Kevin Jackman

To:

From: Kevin Jackman and Bobby Mette

Re: The Legality of the Current NFL Lockout

Date: May 31^st, 2011

Issue:

The NFL and NFLPA are currently in the midst of a major labor dispute that has been playing out both in the board room and the court room. Since the deadline passed more than two months ago, an indefinite lockout of the players has been in full effect. Aside from a temporary stay granted by a court in Minnesota, players have not been allowed to train at team facilities, sign with new teams, or collect pay checks.

A lockout occurs when two sides fail to create, or renew, a collective bargaining agreement, resulting in an impasse. Either side has the right to decertify, or file appropriate paper work to the courts in order for them to hear the case at hand. There are two types of lockouts, offensive and defensive lockouts. The offensive lockout occurs when the employer locks out the employees to try and get them to meet an agreement that benefits the employer. The defensive lockout occurs when the employer locks out the employees in order to avoid harm that can be done to the employer’s business.

Professional sports have had many bright spots, but they have also had many times when their respective leagues were in quite a pickle. The “big four” sports: football, baseball, basketball, and hockey have all had labor disputes dating back to 1972. The main problems that can arise from labor disputes are the consequences of a shortened season or even no season at all. When owners and players cannot agree on specific terms for a new contract, they take a long time to settle on an arrangement. In pretty much every time, the argument is over money. Players think they deserve to earn more money from the league because they are the ones who work hard each day. They also try to receive more health insurance for if they get injured, they will be taken care of. Lastly, professional sports can take a toll on one’s body, so when an athlete retires from sports, they will more so than not want to retire for good. They will need to earn benefits from the league in the future so that they can continue to take care of their families. Owners on the other hand feel that they need more money because they are the ones who run the entire team. They take all of the risks, and they pay everyone. The team owners usually own the stadiums and they want more money so that they can continue to manage their dealings to the best of their abilities. If these two sides cannot come up with something, then both the players and owners suffer, but most importantly, so do the fans. Fans bring a lot of money into the league, and if there is no agreement, then the fans cannot enjoy their favorite games. Now, each league goes through a lockout or a strike every once in a while, so it does not occur frequently, but when it does, it can cause many problems.

Questions Presented:

What events led up to the current NFL Lockout?

By decertifying, what implications does that present when negotiating a new collective bargaining agreement?

Did the owners violate antitrust laws by securing “lockout funds” from television stations?

Analysis:

Overview of Professional Sports Lockouts and Strikes

In the past 40 years there have been a total of 16 strikes and lockouts among the four major sports. This includes eight in Major League Baseball (MLB), three in the National Hockey League (NHL), three in the National Football League (NFL), and two in the National Basketball Association (NBA). There has only been one time a season was lost entirely. This occurred in the NHL when the entire 2004-2005 season was cancelled. There have been many instances; however; that resulted in the majority of the season being destroyed as well as the most entertaining part of the season, the playoffs. The only NBA lockout occurred in the 1998-1999 season, during which each team only played 50 games. The 1994-1995 MLB strike lost most of the season for all of the teams including the World Series in 1994. The worst NFL lockout to date occurred in 1982, which shortened the season to only nine games. Many times, leagues have been able to finalize a deal and not miss much or any time at all. The 1992 NHL strike lasted only 10 days and no games were lost. Only one week was cancelled in the 1987 NFL strike. The MLB strike of 1980 and lockouts of 1976 and 1973 each lasted no more than two weeks and did not lose any games in result. As time goes on, there will be more and more occurrences of labor disputes. It seems as if the worst lockouts have occurred more recently, which can only mean for worse things to come. Here is a more specific look at some of the past labor disputes in sports other than the NFL and why they are different from the current NFL lockout. [1]

