Event Recap: Union Days '14

This post was written by Taylor Kosakoff, Director of Career Services for the Cornell Sports Business Society.

On Thursday, April 10th, I spoke on behalf of the Cornell ILR Sports Business Society for the annual event, “Union Days”, in the School of Industrial and Labor Relations. “Union Days” is an event sponsored by the Worker Institute at Cornell, which addresses current labor movement issues in various industries. The event I spoke at was titled, “Fighting for Equality in Education, Sports, and the Fashion Industry.”

I was called upon to address the background of the Northwestern football players’ attempt to unionize and the ramifications of this historic event. The reason I was chosen to speak on the panel was because of the research I conducted on this topic for an article that I wrote for the Cornell ILR Sports Business Society’s magazine, Sports Inc., earlier this semester. Although there were many prominent figures in the labor movement on the panel, the speakers that participated in the Northwestern discussion were two players on Cornell’s football team, senior quarterback Jeff Mathews and senior outside linebacker Taylor Engstrom.

The Northwestern football players’ attempt to unionize is a significant development in the labor movement, and could have a meaningful impact on the future of the NCAA and its relationship with student athletes. Previously, students have not had success in their attempts to be treated as employees of their universities. This recent effort to organize demonstrates however, that a change may be on the horizon for student athletes. Led by Northwestern quarterback Kain Colter, the students achieved a significant breakthrough by receiving a decision from a Regional Director of the National Labor Relations Board which gave the Northwestern football players employee status. 

Colter and his teammates are trying to gain representation for the student-athletes by the College Athletes Players Association (CAPA), in order to secure benefits that they believe college football players deserve. Specifically, Colter and the CAPA are seeking medical cost coverage for players who sustain injuries during games or practices. Other benefits that they are attempting to secure include ease on transfer restrictions and security of scholarships after injury. Compensation is not a topic of discussion currently and is not the main focus of this movement, but could be a goal in the future. Colter and the CAPA believe that the players deserve more than what they are getting, especially when compared to the millions of dollars the NCAA and universities are making off the efforts by these student-athletes.

The discussion of the Northwestern football players was the final segment of the event. I discussed how the attempt by Northwestern’s football team to unionize could revolutionize the NCAA. This initial step, with the leadership of Colter, may be the impetus for other teams to join this initiative to gain more rights for themselves on the football field. This attempt may even expand to other college sports and include women’s teams. If the student athletes are ultimately deemed employees, there could be a difference in what rights these players may have due to their enrollment in public and private universities, with different laws regarding public and private employees. While there is support for the players’ initiative, many people oppose the idea of unionization and believe that it may ruin the entertainment of the NCAA and college sports.

To see how college football players themselves feel about the Northwestern football team’s attempt to unionize, Jeff Mathews and Taylor Engstrom provided their perspectives as student athletes. It was especially interesting to hear college athletes from Cornell talk about the labor movement from Cornell because players are not allowed to receive athletic scholarships in the Ivy League. Both Mathews, who recently signed with the Atlanta Falcons, and Engstrom, held similar views about college football players trying to unionize.

Both were intrigued by the movement and believed that medical cost coverage for injuries is a benefit that the NCAA should provide for student athletes. However, both student athletes stated that they did not want to be compensated for their play because they think that this would diminish the enjoyment of college football and the relationship between students and the university that they cherish. Matthews and Engstrom both emphasized that they feel lucky to attend such a prominent university as Cornell, and that they play on the football team and devote more hours than expected because they enjoy playing football.

This event was an interesting way to see how a topic from the sports world could be such a major factor in a discussion of the labor movement. It was intriguing to hear the perspectives of two of Cornell’s most prominent football players who both agreed that they would never want to be compensated for their college play, although they do not receive athletic scholarships in the Ivy League. Their views are similar to those of Kain Colter and his teammates, who are pursuing employee status primarily to secure medical cost coverage. There is a long way to go before a final resolution of the matter, and it will be fascinating to see how this case impacts the future of the NCAA.

This post was written by Taylor Kosakoff, Director of Career Services for the Cornell Sports Business Society.

Event Recap: Paul Salvatore, ILR '81, Law '84

On October 24, the ILR Sports Business Society hosted Paul Salvatore, ILR '81, Law '84.

Salvatore is the co-chair of the Labor and Employment practice at Proskauer Rose LLP, the first law firm to represent league management in all four major sports. Proskauer's sports practice started in the 1970s with the NBA. Today, however, the firm is best known for representing the NFL, MLB and NBA in reaching new collective bargaining agreements. The firm is currently working with the NHL on their collective bargaining efforts.


