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Donald Sterling, Adam Silver, and the Ends Justifying the Means

December 15, 2015

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By Ian Walker – Thompson Rivers University JD Student

On November 16, former Los Angeles Clippers owner Donald Sterling lost his appeal to regain the team after his estranged wife sold it for $2 billion after he was banned from the NBA for life. The ban was part of a league-imposed penalty for racist remarks Sterling made to his girlfriend. The penalty also included a $2.5 million fine, the largest fine allowed under the NBA rules, and a threat from the league to seize and auction the team.

Sterling’s wife, Shelly, took control of the family trust that owned the team and sold it to former Microsoft CEO Steve Ballmer. Sterling sued his wife to block the sale, but a Los Angeles Superior Court ruled against him and approved the sale last summer. This recent appeal found that Shelly Sterling properly removed her husband from the trust, as she relied on the opinions of two doctors who found Sterling had signs of Alzheimer’s disease.

The court found that the sale to Ballmer prevented the trust from an “extraordinary loss”. The decision also relied on the fact that before Sterling refused to sign off on the sale, he had congratulated his wife on the price she had negotiated, which was $400 million higher than the next best offer. The appeal court held that Sterling failed to prove the lower court, in approving of the sale, made any legal errors.

This appeal decision appears to bring the Donald Sterling saga to an end. However, Sterling still has lawsuits pending against his wife, the doctors who examined him for Alzheimer’s disease, and the NBA. So while the sale of the Clippers appears to be final, this is likely not the last we will hear from Sterling. The case, however, has been interesting to follow for a number of reasons, and it involves many important issues and concerns surrounding professional sports.

The incident that led to Sterling’s forced departure from the NBA took place in private and away from the media. His comments were secretly recorded and were never meant to be public. This raises important privacy issues. When the news first broke, many commenters were surprised by the severe punishment for such a private act, despite the content of Sterling’s remarks.

The league justified its actions by charging Sterling with damaging the league and its teams by his remarks. The incident also appeared to be a kind of final straw, as Sterling’s unsavory behavior had a long history. Because of that history, few people felt sorry for Sterling. And yet, as uncomfortable as it may have been to think so, the penalty still struck many people as particularly severe.

The incident took place shortly after Adam Silver’s term as NBA commissioner began. Many people applauded Silver’s swift and strong actions. They were a stark contrast to Silver’s predecessor, David Stern, who had known of Sterling’s volatile behavior in the past and did little to deal with it. But Silver’s dealing with Sterling, and the severe punishment he imposed, serves as a strong reminder of the extensive influence and powers of professional sports league commissioners in today’s sports climate.

The loss of this appeal seems to have spelled the official end of Donald Sterling’s days with the NBA, and he would be hard pressed to find anyone who feels sorry for him or who will miss him. But this appears to be a case of the ends justifying the means. Everyone is glad he is gone, but there lingers for many an uncomfortable feeling that even though he may be despicable and what he said was despicable, his punishment seems severe for comments made entirely in private. There also seems to be a self-contradictory sentiment that Adam Silver’s swift use of his extensive commissioner power was quite harsh, and yet, should be applauded.

 

 

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Antitrust in Mixed Martial Arts

December 9, 2015

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By Edward Hulshof – Thompson Rivers University JD Student

The UFC’s legal woes continue as the Le et al v. Zuffa antitrust lawsuit enters discovery. Zuffa, LLC (“Zuffa”), the corporate entity who owns the Ultimate Fighting Championship brand, has been the subject of staunch criticism for anticompetitive practices and the use of coercive adhesion contracts for several years. Zuffa recently lost a motion to stay document discovery proceedings – the document production obligations a part of the normal course of litigation – and with it, potentially, the shroud of mystery ensconcing its promotional and venue agreements with fighters and event hosts. If the antitrust lawsuit is successful, Zuffa could see fundamental reforms to its UFC brand and increased competition from market competitors such as Bellator MMA, a competing MMA promoter.

At issue is whether or not Zuffa’s business practices amount to “anticompetitive, illicit, and exclusionary acts,” which illegally acquire, enhance and maintain its dominant position in the market for promoting elite level professional MMA bouts as well as its control of MMA fighters. The Antitrust Class Action Complaint, filed December 16, 2014, (the “Complaint”) hinges on economic considerations, namely Zuffa’s control of “output markets,” that is, promoting MMA events, and “input markets,” fighter contracts.

