Tool of Labor Relations in Professional Sports: Collective Bargaining

Industrial relations or labor relations are an essential consideration in any professional setting. They provide the all-important interface between employers and professionals or employees. Typically, the profit-oriented business model pits the interests of the employers against those of the employees. While the employer’s interests lie in cost-effectiveness and profit-making, the employees are mostly concerned with their welfare and working conditions. Therefore, tools of labor relations such as collective bargaining are used to develop mutually agreeable structures and guidelines for employer-employee interactions. However, a failure to adhere to these conditions often elicits the industrial actions of defiance, such as strikes and lockouts, to improve employees’ bargaining positions. The cases of the WNBA collective bargaining agreement of 2014 and the NBA’s lockout of 2011 can be used to understand labor relations in professional sports.

The WNBA (Women’s National Basketball Association) has come under significant scrutiny after its employees declared that they would be abandoning the current collective bargaining agreement a year before its expiration. This agreement was signed into existence in 2014 following intense disagreements between the player’s union and the WNBA. The players had demanded increased wages since they were significantly underpaid. Similarly, the players had also demanded an increase in the number of players on the roster following a 2009 decision to cut the roster down to 11 players. The outcomes included an agreement to add an extra player to the roster to make a total of 12. Additionally, the WNBA and the players struck a revenue-sharing deal that would allow them 30% of the overall earnings. The players were also entitled to marginal annual increases in the salary cap. On the other hand, employers can impose fines on players for failure to fulfill WNBA requirements due to overseas play. However, players who use less than three months for overseas duty can draw from an incentive fund of $50,000.

The NBA’s lockout of 2011 is an excellent example of industrial responses that employees can use to bolster their bargaining position. The league and players, under the representation of their unions, had been engaged in negotiations for 18 months without a mutually agreeable compromise. Instead, the negotiations led to the intensification of the conflict. The players had demanded an increase in the average annual earnings of the players to $7 million. They had also demanded an increase in all revenue outside ticket sales. These demands were at conflict with the league’s interests, which are to make a profit. The league intended to install a hard cap on the player’s salaries, ensuring that they did not have an opportunity to increase their salaries beyond the cap point throughout the agreement’s existence. As such, the stand-off contributed to a lockout in 2011, where they refrain from playing and abscond their duties to the league. Eventually, the league allowed a 50/50 split on all revenue with the players.

Collective bargaining is considered a basic entitlement among employees. It refers to negotiations that take place between an employer and a group of employees who form an organization such as a union. The union is tasked with providing a strong organization that is capable of negotiating on behalf of the employees. These organizations often work towards achieving higher wages, improving worker conditions, and regulating interactions between employers and employees. The necessity of these unions and the broader concept of collective bargaining has to do with the perpetual conflict that exists between the employer and the employee, which can lead to a hostile and unfair working environment. The WNBA used the WNBPA (Womens’ National Basketball Players Association) to negotiate for better wages and working conditions in the league. The organization was crucial in presenting strong and unified demands that would improve the welfare of each player.

The installation of a soft salary cap was one of the primary bargaining outcomes. A salary cap is a tool used to restrict or limit the maximum amount that a professional team can pay to its players as salaries. Therefore, it sets a limit on how much a team of players can earn cumulatively or individually. The salary cap for the WNBA currently stands at $110,000 per player as per the 2014 collective bargaining agreement. The cap is derived from the considerations of factors such as revenue collected to ensure that the WNBA does not attain losses. However, the placement of a soft cap allows for marginal increases in the salary ceiling imposed on the players and the teams. Therefore, the agreement offers an opportunity for players to increase their annual earnings upon the upward revision of the cap, depending on prevailing conditions. This resolution does offer benefits to the players and a compromise to the employer.

Revenue sharing was a vital aspect of the agreement as well. It refers to a distribution of income derived from the overall business to the stakeholders. In sports, it allows for the distribution of this revenue with the teams involved in the business. Therefore, the contributors can enjoy the income that they help create. The WNBA players had demanded an increased share of the revenue from ticket sales and other forms of merchandising. The outcome allowed the players 30% of the league’s revenue. This approach was essential since enfranchising the employees ensures their investment in the business since their interests align with those of the employers. However, one key consideration involved the comparison of this agreement to that in the NBA, where the players hold 50% of the revenue. Therefore, this situation indicates the presence of gendered bias, which was also a key concern among the female players.