NHL Lockouts

Starting off with the NHL, the 2004 lockout mentioned earlier was the first sport ever to lose an entire season. The players and the owners each proposed their own ideas to a new salary cap. The players wanted $49 million per team, while the owners wanted $42.5 million. Eventually, an agreement was settled, but only after the season was lost. This lockout has been compared to the current NFL lockout because of the loss of cooperation among players and owners. The 1994 NHL lockout lost 34 games for the league and established a salary cap for rookies. The players won the 1992 NHL strike in which changes were made to free agency as well as the fact that players would receive playoff bonuses. [2]

NBA Lockouts

Going back to the 1998 NBA lockout, 32 of the 82 regular season games were cancelled during the season. The lockout carried on from the offseason until about halfway through the season. The owners wanted to change the salary-cap rules, while the players were working towards increasing the league minimum pay. The other NBA work stoppage occurred during the 1995 offseason, which did not affect the amount of games played, but the labor peace would not last long as a new collective bargaining agreement would be needed in a few years. The current collective bargaining agreement expires on June 30, 2011, so the owners and players have until then to reach an agreement or else they may end up in the same situation as the NFL. 2

MLB Lockouts

The idea of collective bargaining between the owners and players in the MLB began in 1968. Since then, there have been eight work stoppages, three of which have resulted in a shortened season. The Major League Baseball Players’ Association (MLBPA) is a union created to help players earn their rights as everyday athletes. The Major League Umpires Association (MLUA) was also created to help protect the rights of umpires. They even have had many strikes of their own, many of which ended up failing. The MLB strike in 1994 was the worst baseball has yet to see. The issue here was whether or not there would be a salary cap added into the league. The MLB is the only sport that does not have one. Many people believe having a salary cap makes teams fairer. The problem with baseball is that many times, small market teams miss out on adding top players, while large market teams like the Yankees are always in the mix to acquire a big bat or arm. A salary cap was not added, but a revenue-sharing system was implemented.  The increase of the league minimum salary was the result of the 1990 MLB lockout. Salary arbitration and the league minimum salaries were the key issues in the 1985 MLB strike. The only real loss during the 1981 MLB strike was when the All-Star game had to be moved from July to August. Owners did not like the rules regarding free agency and the compensation teams would receive when losing a player to free agency. Teams were then allowed to select an unprotected player from another club, which ended the strike. A four-year agreement was made during the 1980 MLB strike, but the issue of free agency would continue the following season. No games were lost during this event. The MLB lockout of 1976 contained the issues of salary arbitration and when a player would become eligible for free agency based on the amount of service in the league. The 1973 MLB lockout was similar to the one from 1976 in which negotiations consisted on player arbitration. The 1972 MLB strike was the first professional sports strike to occur, and it resulted in the increase to the pension amount and the loss of a small portion of games. [3]

NFL Lockouts

Before the current lockout, the NFL had been experiencing the longest labor peace between players and owners among the four major sports. It could, however; go from very strong to very weak in the next few months. The 1987 NFL lockout was quite interesting because replacement players were brought into the league for three weeks. Players were not happy with this, so they eventually returned to their teams, and only one week was cancelled in total. The 1982 NFL strike was shortened because the players’ union believed the athletes should be receiving a higher income. In 1974, the strike did not last long and no games were lost. Like the MLB, officials had a strike of their own back in 2001. The NFL locked out the National Football League Referees’ Association (NFLRA), and officials from many other football leagues were brought in to help call games. An agreement was made a couple days after the 9/11 attacks with the owners coming out on top. Many of the previous lockouts and strikes had many ups and downs, but the current NFL lockout could be the worst any of the sports has ever seen. 3

NFL v. NFLPA

After more than two months of back and forth negotiations, the NFL and their players remain in a deadlock on a new collective bargaining agreement for the 2011-2012 season. During that time, the courts have been hearing issues concerning the legality of the actions made by the owners pre-lockout, at one point even lifting the lockout for a brief period of a day and a half.

