MLB Facing Many Legal Hurdles With Delayed Season
Are Major League Baseball and the Major League Baseball Players’ Association headed for a labor battle in the midst of a worsening pandemic? Or could suspended baseball activities produce the opposite effect and lead both sides to solve short-term problems and eventually come to terms on a new collective bargaining agreement?
There is no timetable on when, or if, the 2020 baseball season will begin. It’s a safe bet that it will be many weeks, if not several months, before the season begins. That’s if the season happens at all.
Resumption of play would face a host of hurdles, including legal risks
As a starting point, more states and municipalities are banning gatherings as well as on-premises consumption of food or drink at bars and restaurants (including those within ballparks). These proclamations make it illegal for games to be held with spectators. In some states, it is now illegal to play games even if fans aren't in attendance.
For example, on Sunday, Massachusetts Gov. Charlie Baker announced that gatherings of over 25 people are prohibited. The order explicitly defines “gatherings” as including “sporting events with spectators,” along with concerts, parades, faith-based events and other types of get-togethers. The order will remain in place through April 5. However, if the virus isn’t sufficiently contained over the next couple of weeks, it’s possible the order will be extended. The order has practical implications for baseball games at Fenway Park. Even if the Red Sox played a game without spectators or merely practiced as a team without another club present, Ron Roenicke’s squad couldn’t comply with this order. MLB clubs have 26-man active rosters, not to mention a manager, coaches and staff.
In addition, the Centers for Disease Control and Prevention recommends that for the next eight weeks, gatherings of 50 people or more be canceled or suspended. Late Monday, President Donald Trump issued new guidelines, one of which encourages people to avoid gatherings of more than 10 people. While neither a CDC recommendation nor a presidential advisory are binding, expect sports leagues to follow them. Leagues will do so in the interest of public health and, less importantly, out of concern for potential liability.
COVID-19 can spread through the air and by touching a contaminated surface and then touching the face. It appears that infected people who are asymptomatic are much more contagious than was previously assumed. In normal times, MLB games involve spectators who sit next to one another, walk in crowds and touch various surfaces. MLB players, meanwhile, interact with each other and with umpires and coaches, including at each base and in the clubhouse. They do so in ways that would clearly defy a CDC recommendation of social distancing by at least six feet. Common sense suggests that a suspension of MLB games is a pragmatic way of promoting public health.
Playing MLB games in defiance of a CDC recommendation or a presidential guideline could also elevate the risk of a liability for a club. While these directives aren't binding, they arguably set the standard for what constitutes “reasonable” conduct by event organizers and hosts. If fans attended MLB games in contravention of these directives and if a significant number of them tested positive shortly thereafter, it’s conceivable they could argue that MLB was negligent in inviting them to attend games. An analogy would be when a high percentage of restaurant patrons show symptoms of food poisoning. The patrons can’t always “prove” it was the food they ate. However, if an abnormal number of patrons display symptoms consistent with food poisoning, they can establish with some degree of certainty that the food they consumed was unsafe.
A lawsuit over contraction of COVID-19, allegedly at a baseball game, would nonetheless face a bevy of hurdles. For one, establishing how a person was infected would be difficult to clinically prove. Contraction can occur in multiple ways, and some people don’t show symptoms for up to two weeks. Spectators at sporting events may have already been infected. Also, fans at baseball games assume various risks of injury. Game tickets contain waivers of liability (see foul ball injury litigation) and common sense suggests that it’s now unwise to partake in group events. Plus, the vast majority of people who contract COVID-19 recover; those who recover are going to be less motivated to bring a lawsuit that would demand their limited time and energy. Still, MLB clubs are like other businesses: They seek to avoid exposure to the possibility of litigation, even litigation that they’d likely defeat. Being sued is disruptive and can lead to adverse media coverage.
Resumption of play would also require MLB-MLBPA agreement on various terms of return
Resumption of play in a shortened or accelerated season would compel clarity on how service time and performance bonuses in player contracts are handled.
Service time was a point of labor disagreement long before the pandemic struck. This was apparent in the Kris Bryant arbitration matter. Under Article XX of the collective bargaining agreement, a player is ineligible for free agency until he has accumulated six “full years” of service time in MLB. A “full year” has a precise meaning that would prove problematic if the 2020 season was shortened. Specifically, under Article XXI, a full year requires at least 172 days on a team’s active roster or injured list. Keep in mind, an ordinary MLB season spans 187 days.
Player performance bonuses raise the same basic issue. If the 2020 regular season was halved from 162 games to 81 games, it would (in the aggregate) be twice as difficult for batters and pitchers to reach performance thresholds that are based on accumulative statistics, such as plate appearances for a hitter or games for a reliever.
