Players on the Picket Line:
Sports Lockouts
Robert A. Boland, Esq.
Academic Chair & Clinical Associate Professor of Sports Management
New York University's Preston Robert Tisch Center
7 East 12th Street, Fifth Floor
New York, 10003
(212) 998-7274 (office)
[email protected]
What is a Lockout?
A lockout is not a strike. A strike is player driven and in the case of the most
recent NFL and NBA lockouts, the players and the player associations would have gone
back to work if they could have. A lockout is under the common law derived from the
National Labor Relations Act (NLRA) and is a corollary to the players’ right to strike,
which is expressly contained in the NLRA. The right to lockout is a right of any
company that has a union to lockout their employees in advance of a strike. This right
can be exercised any time after a collective bargaining agreement has expired. For
example in both the NFL and NBA lockout, the day the collective bargaining agreement
expired, the owner groups voted to lock the players out. Essentially this prevents contact
between the employer and the employees. The employees cannot attend training camps
or practices and cannot receive medical and other benefits that derive from their
employment. In the NFL lockout, this even meant that Dallas Cowboys’ owner Jerry
Jones needed to receive special permission to attend quarterback Tony Romo’s wedding.
The lockout was invoked in order to create a more favorable environment for
collective bargaining. As the employees lose paychecks, the employers gain increased
leverage to force the employees and their unions to compromise on certain key issues.
For instance, the NFL succeeded in reducing the players’ share of revenues from sixty
two percent to fifty percent under the new collective bargaining agreement.
The History of Labor Strife in Sports
Since 1994, essentially every stoppage in professional sports has been a lockout.
The last players strike was the 1994 strike by the Major League Baseball Players
Association. Key factors have led to the lockouts in professional sports. The players in
almost every sport have short careers, in most cases the average career is less than five
years. This means that every lost game check is a vanishing asset to the players who only
have a very limited amount of future game checks to look forward to. This prevents the
players from winning a war of attrition.
Two primary aspects allow collective bargaining agreements and lockouts to
occur. The statutory and non-statutory labor exemption permit and favor lockouts as the
courts value the bargaining process and the lockout is the only way to really end the
previous unfavorable collective bargaining agreement. Under Powell v. NFL, the court
ruled that without a lockout the old collective bargaining agreement extends at
sufferance.
A court has never issued a final judgment on the issue of whether lockouts are in
fact legal. The closest the courts have come to deciding the issue was in the recent Brady
v. NFL case when the district judge ruled that the lockout was a conspiracy and issued an
injunction in order to stop it. This ruling was made because the NFL Players Union
decertified and allowed the players to argue that the lockout was unlawful. However, the
ruling did not stand.
Currently it is in the best interest of the owners to lockout whenever they are
faced with an expired collective bargaining agreement that they do not like. However,
the owners found out the benefit of lockouts by happenstance. In the 1990’s, the NBA
had a number of franchises that were losing money. They instituted a lockout and found
that the lockout caused the players to settle for terms that were favorable to the owners.
They also were not committing any anti-trust violations by continuing to play without a
collective bargaining agreement. In the 1990’s, the NFL found that continuing to employ
players after the union had decertified could potentially run afoul of anti-trust legislation.
During that NBA lockout, favorable terms were given because many of the players began
to run out of money and needed to go back to work.
The NFL Lockout
In the NFL, there was a perfect storm that led to the lockout. Gene Upshaw, the
previous head of the Players Union died suddenly and left a great void as there was no
obvious successor. At the same time Paul Tagliabue, previous commissioner who had a
great relationship with Upshaw had retired. These two had a great working relationship
and had used their political might to broker the 2006 collective bargaining agreement.
When Rodger Goodell was made the new commissioner, he promised that he would get
the owners a more favorable deal when the previous one expired.
At the same time, the players were trying to pick a new union head and were thought to
be deadlocked between Troy Vincent, a previous union head as a player, and Trace
Armstrong, who had similar credentials. Instead, the players agree to make DeMaurice
Smith, who was a Washington D.C. based lawyer, the executive director of the union.
Many believe that he was elected due to his desire to aggressively take on the owners on
a variety of issues. The owners believed that they were at an advantageous position due
to union division and strong unity among the owners. However, no one foresaw the
economic downturn, which led to public opinion being unsympathetic to the positions of
billionaires and millionaires.
While there were a few hardliners among owners, most notably Jerry Richardson,
who was a former player, most of the key owners were moderates, including John Mara
of the New York Giants, Robert Kraft of the New England Patriots, and Jerry Jones of the
Dallas Cowboys. Even with the moderates, the lockout could not be avoided and as soon
as the lockout went into effect, the players union disclaimed and immediately filed
litigation. On the owners’ side, one attorney who became central to the case was David
Boies. He was key in ensuring that the Eighth Circuit Court did not enforce the
injunction that the players had won in Minnesota District Court. He put forth the theory
that the Norris-LaGuardia Act of 1932 prevented the issuance of injunctions in labor
disputes. The Eighth Circuit had enough reservations about this act that they found in
favor of the owners. However, the Norris-LaGuardia Act had never previously been
applied to labor groups that were in a lockout, instead only having been used to prevent
strikes.
