRATEGY

• Seizing on the Court’s dicta in Brown, the players’ unions have “disclaimed” interest (or threatened to) in multiple negotiations • 1998-99 – NBPA (threatened disclaimer)

• 2011 – NFLPA (disclaimer)

• 2011 – NBPA (disclaimer)

• 2011-12 – NHLPA (threatened disclaimer)


• The strategy: create leverage in negotiations

• Issue: Will the NSLE still apply if the union is decertified or disclaims interest in representation?

• If not, then possibility of anti-trust liability • treble damages (actual damages X 3)

• uncertainty from jury determination of damages


• High risk strategy for unions

• Difference between decertification/disclaimer

• No court has held that this tactic immediately voids the NSLE or prevents unilateral imposition of terms immediately following. • From a labor law perspective, decertification or disclaimer eliminates

the employers’ duty to bargain with the union and privileges unilateral implementation of any terms

IMPACT OF BRADY V. NFL

• NFLPA disclaimed interest just prior to expiration of CBA and planned lockout by NFL

• NFL proceeds with lockout

• Players sue under antitrust law • Claim that NFLPA disclaimer meant that NSLE did not protect lockout

and NFL’s actions constituted a group boycott and price-fixing agreement in violation of Section 1 of the Sherman Act

• District Court grants injunction against the lockout


• Court of Appeals reverses!

• Analyzes case as a “labor case”

• Holds that an injunction should not have issued under the Norris-LaGuardia Act (NLGA)

• Disclaimer of interest and purported absence of a union held not to mean it was not a labor dispute • Presence of a union is not necessary where there is other concerted

employee activity

• Section 4(a) of NLGA precludes courts from issuing injunctions to prohibit a lockout of its employees


• Court specifically does not rule on whether the NSLE survives the union’s disclaimer

• However • Creates a big hole in the unions’ presumption that they can disclaim and

automatically void the NSLE

• Suggests that post-disclaimer actions will be found to meet the Brown standards for upholding NSLE: • Union not necessary for a “labor dispute”

• Further, NSLE protects conduct which takes place during and immediately after negotiations, and which grows out of and is directly related to the collective bargaining process

• NFL and “the players” quickly settled after decision

• NFLPA quickly sought formal recognition again

ALTERNATIVES TO THE CURRENT PARADIGM

• Pre-Brady: Unions assume antitrust leverage through decertification or disclaimer.

• Post-Brady: Antitrust leverage put in doubt … but still there.

• Future: How to remove leverage altogether? • NFL and NBA: Argued disclaimer was merely a “sham” and filed

charges with NLRB. No decisions were ever issued.


• Defenses Based on NSLE • NSLE does not depend on presence of a union

• Following Brady analysis of “labor dispute,” any collective activity still brings actions within NSLE

• Further, union disclaimer or decertification does not make exercise of economic actions contemplated during prior negotiations “sufficiently distant” in time or circumstances to void the NSLE

• Under Brown, NSLE still applies if action “during or immediately after a collective bargaining negotiation” and “grew out of, and was directly related to, the lawful operation of the bargaining process.”


• Bargaining Strategy: “Last, Best, and Final” Offer

• Get LBF on the table before any disclaimer or decertification

• Post-disclaimer implementation would be viewed as “growing out of, and being directly related to” the bargaining process

• Privileged by federal labor law • Disclaimer would be strong evidence of impasse – i.e., union had no

further room for movement

• Absence of duty to bargain further after impasse, and clear right of non-union employers to implement

• Prior collective decisions of employer group immune to antitrust scrutiny because plainly made within the bargaining process


• Antitrust Defenses Under “Rule of Reason” • Mackey Issue: Is the rule more restrictive than necessary for a

legitimate business purpose?

• Inherent sports industry needs • Preservation of “on the field” competitiveness is essential industry

• Critical issues include draft, player movement rules, salary caps

• Supreme Court signaled appreciation for such in American Needle v. NFL (2010) (while holding that joint licensing and marketing agreement was not outside antitrust scrutiny):

“The fact that NFL teams share an interest in making the entire league successful and profitable, and that they must cooperate in the production and scheduling of games, provides a perfectly sensible justification for making a host of collective decisions.”


• NCAA antitrust cases regularly uphold all “pro-competitive” rules regarding athletes and rules that equal the playing field

• NCAA v. Board of Regents of University of Oklahoma (1984):

“Rather, what is critical is that this case involves an industry in which horizontal restraints on competition are essential if the product is to be available at all.”

“In order to preserve the character and quality of the "product," athletes must not be paid, must be required to attend class, and the like. And the integrity of the "product" cannot be preserved except by mutual agreement; if an institution adopted such restrictions unilaterally, its effectiveness as a competitor on the playing field might soon be destroyed.”


• “Joint Employer” Defense • League is “joint employer” of players with teams

• If league and teams are “joint employers,” then there can be no collusion finding

• North American Soccer League (NLRB 1978), affirmed (5th Cir. 1980) • union sought joint employer status

• NLRB found joint employer relationship because the league, through the commissioner, exercised a significant degree of control and influence over teams, including over the terms and conditions of player employment

• 5th Circuit affirmed relying heavily on fact all teams had representatives on league’s governing board

CONCLUSION

• Union decertification/disclaimer has been used as a last ditch union tactic to obtain more leverage in negotiations

• Questionable validity • Clearly not sincere disclaimer

• Brady puts validity in further doubt

• Further defenses are available to the leagues • Obvious downside risks in fighting antitrust claims

• But continuous antitrust play and work stoppages brings instability which damage brands to the public

The Role of Decertification in NFL and NBA Collective ... · PDF fileTHE ROLE OF...

Documents

Transcript of The Role of Decertification in NFL and NBA Collective ... · PDF fileTHE ROLE OF...