The good news is that these are surmountable hurdles. They could be addressed by math. MLB and MLBPA could simply agree to adjust service time and performance bonuses to fit a shortened season. Assuming the 2020 season were cut in half and assuming the number of season days was also cut in half, a full year in 2020 could be defined as 86 days instead of 172 days and a performance clause that calls for 600 plate appearances could be reduced to 300 plate appearances, and so on. Still, MLB and MLBPA would need to agree on those changes. Under labor law, neither side can unilaterally alter the CBA or modify player contracts.
Lastly, MLB and MLBPA will likely be wary of resuming play if there is a threat that players, coaches and staff could unintentionally infect each other. MLB and MLBPA might wait until test kits become more available and until they provide results in a matter of hours rather than days.
MLB clubs could lawfully refuse to pay players
If a substantial number of games are going to be lost due to the pandemic, MLB clubs could invoke paragraph 11 of the uniform player contract (“UPC”).
Before discussing paragraph 11, it’s worth considering the UPC itself. The UPC is found in Appendix A of the CBA. The fact that the UPC was bargained by the league and the MLBPA carries legal significance. Under what is known as the nonstatutory labor exemption, collectively bargained policies that allow competing MLB clubs to restrain how they compete over players’ wages, hours and other working conditions are exempt from lawsuits under Section 1 of the Sherman Antitrust Act. Successful Section 1 lawsuits lead to the imposition of treble (three times) damages. Antitrust litigation also tends to be expensive and time-consuming. To that point, it can lead to invasive pretrial discovery, where MLB would need to turn over sensitive records and its officials would be required to answer questions while under oath. While MLB enjoys a historic exemption from federal antitrust laws, that exemption was narrowed in the Curt Flood Act of 1998. The Act limited the exemption to issues of franchise relocation, the amateur draft and the minor leagues, meaning suppression of MLB wages by MLB clubs would be subject to antitrust scrutiny. However, MLB need not worry about such scrutiny since the UPC is in the CBA and is thus exempt.
Now let’s consider paragraph 11 of the UPC. It states the following:
Governmental Regulation–National Emergency
11. This contract is subject to federal or state legislation, regulations, executive or other official orders or other governmental action, now or hereafter in effect respecting military, naval, air or other governmental service, which may directly or indirectly affect the Player, Club or the League and subject also to the right of the Commissioner to suspend the operation of this contract during any national emergency during which Major League Baseball is not played.
In short, paragraph 11 permits MLB clubs to suspend the operation of player contracts while MLB games are not played during a national emergency. Once games eventually resume, paragraph 11 would allow for clubs to pay players on a prorated basis for the days when games occur. As a result, the players wouldn’t be owed backpay for canceled games.
On March 13, President Donald Trump proclaimed a national emergency on account of the outbreak of COVID-19. He did so under the National Emergencies Act and in reflection of the World Health Organization declaring that the COVID-19 outbreak is a pandemic. This means paragraph 11 could be invoked.
To be clear, MLB clubs do not “have to” invoke paragraph 11 in light of the president’s proclamation. They simply have the option to do so. The president will also eventually rescind the proclamation once the pandemic is under greater control. Once that happens, and if MLB clubs haven’t yet invoked paragraph 11, the opportunity to do so would have arguably passed.
MLB revenues could collapse, which in turn could spawn litigation over who absorbs the loss
Players are scheduled to be paid at the start of the regular season. According to The Athletic, MLB clubs will move forward and pay them. This is despite the fact that clubs will, in a best-case scenario, see their gate receipts, broadcasting and IP rights sales, and other forms of revenues delayed until later in the year.
There’s also the strong possibility that even if games resume, and even if fans can attend those games, many fans will prefer to get their tickets refunded and watch at home instead. MLB could lose hundreds of millions of dollars if fans stay home, be it by legal order or by their own choice. According to Statista, about 30% of MLB revenue comes from gate receipts. Last year, MLB generated $10.7 billion in revenue during the 2019 season—an all-time high.
To add to MLB’s worries, sponsors might invoke force majeure (French for “superior force”) clauses as a means of trying to exit sponsorship deals or at least reduce obligations to pay the league and clubs. These clauses permit sponsors to suspend or terminate their obligations on account of an extraordinary and uncontrollable circumstance, sometimes called an “act of God.” A volcanic eruption, a terrorist attack or a contagious disease pandemic could—depending on the contract’s wording—authorize a sponsor to invoke a force majeure clause. Such a clause could also appear in contracts between MLB and its broadcast partners, including ESPN, Fox Sports, as well as in clubs’ contracts with regional sports networks.
Even if force majeure clauses aren’t worded in ways that protect MLB’s sponsors and broadcasters, contracts might contain so-called “impossibility” clauses. These clauses instruct that the parties aren’t obligated to perform a contract when, due to a sizable change of circumstances, it would be impossible to perform a contract. Such clauses also sometimes use more inclusive language, such as “commercially impracticable” rather than “impossible.” Sponsors and broadcasters could argue that since federal, state and municipal governments have made it impossible for games to played with fans, or to be played at all, sponsors and broadcasters shouldn’t have to pay.
