Sports Law

Professional athletes are paid for their services. Professional sports organizations use many relationships and a similarly high number of agreements and contracts to support their industries. The parties involved include team owners, promoters, athletes, agents, lawyers, accountants, advertisers, builders, carriers, journalists, media outlets, politicians, courts, and the governing body of the particular sport.

For the professional athlete, the most immediate concern is the employment contract. The contract between the athlete and the employer determines the rights and duties of both parties. These contracts are bargained agreements, and the bargaining power of the respective parties is reflected in the terms. Unproven or average athletes generally obtain contracts for a salary and benefits that are less than those received by athletes of proven skill. Most professional leagues that have a players' union negotiate with management or promoters to draft a standard player's contract. A standard player's contract is a document that establishes basic rights and privileges for the athletes. Owners, managers, and promoters may violate agreements with unions if they tender contracts that offer fewer rights and privileges than are contained in the standard player's contract.

Because their sport enjoyed widespread popularity before any other sport, BASEBALL players led other professional athletes in the reform of laws on professional sports contracts. The earliest and most infamous of the contract issues addressed by baseball players was the reserve clause. This clause, placed into contracts by the owners of professional baseball teams, prevented a player from playing for another team for at least one year following the expiration of his contract. Owners of teams could trade or sell players to other teams, but players had no say in the decision about what team they would play on. The intent of the clause was to keep players on the same team to build the team's identity and increase fan loyalty. Players objected to the clause because it restricted their right to freely market their skills and their right to choose where they would live and play baseball.

The reserve clause was used in the first professional baseball league, the National League, in the late nineteenth century, and it survived until 1975. For years, the Supreme Court and other federal courts held that professional baseball was not subject to ANTITRUST LAWS because the game held a special place in American society. Antitrust laws prevent businesses from engaging

From 1970 to 1972, outfielder Curt Flood challenged Major League Baseball's antitrust exemption in court and lost. His challenge set the stage for a later challenge to baseball's "reserve clause."
BETTMANN/CORBIS

in acts that restrain free trade if the commercial activity affects interstate commerce. Applying antitrust laws to professional baseball would have made it illegal for owners of professional baseball teams to restrain trade with the reserve clause. Players challenged the clause but lost in court.

In 1966 the Major League Baseball Players Association (MLBPA) hired Marvin Miller as its first executive director. Miller was instrumental in winning concessions from the owners of the major league teams. In 1970, after threats of strikes and hours of COLLECTIVE BARGAINING, the Major League Baseball Players Relations Committee, representing the major league teams, agreed with the MLBPA to the neutral ARBITRATION of their disputes. Arbitration is a process whereby two disputing parties agree to have their dispute settled by a third party.

The players' movement for market freedom suffered a temporary setback when St. Louis Cardinals star center fielder Curt challenged baseball's antitrust exemption and lost. Flood was traded in 1969 to the Philadelphia Phillies when he was at the peak of his career. Flood refused to play for the Phillies, and he sat out the entire 1970 season. That year, Flood filed suit in federal court against Bowie Kuhn, then the commissioner of Major League Baseball. Flood argued that the actions of major league baseball club owners violated the federal antitrust laws, CIVIL RIGHTS laws, laws prohibiting peonage, and laws on SLAVERY, including the THIRTEENTH AMENDMENT to the Constitution. The Supreme Court disagreed, holding that major league baseball maintained a special exemption from antitrust laws under Supreme Court precedent and that any changes in the law should come from Congress. Major league baseball remains the only professional sport to which courts have not applied antitrust laws.

In 1974 pitchers Andy Messersmith of the Los Angeles Dodgers and Dave McNally of the Baltimore Orioles played the entire season without new contracts. Both pitchers were paid their previous year's salary (Messersmith received a slight raise), but both had refused to sign their contracts. At the end of the season they declared that they were free agents because the reserve clause in the last contract they had signed lasted for only one year. The club owners argued that the clause could be renewed unilaterally (by one party, here, the owners), year after year. Messer-smith and McNally brought their cases to a panel of arbitrators, and the panel held that the reserve clause was actually an option clause: it gave the teams an additional option year to sign a player to a new contract. Without a new contract, the player was a free agent and could market his service to other professional teams.

After almost a century of attempts to shake the reserve clause through the court system, major league baseball players finally gained their freedom through collective bargaining and arbitration. The decision was upheld on appeal, and baseball players instantly gained bargaining power. In 1976 the players relations committee agreed to remove the reserve clause from standard contracts and install a system of FREE AGENCY that gave free-agent status after six years of service to players who did not otherwise qualify through the option clause. By 2003 the average salary for major league baseball players was $2.3 million, compared to an average salary of $19,000 in 1967.

