Employment & Labor Insider

EDITOR’S NOTE: A longer version of this article was previously published on Forbes.com. This is Part Two of a two-part series. Part One is here.

Last week, I examined recent decisions by the Supreme Court of Nevada and the U.S. Court of Appeals for the Second Circuit that rejected courts’ historical deference to the authority of the Commissioner of the National Football League. The professional sports leagues – particularly the NFL – must now make changes to try to preserve their historical level of control.

Protecting the shields

Sports leagues are unique and insular businesses in many ways. Yet, they contribute to our collective culture in important ways and are therefore subject to considerable public scrutiny. For these and other reasons, the leagues believe that the Commissioner holds a unique position that requires him to have broad authority to manage in the best interests of the league and sport.

But courts are clearly no longer willing to treat sports and their Commissioners deferentially. 

The NFL and the other leagues will need to revisit how they can maximize Commissioner authority while avoiding adverse legal rulings. They should consider the following revisions to their arbitration procedures:

• Vest initial authority in the Commissioner. As is generally the case now, the league Constitutions should provide the Commissioner – or his designee – the authority to be the arbitrator in any dispute related to or arising out of a non-player’s employment with the club.
• Broaden the coverage. The arbitration provision should cover claims against the club, a colleague, another club or its employees, and the league or league employees, including the Commissioner. The parties covered by arbitration provisions have historically been more limited.
• Clarify the arbitration rules. Courts across the country are increasingly reluctant to enforce arbitration provisions, especially in California and its neighboring states. Leagues must update their arbitration processes to meet these courts’ exacting standards. Among other things, they should provide clear and fair rules that do not substantially diminish a party’s rights as contrasted with litigation in court. Arbitration agreements frequently incorporate by reference the rules of the American Arbitration Association or JAMS. The leagues can either do the same, or construct and make available their own detailed sets of rules.
• Create a process for managing possible conflicts. It is pretty clear based on the Flores and Gruden decisions that Commissioners should no longer hear disputes involving themselves or the leagues. Nor are courts likely to accept a Commissioner’s decision as to whom to delegate the matter. Instead, the leagues should create a process by which a neutral arbitrator can hear any case if the league or the Commissioner is a party or a substantial fact witness. Both AAA and JAMS maintain a panel of arbitrators with sports industry expertise. The league could delegate the matter to one of them.
• Include a right to remand. The previous proposal would give claimants an incentive to name the league or the Commissioner as a party to avoid having to arbitrate before the Commissioner. However, the arbitration provision could give the league the right to challenge as a sham its inclusion as a party. That initial question could be resolved by a AAA or JAMS arbitrator.
• Freeze the Constitution. Both the Second Circuit and the Nevada Supreme Court disapproved of the fact that the Flores and Gruden arbitration provisions incorporated the NFL’s Constitution while also preserving the right of the NFL to amend the Constitution at any time. Instead, the parties should be bound by the version of the Constitution that existed at the time of the parties’ agreement.
• Identify criteria for the league’s interests. In the event that a matter must be arbitrated before a neutral arbitrator, the arbitration provision could nonetheless spell out certain criteria that the league believes are important to the league’s interests and which the arbitrator must consider in reaching a decision. For example, the arbitrator could be required to consider prior relevant decisions by the Commissioner, to consider the league’s history, to consider the effect of any decision on the public’s perception of the league, and to consider the league’s unique integrity or cultural concerns. The baseball salary arbitration process includes permitted criteria (essentially the player’s performance and contribution to the club) and prohibited criteria (the club’s financial position, press reports, prior offers, and salaries in other sports or occupations). By identifying criteria that can and must not be considered, the leagues may be able to protect themselves from judicial scrutiny while still encouraging an arbitration process that considers the league’s unique interests.

The leagues generally seek to resolve disputes and controversial issues internally and as privately as possible, and to avoid the courts. If they want to continue to do that, they – and their arbitration processes – will have to evolve.