Tag Archive: Lockout

Jan 21

Drop the Puck: An Overview of the New NHL CBA

The National Hockey League (NHL or League) has officially begun its new season.  As pucks dropped across the NHL Saturday night, a new collective bargaining agreement (CBA) was in effect.  Negotiating the agreement led to a lockout which lasted more than one hundred days[1] and had far reaching costs (as discussed here).  Much of the previous CBA will remain unchanged, however, there have been some important changes made to certain aspects of the relationship between the League and the National Hockey League Players Association (NHLPA or Union).  These changes are highlighted below.

The new CBA is a ten-year agreement[2], making it the longest agreement to be signed between the League and the Union[3].  Each side has a right to terminate the agreement in 2019[4].

Two of the central sticking points during negotiations – the division of hockey-related revenue and a pension plan for players – were resolved through the new agreement[5].  Under the previous CBA hockey-related revenue (HRR) was divided with a slight advantage for the players, who received 57%[6].  The new agreement splits HRR evenly between the players and the League[7].  Additionally, a defined benefit pension plan will be created[8].  A defined benefit plan is one that provides recipients with retirement benefits for the remainder of their lives[9].

Along with a new split in HRR, the agreement creates a new structure for revenue sharing, including the creation of a Revenue Sharing Oversight Committee (the Committee)[10].  The revenue sharing pool will equal 6.055% of HRR per year and will obtain half of its funds from the ten teams that have the highest gross revenue[11].  The remainder of the funds will be made up of money from league revenue and gate receipts for playoff games[12].  The Committee will control the revenue sharing program and will exercise oversight authority over any team that generates less than 75% of the league average in gate revenues[13].  The new agreement also creates an Industry Growth Fund (the Fund) which will provide assistance to any team that is struggling with generating revenue[14].

Individual player contracts (called Specific Player Contracts or SPCs) will remain the same for the remainder of the 2012-13 season, despite the shortened season[15].  After the end of this season, any player contract that provides for a lower salary for any given season that is lower than the minimum salary for that season will be adjusted so that the player receives the minimum[16].  The minimum salary begins at $525,000 and increases to $550,000 for next season[17].  After that, it increases by an additional $25,000 every two years until it jumps by $75,000 between the 2016-17 and 2017-18 seasons[18].  It then increases by $50,000 every other year until the end of the contract[19].  After four seasons players will be eligible for salary arbitration under the system that existed in the previous CBA[20].  The existing system of free agency is also carried over to the new agreement, meaning after seven seasons or at the age of 27 players become free agents and are able to talk to any team[21].

In addition to minimum salaries for individual players, the new CBA creates payroll ranges for the teams[22].  The upper limit, midpoint, and lower limit are set for the first two seasons, after which the three amounts are set through a formula[23].

The new CBA divides the discussion of discipline into two distinct sections – on-ice discipline and off-ice discipline[24].  The amount of fines that may be levied against a player for on-ice infractions is increased[25].  Further, the new agreement provides for an appeals process players can access if they are subject to discipline[26].  The first step in appealing on-ice discipline is going to the Commissioner; in certain cases, there may be an additional right to have an appeal heard by a neutral arbitrator[27].  There are a number of reasons a player may be disciplined for off-ice conduct, including participating in conduct that can ultimately harm the game of hockey[28].  In such a case a player may be subject to a range of penalties, from suspension to paying a fine to the nullification of the player’s contract[29].  If a player wishes to appeal discipline for off-ice conduct, the appeal goes directly to a neutral arbitrator[30].  The standard of review for all disciplinary appeals is substantial evidence[31]

The final major area covered by the new CBA is health and safety concerns.  The agreement begins by tackling substance abuse through a review of the Substance Abuse and Behavioral Health Program (the Program)[32].  A player who tests positive for drugs at “dangerous levels” must be referred to the program; the agreement sets a deadline by which the Program must create a definition of “dangerous levels[33].”  The list of banned substances is expanded and the testing program is expanded[34].  Additionally, the parties commit to a study of HGH testing[35], something that has been controversial in many professional sports.  Players will now be subject to four types of testing: testing during training camp, “team testing” during the regular season, random individual testing (which can occur at any point, including during the off-season), and testing based on reasonable belief the player is using a banned substance[36].  In order for the final type of testing to be utilized, probable cause must exist[37].  Importantly, a player who refuses to comply with drug testing is seen as having tested positive[38].  The strict liability provisions found in the old CBA remain in effect but the new agreement changes the defenses available to players who test positive[39].

The new CBA creates an Owner-Player Relations Committee which will meet at least twice each year to discuss a multitude of issues that affect both parties and the game of hockey as a whole[40].  Given the difficulty the two parties seemed to have during the most recent negotiations and lockout, this type of committee will hopefully help to foster a better working relationship between the League and the Union.

The remainder of the changes deal with issues like how a team may conduct fitness testing, how long training camps may last, the number of days off players get during the season, the amount of insurance coverage players and their families are eligible to receive, and other playing conditions[41].