The Complaint specifically alleges that “[t]he UFC has used the ill-gotten monopoly and monopsony power it has obtained and maintained…to suppress compensation for UFC Fighters in the Bout Class artificially and to expropriate UFC Fighters’ identities and likeness inappropriately.” This isn’t the first time Zuffa has been called to answer for its use of career suffocating fighter contracts.
Indeed, in 2008, well-renowned UFC fighter Ken Shamrock sued Zuffa for breach of contract when, it is alleged, Zuffa refused to extend Shamrock’s contract when he returned from retirement. (The court ruled against Shamrock, interpreting a key provision in the contract as providing Zuffa with the right to suspend and terminate the contract.)

More recently, Zuffa underwent intense media scrutiny when its confidential fighter contract with Eddie Alveraz was produced in a New Jersey lawsuit. The contract provided for extensive ancillary rights to Zuffa for the purposes of promoting the UFC brand and bouts. Additionally, and more troublingly, the contract granted Zuffa certain exclusive rights in perpetuity for promotional purposes, closing the door on Alvarez’s right to exploit and promote his own image outside the octagon and with other MMA promoters. Zuffa’s fighter contracts, it appears, choke the supply of inputs into competing MMA promoters.

It should come as no surprise then that MMA fighters are contemplating unionizing in an effort to strengthen their bargaining position with Zuffa and the UFC. The movement is a reflection of the repetitions of history, being reminiscent of the movement in boxing in the 90s which ushered in the Mohammed Ali Boxing Reform Act, legislation designed to rectify anticompetitive practices and coercive contracts between boxers and promoters. With Zuffa as the most powerful MMA promoter with a collection of fighters signing contracts with renewal options in favour of Zuffa, it is not surprising that many fighters are seeking to regain control of their careers. Zuffa, it appears, likes control. Even if the antitrust lawsuit is unsuccessful, it should serve as a signal to Zuffa to reform its contract practices and marketplace strategies ahead of the shifting balance in power that has been the source of tension between promoters and athletes for years.

 

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More Clarity is Needed Regarding Substance Abuse in the NHL

December 9, 2015

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By Nathan MacDermott – Thompson Rivers University 2L JD Student

In early October the NHL and the NHLPA acknowledged that there is a cocaine problem among NHL players. With NHL drug arrests on the rise, the league has asked the NHLPA to allow cocaine to be added to the list of substances regularly monitored within the league’s testing program under the current Collective Bargaining Agreement (CBA).
If it is truly on the rise, what effects may it have on the league and its players?

Given the nature of the drug, one could argue that it is a performance-enhancing drug in a sport like hockey where aggressive play is an asset. But the true implications could be more to do with the image of the players, teams and the league as a whole.

There is a need for clarification within the CBA as to what impacts substance abuse will have on players and their contracts. Currently the substance abuse program is the place for players who are found to have a problem, but the recent case of Mike Richards may have changed that somewhat. The Los Angeles Kings recently terminated his contract after a drug related arrest, and eventually the parties reached a settlement. On its face it appeared that he should have been placed into the leagues substance abuse program before the Kings took any action regarding his contract. The Kings however stated that they terminated his deal because he did not tell them of the arrest, and not because of his drug use or the arrest itself. This shows that more clarity is needed within the CBA to protect players from similar outcomes.

If the league’s policy is to attempt to assist players with their addictions quietly before further action is taken, then there should be further clauses within the CBA to limit team action around such cases. Page 2 of the Standard Player Contract (SPC) states that the player agrees “to conduct himself on and off the rink according to the highest standards of honesty, morality, fair play and sportsmanship, and to refrain from conduct detrimental to the best interest of the Club, the League or professional hockey generally.”

This leaves the door open for clubs to penalize players or even terminate contracts for a myriad of reasons, and it appears that this could include drug use if any of the criteria in the SPC are met. A drug related arrest or simply being found in possession of an illicit substance could violate the contract and leave the player open to reprimand if pursued under the guise of another violation.

The NHL and the NHLPA need to get together to amend the language to avoid conflicts in these situations. If they left substance abuse related incidents outside the realm of ‘conduct detrimental’ etc., then players would truly have more security when dealing with substance abuse. The league may even find that players would be more willing to come forward and enter the program of their own volition, knowing that the contract repercussions were limited in this regard. As the setting in which these contracts function changes, so should the terms within the CBA and the SPC to better reflect the current state of affairs within the NHL.