To understand the current dispute between the National Football League and the National Football League Player Association, it is necessary to first look at the inception of the league, how it has grown to be the powerhouse of the modern day sports world, and the major conflicts that have plagued the game over the course of the last decade. Next, we will take a look into some of the major sticking points of the current labor dispute that include revenue sharing, rookie wages, and player health issues. Finally, after presenting all the necessary background information, we will be looking at the legality of the actions made by the 32 owners that comprise the NFL and determine whether or not the current lockout is legal. [4]

The Beginning of the National Football League

While football had been around in various forms for longer than the existence of the NFL, the league was not formally created and properly named until 1922, being referred to as the American Football League Association. At its inception, the NFL was comprised of only eleven teams, expanding to 32 in its modern day format. Over the course of the following forty-three years, the league saw continual growth in both revenue and overall popularity in American society. In 1965 the National Football League even overthrew one of its biggest competitors, Major League Baseball, formerly tagged as “America’s pastime” as the most popular sports league in the United States.

The following year, the NFL began a merger with the American Football League that was ultimately completed in 1970. That year, two major events occurred that jettisoned the NFL towards major prosperity. First, the NFL introduced their new championship game called the “Super Bowl”, quickly becoming one of, if not the most, popular sporting event in America. The second event was when the American Broadcast Company (ABC) began announcing live NFL games on Monday night, which greatly increased the visibility of the league. With that move, ABC began what had now become an enormous partnership between the NFL and five separate television entities- ABC (ESPN), NBC, Fox, CBS, and Direct TV, which will be discussed later on. 4

The Formation of the NFLPA

Prior to 1968, the owners of NFL teams held unopposed power to decide all legal and financial situations that arose. That year, however, the NFLPA formed, and was properly recognized by the National Labor Relations Board in 1970, the same year as the aforementioned NFL-AFL merger. Until 1976, the power of decisions had been relatively balanced, but still favored the owners of each NFL club. That changed when the first major dispute between the league and its players went to court in the form of Mackey v. NFL. Prior to the lawsuit, the “Rozelle Rule” in the NFL was restricting several players from what they argued as free employment, a quintessential component of the Sherman Act. 4

Disputes between the NFL and NFLPA

In 1982 and then again in 1987 the players had a strike, primarily in order to receive a larger portion of the gross revenue. Neither strike was particularly successful, though the 1987 strike was an absolute disaster for the players’ association. After a mostly unsuccessful attempt in ’82, the owners better prepared themselves with backup players and a fund that would go in effect in the event of a lockout. So in 1987 when the players tried another strike, it quickly dissolved as many of the players with no other means of income crossed the picket line before any of the union’s objectives were completed.

However, the two strikes helped start an important series of events. Soon after the failed 1987 attempt, the union decertified and filed several lawsuits in order to bring the NFL to the negotiation tables. This time it worked, as the threat of a class action lawsuit forced the commissioner and the rest of the NFL to create free agency, the main object of the suits. In exchange the NFL imposed a new salary cap that would be imposed during the 1988 season. While on paper it seems like it was a negotiated exchange of new rules, this was the union’s second win against the NFL in the courtroom, which quickly became their medium of negotiation.[5]

The NFL- Single Entity or 32 Owners?

One of the major roadblocks to the recent impasse is deciding whether or not the NFL must act in accordance to the Sherman Act. It depends on if they are a single entity, which is one large business consisting of 32 owners all abiding under a single decision making body, or 32 separate profit generating franchises, all with their own management and means of operating. This is not a new subject that the NFL has had to deal with in recent years. In multiple instances, the NFL has dealt with the issue of unity and possible coercion. The following are cases that address some of the problems the commissioner, his office, and the owners have had.

