Pro Sport – Collective Bargaining
Collective bargaining
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
procedure whereby an employer or employers agree
to discuss the conditions of work by bargaining
with representatives of the employees, usually a
labor union.
terms and conditions of employment (wages, work
hours, job safety, or job security) or a consideration
of the collective relations between both sides (the
right to organize workers, recognition of a union, or
a guarantee of no reprisals against the workers if a
strike has occurred).
The parties often refer to the result of the
negotiation as a Collective Bargaining Agreement
(CBA)
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Pro Sport – Collective Bargaining
Benefits of CBA
http://www.americanprogressaction.org/issues/2010/09/nfl_labor_agreement.html
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Pro Sport – Collective Bargaining
Franchise values
http://www.americanprogressaction.org/issues/2010/09/nfl_labor_agreement.html
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Pro Sport – Collective Bargaining
Monopsony買主獨家壟斷
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Only 1 consumer, use their power to drive
down the price
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Reserve clause in MLB until 1970s
When TV stations are few, broadcast fees
may reduce
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Pro Sport – Collective Bargaining
Collective bargaining
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As an essential process in labor relations, collective
bargaining was first developed in Great Britain in
the 19th century.
It has since become an accepted practice in most
Western countries with a high level of
industrialization.
The National Labor Relations Act of 1935, known
as the Wagner Act, established the right to
collective bargaining in the United States
Usually include: luxury tax, revenue sharing, salary
cap, minimal salary, draft, pension plan…
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Pro Sport – Collective Bargaining
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Pro Sport – Collective Bargaining
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Recent work stoppages
in professional sports
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Unable to reach collective bargaining
agreement between owners and players
NHL
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Pro Sport – Collective Bargaining
2004-2015 lockout: the first major American sports
league to lose an entire season to labor
2012-13 lockout: cancelled 41.5% games
NBA: Cancellation of one-half of the 19981999 due to lockout, 2011 lockout
8
Recent work stoppages
in professional sports
Pro Sport – Collective Bargaining

MLB: the most among 4 major leagues, but
stable in the past 20 years
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Cancellation after Aug 1994, postseason, delayed
start of 1995
NFL: no strike/lockout after 1987
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Pro Sport – Collective Bargaining
Timing of work stoppages

Player strikes tend to toward the end of
season
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Players already collected most salary
Lockouts tend to in beginning of season

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Work stoppage toward end of season is
expensive for owners
Owners receive significant revenue from
playoffs
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Pro Sport – Collective Bargaining
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Intervention analysis
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General public’s ‘disgust’ against labor
conflicts in professional leagues is short-term
None of the impacts of strikes on attendance
is permanent
Schmidt & Berri, 2004
Pro Sport – Collective Bargaining
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Average yearly attendance
Schmidt & Berri, 2004
Pro Sport – Collective Bargaining
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Average yearly attendance
Schmidt & Berri, 2004
Pro Sport – Collective Bargaining
Reserve clause
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In 1800s, talented players found ‘contract jumping’
increase salary
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Owners of remaining NL teams reached a secret
agreement: each team reserve 5 players who can not
be touched by other teams
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Cause financial problem, even collapse of teams
Very successful in stopping increase in salary
By 1890s every contract include a reserve clause
Reserve clause: contract can be automatically
renewed for 1 year upon expiration by team, even
without player’s signature

A new contract also include reserve clause
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Pro Sport – Collective Bargaining
Formation of MLBPA

John Montgomery Ward, SS with NY Giants,
formed Brotherhood of Professional Baseball
Players in 1885
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Formed in 1954, unhappy in discussion for
improved pension plan
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Fight reserve clause and salary cap
Brotherhood collapsed in 1891 after failure of its Players
League
Bob Feller as first president
Although not a bargaining unit, agreed with owners for
60% TV revenue from AS/WS for players’ pension fund
Hire Marvin Miller, negotiator for Steelworkers
Union as president, gain bargaining power
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Pro Sport – Collective Bargaining
CBA in MLB
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First CBA in 1968
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Second CBA in 1970
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Formal grievance procedure which allow players to file
complaints against owners who violate their contractual
rights, with commissioner as arbitrator
minimal salary
Increase in minimal salary, limit salary cut to 20%
Impartial arbitration process
CBA in 1973 after 12 days of lockout