 

 

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What the global ban on Third Party Ownership (TPO) means for football?

December 8, 2015

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By Joe Nelson – Staffordshire University, BA Sports Journalism Student

Following FIFA’s worldwide ban of Third Party Ownership (TPO) on professional footballer’s contracts earlier this year, it is hoped that football clubs across the globe will now be urged to invest more time into their players, nurturing their well-being and talents to procure better deals for all parties involved.

The new law, introduced in May 2015 by FIFA, put forward by FIFPRO (The Professional Football Players Union) received huge backing, including the likes of Michel Platini, who had likened TPO to ‘slavery’.   Although currently suspended from footballing activity, at the time, Platini explained in a UEFA statement how young players are vulnerable and could be exploited using TPO: “UEFA and FIFPRO therefore call on the European Commission to investigate the practice of third-party ownership and to fully endorse FIFA’s decision to prohibit such arrangements.”

A study in 2014 by KPMG showed that 90% of player’s economic rights in South America were partly owned by third party investors. TPO gained mass coverage when it was announced that Santos, a Brazilian football club would only receive €17.1 Million from the superstar, Neymar’s transfer to Barcelona, where €40 went to N&N, a company owned by Neymar’s parents.

It was also found by audit firm, KPMG, that investors and ‘third parties’ owned stakes in the contracts of up to 1100 professional footballers in Europe. For example, world class talent such as Radamel Falcao has been in the spotlight over the dealings, as two of his previous clubs (Atletico Madrid and Porto) have been found guilty of selling a percentage of their player’s contracts to raise funds. Porto, the Portuguese giants had previously been linked with other TPO dealings, and another recent study showed that as much as 36% of professional football players in Portugal were co-owned by third-party. Most recently publicised was Sporting Lisbon’s William Carvalho, whose transfer to Arsenal was said to have broken down due to the ownership problems.

The first breach in the new law was made by second division Belgian club, Seraing United, who failed in their appeal to FIFA’s ban in court in July 2015. The club have been banned from signing players for two years and fined 150,000 Swiss francs after agreeing to third-party ownership deals. FIFA welcomed this legal win as they stated it was “Indispensable for preserving clubs.” FIFA’s executive committee agreed to the ban in May following the campaign by UEFA and FIFPRO.

FIFA have agreed, due to the vast quantity of players involved in third-party ownership that they cannot prosecute each club, as there will be a natural ‘transitional period’, which may cause unrest within numerous leagues due to the nature of the proposal. Where one team may be severely punished, another club from the same league may not be investigated as deeply, which could cause unrest and numerous cases being appealed. For instance, if FIFA had simply cut all ties, expressing that all third party owners must be bought out immediately, it would have made for a far more straightforward command and consequence: You buy out the third parties, or pay a severe fine and be given a transfer embargo.

FIFA have announced that any deals made before 2015 will be allowed to expire under the current circumstances, and any made between January 1st and April 30th will be subject to a maximum one year time limit.

However, any new TPO deals agreed will be punished immediately, which is explained in more depth here. This ‘transitional period’ means that numerous transfers will still require buying out a ‘third party’ in the coming months due to the clauses still within the contracts. For example, recent Premier League acquisitions such as Eliaquim Mangala, Lazar Markovic and Marcus Rojo all involved an external source receiving funds for the transfers, along with the players’ previous clubs.

Inquisitions into TPO in English football is not a new concept. The Kia Joorabchian case brought a lot of light to the situation nearly ten years ago. In that instance, the  problem arose after Joorabchian was said to have represented four separate companies who owned shares in the Argentinian stars, Carlos Tevez and Javier Mascherano during their moves to West Ham United from Corinthians in 2006 (although Joorabchian has publicly declined to discuss the details of Tevez’s ownership and his buying, loaning and selling of the player, citing confidentiality agreements). The Premier League did however fine West Ham a record £5.5 million, and took steps to outlaw TPO in England in 2008.

Joorabchain later claimed that multiple other Premier League clubs use TPO and conceal their involvement in it. He also defended the use of TPO, expressing that it was: “a way of bringing outstanding players to clubs that would not be able to afford them ordinarily.” The Iranian believed it was a ‘South American model’ being used all over Europe.

These third party agreements are understandable, especially with the poorer clubs in the poorer leagues across the world, who need the revenue badly. However, the change means that football clubs should now become more invested in their sides, and not see their players simply as commodities and potential profits.

