THE ROLE OF DECERTIFICATION IN NFL AND NBA COLLECTIVE BARGAINING

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1 Presented By: Anthony B. Byergo THE ROLE OF DECERTIFICATION IN NFL AND NBA COLLECTIVE BARGAINING 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 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

3 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

4 A BRIEF SUMMARY OF A LONG HISTORY 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)

5 A BRIEF SUMMARY OF A LONG HISTORY NBPA Formed in 1954 Recognition in 1964 Lockouts in 1995, 1996, , 2011 Landmark player antitrust litigation against league NHLPA Robertson (brought in 1970, settled in 1976) Formed/recognized in 1967 (predecessor in 1950s) Strikes/lockouts in 1992, , (entire season),

6 A BRIEF SUMMARY OF A LONG HISTORY Contrast with MLBPA Formed in 1953 and first agreement in 1968 In season strikes in 1972, 1981, 1985, 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 agreement

7 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

8 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

9 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

10 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

11 NSLE: NON-STATUTORY LABOR EXEMPTION 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.

12 NSLE: NON-STATUTORY LABOR EXEMPTION Mackey v. NFL (8 th 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 (8 th 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

13 NSLE: NON-STATUTORY LABOR EXEMPTION 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

14 THE UNIONS DECERTIFICATION STRATEGY Seizing on the Court s dicta in Brown, the players unions have disclaimed interest (or threatened to) in multiple negotiations NBPA (threatened disclaimer) 2011 NFLPA (disclaimer) 2011 NBPA (disclaimer) NHLPA (threatened disclaimer)

15 THE UNIONS DECERTIFICATION STRATEGY 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

16 THE UNIONS DECERTIFICATION STRATEGY 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

17 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

18 IMPACT OF BRADY V. NFL 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

19 IMPACT OF BRADY V. NFL 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

20 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.

21 ALTERNATIVES TO THE CURRENT PARADIGM 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.

22 ALTERNATIVES TO THE CURRENT PARADIGM 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

23 ALTERNATIVES TO THE CURRENT PARADIGM 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.

24 ALTERNATIVES TO THE CURRENT PARADIGM 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.

25 ALTERNATIVES TO THE CURRENT PARADIGM 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 (5 th 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 5 th Circuit affirmed relying heavily on fact all teams had representatives on league s governing board

26 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