After the Eighth Circuit decision, the players lost most of their leverage and the only
thing they could have done was to threaten the beginning of the season, but it is unlikely
that the players would have remained a solid front as time went on.
Another key factor of the end of the lockout was a series of one-on-one meetings
between Smith and Goodell that took place without the presence of their attorneys.
Neither side found that they were too far apart and neither side wanted to jeopardize the
popularity of the league by continuing the lockout.
The end result of the lockout was that not much had changed. The multiplier has
changed to some degree. The NFL is now much more of a fifty/fifty split of all revenue
between players and owners and allows the players to be a vehicle for revenue growth.
One major victory for the owners was getting a ten year collective bargaining agreement
with no opt-out clauses for the players. The players did not get any major victories but
did get an increased salary floor and got back to the four year free agency window. The
players also got several million dollars from the owners to increase health and retirement
benefits. Unresolved issues remain however. The owners wanted a way to get out of
player contracts when the player’s off the field conduct prevented them from playing on
the field, such as with the Michael Vick situation. The players also do not like the
Commissioner’s ability to impose disciplinary actions, almost single handedly.
The NBA Lockout
No one wanted a legal resolution to the NFL lockout than players and owners of
the NBA. Even before the NFL lockout was settled, the NBA locked out its players on
July 1, 2011. The NBA has some teams, maybe up to half its teams, that lose money. In
the NFL, no team loses money. The players in the NBA, before the lockout, got fifty
seven percent of basketball related income. Figuring out basketball related income is no
easy task as it does not contain certain revenue such as luxury box revenue and local
media deals. Another difference is that NBA players have a maximum contract value
that they cannot exceed. This is the fourth labor agreement between Commissioner
David Stern and union head Billy Hunter. The relationship between these two men
dissolved as this round of negotiation went on.
Unlike the NFL, the players did not immediately dissolve the union and it was not
until November that they took steps to disclaim. At this time, the players also hired
David Boies, who had previously been working with the NFL owners. He immediately
came up with a strategy for the players and had the players file two lawsuits, one in San
Francisco and the other in Minnesota in an attempt to get the league out of New York
which has a very broad interpretation of the non-statutory labor exemption. The NBA
owners had preemptively, even before the lockout began, filed suit against the players in
New York in an attempt to establish jurisdiction there. Boies’ strategy was at least to get
the courts debating on which court had proper jurisdiction of the case.
His main strategy was not to use an injunction to end the lockout but to have the players
disclaim the union, sue on anti-trust grounds, and win on summary judgment on the
theory that a lockout is a per se anti-trust violation. This was of great benefit to the
players as a summary judgment motion does not get expedited appeal, meaning that if the
players won, the league would not be able to immediately stop enforcement which would
have put immediate pressure on the owners. This strategy was never carried out to the
end.
The final agreement that the players accepted, was not very different than the
offer that the owners proposed as a final best offer at the onset. The NBA owners
succeeded in getting an amnesty, which allows owners to get out of a player’s contract
counting against the salary cap. The owners also got a fifty/fifty split of revenue instead
of the forty three percent that they were getting before. The only win for the players is
that even though the agreement is for ten years, the players have the ability to opt out
after six years. This is the third straight negotiation round in which the players have
conceded issues.
Lessons from the Lockouts
Not much was learned from the lockout that attorneys did not already know. We
learnt that lockouts are legal, or at least no court enforced the notion that lockouts are
illegal. Also, lockouts remain a valuable ownership tool.
Decertification is a tool of the players to try to get away from the lockout doctrine, but
has not really succeeded. Also, lockouts are helpful to the owners to get concessions
from the players.
Lockouts can hurt the league by creating negative public image and that owners
also want to settle fairly quickly in order to preserve league image and popularity.
American Needle v. NFL involved a hat manufacture who wanted to get the right
to make sideline hats for NFL team. The NFL had already assigned this right to Reebok
who was also a partially owned licensee of the league itself. American Needle filed a
lawsuit arguing that this was an anti-trust violation. The league was successful at both
the district court and the Seventh Circuit Court of Appeals in arguing that they were a
single entity and therefore incapable of conspiring under the Copperweld test, as they
could not conspire with themselves. Under long held notions, a sports league needs a
specific exemption from anti-trust law in order to function. The single entity argument
put forth by the NFL would have changed that as they would no longer need these
exemptions as they are a single entity and could never meet the tests under anti-trust law.
There would give almost full immunity intrasport between the league and its teams.
However, the Supreme Court granted certiorari and ruled unanimously in favor of
American Needle and put to rest the single entity argument.
The fact that 2011 was the year of the lockout was probably inevitable as soon as
the economy collapsed in 2008 causing owner margins to drop. Additionally, no clear
winning was declared from the courts as lockouts were not deemed illegal and single
entity theory was struck down. The big winner, therefore, is collective bargaining itself.