This process also means that, when the likes of Barcelona or Madrid come swooping in for the next showstopper from South America, they need not fret about complications in the contact and can focus solely on the player’s footballing ability and what he has to offer, along with paying his club 100% of the transfer price. Santos, in this scenario, would receive the full transfer sum for one of their prized assets, thereby giving them more money to invest in their club.

The ban on TPO now makes the game a fairer playing field for all involved, and will produce happier playing professionals across the world. There are still several cases to be sorted across South America and Europe, and we are bound to see numerous cases involving loopholes in the law crop up in the coming months, but it’s another big step towards making football clubs realise they’re still running a team, not a business.

 

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The Rules and Regulations of eSports Are Lagging Behind Its Exponential Growth

December 4, 2015

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By Casey Goodrich – Thompson Rivers University JD Student

Over the last few years there has been an enormous explosion in popularity for the eSports scene. The International – one of the biggest tournaments in the industry, featuring the game Defence of the Ancients 2 – is a fantastic example of the exponential growth that the industry has recently experienced. Last year, the International had over two million concurrent viewers and a prize pool of over $10 million. This year, the tournament had over 20 million people watching, with a prize pool of over $18 million. The winning team received $6.6 million, resulting in approximately $1.32 million for each player. With eSports becoming such a lucrative industry, it is truly puzzling how and why the rules and regulations are so poorly conceived.

A recent and perhaps unsurprising issue that has arisen is the use of performance enhancing drugs. In July, a professional Counter-Strike player publicly admitted in an interview that his entire team was using Adderall during tournaments. This prompted the Electronic Sports League (“ESL”) to implement drug tests for its competing players. It is disappointing that it took the ESL almost two decades to realize that drug testing was necessary for fair competition. Core skills for any professional gamer include possessing quick reflexes, swift reaction speed, and incredible concentration, all traits that are easily enhanced through over-the-counter medication, such as Ritalin and Adderall. Also factoring in that a large amount of the professional gamers are teenagers, who are vulnerable individuals that are still undergoing mental maturation, making the hands-off approach of the ESL even more alarming.

Another substantial issue that is prevalent in eSports is based on the contracts that professional players sign. A good proportion of the players are either teenagers or young adults; they are generally not advised to hire a lawyer, and there are very few agents looking out for players. The end result of this is that many players do not adequately review contracts and end up agreeing to inequitable deals, and are also not always paid what they are owed. Until eSports are run like a professional sport, there will be no resolution for this issue. The issue with eSports is that players don’t have the adequate representation and protection, so they sign their own contracts without the legal expertise necessary and frequently receive the short end of the stick.

An important distinction between eSports player contracts and other professional sports is that revenue is shared between players and teams in eSports, whereas it is a separate source of income for most other sports. The income comes from streaming, sponsor endorsements, and the developer of the game (which in turn can come from consumers who make purchases in the game that are contributed to the prize pool). So depending on the contract, a fixed salary and income is rarely guaranteed in eSports, whereas it is the norm for most other professional sports.

These issues garner the impression that the regulatory framework governing eSports lacks both competitive integrity and ethical obligations to the players involved. One would think that the professional players that are helping to generate interest, popularity, and subsequently more sales of these games would be treated more fairly. It is plausible that the root of these issues is the absence of any universal, overarching organization to regulate this emerging industry. While the ESL is a large and influential organization, it does not have full autonomy over eSports, but rather regulates specific game tournaments. For certain popular games, such as Defence of the Ancients 2, the competitions are managed by the developers of the respective games (in this instance – Valve Corporation).

Interestingly enough, there is also currently no Players’ Association to represent professional players in eSports. The lack of a true regulatory organization, and no representation for players, has led to an imbalance in power and protection for players when negotiating deals with teams. Hopefully the recent growth and popularity in eSports will prompt stronger regulation and a universal organization to rectify these painfully apparent issues.

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Do NBA cheerleaders deserve to be paid?

November 22, 2015

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By Afras Khattak – Thompson Rivers University 2L JD Student

The Milwaukee Bucks of the National Basketball Association (NBA) are purported to have been engaged in unlawful pay practices for their cheerleaders for allegedly failing to comply with the minimum wage and overtime requirements of the Fair Labor Standards Act (“FLSA”). I posit that the Bucks will likely follow the recent stream of NFL cheerleader pay practices case law, and settle out of court even if they can establish an exemption under the FLSA.