A major focus of the presentation was Proskauer's rich history in sports law, something represented in large part by the roles of its alumni. The current NBA commissioner, David Stern, is a Proskauer alum and began by jumping from the firm to become the league's general counsel. Gary Bettman '74, then a Proskauer partner, was hired by Stern to replace him as general counsel when Stern was promoted to league commissioner. Bettman has since become the NHL's commissioner.

Salvatore detailed the five subdivisions of the sports law practice at Proskauer: Labor and Employment, Corporate, Financing and Facilities, Media and New Media, and Litigation, which includes commercial, media, sponsorship, and antitrust. Antitrust is of particular importance to three of the four major leagues; only the MLB is exempt. The firm also works closely on sports M&A deals, having brokered the sales of the Houston Astros, San Diego Padres, Jacksonville Jaguars, Cleveland Browns and New Orleans Hornets. The media division of Proskauer has worked closely with the Pac-12 conference, arranging TV deals with ESPN, FOX and the Pac-12 network.

Proskauer has played a key role in expansions as well, leading NBA efforts in Charlotte, Miami, Minnesota, Orlando, Toronto, and Vancouver, not to mention NHL expansions to Nashville, Colorado, Atlanta and Minnesota. Naming rights are another specialty of the firm, including the deals behind the New York Red Bulls of Major League Soccer, Philadelphia's Lincoln Financial Field and East Rutherford, NJ's MetLife Stadium.

According to Salvatore, Proskauer takes pride in "fighting tough and playing fair," something he feels contributes strongly to the firm's dominance in the sports law niche. He also reminded students of the importance of honing their personal skills and shared how the lessons he learned studying at the ILR School inspired him to pursue a career in the law of labor relations.

We were incredibly happy to host Paul Salvatore. Alumni are an integral part of the Society's success, and we hope Mr. Salvatore is willing to stop by again during his next trip to Ithaca!

The NHL Lockout: Questions for International Labor Law

Will the Canadiens be paid during the lockout?

International law is a tricky concept to tackle. If law implies governance, then, by definition, law applies only to a governed region. And since no two countries operate under the same governing body, international law is ultimately toothless.

But sometimes international law must be addressed, as in instances in which a multinational legal issue arises. The ongoing NHL players’ lockout presents such a case, providing insight into the convoluted arena of international law, namely with respect to labor and employment.

First, let’s lay the groundwork for the issue at hand. The National Labor Relations Act (NLRA), which serves as the chief authority on U.S. private sector labor law, maintains federal jurisdiction over matters of interstate commerce. The NHL, whose operations depend upon commerce across states (i.e. games), therefore falls under the purview of the NLRA. Under the NLRA, both employers and employees may use economic weapons, such as strikes and lockouts, during collective bargaining negotiations.

But what happens when interstate commerce becomes international commerce? Seven of the thirty NHL teams are based in Canada, a notable proportion considering that the three other major sports leagues contain in total only two Canadian teams. Technically, despite bargaining under the NLRA, these owners and players are subject to Canadian law. So where does our conception of labor law fit into this hazy framework?

Canada, of course, does not care about the NLRA; it functions pursuant to its own codes and laws. For one, up north, labor law is strictly provincial in nature. According to the Vancouver Sun, under Quebec law, an employer may issue an employee lockout only if those employees are members of a board-certified union. The NHLPA is not certified by Quebec’s labor relations board, potentially rendering the lockout impermissible in Quebec.

Recently, players for the Montreal Canadians have taken advantage of this clause to seek an injunction against the NHL lockout in Quebec court. If granted, the labor relations board could enjoin the lockout for Montreal players only, granting them regular pay and benefits while players for the other twenty-nine teams remained locked out. In the history of NHL labor relations, however, not once have players tried to use the Canadian court system to enjoin a lockout. The very fact that the NHL and NHLPA have bargained under the NLRA for decades may suggest that these player efforts are nothing more than unfounded distractions.

Even if courts in Quebec enjoin the lockout and compel Montreal ownership to pay its players, there is little evidence that this maneuver on its own will have any impact on widespread bargaining issues. But this viewpoint may be shortsighted, as a successful injunction could have a palpable impact on the axis of bargaining power in player-owner negotiations.

If the players are indeed successful in Canadian court, that success could perhaps prompt players on other Canadian teams to similarly challenge the lockout in their respective provinces. In fact, Edmonton Oilers and Calgary Flames players have already attempted to do so (albeit unsuccessfully, though they are currently appealing the decision).

