Covid-19 pandemic pushes the boundaries of employment law as U.S. sports come to a halt

The National Basketball Association (NBA) is credited with triggering the suspension of professional and collegiate sports across the United States in response to Covid-19. Its swift response in early March to Utah Jazz star Rudy Gobert being diagnosed with the virus prioritised public safety. Each sport now faces the challenge of determining how and when they can return to action – and who will bear the financial impact of this stoppage.

Questions remain as to whether (and to what extent) games that are currently postponed will be played without spectators, postponed to the off-season or completely cancelled. Cancellations would lead to significant income that is lost, rather than merely delayed, from ticket sales, broadcasters and sponsors. Who suffers the loss – the teams, the players or someone else? How would the league determine what this revamped season should look like? And what happens if a player’s contract is due to expire during any elongation to the season?

Collective bargaining agreements

Professional sports leagues in the U.S. typically have a collective bargaining agreement (CBA) in place with the relevant players’ association. The CBA sets out in detail the basis under which all players are employed while playing in the league. In turn, the CBA determines the parameters within which individual teams can enter into contracts with their players.

Each CBA will govern the rights and obligations of the league and the players towards each other as employer and employee in response to the Covid-19 suspension. However, irrespective of the provisions agreed in that CBA, the reality is that it is being tested by circumstances that it was not designed to realistically ever encounter.

Force majeure

The National Basketball Players Association (NBPA) has already highlighted to its players the presence of a force majeure clause in the NBA CBA (Article XXXIX, Section 5). The clause gives each NBA team the right to potentially withhold 1/92.6th of the salary of each player on its roster for each game that is missed due to Covid-19. The clause would apply if there is, among other things, an “epidemic” that “makes it economically impracticable for the NBA to perform its obligations” under the CBA.

The force majeure clause also gives the NBA the right to terminate the CBA entirely if notice is given within 60 days of the force majeure event’s occurrence. The termination right requires 60 days’ prior notice from the NBA to the NBPA of its intention to terminate the CBA. The NBA and the NBPA would then be obliged to negotiate in good faith to agree a successor agreement during that notice period.

The NBA has shown no desire to attempt to enforce this clause. Nor is it certain that such action would be upheld, if disputed by the NBPA. But it offers an example of how players could be asked to forgo some of their salary or to make other compromises in the interest of achieving some form of closure to the 2019-20 NBA season.

Salary caps

U.S. professional sports teams are typically subject to a maximum aggregate amount that they can pay their players (the salary cap). This cap may be absolute (a “hard cap”) or subject to exceptions and penalties (a “soft cap”), as determined by the CBA. They equally will typically be subject to a minimum aggregate amount that they must pay their players (the minimum team salary). In each case, the salary cap and the minimum team salary for a given season will typically be determined based on a proportion of the sport-related income projected to be generated by the league in that season. The relevant proportion is understandably one of the most contentious aspects of negotiating any CBA, but hovers around 50% of sport-related income for each applicable sport.

Each U.S. sport can expect to generate less income than its salary cap projections would have otherwise calculated for its current league year. Even the National Football League (NFL), which does not start its pre-season until August, will have its marquee off-season event, the NFL Draft, impacted in April. Rather than taking over the Las Vegas Strip, the event will now be confined to a television studio.

The Women’s National Basketball Association (WNBA) typically begins its season in May. This is intended to allow the WNBA to operate mainly during the NBA off-season. The WNBA, like many other sports leagues, may instead find itself unexpectedly in greater competition for viewers once its season commences. This reality may further undermine each sports league as it attempts to minimise the losses suffered from Covid-19 by concluding its season as soon as possible.

The salary cap for next season will likely be negatively impacted across U.S. sports. With less cash to spend, especially in those sports subject to a hard cap, Covid-19 will fundamentally change the market for players facing contract renewal and free agency during the next off-season. It may also alter who teams contemplate signing to their roster using their (lower than anticipated) salary cap space. Covid-19 may, therefore, have a lasting impact on the composition of rosters in each league.

Returning to action

While all stakeholders wish for the return of sporting action as soon as possible, the health and safety of players, staff and fans remains paramount. The decision to return to sporting activities may come before the threat from Covid-19 has completely dissipated from public life. That decision, even if playing in empty arenas, will then raise questions of the employer’s responsibility to provide a safe workplace for its employees. With that comes the risk of liability if a player was found to have contracted Covid-19 due to the resumption of sporting activities. This will encourage leagues to ensure that players are comfortable with the prospect of returning to action.

The decision as to how to rearrange the sports schedule upon any resumption to the season will be within the control of the league. But it is likely to also require at least some consultation, if not bilateral agreement, with the players’ association. For example, Major League Baseball (MLB) is expected to announce an agreement with the Major League Baseball Players Association (MLBPA) in the coming days. This could include provision for a four-week “second spring training” for players to reach full fitness before beginning a shortened season.

The NBA CBA (Article XX, Section 4) provides discretion to the league to re-schedule games in response to force majeure events, but the NBPA has the right to be consulted first. The league also finds itself with an agreed form of playoffs (Article XXIX, Section 7) that will need consent from the NBPA in order to be scaled down from 16 teams or changed from a best-of-seven series.

Many sports arenas are shared by basketball teams and hockey teams. There will also need to be some coordination between the NBA and the National Hockey League (NHL) as to when their respective sports may resume playing and whether spectators may be in attendance at that time.

Back to the bargaining table

CBAs are typically painstakingly negotiated, sometimes even at the expense of the shutdown of a given league season. A CBA is designed to strike a fair balance between the league and its players, the challenge being how to fairly divide an ever-growing pie between employer and employee. The negative economic consequences of Covid-19 ought conversely to be shared by both sides.

The novel circumstances encountered as a result of Covid-19 mean that a solution for each U.S. sport will need to be agreed upon by the league and its players. This should not entail renegotiating their CBA on a permanent basis. The parties should be solely agreeing how to vary their CBA to cater for the unique set of circumstances created by Covid-19. A fraught negotiation is possible but since both sides have the same common goal, a sensible agreement seems likely. The NBA and NBPA have, for instance, already agreed to a moratorium on any player transactions and drug testing during the league hiatus.

It remains to be seen what novel solutions and compromises each sport will devise to return to sporting action and conclude what will already be remembered as an unprecedented season.