This case materialized when Lauren Herington, former cheerleader of the NBA’s Milwaukee Bucks, filed a lawsuit alleging that the team failed to pay her in accordance with federal and state minimum wage laws. Ms. Herington contends that the team required its cheerleaders to spend upwards of thirty hours per week in mandatory practice and workout sessions, in addition to their game-day duties. Because these workout sessions (as well as mandatory salon visits) were unpaid, the complaint was brought forward to substantiate Ms. Herington’s claim that the Milwaukee Bucks not only failed to pay their cheerleaders the minimum wage, but often neglected to pay them overtime as well.

The Bucks could argue that the team is exempt from at least the federal minimum wage and overtime requirements under s. 213(a)(3) of the FLSA, a statutory provision covering seasonal amusement and recreational establishments. Under this exception any amusement or recreational establishment may pay its employees a sub-minimum wage (without overtime) so long as one of the following two conditions are met: either (A) the establishment does not operate for more than seven months in any calendar year, or (B) the establishment’s revenue in its six lowest revenue months in the previous year was no more than 33 1/3% of its revenue received in its six highest revenue months.
One major factor that could bolster this argument is that because the Bucks were eliminated in the first round of the NBA playoffs this past season, the team’s entire 2014-15 pre-season, regular season, and post-season only spanned seven months in its entirety (from October through April). The Bucks could very well likely argue that this qualifies it as a seasonal establishment under s. 213(a)(3)(A), and therefore that the team is not required to pay its cheerleaders in accordance with the FLSA.

NBA teams can credibly contend that they qualify for the s. 213(a)(3) exemption in at least some portions of their operations given the existing statutory language and accompanying regulations. Nevertheless, despite this potential defense, it would not be surprising if the Bucks ultimately chose to settle the suit before impending litigation commences. This would seem analogous to the path several National Football League (NFL) teams have chosen. NFL cheerleader lawsuits often settle the claims even though they arguably have an even stronger argument for exempt status under s. 213(a)(3) given the shorter length of their playing season.

Most notably, the Oakland Raiders agreed to pay its former cheerleaders $1.25 million to settle their minimum wage claims even though the U.S. Department of Labor had issued an opinion earlier that same year concluding that the team was not subject to the FLSA due to s. 213(a)(3) (Caitlyn Y and Jenny C, et al. v. NFL and the Oakland Raiders, et al.).

It would also not be surprising if this case motivates other NBA cheerleaders to file separate lawsuits against their teams. For the NFL, five additional teams quickly faced their own cheerleader lawsuits within a period of just a few months after the league’s first case was filed. The NBA is likely hoping that its teams do not face a similar outbreak of cheerleader minimum-wage litigation. At a minimum though, this case shows that the allegedly unlawful pay practices of professional sports teams still remain a pressing issue for the sports industry, and it may get worse for the NBA in the foreseeable future.

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Circumventing the Salary Cap

November 16, 2015

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By Aasim Hirji – Thompson Rivers University 3L JD Student

The NHL Salary Cap currently has a ceiling of 71.4 million, with a floor of 52.8 million. This means that every NHL team must spend at least 52.8 million, and at most spend 71.4 million on player salaries. The issue with a firm salary cap is team’s will always attempt to circumvent the cap to help them out of situations. Cap circumvention is ruining the equitable arrangement of the salary cap, which is already hinged in favour of rich teams willing to spend to the cap. A prime example is the Mike Richards case with the Los Angeles Kings. In the 2013-2014 season, the LA Kings had a chance to use a compliance buyout on Mike Richards. This means that any buyout would only affect them financially, and would not go against their salary cap.

Compliance buyouts were a two-year measure brought in after the new Collective Bargaining Agreement that would allow each NHL team to buy out two players without any affect to their salary cap. The LA Kings were attempting to trade Mike Richards, with a few potential suitors, then some news came to their attention. Richards was held at the Canada-USA border for bringing oxycodone into Canada, thus giving the LA Kings potential to terminate his contract for “material breach”, despite no arrest at the time. The LA Kings used this to terminate his contract, unprecedented in the NHL. With the recent settlement between the Kings and Richards, it is clear that this is salary cap circumvention.

