My Attempt to Explain the NFL Labor Dispute

In this post, I'm going to do my best to chronicle and explain the tangled mess that is the 2011 NFL labor dispute.  I'll try to clarify some of the legal jargon being thrown around, but, as always, I'm not giving definitive legal advice.  With that, off we go...

Way back in 1956, the NFL players formed a union known as the National Football League Players Association (NFLPA).  Once a union is formed, the employer can no longer bargain individually with his employees.  Rather, the union becomes the exclusive bargaining representative for all the employees (even those who didn't want to unionize). This is known as "collective bargaining."  When the employer and the union finally come to terms on wages, hours, working conditions, etc., the resulting contract is known as a "collective bargaining agreement" (CBA).

At this point, you may be wondering, "wait, if the Owners bargain with the union, how come we hear all this talk about players negotiating contracts for themselves?"  Great question.  The union is entitled to eliminate all individual bargaining, but the union may also (and typically does) bargain with the employer to permit an individual to negotiate whatever extra compensation the market will bear.  While this strategy wouldn't make much sense to an autoworkers union, it works very well for athletes (and actors).

So, now let's jump ahead to 2006.  The Owners and the NFLPA reached an agreement that, among other things, agreed to a deal whereby the Owners would take the first $1b in league revenue (much of which would fund new stadiums) and, of the remaining revenue (approximately $7b), the players would receive approximately 60% and the owners would take 40%.  Each side had the opportunity in 2008 to opt out of the CBA, which would cause the CBA to expire after the 2010 season.  The Owners unanimously chose to exercise this opt-out clause.  In simple terms, they believed that the NFLPA had ripped 'em off (which, of course, the NFLPA has every right to do).

So, on March 11, 2011, the collective bargaining agreement officially expired.  (It was originally scheduled to expire on March 3 but the sides extended it for a week to give themselves more time to bargain.)  At this point, the NFLPA had a choice to make.

The players had to decide whether to strike or not.  Striking is simply a collective refusal to work by the employees in hopes that holding out from working will force the employer to make concessions.  (Typically, a CBA includes a "no-strike" clause where the union gives up its right to strike while the CBA is in effect; that's why the players would have to wait until the CBA expired to decide whether to strike, I presume.)  Would it make sense for the players to strike in March?  Nope.  Why not?  Because the strike wouldn't have much of an effect.  You strike when doing so hurts your employer--in the NFLPA's case, it would only make sense to strike during the regular season or playoffs, when a strike would cause the Owners to lose gobs and gobs of money.  Also, striking is typically bad publicity, and there's no reason for the NFLPA to wear the black hat yet.

[There's a bunch of law concerning the rights that employees and employers have once a strike takes place.  Can an employer hire replacements?  Can the employer fire employees for striking?  These questions are tempting but are outside this entry's scope.]

The Owners similarly had a choice once the CBA expired.  They could decide to lock out the players or do nothing.  Had they done nothing, the CBA would have continued on, as labor law dictates.  The Owners certainly didn't want that, so they instead decided to lock out the players.  A lockout prevents the employees from working and essentially shuts down the league.  Thus, the Owners don't have to play the players.

In anticipation of the lockout, the NFLPA voted to decertify just before the Owners locked out the players.  Decertification simply means that the union dissolved itself.  (The Owners, btw, have filed a grievance with the National Labor Relations Board, claiming that by decertifying, the NFLPA isn't bargaining in good faith.)  Now, why on earth would the NFLPA voluntarily dissolve itself?  I'm glad you asked...

Our country has antitrust laws and labor laws.  Antitrust laws prohibit (some types of) anticompetitive conduct, and labor laws protect certain forms of anticompetitive conduct.  A group of workers getting together and agreeing to fix the prices of their product is anticompetitive, whether that product is a shirt, a car, or--in the case of a union--labor.  Yet, the NLRA and other federal labor laws explicitly protect the right to unionize. Clearly, we have a conflict between the two areas.  Which one wins out?  Well, I'll spare you the boring case law and get right to the answer: labor law trumps.  In fact, there's an explicit statutory exemption to the antitrust laws for labor.

The fact that labor law trumps antitrust law sounds like bad news for the Owners, but it's actually a good thing.  You see, the NFL does some things that are quite anticompetitive.  For example, think about the upcoming NFL Draft.  By the end of Thursday night, one team, and one team only, is going to have the right to sign Cam Newton.  Don't you think Cam could make more money if he stayed in college if he had 32 potential suitors?  Don't you think you'd get a bigger salary if you had 32 law firms, or elementary schools, or software companies chasing after you instead of only one?  (Cam may not be the best example because the high draft picks get paid a ton of money, but keep in mind that most picks don't.)  So, if the NFL is violating the antitrust laws, how come no one has sued 'em?

Well, there have been lawsuits, of course, but here's the thing: there's a labor exemption to antitrust law.  The NFL and the NFLPA bargained for the current draft system, and since the draft arose from a CBA, it's exempt from antitrust litigation.  The Owners love that the NFLPA exists, because without it, they'd be subject to antitrust litigation; losing an antitrust suit would probably force the Owners to alter the way it does business and pay damages to the injured plaintiffs.  (Also, losing in antitrust law sucks because the winning party's damages get tripled.  If it's found that the plaintiff suffered $1m in damages, the defendant has to pay $3m.)

Now you're beginning to understand why the NFLPA decertified.  By doing so, NFL players can sue the Owners in antitrust law--and wouldn't you know it, some already have.  According to the L.A. Times, "[t]he players allege that the NFL conspired to deny their ability to market their services."  This is typical antitrust language--the players are contending that the NFL's policies (regarding free agency and the like) have prevented the players from getting paid their fair market value.  If true, this is obviously anticompetitive (you can't get together with fellow employers for the purpose of holding down salaries) and likely in violation of the antitrust laws.

In addition, the players asked for an injunction that would stop the lockout.  An injunction is a court order that forces a party to do--or refrain from doing--something.  In this case, the NFL would be forced to refrain from continuing the lockout.  Yesterday, the federal district judge granted that request and ordered the lockout lifted.  In essence, the judge told the NFL to start its season.  The NFL has already appealed this order.  In the interim, it asked that same district judge to stay (to put off or delay) the injunction until the appeal has been heard.  Just this evening, the judge denied that request.  That means that we could be in for some interesting developments in the next few weeks, as the league will be operating without a collective bargaining agreement.

As you can see, the NFLPA has adopted a strategy of litigation, as opposed to bargaining.  It could have stuck together and continued to negotiate with the Owners until a CBA was reached.  Clearly, the NFLPA thought it could gain more by going to court instead.  Similarly, the Owners haven't hesitated to use their legal weapons.  They locked out the players and brought an Unfair Labor Practice claim to the NLRB.  The moral of the story?  In bigtime disputes like this, with lots of money on the table, the lawyers always win.

The labor dispute largely comes down to how to divvy up the revenue.  There are other issues as well--possibly lengthening the season, changing how much rookies get paid, etc.--but the revenue question is the main one.  As both sides are making tremendous amounts of money, it seems unlikely that they'll fail to reach an agreement before the regular season begins.  There's simply too much money to be had to justify killing off a season.  (The NBA, however, faces a similar battle only this time some of the Owners are losing money and will likely dig in and force major concessions from the players.  That's a post for another day, however.)