Salary arbitration, 10-and-5 rule
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Pro Sport – Collective Bargaining
Dismantling of reserve clause
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Dodgers pitchers Don Drysdale, Sandy Koufax
formed 2-person negotiating team in 1965
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Curt Flood sued MLB for damage and free agency
in 1970, financially supported by MLBPA
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Hire a lawyer as agent
Owner O’Mally outraged but finally gave salary rise
Lost in Circuit Court and Supreme Court
Catfish Hunter signed 2-year contract with Charlie
Finley of A’s in 1974
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Part of money paid to insurance fund, which Finley did
not pay in 1974
Arbitrator ruled that contract is voided, Hunter signed
with Yankees in 1975 for 3-year lucrative contract
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Pro Sport – Collective Bargaining
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Dismantling of reserve clause

Dave McNally (Expos) and Andy Messersmith
(Dodgers) unhappy with club offers
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Did not sign contract in 1975
Team renew their contract according to reserve clause
Grievance panel arbitrator ruled in Dec 1975, that
contract can be renewed without player’s signature only
once, granted free agency
CBA in 1976
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Owners outraged by free agent ruling, preseason lockout
Agreement for all players with 6 years of MLB
experience as free agents
Salary arbitration for players with 2-5 years MLB
experience (Super Two, top 17% of 2-3 years experience)
Pro Sport – Collective Bargaining
Collusion by MLB owners
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Owners reached a secret agreement after 1985
season to restrict FA movement
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Owners use ‘information bank’ after 1987 season
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Collectively refused to sign any FA whose previous
teams were interested in retaining them
Star players Kirk Gibson, Andre Dawson could not draw
interest in FA market
MLBPA filed grievance in 1986 and 1987
Share information about offers to FA
MLBPA filed grievance again
Arbitrator ruled against owners, settled form 280 M

Distributed to individual players by MLBPA
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Problems in MLB
CBA negotiation

Owners can not agree with one another
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Pro Sport – Collective Bargaining
Big-, medium-, small-revenue teams want different
things
Current commissioner Bud Selig not a good negotiator,
also threaten to fine owner who speak freely
Distrust between owners and players
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Salary cap always an issue but no agreement
Salary cap guarantee certain percentage of revenue go to
player salary, not a bad thing for players
Players do not trust owner for revenue numbers
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Pro Sport – Collective Bargaining
Donald (Don) Fehr
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lawyer
Executive Director of MLBPA 1985-2009
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assisted MLBPA in Andy Messersmith and Dave
McNally arbitration case in 1975
beat the owners for collusion issue in 1985
Led player strike in 1994-95, fight against salary cap,
replacement players, contraction
Unite players against owners, set fund to cover lost wage
Executive Director of NHLPA 2010-now
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2012-13 lockout
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Pro Sport – Collective Bargaining
Oscar Robertson suit in 1970
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antitrust suit filed by the NBA's Players
Association against NBA
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Robertson the president of the PA
prevent ABA-NBA merger (less competition for
players, lower salary)
draft, option clause and other rules restricting player
movement were violations of antitrust laws
Settlement in 1976

ABA-NBA merger
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league agreed to let players become free agents in
exchange for their old team's "right of first refusal" to
match any offer they might receive
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)

http://www.nbpa.com/cba_articles.php
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Players will be guaranteed to receive 57% of league
revenues (BRI), the same percentage paid to players
the last two seasons.
The Salary Cap will increase from 48% to 51% of
BRI
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luxury tax level will be set at 61% of league
revenues
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All Cap exceptions will remain unchanged
the same level as in the 2001-02 – 2003-04 seasons
The maximum length of a player contract reduced
from 7 to 6 years for a team’s own players, and
from 6 to 5 years for other players
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)
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maximum annual increases in multi-year contracts
reduced from 12.5 to 10.5% percent for team’s own
players, and from 10 to 8% for other players
Players subject to 4 random drug tests per season
 ↑penalties for use of performance-enhancing drugs
age limit for entering the draft increase from 18 to
19 (plus one year removed from high school).
Players have the right to an arbitrator’s review of
suspensions for on-court misconduct > 12 games
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previously, no arbitrator review for any suspension
Players in their first 2 seasons in the league may be
placed on NBA Development League for skills
development.
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)
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increase in benefits and pension
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Moving expenses (after being traded): hotel, rent
Meal expense allowance: $102/day in 2006, plus
cost of living adjustment afterward
Pension for ‘Pre-1965 player’: $200/month for
each ‘year of pre-1965 credited service’
Pension Plan: maximum monthly amount
permitted under Internal Revenue Code
Medical and dental insurance benefits
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)
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Early termination option in contract
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Option buy-out
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Amount less than 50% of option year salary
Travel accommodation
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Exercisable only once, takes effect no earlier than the end
of 4th season
First class hotels, extra-long beds, individual room, first
class in flight
Broadcast/telecast rights