Elliotte Friedman, a Sportsnet report, stated: “If the Kings had bought out Richards last summer, he would have stayed on their payroll until the end of the 2024-25 season. The cap hit would move from approximately $1.2M this season to $1.7M next year, followed by $2.7M in 2017-18 and a two-season peak of $4.2M in 2018-19 and 2019-20.Then it would stay just under $1.5M for the final five seasons. With the agreement, Richards’ cash lasts until the end of 2030-31 campaign. As part of a pre-capture penalty due to decreasing dollar values towards the end of his contract, the Kings lose $1.32M from their cap this year — and the next four — with the settlement amount added to that total. Starting in 2020-21, the team’s only penalty is the settlement itself — and that’s not a high number, believed to be somewhere in the $550,000 per season range on average.”

Elliotte Friedman went on to say that other general managers are “screaming bloody murder and are threatening to make an issue about it at December’s Board of Governors’ meeting”. The LA Kings are not the only team guilty of such obvious cap circumvention. A much clearer example of cap circumvention was the trade between the Toronto Maple Leafs and the Columbus Blue Jackets. The trade was David Clarkson for Nathan Horton.

On its face, it appears to be a legitimate player-for-player swap. Nathan Horton’s contract had 5 of 7 years left on a $37 million contract. David Clarkson was on a $36.75 mil, 7-year contract. Similar contracts, however one major issue – Nathan Horton is likely permanently injured and the only reason he hasn’t retired is he is owed in excess of $25 million. David Clarkson was a potential buyout candidate, or alternatively, the Leafs would have an overpaid player on the cap. With this trade, Toronto can put Nathan Horton on Long Term Injury Reserve where his 5.28 million cap hit will not count towards the cap. TSN’s Bob McKenzie stated that other GM’s “get it”, but don’t like the fact that trades like this work.

The NHL has already addressed the method of circumventing the cap by burying players in the AHL, such as New York Rangers sending Wade Redden and his $6.5 million contract into the AHL. This rule was changed where teams do not receive full cap relief, rather the cap hit will be contract value- (minimum salary+$375000). Under these new rules, Wade Redden’s contract buried in 2015-2016 would have been 5.5 million instead of $6.5 million.

There were a few trades that raised some eyebrows in the NHL regarding salary cap relief from the use of long-term injury reserve. During the NHL draft, Philadelphia traded the rights to Chris Pronger to the Arizona Coyotes. Similarly, the Boston Bruins traded the rights of Marc Savard to Florida. Both of these players have career ending injuries and will not see another game in the NHL. Pronger’s deal had a cap hit of $4.9 million, with a salary of $575,000. Savard had a cap hit of $4 million, with a salary of 575,000. Prior to the Philadelphia trading Chris Pronger, there were thoughts that the Flyers did not want him to retire otherwise there would be a cap hit due to Pronger’s age. Instead, he stayed on long term injury reserve where the cap hit would not affect them. Once traded, Chris Pronger and Marc Savard were not placed on injury reserve, as the teams wanted their cap hits to count in order to get to the salary floor, thereby manipulating the entire purpose of the salary cap.

It is clear that salary cap circumvention goes against the spirit and purpose of the salary cap. The NHL must adopt measures to prevent this from happening. Changing the salary cap relief from burying players in the AHL is the first step. The NHL has also addressed contract lengths, used to bring down the cap hit of players in the recent Collective Bargaining Agreement. There must be careful monitoring of procedures, particularly in looking at the Mike Richards case, to prevent teams from circumventing the salary cap.

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Smoothing out the wrinkles in the NBA salary cap

November 16, 2015

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By Afras Khattak – Thompson Rivers University 2L JD Student

The current National Basketball Association (NBA) collective bargaining agreement (CBA) is fixed to run through the 2020-2021 season. This however, is unlikely to happen as any time before December 15, 2016 either the NBA or the National Basketball Players Association (NBPA) can exercise an opt-out clause that would end the CBA on June 30th, 2017. The topic of controversy is understanding how the NBA’s immense nine-year, $24 billion contract with ESPN and Turner Sports (set to start in 2016) will affect the on-going negotiations to reach a new CBA. This infusion of money is going to increase the NBA salary cap from $63 million to approximately $90 million.

On the surface, players and fans would seem poised to celebrate a higher salary cap. There would be higher salaries for players, for whom teams would have more money to bid and in some cases might need to sign in order to satisfy the salary floor (90% of the total salary cap must be used). Along those lines, a higher salary cap would enable more teams to be “under the cap” and thus able to compete for free agents. Fans who feel as if their favorite teams are stuck in salary cap calamity would be granted a reprieve. However, assuming that either the NBA or NBPA opt-out and the two sides do not negotiate a new CBA before it expires in June 2017, it is likely that the NBA would be poised to lockout the players which would threaten the 2017-2018 season and potentially lead to antitrust litigation.

