Friday, June 12, 2009

NFL Labor Negotiations: Early Posturing over Disclosure of League Financial Information

NFL commissioner Roger Goodell and DeMaurice Smith, executive director of the NFL Players Association opened talks toward a new collective bargaining agreement when the two met last week in New York. AP coverage on the meeting reports that an early point of contention is the commissioner’s refusal to offer the union full financial information.

One early subject of contention: the union's demand the NFL teams open their books and the league's position that the union already has all the relevant financial information.

The battle over financial disclosure in negotiations is not new, and whether the league or union are legally in the right depends on the particular circumstances. However if the NFL maintains that financial concerns are driving their bargaining position, they should be obligated to open their books to the union.

In 1980, the Major League Baseball Player Relations Committee (PRC) proposed replacing the free agency with a more restricted version, akin to the NFL’s Rozelle Rule, whereby clubs losing a free agent could select a player from the roster of the club signing that player. The union, under the leadership of Marvin Miller, strongly objected, contending (correctly) that the market for free agents would be significantly restrained. Prior to the negotiations, Commissioner Kuhn and some individual club owners (Kroc and Turner) made public comments to the effect that escalating salaries, driven by free agency, had caused serious financial problems to the game— to the degree that some clubs were on the verge of bankruptcy. The commissioner’s statements implied that a financial threat to MLB clubs, and therefore players’ livelihoods, was imminent if players did not accept restrictions on free agency. Miller consequently petitioned the NLRB to force MLB to open its books and provide evidence to the union of the claimed financial distress, under the conventions of good faith bargaining. Miller’s position was that the Players Association must have the requested financial data in order to fulfill its duty of fair representation. The Board agreed with Miller, but the PRC appealed in US District Court (Silverman v. MLB PRC, US District Court, Southern District of NY, 1981). The Court overruled the NLRB in favor of the PRC. The rationale given was based on the PRC’s exclusive authority (my emphasis) to formulate the bargaining position of the clubs. The commissioner was not a member of the PRC—nor was an agency relationship established between them to the Court’s satisfaction. Therefore, the commissioner’s statements could not be attributed to the PRC as a statement of their bargaining position.

The inference drawn from Silverman is that if the specific financial concerns are part of the NFL’s official bargaining position, the union is justified in asking for financial disclosure. Included in the NFL’s statement in May 2008, as their rationale for opting out of the current CBA two years early was the following:

The NFL earns very substantial revenues. But the clubs are obligated by the CBA to spend substantially more than half their revenues – almost $4.5 billion this year alone -- on player costs. In addition, as we have explained to the union, the clubs must spend significant and growing amounts on stadium construction, operations and improvements to respond to the interests and demands of our fans. The current labor agreement does not adequately recognize the costs of generating the revenues of which the players receive the largest share; nor does the agreement recognize that those costs have increased substantially -- and at an ever increasing rate -- in recent years during a difficult economic climate in our country. As a result, under the terms of the current agreement, the clubs’ incentive to invest in the game is threatened.

It appears that financial issues are a significant part of the league’s official bargaining position. (Although that determination will have to be made by the NLRB or courts.) Commissioner Goodell claims that the union has all relevant information and, as required by the CBA for salary cap computations, the union does have access to all revenue information and labor costs. However, they are not privy to information on costs as they relate to capital expenses, specifically stadium construction, which the league claims have changed the economic climate to the degree that a new CBA is necessary. As such, the NFL should be required to open its books to the union.

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