NBA, Properties, Media Ventures, and NBA Teams have
right to use, distribute, license any performance by
players for any form
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)
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NBA Development League
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NBA team may at any time assign player (with 0-1 year
of service) on its active or inactive list to NBADL team
The player should report to NBADL within 48 hr
May return to NBA team at the direction of NBA team
A player can receive no more than 3 assignments to
NBADL in one season
NBADL assignment can NOT be used for the purpose of
disciplining or retaliating (against player for exercising
his right under CBA)
Player continue to receive compensation, benefits,
insurance in his original contract while in NBADL
Injuries in NBADL considered as injuries in NBA
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)

Drug testing: increased tests and penalties
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For both recreational drugs and performanceenhancing drugs
4 random tests a season
10 and 25 game suspensions for the first two
violations, a one-year suspension for the third
violation, disqualification from the league for a
fourth violation.
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)

Rosters
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Each team is required to carry 12 players on its
active list and 1 player on its inactive list (which
will replace the injured list).
maximum 3 players on their inactive list
Players sent to the NBADL continue to count on
a team’s inactive list.
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)
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Restricted Free Agent: subject to a Right of First Refusal in
favor of the Team (“ROFR Team”)
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A team must exercise its options for the third and fourth seasons of a
Rookie Scale Contract in order to have first refusal rights
during the second Option Year of a First Round Pick’s Rookie Scale
Contract, the player’s Team may make a Qualifying Offer
If such a Qualifying Offer is made, then the player become
Restricted Free Agent
Any Veteran Free Agent (other than a First Round Pick
whose first Option Year or second Option Year was not
exercised) with 3 or fewer Years of Service


if Prior Team makes a Qualifying Offer, the player become
Restricted Free Agent, subject to “ROFR Team”
If such a Qualifying Offer is not made, then the player shall become
an Unrestricted Free Agent on such July 1.
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)
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Restricted free agent
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Non-ROFT team (and the player preferred team)
can offer restricted FA with contract outlines in
Offer Sheet
If the ROFR Team does not give the First
Refusal Exercise Notice within the 7 day period,
then the player and the New Team shall be
deemed to have entered into a Player Contract
containing all of the terms and conditions
included in the Uniform Player Contract attached
to the Offer Sheet
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Pro Sport – Collective Bargaining
NBA’ CBA 2005(06)-2010(11)
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Unrestricted Free Agent
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If such a Qualifying Offer is not made, then the
player shall become an Unrestricted Free Agent
on such July 1.
If a Team does not timely exercise its Option
with respect to the first or second Option Year of
a player’s Rookie Scale Contract, the player
become an Unrestricted Free Agent.
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Pro Sport – Collective Bargaining
NFL’s CBA: 2006-11 (actually 2008)
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http://www.nflplayers.com/user/template.asp
x?fmid=181&lmid=622&pid=0&type=l
Owners opt out of CBA in May 2008
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Original CBA allowed either side to negate the
contract by Nov. 8, 2008
could lead to a season without a salary cap in
2010 and a possible lockout in 2011
Settled and signed new 10-year CBA in 2011
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Pro Sport – Collective Bargaining
NFL’s CBA: 2006-11 (actually 2008)
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SALARY CAP:
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REVENUE SHARING:
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$102 million for 2006; $109 million for 2007; $116 million for 2008,
(94.5 M in 2005 )
To be determined in future years by revenue.
Owners' contribution to salary pool starts at just under 60%.
Top 15 revenue-generating teams contribute, with the top five teams
giving the most.
The bottom 17 teams don't contribute to the pool,
Expected to add 850-900 million over the life of the contract
Tuition reimbursement program
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~100 players enrolled in executive education program in Harvard
Business School and Wharton School of UPenn
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Pro Sport – Collective Bargaining
NFL’s CBA: 2006-11 (actually 2008)
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ROOKIES:
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FRANCHISE PLAYERS:
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Players drafted in first round can sign contracts >5 years.
Those drafted in rounds 2-7 can sign only 4-year deals
Discontinues the practice of some teams of protecting a
player with the ''franchise'' tag for more than 2 years.
In the third year, ''franchise'' player becomes ''transition''
player, making it easier to leave.
Player benefits are substantially improved,
including expanded post-career medical coverage.
continued support from the union for stadium
construction, youth football, NFL Europe League
and other initiatives.
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Pro Sport – Collective Bargaining
NFL’s CBA, 2009-2010
End in March 2011
Team salary
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Cap: $123 M in 2009, none in 2010
Floor: $107.748 M in 2009, none in 2010
Final league year: 2010 season
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Substantial restriction on free agency
Reduction in players benefits, player annuity年金,
severance pay遣散費, performance-based pay (325 M
in 2009)
Restricted free agent
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In capped years, after 3 years
In uncapped years, after 3-5 years
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Pro Sport – Collective Bargaining
NHL’s CBA 2005(06)-2010(11)