The issue for the NBA is that the NBPA does not seem poised to accept a proposal for ‘cap smoothing.’ Cap smoothing postulates that the salary cap be raised modestly and gradually over a several year span. The NBA believed that the NBPA would accept this term because players in multiple free agent classes would benefit from the surge in the salary cap. Additionally, the money from the players’ 51 percent of league revenue would still be split between all players so they still receive this payout. However, the NBPA has rejected this proposal.

NBPA chief Michelle Roberts explains: “The union should not have to police how much the owners spend. That’s not the job of the union. All of the caps that are on salaries now, the max deals and the shorter lengths and all of that, it’s all stuff that has been done to protect owners from themselves. [We have] been pretty strong on saying, hey, it’s not the job of the players to protect owners from other owners. Why should that fall on the players?”

Put simply, the NBPA is concerned that any form of cap smoothing would likely depress players’ salaries from rising as fast as they should or could under a more open system. This mode of reasoning likely stems from the players’ belief that they sacrificed a great deal in the last CBA, when the players’ share of league revenue fell from 57% to 51%. This will likely lead to a lack of cooperation as concessions will be expected and highly coveted in the next CBA negotiations.

The problem here lies in that the inability of the NBA to get a cap smoothing policy would lead to a disproportionately small number of benefiting players: those who are set to become free agents in 2016 and those whose salary negotiations are tied to available salary cap space. On the other hand, a cap smoothing structure would not reduce the amount of money received by the players; it would dictate how equitably and in what sequence the money is distributed.

The rejection of the smoothing proposal by and large means that the NBPA appears interested in negotiating policy changes within the framework of negotiations for a new CBA, rather than in piecemeal. Overall, the NBA may essentially have to accept the NBPA’s stance and make calculated tradeoffs to achieve their cap smoothing agenda because the longer it takes for both parties to agree on a strategy for incorporating the TV money, the clearer it becomes that there is a fraying relationship.

If one were to formulate a ratio for the likely labour dispute it would probably read: Fans who were irritated by the 2011 NBA labour dispute are going to despise the 2017 NBA labour crisis.

 

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NHL Contract Termination – Inconsistencies Based on Player Value

November 12, 2015

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By Casey Goodrich – Thompson Rivers University 2L JD Student

A relatively recent phenomenon in the National Hockey League has been to grant star players exceptionally long term contracts, which front-load most of the payout in the early years of the contract. This is done to circumvent the salary cap limit, in effect lowering the player’s annual average cap hit, providing a great benefit to a team that is spending to the salary cap imposed by the league.

On the contrary, this type of contract can also be detrimental as it commits a team to a player for a very long period of time, which has obvious downsides regarding the player’s potential regression, which may include injuries, old age, and inconsistencies in their play. While this type of contract has largely become a thing of the past due to the new CBA provisions enacted, there are still quite a few active players that are currently signed to these long-term deals.

The reason that I mention this type of contract is that it has triggered some controversy based on how teams handle players that are signed long-term and are no longer valued as contributors to the team. A recent example of this was the Los Angeles Kings terminating Mike Richards’ contract in June, after he was charged with having possession of a controlled substance (oxycodone) at the Canadian border. The organization justified the termination by stating that there was “a material breach of the requirements of his Standard Players Contract”.

Richards had five years remaining on his contract, with an average salary (cap hit) of $5.75 million. The timing of the termination seems rather convenient, as the team had been attempting to trade him last season and ended up placing him on waivers in January due to his lack of production (resulting in the team saving $925,000 in salary cap relief). After the termination transpired, Richards filed a grievance with the NHL Players’ Association.

What really stands out here is the seemingly arbitrary decision that a team can make when a player is guilty of unlawful off-ice behaviour. There are currently stark inconsistencies with how teams manage contracts for players that are caught in illegal conduct. To illustrate this point, there have been other recent incidents that were handled in completely different ways than that of Richards. Zack Kassian of the Montreal Canadiens was recently suspended without pay and ordered to rehab (stage two of the NHL/NHLPA Substance Abuse and Behavioral Health Program) after he was involved in a car accident that left him with a broken foot and nose. This is a much fairer and equitable resolution, since Kassian can return to the team once doctors determine that he is well enough to play.