The Sherman Act, Section 1

The Sherman Act states that “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished….” 6

The Sherman Act is right in the middle of all the controversy surrounding the NFL. If the National Football League is, as they say they are, a single entity, then any act would not be subject to suit under the Sherman act. However, if deemed to be 32 separately owned franchises without a single governing body, then any action made regarding the restriction or elimination of competition is entirely subject to violations and penalties. [6]

The Rozelle Rule

The Rozelle Rule stated that “Any player, whose contract with a League club has expired, shall thereupon become a free agent and shall no longer be considered a member of the team of that club following the expiration date of such contract. Whenever a player thereafter signs a contract with a different club in the League, then, unless mutually satisfactory arrangements have been concluded between the two League clubs, the Commissioner may name and then award to the former club one or more players from the active, reserve, or Selection List (including future selection choices) of the acquiring club as the Commissioner in his sole discretion deems fair and equitable; any such decision by the Commissioner shall be final and conclusive.”7

The Rozelle rule effectively hindered every player’s movement in the NFL by placing penalties on the signing team for giving a player a contract. While it may have initially helped balance the league and halt any large-budget teams from gaining a significant advantage, it severely limited what players could do after their contracts expired, pushing them in to free agency. At the time, John Mackey was the head of the NFLPA and when he brought this suit against the NFL, the court decided in favor of the union, scoring the first major win for the player’s association. [7]

American Needle Inc. v. NFL

Up until 1999, American Needle had the right to manufacture and distribute merchandise of the NFL and all the logos and names that the NFL is comprised of. However, in 2000, the NFL, acting as a single entity, created a partnership with Reebok to outfit each one of their teams and hold the exclusive rights to the team’s logos, colors, etc. American Needle sued the NFL claiming it had violated the Sherman Act and does not have the right to make an exclusive deal for all 32 teams, thus eliminating any competition with Reebok. The Supreme Court took this case, and, in 2010, decided unanimously that the NFL was in fact not a single entity; it is 32 separately owned franchises, therefore subject to penalties under the first two sections of the Sherman Act. This was an enormous decision by the courts because of the lack of prior ruling in this area before. The American Needle v. NFL case could work very much in favor of the players’ association when it comes time to finally decide the case on June 3, 2011. [8]

Brown v. Pro Football

During the 1987 collective bargaining agreement negotiations, the league wanted to implement a new “developmental squad” that would consist of six players. Those who signed up to be on the practice squad would be paid 1,000 dollars a week. However, under the offer the owners gave the NFLPA, those players would not receive the benefits and protections similar to those provided to regular players. However, due to an impasse in negotiation, the NFL went ahead with their plan and implemented the new rule without the consent of the players’ association and bargaining with the players association. Shortly thereafter, 235 squad players brought a suit against the league, arguing that by issuing the contracts unilaterally and without benefits, the NFL violated the first section of the Sherman Act. After the first round through the courts, the replacement players were awarded 30 million dollars, but after the Supreme Court took up the case, they reversed it, stating the NFL had not violated the Sherman Act, and no monetary damages would be awarded to the plaintiffs. [9]

The Current Labor Dispute

Today, the NFL and NFLPA have a slew of problems that must be dealt with before a new collective bargaining agreement can be reached and the 2011-2012 calendar football year can begin. There are three main problems with the current NFL lockout. These include revenue sharing, rookie wage scale, and player safety.

Revenue Sharing

Though the NFL is a very profitable league, the rising cost of stadiums, players, and taxes have reportedly become a problem for team owners in recent years. Due to those costs, the owners claim they need an additional billion dollars added on off the top of the revenue sharing scheme that the NFL and NFLPA had already established in 2006. Resisting their proposal, the players association shot it down and established a push for putting a portion of that money towards retired players, which will be discussed further down. [10]

The Rookie Wage Scale

The rookie wage scale seems to have been agreed upon between the owners and players.  The past standard states that any player drafted within the first 16 picks can sign a six-year contract with their team, and any player drafted within the picks 17-32 can sign a five-year contract. The owners wanted the rookies drafted in the first round to be able to sign five-year contracts because this would allow good players to stay on teams for longer without signing a new contract that would pay them more money. They instead dropped their proposition and settled on rookies being able to sign four-year contracts. The clause is expected to limit the amount of guaranteed money and signing bonuses. It is unknown how much less money will be earned by the top draft picks. It is highly likely that their salaries will be much lower than the most recent draft classes’ salaries. [11]

