Employment

Transfers

What is the legal framework for individual transfers? What restrictions can be placed on individuals moving between clubs?

Each of the major sports leagues in the United States functions under a separate CBA. Each CBA has specific free agency rules that restrict when a player may transfer between teams. The CBAs and specific player contracts are renegotiated periodically and govern individual transfers. Additionally, in some leagues, teams themselves are limited as to accepting a player who may be a free agent if the team already has a specified number of active players on the team (ie, ‘hit the cap’).

Ending contractual obligations

Can individuals buy their way out of their contractual obligations to professional sports clubs?

Yes. The logistics of getting out of a contract vary depending on the league and the CBA provisions governing contracts along with details in the player’s contract. For example, in the NBA, in terminating his or her contract, a player may accept a portion of the remaining value of his or her contract, allowing the team to save a portion of what they would have paid had the contractual arrangement continued, and the player to seek out a different contract with another team. In the MLB, player contracts often include an option after a specified number of years for the team to either keep the player or discuss a buy-out arrangement. The specifics on how the player is released from the contract vary, but such releases are possible.

Welfare obligations

What are the key athlete welfare obligations for employers?

As a general rule, participants in professional sports assume the risk of unintentional injuries, but will not assume the risk of injuries intentionally inflicted, or that result from a disregard for safety. Participation in contact sports constitutes implied consent to normal risks that attend with that sport. Negligence is insufficient to establish a cause of action, but wilful or wanton behaviour or reckless disregard for the safety of others will be grounds for a negligence suit.

Young athletes

Are there restrictions on the employment and transfer of young athletes?

Minors under the age of 16 may not be employed during school hours pursuant to the Fair Labor Standards Act. Minors under the age of 18 may not be employed in occupations the Department of Labor deems detrimental to their health or well-being. Additionally, states place further restrictions on child labour that may be more restrictive than the national standards.

The NHL allows a player to be drafted once he is 18 years old. The MLB requires a player to have graduated from high school, while the NBA requires players to be one year removed from high school and the NFL requires players to be three years removed from high school.

What are the key child protection rules and safeguarding considerations?

The main considerations in employing young people are their safety and education. Specifically in athletics, there is a concern with protecting young athletes by shielding them from physical injury and requiring them to mature emotionally and receive an education before entering the world of professional sports.

Club and country representation

What employment relationship issues arise when athletes represent both club and country?

As mentioned, each of the major sports leagues in the United States are unionised and function under separate CBAs. The players of the major sports leagues are employees of their respective clubs and their employment relationships are governed by the respective CBAs. Additionally, the CBAs or leagues may restrict or limit a player’s ability to represent his or her country in an international event. For example, the NHL did not suspend its normal season in 2018, which restrictedits players from participating in the 2018 Winter Olympics.

Selection and eligibility

How are selection and eligibility disputes dealt with by national bodies?

The International Olympic Committee grants the United States Olympic Committee (USOC) the right to represent the United States in all matters relating to its participation in the Olympic Games. The USOC, in turn, authorises a National Governing Body (NGB) as the governing body for each Olympic sport within the United States. The USOC and each NGB have their own dispute resolution processes, though the majority of disputes can be handled by the relevant NGB.

In the first instance, an athlete seeking to challenge an NGB’s decision regarding an athlete’s right to participate in competition may seek resolution of their dispute by filing a formal complaint with their sport’s NGB. Subsequent to or concurrently with filing a complaint with the relevant NGB, an athlete may also file a complaint with the USOC under section 9 of the USOC Bylaws (a Section 9 complaint), which states that ‘no member of the USOC may deny or threaten to deny an athlete the opportunity to participate in the Olympic Games, Pan American Games, Paralympic Games, a World Championship competition, or other such protected competition, as defined within the USOC Bylaws.’ A Section 9 complaint must be filed within six months of the alleged denial of the right to participate. Filing a Section 9 complaint is purely a notice mechanism that alerts the USOC that an issue exists, and allows the USOC to intervene to attempt to mediate a dispute between the athlete and the NGB. After filing a Section 9 complaint, however, an athlete may seek a final resolution of their claim by filing for arbitration with the American Arbitration Association (AAA). Arbitrations are typically held before a single arbitrator selected from a closed pool maintained by the AAA and the Court of Arbitration for Sport. Decisions rendered in these arbitrations are final and binding in accordance with the Commercial Rules of the AAA.

What are the key taxation issues for foreign athletes competing in your jurisdiction to be aware of?

Foreign athletes pay US federal income tax at the same rates as domestic athletes on income from competing or other personal services performed in the United States. The applicable withholding regimes vary based on whether a foreign athlete is employed by a team or self-employed. States generally follow a similar approach and subject athletes to state tax based on competition or other services performed in the state. Foreign athletes with endorsement deals must allocate the income from the deal between personal services and royalties for the use of the athlete’s name and likeness. The different types of income may have different withholding and treaty eligibility consequences.

A foreign athlete who is in the United States for a substantial period of time may become a ‘permanent resident’ for tax purposes and subject to US federal income tax on his or her worldwide income. In such a case, one or more states may also assert that the foreign athlete is a resident of that state under similar rules.