Labor Relations
A collective bargaining dispute was recently settled between Major League Soccer (MLS) and its players, on the eve of the 2015 season. The league had just finished averting a dispute with its officials, who formed a union in 2012, when the dispute with the players arose (Parker, 2014). The MLS Player’s Union (MLSPU) and MLS had just seen their prior five-year deal expire, and the union was seeking more flexibility for its members. The structure of Major League Soccer is that the league owns all of the contracts for the players. The teams are franchises, and negotiate deals with the players, but ultimately the league has final say over player movements. This restricts the rights of the players with respect to free agency. Soccer players in Europe, where several leagues act as competitors with MLS for playing talent, players enjoy full free agency when their contract ends. In MLS, their last team retains their rights when their contract expires. The team has to specifically allow the player to leave. The players had other grievances as well, including the salary cap that the league imposes. The combination of the salary cap and the lack of true free agency restricts the ability of players to earn fair market value for their services, should they choose to play in North America. In the U.S. And Canada, MLS is the only fully-profession soccer league, and many other countries have restrictions on the number of foreign players that can limit a player’s ability to negotiate overseas for better terms than would be offered in MLS. Thus, the players and the league were in dispute over the content of the new collective bargaining agreement (Brenner, 2015).
The underlying cause of the dispute therefore is the de facto monopoly that MLS has, and the way that it exploits this to drive down player salaries. Players theoretically can play overseas, but in most countries there are quotas or visa rules that limit the number of foreign players. In North America, only Liga MX in Mexico can offer comparable salaries to MLS — the other leagues are minor pro-or semi-pro. Individual clubs negotiate salaries with their players in MLS, but are bound to the league’s salary cap, and they retain player rights. Thus, if a player does not like the terms of the deal his club is offering, he does not have the right to negotiate with another team, even if he is out of contract. This limits the ability of players to bargain with clubs for a better deal. The lack of true free agency lies at the heart of the contract dispute in this collective bargaining round.
The salary cap was another issue. There are three exceptions to the salary cap allowed per team. As a result, the average salary is MLS is $292,000 while the median salary is $92,000. Thus, a team is typically composed of three high-priced players with the others earning at or below the median. Six players accounted for over one-quarter of total salary in 2014 (Cohen, 2015). The cap was set at a level lower than in comparable soccer leagues or in other North American pro-sports leagues (Cohen, 2015).
The players sought to resolve the dispute by threatening to withhold their labor. The MLS is responsible for the marketing of the league, and had signed a number of television deals globally, including a high profile deal for live matches in the UK. The league therefore had considerable financial incentive to reach a deal before a strike delayed the start of the season (Carlisle, 2015). This was the primary point of leverage for the players. A prolonged strike could have been met with scab players — this would have resulted in the quality of the play in the league suffering and would have created ill-will that could convince high profile players to avoid the league.
That said, a prolonged strike would not have served the existing players well. They have an interest in a strong MLS that can continue to attract top talent, as this attracts sponsors and fans. Growth of the league is imperative for the players, because the salary cap will grow, giving the players increased salaries. The league, for its part, realized as well that many of the players were not going to be able to afford a prolonged strike. Many players earn less than $100,000 per year, and would not have been able to move to any other league to earn during the dispute. A prolonged strike would have created financial hardship. Given the economic realities of soccer as a niche sport in North America, most of these players would have lost more money in a strike than they could have gained from free agency — the most desirable players could simply walk away from the league, so only the lower-end players would genuinely benefit from free agency. The owners of the franchises tend to be very wealthy and with other revenue streams in their portfolios could easily withstand a work stoppage, in contrast to the players (Cohen, 2015).
The BATNA is this deal was decertification by the union, and a challenge to the league under the Sherman Act. This was termed by one labor lawyer as “mutually assured destruction,” so there was incentive for both parties to accepted the recommendations of the mediator and come to an agreement on the key issues.
There was no evidence of unethical conduct from either party. The dispute was simply a legitimate dispute between two parties, where the players in particular tried to use their bargaining power to extract more freedoms for themselves with respect to increasing their salaries. In the prior dispute, the Federal Mediation and Conciliation Service (FMCS) was brought in to mediate an agreement. This was in 2010. This body is commonly used in disputes between sports leagues and their unions. There are no ethical issues identified either with this process or with the behavior of either side in this dispute (Cohen, 2015).
The dispute was resolved a few days prior to the start of the season. The players and the league came to a negotiated settlement. The league surrendered a very limited, restricted form of free agency. There was movement on the issue of the salary cap, but again the league was able to maintain fairly strong control over this issue. The new deal, for five years, represents a modest improvement for the players, while the league retains significant control over the players operating under its employ (Carlisle, 2015).
The dispute is technically resolved, but there are issues that were left on the table. Many players voted against the deal, feeling that it did not provide adequately for free agency. Of particular concern is that younger players who excel have their upside pay limited, which could cause the league to lose young stars. Such terms are not good for the league or its clubs. Conversely, players who have not shown enough to move to foreign leagues will still find that their options are limited, as they will not have much if any freedom of movement within MLS (Carlisle, 2015). The resolution, therefore, appears somewhat incomplete, and both sides may find that their compromise deal is ultimately unsatisfactory.
Mediation was necessary to bring this dispute to resolution. The mediator was Scot Beckenbaugh, from FCMS, who had previously worked on the mediation in 2010 as well. His arrival allowed the two sides to bring the dispute to resolution, as key issues were resolved relatively quickly at that point, after two months of negotiations moving at a glacial pace (Cohen, 2015). The league moved, somewhat, on the two key issues of salary cap and free agency, and almost doubled the minimum salary. This resulted in most of the league’s players benefitting from the deal, allowing it to be ratified by the union.
This dispute could have been resolved in a more constructive fashion. The league, recognizing that it has substantial bargaining power advantage, sought to negotiate strictly with the players. This was never really necessary, and the final agreement remains favorable to the league. The players were well aware that league revenues had increased significantly, and that players in comparable leagues enjoy greater freedom of movement. The league could have reached this agreement without it getting to the point of dispute, and without requiring a second consecutive mediation to bring the dispute to resolution.
References
Cohen, J. (2015). MLS’ CBA negotiations: Federal mediation, salary cap and steps toward free agency. Law in Sport. Retrieved April 5, 2015 from http://www.lawinsport.com/articles/item/major-league-soccer-s-collective-bargaining-negotiations-federal-mediation-salary-cap-and-steps-toward-free-agency
Parker, G. (2014). MLS hopes of growth, grandeur could be slowed by contract negotiations. Al Jazeera. Retrieved April 5, 2015 from http://america.aljazeera.com/articles/2014/4/18/mls-union-contract.html
Brenner, S. (2015). Will MLS players go on strike? The CBA dispute explained. The Guardian. Retrieved April 5, 2015 from http://www.theguardian.com/football/2015/feb/16/will-mls-players-go-on-strike-the-cba-dispute-explained
Carlisle, J. (2015). The details of Major League Soccer’s new collective bargaining agreement. ESPN FC. Retrieved April 5, 2015 from http://www.espnfc.us/major-league-soccer/19/blog/post/2332341/the-details-on-major-league-soccers-new-collective-bargaining-agreement
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