If MLB and its sponsors and broadcasters disagreed about the financial fallout of the absence of games, it’s likely that their contracts contain mediation and arbitration provisions. Those provisions would ensure that legal debates aren’t brought to court but are instead resolved through private means of dispute resolution. Insurance companies probably also play a role. The various contracting parties have likely purchased policies that could mitigate economic fallout for clubs and their partners; whether those policies contemplate a pandemic scenario is unknown. Regardless, MLB and its clubs could lose a massive amount of money if games aren’t played in 2020. Even if MLB agrees to pay players for now, that could change later.
Impact of the COVID-19 pandemic on how MLB and owners view bargaining priorities
The current CBA is set to expire on Dec. 1, 2021. While there is plenty of time for the two sides to strike a deal, the economic consequences of the pandemic could alter the negotiations. That would prove especially likely if the pandemic becomes viewed less as a one-year aberration and more as a lasting, disruptive force that permanently changes pro sports.
It’s not as if the virus will work its way through the U.S. and Canada over a period of several months and then magically disappear. It will remain in the population for the foreseeable future, perhaps forever. We may be entering a “new normal” that regards social distancing and self-quarantining as ordinary behaviors rather than extraordinary measures.
Much will thus depend on how quickly a COVID-19 vaccine is developed, tested and approved by regulators as safe. Experts theorize that we are at least a year away from such a vaccine, particularly since the FDA approval process normally takes years, not months. The efficacy of the vaccine will also be a crucial factor; the flu vaccine immunizes a person only about 40% to 60% of the time, in part because of multiple flu strains. It’s possible the eventual COVID-19 vaccine will work most of the time but also fail with some regularity.
Without an effective COVID-10 vaccine that is widely available, sporting events might be played without spectators for many months, if not years, to come. As mentioned above, about 30% of MLB’s revenues derive from gate receipts. Clubs also profit from sponsorships that are pegged to spectators seeing signage. MLB might recover some of that lost revenue. Many of the people who would otherwise attend games will watch them on TV instead. Still, a loss of gate receipts and accompanying revenues would likely shrink the economic size of MLB and its clubs. Those clubs, in turn, would be valued at lower dollar amounts (in 2019, Forbes estimated the average MLB franchise was worth $1.8 billion). It stands to reason that MLB is poised to demand a more punishing competitive balance tax if revenues are going to drop dramatically in the years ahead.
The relationship between large- and small-market clubs could also be tested by the pandemic. Small-market teams may be less capable of withstanding a loss of local revenue caused by the pandemic. Small-market teams have long felt that the economics of MLB are skewed in favor of large-market clubs, particularly since MLB, unlike the NFL, NBA and NHL, has no salary cap. At a minimum, the great pandemic of 2020 will further showcase the varying abilities of smaller and larger market teams to weather the storm.
A more hopeful possibility
The above analysis presents a fairly bleak picture for the economics of MLB. It also suggests potential legal quarrels between the league, players and the many businesses that are connected to the sport.
It’s also not a forecast that has to happen.
As each day passes, more and more people seem to heed social distancing, self-quarantining and related measures that should slow the rate of infection. These steps will hopefully “flatten the curve” whereby fewer new cases are reported and the virus’s spread gradually slows. The more closely we follow the advice of public health experts, the sooner day-to-day life will return to some semblance of normalcy. As that happens, sports, concerts and other gatherings should return in some form, too.
Likewise, MLB and MLBPA could use the time off to enhance their bargaining relationship. The current CBA is set to expire on Dec. 1, 2021. As explained above, commissioner Rob Manfred and MLBPA executive director Tony Clark and their negotiators are going to need to work through various issues in order for resumption of play to occur. If they can reach agreement on how to return, it’s possible they could also work toward a new CBA. A spirit for cooperation and compromise might surface as MLB and MLBPA, like the rest of us, work together as a community to overcome the crisis.
MLB and MLBPA could go further still. The two have already collaborated in response to the pandemic. In addition to each of the 30 MLB clubs pledging to donate $1 million to assist ballpark employees, MLB and the MLBPA have made a combined $1 million pledge to help provide meals to those in need. Individual players have also stepped up. To illustrate, Washington Nationals pitcher Sean Doolittle and his wife, Eireann Dolan, plan to donate 25,000 meals for impacted families in the D.C. metropolitan area. Perhaps MLB and MLBPA will join hands to further help the many part-time, seasonal workers at ballparks who stand to lose the hourly wages that they and their families rely on. Likewise, owners and players could financially help minor league players and minor league teams’ staff who bear the brunt of the pandemic’s economic chaos.
Like with everything related to COVID-19, only time will tell.
Michael McCann is SI’s Legal Analyst. He is also an attorney and the Director of the Sports and Entertainment Law Institute at the University of New Hampshire Franklin Pierce School of Law.