As of 2003, baseball players are free to negotiate contracts with any number of clauses. A player may sign a contract that guarantees a salary for a certain number of years, negotiate clauses that limit the club's right to trade the player, and enjoy the benefits of incentive clauses, or clauses in the contract that grant extra compensation in the event the player achieves certain goals. A last vestige of the reserve clause remains in some contracts as the option clause. This clause states that in the event the player and the team cannot come to terms on a new contract upon the expiration of a contract, the club may retain the player for another year at a percentage of his previous year's salary, usually 90 percent. Players with bargaining power do not sign contracts with such option clauses.

Another product of Miller's collective bargaining for the MLBPA was arbitration of salary disputes. The MLBPA was concerned about a perceived tendency of club owners to collude against demanding players. Specifically, players who played out their options were finding that no teams were interested in hiring them for their fair market value. In 1976, the year after the Messersmith-McNally case, the MLBPA and the club owners agreed that any player with at least two years of experience who was ineligible for free agency could renegotiate his salary through a neutral arbitrator.

The spirit of cooperation over salaries was short lived. In 1986 the MLBPA alleged that the club owners had colluded against free agents by agreeing amongst themselves to offer relatively low salaries to free agents. The MLBPA filed a grievance in 1986, and in 1988 an arbitration panel ordered the teams to pay more than $10 million to 139 players who had been harmed by the collusion. In 1988 another arbitration panel found that the club owners had continued to collude over the 1987 and 1988 seasons to keep player salaries low or keep players out of the game, and in 1990 the owners were forced to pay players more than $100 million in lost salaries. The arbitration process is applied to a number of disputes between players and management, including disputes about fines, suspensions, and other punitive measures taken by a club or by the league.

Labor issues are another chief concern of professional athletes. In major sporting leagues, players' unions and management enter into collective bargaining agreements that establish standards and cover the basic rights and duties of all major league players and club owners. Collective bargaining agreements address such issues as club discipline, injury grievances, noninjury grievances, discipline by the commissioner of Major League Baseball, standard player's contract, college drafts, option clauses, terminations of contracts, base salaries, access to personnel files, medical rights, retirement and insurance benefits, and the duration of the existing collective bargaining agreement.

Collective bargaining agreements last only for specified periods of time, so occasionally

they need to be renewed. If the players are collectively unable to come to an agreement with the club owners, players may go on strike to gain what they feel they deserve or prevent the owners from enforcing detrimental regulations, such as a salary cap on the amount a club can spend on its payroll. The 1994–95 professional hockey season was shortened by a players' strike. The MLBPA also conducted a strike that began on August 12, 1994, lasted through the end of the 1994 season, and ended in March 1995. The players conducted the strike to thwart a proposed salary cap, and it ended without a new collective bargaining agreement or a final resolution of the salary cap issue.

The four most popular team sports in the United States—baseball, football, basketball, and hockey—have created leagues that exercise monopolistic powers. Owners of the professional teams in Major League Baseball, the National Football League (NFL), the National Basketball Association, and the National Hockey League have been able to keep the number of franchises lower than they would be in a free market. This artificially created scarcity gives owners of these teams leverage to force fans and taxpayers in cities across the country to provide billions of dollars in subsidies or risk losing professional sports entertainment. The scarcity also ensures a high level of talent in the league, making the creation of new leagues difficult.

Courts and legislators have been successful in removing some elements of antitrust activity, such as limits on the freedom of movement of players. One court has held that the National Football League violated antitrust laws by unreasonably restricting the right of owners to move their franchises (Los Angeles Memorial Coliseum Commission v. National Football League, 726 F.2d 1381 [9th Cir. 1984]). However, by and large, courts and legislators have been unable or unwilling to strike down or repeal other monopolistic activities. Legislators have even taken steps to give certain leagues special privileges. Under federal law the NFL may enter into agreements with television networks to pool and sell a unitary video package (15 U.S.C.A. § 1291 [1966]). Another federal law allows blackouts of nonlocal NFL games televised into home territories when the home team is playing and blackouts of home games in the home team's territory (15 U.S.C.A. § 1292 [1966]).

A professional sport is a complex business for the average athlete, and many athletes require the services of an agent. Agents negotiate personal service contracts with teams or individual promoters, and they manage the personal affairs of their clients. Agents may handle such concerns as taxes, financial planning, money management, investments, INCOME TAX preparation, incorporation, estate planning, endorsements, medical treatment, counseling, development of a career after sports, insurance, and legal matters. The agent is a fiduciary of the client-athlete, which means that the agent has a responsibility to act with the utmost care and GOOD FAITH and to act in the athlete's best interests. Agents must avoid activities that conflict with the interests of the client-athlete, and they must inform the athlete of any circumstances that might affect the athlete's rights or interests. Many states require that agents obtain a license and post a security bond before they may work in the state.