Baseball Labor Relations: Anti-Trust Exemptions & the Reserve Clause

Baseball has had a tumultuous history with its labor relations. The reserve clause - the clause in baseball contracts that continued to roll the terms of the contract over at the will of the club - was the subject of player ire almost from the founding of major league baseball. Over the last several years, the working relationship between the players and owners seems to have become less contentious. This article discusses some of the origins of the animosity to the present day's relative labor peace.

In 1922, the Supreme Court ruled against the then defunct Baltimore Federal League team in it's case against the National League on anti-trust grounds and in so doing created a "troublesome and unusual situation."

As an aside, the court was not persuaded that vaudeville acts had been ruled to be covered under the anti-trust statutes and that they perform a similar function.

The Federal Baseball Club v. National League decision stood for the idea that the business of "base ball" was not the interstate travel to far flung cities, but rather the intrastate exposition of individual effort in the playing of a game. Since the Major Leagues were simply organizations for scheduling the games and organizing rules, there was some merit to the argument. The court decided that in this instance, congress had not meant to cover the game of baseball under the Sherman anti-trust act.

Since baseball's exemption from this act was strictly a judicial affair, the concept was free to be challenged in court and in 1953, Toolson v. New York Yankees, Inc., et. al. came before the court. Toolson was a Yankees minor leaguer who argued that the reserve clause illegally interfered with his ability to reach the major leagues and that MLB's monopolization and collusion restrained his ability to engage in interstate commerce.

The court reaffirmed the 1922 decision because in the thirty years since the decision, Congress had not acted to amend the statute to specifically include baseball and that baseball had evolved with the understanding of the exemption. Although unlike the Federal decision, there was a vigorous dissent, specifically noting that while in 1922 the game was "local" and didn't amount to interstate commerce the game in 1953 was very different and, quite simply, that congress had demonstrated the ability to expressly exempt specific entities from the statutes and had chosen not to specifically exempt baseball - essentially the flip side of the argument that congress didn't expressly include baseball in the acts. The Toolson decision essentially held that more harm would be done by overturning the decision than in upholding a dubious exemption.

With the refusal to overturn the Federal decision, the reserve clause stood. But only in baseball as the court ruled in subsequent cases that this exemption applied only to baseball.

In 1972, the court ruled on Curt Flood's challenge to the reserve clause in Flood v. Kuhn, et. al. In this case, the court specifically says that were they dealing with baseball for the first time, there would be no exemption granted, but since there had been over 50 years since the Federal case and they were concerned with retroactivity issues should the case be overturned, they had no choice but to uphold the concept although they now admitted that baseball was in fact interstate commerce.

Of course, at this point in baseball's labor history, the players had organized into a union and had negotiated a collective bargaining agreement in 1968. But the issue of the reserve clause had not been tackled. One the issues before the court in "Flood," was whether the reserve clause was a mandatory subject of collective bargaining. The court affirmed lower court decisions that state anti-trust statutes did not apply and that since federal law exempted baseball, they would not rule on that question.

In 1970, the Players' association had negotiated a grievance and arbitration procedure in their collective bargaining agreement. What a grievance process does is keep disagreements as to violations of the contract in a process ending in binding arbitration.

In 1975, Arbitrator Peter Seitz ruled that the reserve clause as it had been interpreted - a continuous rolling over - was incorrect and that the reserve clause held only for 1 year - and thus created the "free agent." The collective bargaining agreement expired at the end of the 1975 season and baseball locked the players out for the first three weeks of March until a federal judge upheld Seitz's arbitration award. There were again work stoppages in 1980 and 1981 over team compensation for losing free agents.

In fact every time the CBA expired since the first contract was negotiated, a work stoppage ensued, culminating in a player strike in 1994-1995 that ended only with a grievance ruling after MLB attempted to unilaterally implement their final offer and the National Labor Relations Board implementation of the 1994 contract. However, that 1995 strike was the last one and baseball has successfully negotiated a contract without a work stoppage the next two opportunities.

It was not until 1998, when President Clinton signed into law the "Curt Flood Act," that Congress did what the Supreme Court had been asking for, removing the exemption of MLB from the anti-trust statutes as it regarded labor relations, allowing the players to challenge in court the actions of owners. This was a message to all involved that there would be no more favorable treatment by the courts, even if unionized employees could not sue over anti-trust violations in federal court.

The contentious nature reared its head recently over increased testing for performance enhancing drugs, yet the issue was resolved without work stoppage. In 2002, MLB discussed the possibility of contraction - and Congress responded by suggesting that there could be further exemptions removed, specifically the anti-trust provisions relating to location of baseball franchises - and the contraction issue was dealt with in contract negotiations with the players association. No contraction has taken place. In 2003, the players' association was convinced that MLB had conspired to increase the number of free agents "on the market" in collusion to increase supply. They had accused ownership of this in 1985, 1986 and in 1988. So while the relationship is not great, the economics for those involved seems to be a driving factor in the labor peace.

While labor relations within baseball can still be contentious, the players association and the owners seem convinced enough such that both realize they walk a fine line and that at the end of the day, baseball is interstate commerce in which both parties are engaged. Money does solve a lot of problems. Curiously, baseball's 1922 victory seems to have been a phyrric one. One that took 75 years to correct.

REFERENCES:

Flood v. Kuhn, et al, URL: http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=US&vol=407&invol=258

Toolson v. New York Yankees, Inc. et. al., URL: http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=US&vol=346&invol=356

History of the Major League Baseball Players Association, URL: http://mlbplayers.mlb.com/pa/info/history.jsp

Chass, Murray "Baseball's Transfer of Power" in New York Times, URL: http://query.nytimes.com/gst/fullpage.html?res=9F04E2DD1438F930A15751C1A9669C8B63

. Lisa Pike Masteralexis, Carol A. Barr, Mary A. Hums Principles and Practice of Sport Management, pg 224

Edleman, Marc, "HAS COLLUSION RETURNED TO BASEBALL? ANALYZING WHETHER A CONCERTED INCREASE IN FREE AGENT PLAYER SUPPLY WOULD VIOLATE BASEBALL'S "COLLUSION CLAUSE", URL: http://www.marcedelman.com/EdelmanLoyolaEntLRev.pdf

Congressional Budget Office Cost Estimate, S. 53. Curt Flood Act of 1997, URL: http://www.cbo.gov/ftpdoc.cfm?index=63&type=0&sequence=0

S. 53 URL: http://www.congress.gov/cgi-bin/bdquery/z?d105:SN00053:@@@L&summ2=m&