As with any collective bargaining endeavor, some of the parties may feel that the terms do not adequately address their concerns. Therefore, unacceptable compromises are bound to lead to a collapse of the agreement. The WNBA players opted out of their agreement a year before its expiration. They cited gender discrimination where their incomes fall short of those of the men in comparable jobs. Additionally, the wages also fall short of comparable international teams in China, Europe, and Russia. The persistence of this discrimination has led to the breakdown of the 2014 agreement, which may lead to a conflict in the future between the players and the WNBA.

The WNBA is likely to experience a player’s strike or lockout, as has been evident in the male league. The 2011 lockout in the NBA was the result of unyielding participants in each side of the conflict. When the interests of each side are set in stone, it becomes difficult to reach a compromise that is appealing to either side. As such, participants may result in tactics intended to boost their bargaining position and force a compromise from the opposing side. Lockouts, which are slow-downs in productivity are intended to achieve such a goal. The players staged a lockout to push the NBA into agreeing to the demands or more favorable ones. The lockout was only successful due to the collective organization that went into its implementation. After all, employers united under a union enjoy the protection of the organization.

The economic costs of the lockout imposed on the NBA were intended to incentivize the league into compliance. The consequences of a failure to reach a decision and the continuation of a lockout would lead to reduced productivity and revenue for the organization. As such, the players’ lockout was meant to achieve a reduction in productivity where poor performances or their absence altogether would lead to a loss for the NBA. This move was essential in motivating the league to offer a revenue-sharing proposal of 50%-50%.

Collective bargaining is a crucial aspect of any workplace. It is essential to ensure that employees obtain fair wages, work in the right conditions and that their relationships with employers are professional. The case of the WNBA and the NBA shed light on the value and importance of the collective bargain agreements The first case of the WNBA shows a group of players who reached an agreement with their employer for increased wages. However, the undesirable compromises, which undermine the players have led to the premature termination of the agreement. A high possibility exists that the women’s league may experience hurdles seen in the male league. A 2011 lockout was the response to the NBA’s failure to offer mutually agreeable terms. The lockout achieved the revision of the terms to the favor of the players following the lockout. As such, collective bargaining agreements are crucial in promoting effective employer-employee relations. However, fair deals can be reached through tactics such as a lockout.

References

1. Associated Press. (2014). WNBA, player’s union agree to new CBA, increase roster sizes. Retrieved 24 October 2019, from https://www.usatoday.com/story/sports/wnba/2014/02/15/wnba-reach-new-cba-agreement-with-players-union-2014/5510315/
2. Forbes Magazine. (2011). The Financial Impact of The NBA Lockout. Retrieved 24 October 2019, from https://www.forbes.com/sites/investopedia/2011/11/03/the-financial-impact-of-the-nba-lockout/#16d7131675ec
3. Keefer, Q. A. (2017). The sunk-cost fallacy in the National Football League: Salary cap value and playing time. Journal of Sports Economics, 18(3), 282-297.
4. Marginson, P., & Galetto, M. (2016). Engaging with flexibility and security: Rediscovering the role of collective bargaining. Economic and Industrial Democracy, 37(1), 95-117.
5. Mather, V. (2018). W.N.B.A. Players Opt Out of Collective Bargaining Agreement. Retrieved 24 October 2019, from https://www.nytimes.com/2018/11/01/sports/wnba-union-opt-out.html
6. Nicholson, L. (2011). The NBA Lockout: Here's What You Need to Know. Retrieved 24 October 2019, from https://www.theatlantic.com/business/archive/2011/06/the-nba-lockout-heres-what-you-need-to-know/241251/
7. Peeters, T. (2015). Profit‐Maximizing Gate Revenue Sharing in Sports Leagues. Economic Inquiry, 53(2), 1275-1291.
8. Sadler, T., & Sanders, S. (2016). The 2011-2021 NBA collective bargaining agreement: Asymmetric information, bargaining power, and the principal agency problem. Managerial Finance, 42(9), 891-901.
9. Samee Wahab – 500890979 – ECN722 Term Paper