Player Safety

The NFL today has more knowledge at their disposal than ever before on a vast amount of injuries, primarily the effects concussions have on athletes. Now, the NFL and their training staffs are able to diagnose, treat, and help a player get back significantly better than in the past. But one of the major sticking points of the labor dispute are the numerous retired players who suffer from a variety of disorders and syndromes that are triggered by head trauma. While the owners want to take an extra portion off the top of the revenue, the NFLPA would like that money to be directed towards aiding the retired players who suffer today.

A survey was completed by Linda Cottler of Washington University and in accordance with ESPN on the drug use of retired NFL players. Of the 644 they contacted, a little more than half actually completed the survey. Among those 350 or so individuals, 52 percent reportedly used a drug called opioid during or after their careers while 71 percent of those who used it actually misused it. In addition, 15 percent of the retired players continue to misuse painkillers to this day due to the lasting effect of football on their body.

The issue of aiding former players is a major point that the NFLPA refuses to give up ground on. Unfortunately, the owners insist on skimming off an extra billion dollars of the total revenue of the NFL.[12]

NFL Securing Lockout Funds

We previously talked about the enormous deal that the NFL has in place with the five TV companies, and that is no insignificant detail. In anticipation of the looming deadline for the CBA, the NFL secured 2 billion dollars for a lockout fund from the TV partners. In a decision from Judge Doty, she stated that securing the funds was a violation of the Sherman Act to make a ‘good faith’ attempt at avoiding a lockout. She then lifted the ban, only to have it reinstated 36 hours later on appeal by the NFL.

 Effects of an Uncapped Year

The 2011 NFL lockout will have many affects on the league. Players’ salaries and teams’ payrolls will be greatly affected. Many people think that in an uncapped year, teams will try and lower their athletes’ salaries. If there is no minimum salary requirement, then owners would be able to negotiate with any player since there would be salary room for every team. It was calculated that since the last collective bargaining agreement in 2006, owners have lost $.06 while the players have gained $.75 for every dollar that the NFL has earned. The owners could change this drastically by offering lower-salary contracts to free agents and rookies. The major problem here pertains to the fact that if the owners act together in this salary-lowering process, then it would violate the league’s antitrust law.

If there were to be an uncapped year, then player movement would be changed. Players who have been in the league for at least six years would be eligible for unrestricted free agency, which is highly beneficial to the players. This means that they would be allowed to negotiate with any team once their contract is up. This does mean that players who have not been in the league as long would not reap the same type of benefits. The Final Eight Plan could result from an uncapped year, which means that the top four teams from each conference would be limited on which free agents they would be able to sign.

An uncapped year could also have a large effect on player benefit programs. One of which is the 88 Plan, which offers medical services to retired athletes who appear to be suffering from dementia, a disorder largely associated with football players due to the physical contact. This plan along with others could be completely destroyed due to the uncapped year. [13]

Suggested Action:

After reviewing the previously debated issues between the NFL and the NFLPA, there are several actions that can be taken. In terms of the revenue sharing, right now there is $9 billion that is currently being negotiated upon where it will be given. The owners want to split it up 60-40 in favor of the players after taking out $1 billion for themselves. We think that the 60-40 proposition seems legitimate, but the $1 billion that would be taken off the top should be split up $500 million each. It is important that the players receive money because football takes a large toll on their bodies’ so being able to take care of themselves once retiring is very important. On the other hand, they knew what they were getting into from day one and the health risks they were pursuing should have been at the top of their minds when they decided to play professional football. That’s what we think regarding the players. As for the owners, since many stadiums are becoming more and more expensive, it would only seem fair that they too receive a large portion since it takes a lot to finance a professional organization. On the other hand, they know beforehand how much a purchase will cost so they should be wary on how much money they can afford to spend before actually buying a jumbo-tron the size of Illinois (Jerry Jones, owner of the Dallas Cowboys).