The new CBA between the NHL and the NHLPA alters some significant portions of the relationship between the parties.  It is a document of compromise.  The players lost 7% of the HRR they received under the old agreement and the owners had to agree to the creation of a defined benefit pension plan.  However, each side received in return something that was important to it.  It will be interesting to see how some of the open-ended issues are resolved (i.e.: testing for HGH) and how the new provisions end up impacting the game.

[1] Katie Strang, NHL, union have tentative agreement, ESPN, January 8, 2013, available at http://www.espn.go.com/nhl/story/_/id/8817955/nhl-nhlpa-reach-tentative-agreement.

[2] NHLPA, Summary of Terms, January 10, 2013, available at http://www.cdn.agilitycms.com/nhlpacom/PDF/Summary-of-Terms-1-10-13.pdf.

[3] NHLPA Staff, NHL, NHLPA Sign Collective Bargaining Agreement, Press Release, January 12, 2013, available at http://www.nhlpa.com/news/nhl-nhlpa-sign-collective-bargaining-agreement.

[4] NHLPA, Summary of Terms, supra at note 2.

[5] Rick Baert, NHL players score new defined benefit plan, Pensions & Investments, January 21, 2013, available at http://www.pionline.com/article/20130121/PRINTSUB/301219982/nhl-players-score-new-defined-benefit-plan.

[6] Steve Zipay, NHL, players reach tentative deal; ratification would end lockout, Newsday, January 6, 2013, available at http://www.newsday.com/sports/hockey/nhl-players-reach-tentative-deal-ratification-would-end-lockout-1.4412276.

[7] NHLPA, Summary of Terms, supra at note 2.

[8] Id.

[9] Colleen E. Medill,  Introduction to Employee Benefits Law: Policy and Practice (2011).

[10] NHLPA, Summary of Terms, supra at note 2.

[11] Id.

[12] Id.

[13] Id.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Id.

[25] Id.

[26] Id.

[27] Id.

[28] Id.

[29] Id.

[30] Id.

[31] Id.

[32] Id.

[33] Id.

[34] Id.

[35] Id.

[36] Id.

[37] Id.

[38] Id.

[39] Id.

[40] Id.

[41] Id.

Jan 19

The Silence of the Arenas: The Tangential Costs of Labor Disputes

The National Hockey League (NHL or League) lockout is over, having lasted 113 days.[1]  Since it began, the lockout has led to the cancellation of 510 games[2] and the annual Winter Classic game, which should have been played at the turn of the new year[3].  Hockey fans will once again be able to watch their favorite teams compete, as a shortened season is scheduled to begin this weekend[4].  Although it is now a footnote in the history of labor-management relations in the NHL, the most recent lockout has provided an important reminder of the economic impact labor strife can cause.

Of course, the League and the National Hockey League Players Association (NHLPA or Union) both stood to lose a significant amount of money as a result of the lockout.  In an uninterrupted season, over 1,200 games are played[5].  Each game represents an estimated $975,000 in ticket sales alone[6].  The math works out to a total loss of $497.25 million over the course of the lockout.  In addition to lost ticket revenue, the League is losing around a quarter of its sponsorship revenue[7].  The Union has also suffered economic losses.  As of early January the players had lost six out of the thirteen paychecks they usually receive during a season[8].

But there are often costs associated with labor disputes that reach beyond the primary parties to the dispute.  This was certainly the case with the NHL lockout.  In addition to lost revenue from merchandise and concession sales at the arenas during games, the businesses surrounding the arenas have been impacted by the cancellation of games.  In Boston, one parking garage operator estimated a revenue loss of $6,000 for each game that was not played[9].  The nearby bars and restaurants were losing approximately $1 million per cancelled game[10].  In Pittsburgh, it is projected that city businesses lost a collective total of $2.2 million per cancelled game on top of the roughly $15.2 million lost as a result of losing traffic from four preseason games that were not played[11].

Local businesses were not the only entities affected by the lockout.  The municipalities in which the arenas are located also felt the sting of lost revenue.  In New York, Nassau County, home of the New York Islanders, was expected to lose around $1 million from lost tax revenue if the entire season was lost[12].  The expected loss is based on the $1.12 million the County received in hockey-related revenue in 2010; the sources of the revenue included sales tax, parking fees, and concession sales[13].  In Ohio, Columbus and Franklin Counties, which share hosting duties for the Columbus Blue Jackets, projected tax losses between $3 million and $4 million if the NHL season was ultimately cancelled[14].  The losses would be the result of unrealized income and sales tax receipts[15].  It is unclear how much tax revenue was lost by the three counties as a result of the lockout.