What is crucial here is the inverse relationship between the number of successful “personalized” injunctions and owner bargaining power. With each Canadian team’s success in court, owner bargaining power is slashed, if only marginally. If all Canadian teams were victorious, however, a considerable number of owners would be forced to pay players in vain, since the ongoing lockout for U.S. teams would preclude games from being held. In such a case, a sustained lockout makes little, if any, economic sense for owners. And with nearly a quarter of owners placed in this position, owners on the whole may soften their bargaining stance, especially in an industry where economic interdependence is so pronounced.

Of course, this scenario requires many hypothetical situations to materialize. It appears highly unlikely that all Canadian players will seek to enjoin the lockout, let alone succeed in this endeavor. Nonetheless, the ongoing NHL lockout provides for an interesting study of international issues as they apply to labor and employment law.

VIDEO: ILRSMC President Gives First Ever "Evolution of Sports" Address

Labeled as "an opportunity to present a message, an idea or a revolutionary thought that could someday change the face of sport," the first Evolution of Sports Address was given by ILR Sports Management Club Co-President Gabe Gershenfeld ('11) last month at MIT's annual Sloan Sports Analytics Conference.

Gershenfeld's address, specifically, focused on "HR, Labor Relations, and the Future of Sports."

For reactions to the event, click here

For more information on:

• The first subject, look for an article entitled "Quantifying Succession Planning and Player Development: What the HR Nine-box Can Learn from Baseball Analysis, and Vice Versa" in the forthcoming Sports, Inc. magazine issue.
• The second subject, look for an article entitled "Bargaining When the Future of an Industry is at Stake: Lessons from UAW-Ford Collective Bargaining Negotiations" in the forthcoming Negotiation Journal issue.
• The third subject, read this blog post entitled "Solution for the NFL-NFLPA: Change the Rules of the Game."

A New Solution to Competitive Balance in Major League Baseball

Is it time for the Diamondbacks and Pirates to start spending some money?

Why MLB Needs a Salary Floor

During the 2002 labor negotiations, baseball owners arrived at the bargaining table with a unified central vision: To improve competitive balance while curbing skyrocketing player salaries. The most obvious way to achieve this goal would have been through a salary cap, a paradigm enjoyed by owners in the other Big Four sports. The MLB Player’s Association, however, vehemently opposed this policy, as it would have limited large-market teams from setting the salary bar indefinitely high during free agency.

So the owners and players compromised. The new Collective Bargaining Agreement (CBA) called for the institution of something of a “soft” salary cap. In comparison to a hard cap, under which teams cannot surpass a certain salary limit, a soft cap simply creates a disincentive system towards such excessive spending.

Two key facets of this soft cap scheme were the luxury tax and revenue sharing. The luxury tax, in essence, punishes the New York Yankees for crossing a certain threshold payroll (I say “punishes the Yankees” because the threshold has been so absurdly high that the Yankees have been the only perennial contributors to this fund). Moreover, given the requisite financial health of teams paying it, the luxury tax has been little more than a slight nuisance, rendering it ineffective as a means of inducing competitive balance and restricting salaries.

Revenue sharing, on the other hand, has had a more complex effect on the economic state of MLB. It is fairly self-explanatory, as teams set aside a portion of their yearly revenue (around 31%), which gets pooled together and then redistributed evenly. To get a sense of how this affects overall competitive balance, the mean revenue for teams in 2009 was $196,600,000, with a standard deviation of $57,308,963. That figure dropped to $39,543,184 after revenue sharing, indicating the variance in revenues decreased quite a bit through this practice. Needless to say, this revenue sharing system can improve competitive balance by providing poorer teams with more cash.

Revenue sharing also serves a means of salary depression. According to economic theory, without revenue sharing, owners simply need to ensure that a player’s value equals his marginal revenue product (MRP). That is, a player is worth the value he returns in the forms of ticket sales, merchandising, etc. With revenue sharing, however, owners now need to ensure that a player’s salary is restricted to just 69% of his MRP, as the owner will need to share 31% of his value with other teams. Owners will therefore be less willing to grant large contracts, or, at least, contracts that respect a player’s true market value.

It appears that this system falls nicely into line with the owners’ aforementioned goals. This is partially true. Granted, revenue sharing boasts a foundationally sound framework for depressing player salaries. With regards to competitive balance, however, the revenue sharing structure is fundamentally flawed. Why? Because the system says nothing about how shared revenue is to be spent. This loophole has created an ironically adverse effect, allowing teams to gain revenue while stagnating salaries and thus doing nothing to improve overall competitive balance.

Let us examine this phenomenon in further depth. The average shared revenue by teams in 2009 was $60,946,000. Ideally, all twenty-two teams generating less than this figure (and thus benefiting from the subsidy) should be using the money gained to increase their payrolls. Thus, for these organizations, we should find that 2010 payroll as a proportion of adjusted revenue should be greater than 2009 payroll as a proportion of initial revenue. For nearly two-thirds of the relevant teams, however, this assumption fails to hold true.