The deal that was made regarding the rookie wage scale seems appropriate since it satisfies both sides’ needs. The owners will not have to pay rookies as much money since their salaries will go down, but on the other hand, the players will sign shorter-term contracts so that if a player succeeds within his first few years in the league, they can sign a new contract sooner than before. This makes sense because no rookie should be paid as much as some of the most recent rookies have been paid. Last year’s top pick, Sam Bradford of the St. Louis Rams, was the highest paid rookie ever after being injured at the end of his last year at Oklahoma University.

We think that the Supreme Court should not be involved in this issue. They should have better things to be reviewing. Sports is the one area that should not be taken to court. This case needs to be decided between Roger Goodell, commissioner of the NFL, and DeMaurice Smith, head of the NFLPA. They need to reconcile and settle the arrangements on their own.

Sources:

“Labour Disputes in North American Sports.” Toronto Sun 2 May 2010. n. pag. Lexis Nexis. Web. 10 May 2011. <http://www.lexisnexis.com/hottopics/lnacademic/&gt;.

Castellano, Anthony. “No game today; A history of work stoppages in major U.S. professional sports.” Newsday 6 Mar 2011. n. pag. Lexis Nexis. Web. 10 May 2011. <http://www.lexisnexis.com/hottopics/lnacademic/&gt;. 

Lattinville, Boland, Speyer, Robert, Robert, Bennett. “Article:Labor Pains: The Effect of a Work Stoppage in the NFL on its Coaches.” Marquette Sports Law review (2010): n. pag. Lexis Nexis. Web. 10 May 2011. <http://www.lexisnexis.com/hottopics/lnacademic/&gt;.

Redding, Peterson, Michael, Daniel. “Symposium: Labor and employment law issues in sports: third and long: the issues facing the NFL collective bargaining agreement negotiations and the effects of an uncapped year.” Marquette Sports Law review (2009): n. pag. Lexis Nexis. Web. 30 May 2011. <http://www.lexisnexis.com/hottopics/lnacademic/&gt;.

“Report: NFL, Union agree on rookie wage scale.” CBS News (2011): n. pag. Web. 10 May 2011. <http://www.cbsnews.com/stories/2011/03/09/sportsline/main20041311.shtml&gt;.

Leblanc, Scott. “American Needle, Inc V. NFL: professional sports league and “single entity” antitrust exemption.” Duke University Law School (2010): n. pag. Lexis Nexis. Web. 10 May 2011. <http://www.lexisnexis.com/hottopics/lnacademic/&gt;.

“Antitrust Law and the NFL.” TalkLeft: The Politics of Crime 16 Mar 2011: n. pag. Web. 10 May 2011. <http://www.talkleft.com/story/2011/3/16/154158/788&gt;.

Cottler, Linda. “Injury, pain, and prescription opioid use among former National Football League players.” ScienceDirect (2011): n. pag. Web. 10 May 2011. <http://www.sciencedirect.com/science/article/pii/S0376871611000020&gt;.

Jost, Kenneth. “Is the NFL doing enough to protect players?.” CQ Press 20.4 29 Jan 2010. n. pag. CQ researcher. Web. 10 May 2011. <http://library.cqpress.com/cqresearcher/document.php?id=cqresrre2010012900&type=hitlist&num=0#NOTE%5B35&gt;.

 “Sherman Anti-Trust Act (1890).” ourdocuments.gov. ourdocuments.gov, 2 Jul 1890. Web. 10 May 2011. <http://www.ourdocuments.gov/doc.php?flash=true&doc=51&gt;.

Brown v. Pro Football, Inc, 518 US 231 (1996)

Mackey v. National Football League, 543 US 606 (1976)

---