The decline in revenue for local restaurants, bars and other businesses that resulted from the NHL lockout is important not only for the survival of individual businesses, but also for the strength of local economies.  Once businesses start losing money and owners are unsure of when, if ever, the source of the lost revenue will return, they must make some choices.  One of these choices may ultimately be to reduce the size of its workforce.  If this occurs, there will be a further impact on the economy of the area as a result of the now-unemployed individuals having less money to spend.  The decrease in revenue to local restaurants and retailers will also have a trickle-down effect on other businesses in the supply chain.  With fewer customers, and ultimately fewer dishes served, restaurants may not order as much food as they would when they are routinely overbooked in the hours before or after a hockey game.  Stores in the area that saw increased sales as a result of the foot traffic of individuals going to and from the games may not be able to turn around merchandise as quickly and, therefore, will not need to order from their suppliers as often or in the same quantities.  Similarly, municipalities that lost revenue as the result of the lockout may have to make tough choices about how to fill the budgetary gaps left by the lost revenue.  The municipality may have to decide to lay off workers, to cut back on providing certain services, or to raise taxes in order to replace the revenue while maintaining a balanced budget.

The costs of a labor dispute can be high for the parties to the dispute, with each side ultimately losing income in one form or another.  But, as the recent NHL lockout has illustrated, there are also resulting costs for other entities that rely on the continued business and operation of the relationship between the two parties in order to help generate revenue.  These tangential costs are often lost in the focus on the progress, or lack thereof, being made by the employer and union that are attempting to reach a settlement, but can have wide-ranging impacts on local communities.

[1] Katie Strang, NHL, union have tentative agreement, ESPN, January 8, 2012, available at http://www.espn.go.com/nhl/story/_/id/8817955/nhl-nhlpa-reach-tentative-agreement.

[2] Id.

[3] Pat Leonard, NHL lockout that’s putting Winter Classic on ice is costing more than just one game, New York Daily News, December 29, 2012, available at http://www.nydailynews.com/sports/hockey/winter-classic-killing-lockout-costs-game-article-1.1229608.

[4] Ira Podell, NHL Lockout Over, Training Camps Set To Open Ahead of 2013 Season, Huffington Post, January 12, 2013, available at http://www.huffingtonpost.com/2013/01/13/nhl-lockout-over-training-camp_n_2465497.html.

[5] Joshua Berlinger, This Is How Much the Lockout Has Cost the NHL So Far, Business Insider, October 4, 2012, available at http://www.businessinsider.com/the-nhl-just-cancelled-the-first-two-weeks-of-the-regular-season-and-its-going-to-cost-them-at-least-xxxxx-2012-10.

[6] Id.

[7] Gregg Krupa, NHL lockout’s true cost is staggering, Detroit News, December 24, 2012, available at http://www.detroitnews.com/article/20121224/OPINION03/212240356.

[8] Steve Zipay, NHL, players return to bargaining, Newsday, January 2, 2013, available at http://www.newsday.com/sports/hockey/nhl-players-return-to-bargaining-1.4396453.

[9] Associated Press, NHL lockout costs Boston businesses millions, Boston Herald, December 27, 2012, available at http://www.bostonherald.com/business/business_markets/2012/12/nhl_lockout_costs_boston_businesses_millions.

[10] Id.

[11] Staff, NHL lockout’s cost to Pittsburgh business: $2.2M a game, Pittsburgh Business Times, October 26, 2012, available at http://www.bizjournals.com/pittsburgh/blog/morning-edition/2012/10/nhl-lockouts-cost-to-pittsburgh.html.

[12] Robert Brodsky and Randi F. Marshall, Officials: NHL lockout could cost LI economy $60 million in revenue, Newsday, September 16, 2012, available at http://www.newsday.com/sports/hockey/officials-nhl-lockout-could-cost-li-economy-60-million-in-revenue-1.4008466.

[13] Id.

[14] Lucas Sullivan, NHL lockout has tax cost, The Columbus Dispatch, December 23, 2012, available at http://www.dispatch.com/content/stories/local/2012/12/23/nhl-lockout-has-tax-cost.html.

[15] Id.

Sep 15

Checking: Is There Potential for Unintended Ramifications from the NHL Lockout Challenge?

The last few years have been active for those interested in labor-management relations in the world of professional sports.  Last year saw the lockout of NFL players and a delay of the NBA season because of a breakdown in negotiations.  Only the MLB and the MLB Players Association seemed able to amicably negotiate a new collective bargaining agreement.

This year’s conflict has been the negotiation of a new collective bargaining agreement (CBA) for players in the National Hockey League (NHL).  The current agreement was set to expire at midnight Saturday.[1]  While the parties have continued discussion in recent days and weeks, it has been reported that they remain far apart on compensation and revenue sharing[2], the two central issues in the negotiations.[3]  Now it appears the parties have ceased the bargaining process altogether.[4]  The players have stated they would gladly continue to play while a new agreement is negotiated[5], however, the owners have already voted to implement a lockout if a new agreement is not reached today.[6]

During previous lockouts in other sports, the union and its player-members have attempted to find ways around the lockout in an effort to ensure the players continue to receive paychecks while an agreement is being negotiated.  Last year NBA players attempted to decertify their union, which would have allowed them to bring an anti-trust claim against the league to end the lockout.[7]  Now, the NHL Players Association (NHLPA), along with a number of players, is attempting to partially block the lockout through an application filed with the Quebec Labor Relations Board.[8]

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