Professional sports leagues and their stakeholders are facing numerous challenges as a result of the COVID-19 pandemic. The National Hockey League (NHL) was nearly finished with its regular season when it shut down. Major League Baseball (MLB) was well into spring training when U.S. President Donald Trump declared a national emergency on March 13, 2020. Both leagues are now scrambling to come up with a solution for the resumption of play that will protect the health of the players while minimizing the potential loss of revenue. But there are a myriad of issues that may keep arbitrators busy for a long time whether or not the current seasons are completed.
Even if the owners and players manage to agree on the format for the resumption of their seasons, both MLB and the NHL have salary arbitration as part of their collective bargaining agreements (CBAs). One can only imagine the complexities of those arbitration hearings when statistics from a season abbreviated by a pandemic are factored in. The current language in the respective CBAs will provide some, but not all, of the answers to these issues.
Challenges Facing MLB
MLB’s CBA is set to expire in 2021. The current agreement is silent with respect to the parties’ rights if a season were to be shortened, suspended or cancelled outright in the event of a pandemic. However, the commissioner has the right to suspend the operation of all player contracts indefinitely during any national emergency during which no games are played.
Within two weeks, MLB and the Major League Baseball Players Association (MLBPA) hammered out an agreement by which each player would receive a portion of his scheduled full-season salary for 2020 based on the number of games actually played in relation to the full 162-game season.
Team owners also agreed to advance a sum of $170 million, payable over 60 days, for salary payments that would ordinarily be due to players for the period beginning March 26 and ending on the earlier of May 24 or the beginning of the 2020 season. The players are being paid on a sliding scale based on their level of Major League service. If games are played, the $170 million would be credited against the prorated salaries owed to the players, and if the season is cancelled and no games are played, the players would keep the advanced funds with no repayment obligation.
The parties also agreed to a formula that would allow players to be credited with a full year of service even if this season ends up being cancelled and no games are played. In that scenario, a star player such as Mookie Betts, who was traded from the Boston Red Sox to the Los Angeles Dodgers in the off-season, could become a free agent without ever having played a game for the Dodgers.
The ink was barely dry on this agreement when team owners decided to throw a high, hard one at the players. On May 11, the owners approved a proposal for an 82-game season starting without fans in early July. The plan includes expanded rosters, an expanded playoff field and use of the designated hitter for all games. The most significant aspect of this new proposal is the requirement for teams to share 50% of their revenue with the MLBPA, thus bringing into play the words most players don’t want to hear: salary cap.
Early indications are that the players will reject this proposal given the fact that their compensation has never been tied to club revenues, and with the current CBA set to expire on December 1, 2021, they fear that negotiations on a new CBA could include a push by the owners to implement a salary cap.
The Situation of the NHL
Unlike MLB, the NHL has in its CBA the power to suspend the season, a power that was exercised in March by Commissioner Gary Bettman. Another distinction is that NHL players and owners divide all hockey-related revenue on a 50/50 basis. The NHL continued to pay player salaries but has the right to reclaim salaries and payments even after they are paid. A provision of the CBA gives the owners the ability to reduce player salaries in the event that the league has to suspend or reduce operations due to “a state of war or other cause beyond the control of the League or of the Club.” NHL players did not receive their final paycheck for the regular season, which was due on April 15. The National Hockey League Players’ Association (NHLPA) deferred its decision on whether to receive the final checks due to the uncertainty caused by the pandemic.
If the full 82-game season is not played, players’ salaries can be decreased in proportion to the number of games canceled. The NHL’s CBA also has an escrow provision that provides for withholding a portion of player salaries when the owners’ share of hockey-related revenue falls under projections for the year. It should be noted that many star players receive significant amounts of compensation through signing bonuses, and these bonuses, which take the form of lump-sum payments, have to be paid out even if games are canceled due to COVID-19.
It is also noteworthy that there is a provision in the CBA stipulating that any money owed to the owners by the players in excess of what was collected in this season’s escrow holdback will come directly off what is owed to the players during the next season. Thus, COVID-19 could also have the effect of dramatically reducing the salary cap for the next season even if the current season were to be completed in arenas devoid of fans.
Any plan to try to complete the 2019–2020 season will also have to take into account the fact that not all teams had played the same number of games when the season was interrupted. Will the regular season be completed? How will the playoff teams be determined if there is no completion of the regular season? How will the teams’ draft positions be determined? What about conditional draft picks from previous trades? Can you even have a draft that takes place before the season is completed?
What about free agency? The normal start date of July 1 for free agents to sign with their new teams will have to be moved back to allow the current season to be completed.
Some NHL players are balking at the idea of returning to complete the season in neutral sites if it might mean being isolated from family members for up to four months. NHL players come from more than a dozen countries, and given the fact the U.S. and Canadian borders are effectively closed, and those allowed to enter are required to quarantine for 14 days, the challenge of completing the season grows even larger.
Baseball players have similar concerns, and there are many unhappy campers among them as well. Some have threatened to sit out the season if they are not paid their full season salary or if they are forced to enter into a revenue-sharing arrangement.
For sports fans anxious for their favorite pastime to return, things have just become much more complex.