However, it does raise the question of the motives of a team. While it is entirely possible that Montreal was only doing what was in Kassian’s best interest, it is also important to note that Kassian is viewed as a young player with high potential (as evidenced by his draft position – 13th overall) and is currently on a very cost-controlled contract ($1.75 million for one year), which makes him a low risk, high reward player for the organization.

Another recent, more analogous example involved Ryan O’Reilly of the Buffalo Sabres, who was charged with impaired driving and fleeing the scene after he crashed his truck into a Tim Horton’s coffee shop. As of now, the team has honoured his contract without any publicized discipline. Notable factors behind this decision include Buffalo recently signing O’Reilly to a seven-year contract extension worth $52.5 million, after having traded for him in exchange for three players and a second round draft pick. It is also important to note that O’Reilly is 24 years old, so he is only just beginning to enter his prime. What is evident here is that the organization, after having given up a hefty package of assets to acquire O’Reilly, refrained from any discipline or contract termination based on the perceived value that he brings to the team. This is the opposite to how the Kings handled Richards due to the value of each player to their respective team.

Based on these examples, it becomes clear that there is currently an inconsistency with how teams enforce or terminate contracts depending on how beneficial or detrimental a player is to the team. While a team should have the right to discipline its players for unacceptable off-ice behaviour, especially in extreme circumstances such as drug abuse, it leaves some uncertainty for the players involved. With the current cap era in the NHL, it is understandable why some teams are driven to terminate contracts, but the ambiguity that this creates can be problematic for the players.

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The Implications of the Mike Richards Settlement

November 11, 2015

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By Nathan MacDermott – Thompson Rivers University 2L JD Student

After the Los Angeles Kings of the National Hockey League terminated his contract and his grievance was filed via the NHL Players Association, Mike Richards and the team entered into a settlement agreement on October 9, 2015. This settlement is the first of its kind, and will likely have significant ramifications going forward.

It appears that this agreement, although unique, complies with the NHL CBA and therefore all parties approved the settlement. But because it is the first of its kind, it appears that a number of owners are upset by it, as it has significant salary cap implications for the Kings going forward. Some might even suggest that it is a circumvention of the league’s salary cap although all parties, including the NHL and Kings’ President and General Manager Dean Lombardi deny this.

The original cap hit attached to Richards’ deal was $5.75 million for each of the next five seasons (totaling $28.75 million). Had they used a compliance buyout, as the team had planned to prior to the termination of his contract, the cap hit would have spread approximately $21.5 million unevenly over the next ten seasons (averaging $2.15 per season). The settlement extends the cap hit unevenly over 17 seasons and totals $17.1 million.

What about this deal is not a circumvention of the NHL salary cap? The Kings now gain approximately $4.4 million in cap space over the payout period (versus the compliance buyout), and they also get to do so over an additional 7 seasons. It is not surprising that this has upset a number of general managers around the league, but it may have also forced them to think long and hard. Although this appears to have been an option available to all GMs under the current CBA, this settlement may have given them all a new perspective on how to get out of ‘bad contracts.’ Yes the NHL and all parties involved have said that this is not a precedent, but is that really a possibility? If another team terminates a player in similar circumstances will the league not have to follow this same path? Some teams may be salivating at the idea of getting out of these ‘bad contracts’ by merely catching their players in a compromising situation.

If I were in the shoes of some of these players, and they certainly know who they are, I might find myself looking over my shoulder a little more often or maybe taking steps to be more cautious when off the ice. Due to the large scale of these contracts and the big business of sports, what is to stop a team from hiring individuals to follow these players? Say a team is looking to find a few million dollars in cap room and possesses one of these bad contracts, would it not make good business sense to keep a much closer eye on that player in hopes that he trips up and falls? There may be moral implications to this, but with the amount of money at stake for all involved those morals may just take a back seat.

In light of this the NHLPA will likely want to get to work as soon as possible to try and alter the language of the current CBA in an effort to better protect players. The NHL teams already seem to have the upper hand when negotiating player contracts, especially with the influx of young, talented players into the league. If these GMs are truly upset at the moment, now may be the best time for the NHLPA to approach them regarding possible changes to the language of the CBA. On the other hand, if these GMs are just showing their angry faces to the media while secretly scheming in the background, there may be an ugly road ahead.

I know this may all seem a bit ‘cloak and dagger’ for a professional sports league, but in case you have not seen any of the NFL’s behaviour over the years, be sure to take a look. It will be interesting to see how this all plays out in the days ahead.

 

 

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