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http://www.nhl.com/nhlhq/cba/index.html
NHLPA having the option to re-open the agreement
after Year Four (2008-09 season)
The players' share of league revenue
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54% in any year league revenue <2.2 billion
55% if LR 2.2-2.4 billion
56% if LR 2.4-2.7 billion
57% if LR > 2.7 billion
37
Pro Sport – Collective Bargaining
NHL’s CBA 2005(06)-2010(11)
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Increased revenue sharing
recipients
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bottom half (bottom 15) in League revenues
operate in markets with a Demographic Market
Area of 2.5 million or fewer TV households.
team's revenue must increase faster than the
league average
certain attendance levels must be met
Average payout 6-12 million per team in 2008

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Canucks, Maple Leafs, Canadiens combined for 41 M
No luxury tax
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Pro Sport – Collective Bargaining
NHL’s CBA 2005(06)-2010(11)

Salary cap 39 M 05-06, 44 M 06-07, 50.3 M in 07-08, 56.7
M in 08-09
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Player salary
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Salary floor 16 M under cap
Maximal: <20% maximal payroll, 7.8 million in 2005-06
Minimum: 450 K in 2005-07, 475 K in 2007-09, 500 K in 2009-10,
525 K in 2011-12
Entry Level player
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maximum annual salary (plus signing and games played bonuses):
850 K for 2005 and 2006 draftees; 875 K for 2007-08; 900 K for
2009-10; 925 K for 2011draftees.
maximum combined signing bonus < 10% of the player's maximum
annual compensation in any year.
Players who sign their first contract at age 18-21 are required to sign
3-year Entry Level contracts; age 22-23 sign 2 years, age 24 sign 1
year
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Pro Sport – Collective Bargaining
NHL’s CBA 2005(06)-2010(11)
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Unrestricted Free Agent
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2005-06: age 31 with 4 seasons
2006-07: age 29 with 4 seasons or with 8 seasons
2007-08: age 28 with 4 seasons or with 7 seasons
2008-11: age 27 with 4 seasons or with 7 seasons
Eligible for salary arbitration after 4 years

3 years in previous CBA
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Pro Sport – Collective Bargaining
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NHL’s CBA 2005(06)-2010(11)
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Drug testing and penalties
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first positive test: a 20-game suspension, and
mandatory referral to the League's Substance
Abuse/Behavioral Health Program for evaluation,
education and possible treatment.
second positive test:60-game suspension
third positive test: minimum two-year suspension
Agreements in major
professional leagues

MLB: 2012-2016 BASIC AGREEMENT
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http://mlb.mlb.com/pa/pdf/cba_english.pdf
http://mlb.mlb.com/pa/info/cba.jsp
NBA: 2012-2021 collective bargaining agreement,
10 years
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Pro Sport – Collective Bargaining
http://www.nbpa.org/cba/2011
http://www.nba.com/laborcentral/
NHL: 2013-2022 Collective Bargaining Agreement

http://www.nhlpa.com/inside-nhlpa/collectivebargaining-agreement
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Pro Sport – Collective Bargaining
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Pro Sport – Collective Bargaining
MLB work stoppages
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