Declines in Payroll as a Proportion of Revenue After Receiving Revenue Sharing, 2009-2010

Team	2009 Payroll/Initial 2009 Revenue	2010 Payroll/ Adjusted 2009 Revenue
Los Angeles Dodgers	51.49%	48.57%
Seattle Mariners	50.98%	50.50%
Atlanta Braves	50.64%	43.80%
Cleveland Indians	43.39%	32.10%
Toronto Blue Jays	43.77%	33.36%
Milwaukee Brewers	43.82%	43.32%
Cincinnati Reds	43.02%	40.45%
Arizona Diamondbacks	42.99%	33.93%
Kansas City Royals	41.48%	40.54%
Texas Rangers	41.07%	31.48%
Oakland Athletics	39.94%	30.64%
Washington Nationals	38.92%	36.59%
Pittsburgh Pirates	31.41%	20.81%
San Diego Padres	30.16%	23.48%

These teams are the “parasites” of MLB, simply reaping the benefits of other teams’ subsidies while not actually doing their part in Bud Selig’s quest for competitive balance. The Pittsburgh Pirates, Arizona Diamondbacks and Cleveland Indians are the worst violators, each exhibiting drops of roughly 11% in payroll as a proportion of revenue after receiving the subsidy. Low and behold, from 2009-2010, the Diamondbacks and Pirates both came in last place in their respective divisions while the Indians finished next to last. It is unclear where the shared revenue is going, but it is clearly not being used for its intended purpose.

So, with the current CBA expiring in December of 2011, here is a revolutionary proposal: What MLB should do in order to increase competitive balance is not introduce a hard salary cap. On the contrary, what baseball needs is a salary floor. A salary floor is the very opposite of a cap. Instead of limiting spending done by large market teams, the new CBA should simply mandate a minimum amount of money each team spends on salary each season.

Consider that in 2009, payroll accounted for 21% of the variance in wins, indicating that teams must spend their money if they wish to win. Winning, in turn, generates more cash, accounting for 22% of the variance in revenue. This figure of 22% indicates that winning is actually more influential than market size (r-squared= 20%) in determining revenue. This revelation leads to an important insight: small market teams have the capacity to succeed, but they must apply more of their funds towards payroll. A salary floor creates a system of self-regulation that fosters competitive balance through mandated spending. As such, it should be considered in the upcoming CBA negotiations.

Solution for the NFL-NFLPA: Change the Rules of the Game

Yesterday was the day the NFL and NFLPA had been hoping to avoid for two years. With no new collective bargaining agreement, the league has locked out the players, and so the players union has decertified itself in order to file an antitrust lawsuit against the league. The two sides may still reach agreement, but the move from the bargaining table to the courthouse is an unambiguously bad sign for football fans. The issues at stake -- division of revenue, rookie pay, health and safety, and the length of the regular season, among others -- have and will continue to be discussed. However, a solution that brings long-term success and stability to the NFL must change the very rules of the game under which both sides bargain. Consider applying planes, trains, and labor relations -- the Railway Labor Act (RLA) -- to pro sports.

Why does the NFL legal bargaining framework need to be changed? And what exactly is their legal bargaining framework in the first place? As a private business, the NFL (and all pro sports leagues) fall under the National Labor Relations Act (NLRA) and the law's enforcing body, the National Labor Relations Board. Very briefly, under the NLRA, labor and management are allowed to use economic weapons, such as strikes and lockouts, to resolve contract disputes as long as they don't commit any unfair labor practices in the way. These tactics should be familiar to sports fans: baseball has had eight work stoppages from 1972 to 1995, and the NBA and NHL have locked out players in 1998-9 and 2004-5.

The NFL and NFLPA have been through this before, and just like 1987, the ability to sue the league for antitrust damages emboldened the union to withstand a lockout, to the detriment of negotiations and a new collective agreement. FMCS Director George Cohen is as talented a mediator as one can find, but over sixteen days even he couldn't overcome the legal / lockout alternatives both parties had. His official (under)statement yesterday said it all: "No useful purpose would be served by requesting the parties to continue the mediation process at this time." Clearly, the mediation process and this private system doesn't incentivize the parties towards agreement.

Before explaining the RLA, a brief introduction to the public-sector labor law is helpful for context. As we're seeing now in Wisconsin, Ohio, and Indiana, policies vary by state, but the basic principles remain the same. Policeman, fireman, teachers, and others who do have the right to bargain and can't reach agreement are not allowed to strike, because the work they do is so essential to the public interest. Binding arbitration is instead generally the last step of the dispute resolution process.


The RLA was passed in 1926, the same year as Northwestern Airlines (above) was founded, but the Act has clearly lasted longer. In many ways, the RLA merges the interests of private- and public-sector labor law framework. Since deregulation, the airline and railway companies are privately owned. However, the transportation industry is strongly in the public interest, as a work stoppage would direct affect the rest of the country's economy. I see a clear parallel to the sports industry. Like transportation, sports leagues are privately run with private owners, yet again in the public interest. An NFL lockout doesn't just directly affect players, but thousands of stadium employees and hundreds of thousands of workers in secondary business (one study estimated a lockout would cost $160 million per city), not to mention indirect effects on morale of millions of football fans. This public interest may not be enough to establish a government regulatory body, but is sufficiently central to the future of the sport to warrant a private version of the RLA.

The RLA -- and a potential application to the sports industry -- is effectively a hybrid of the NLRA and public-sector labor law. A couple highlights from the Act:

• Contracts don't "expire", they simply have a date after which they can become amendable
• Strikes / lockouts cannot be used for disputes classified as "minor"
• They can only be used for "major" disputes after mandatory mediation, non-binding arbitration, and a cooling-off period.

The Act's enforcing body, the National Mediation Board, has strong discretionary power to control the process based on the interests of the parties and the affected public. While some may complain this process is cumbersome, I believe it highlights the best characteristics of private- and public-sector labor relations. Like the private-sector, both parties reach the agreement themselves, without a neutral third party arbitrator essentially telling the company how to run their business. And like the public-sector, work stoppages are exceedingly rare, since their jobs are directly in the public interest.

What would the RLA and its strategic private / public advantages look like if applied to sports? Imagine these NFL-NFLPA negotiations in a world where their contract never expired (the 2011 season would be played under their previous contract if they couldn't reach a new agreement) and we would see a lockout and courthouse battles only after a dispute resolution process many times more exhaustive than George Cohen and the FMCS can subject them to.

Will this ever happen? Congress is unlikely to intervene as they did in the transportation industry in 1926, and even if they did, sports leagues and unions would likely resist government intervention. Any legal change must come from within the sport itself, if both sides look beyond their short-term economic gains to truly re-structure their process in the interests of the most relevant parties not at the table -- fans and communities. There is no better time to explore this option than now.

Note: this post was adapted from part of my Evolution of Sport address at the 2011 MIT Sloan Sports Analytics Conference last weekend. Watch video here.

VIDEO: Gary Bettman, Rob Manfred, and ILR in Pro Sports

What are some similarities and differences in collective bargaining between professional sports and traditional industry? Find out what NHL Commissioner Gary Bettman (ILR '74) and MLB EVP HR and Labor Relations Rob Manfred (ILR '80) say on the subject -- and what this has to do with the NFL-NFLPA negotiations -- in the video following the jump.


A year ago, I was honored to participate in the Human Resource Practices and Industrial Relations in Professional Sports ILR School Workplace Colloquium Series at the Cornell Club in New York City. Both Mr. Bettman and Mr. Manfred have spoken to our club separately in the past, but seeing them interact together and compare experiences added great insight to the relevant issues. Fortunately, video of these excellent remarks from Mr. Bettman and Mr. Manfred are posted online:





Questions discussed include:

• Do players unions more play the role of trade associations or vigilant protectors of worker's (player's) rights?
  
• How do labor and management bargain when the most relevant party -- the fans -- are not at the table?
• How was the 2004-5 NHL lockout different from the 1994-5 MLB strike? Should government intervene in a private dispute?
• Will MLB ever see a minimum payroll or international draft?
• Are professional sports leagues a single entity or competing teams? How does this distinction fit into antitrust law?

Keep in mind, of course, that Bettman and Manfred offer management perspectives. How might Donald Fehr, current NHLPA Executive Director and former MLBPA Executive Director, respond to their comments? Where would he agree or disagree?

These issues are extremely relevant for the NFL-NFLPA negotiations, as the NFLPA has threatened to sue the NFL under antitrust law and the NFL reacted by filing an unfair labor practice charge with the National Labor Relations Board (NLRB) for failure to bargain in good faith. Both parties recently agreed to Federal Mediation and Conciliation Service (FMCS) mediation. FMCS Director (and Cornell undergrad and law alum) George Cohen has issued an introductory statement. Their collective bargaining agreement expires in less than two weeks. What, if anything, can the NFL and NFLPA learn from labor relations in hockey and baseball?

If non-ILRies have any questions on the terms used here, I'm happy to do my best to explain.