Major League Baseball's 'foul ball': why Minor League Baseball players are not exempt employees under the Fair Labor Standards Act.

• Author: Carney, Lucas J.

1. INTRODUCTION II. BACKGROUND A. An Overview of Professional Baseball's Labor Market 1. The Reserve Clause 2. Salary Arbitration 3. Free Agency B. MLB's Exemption from U.S. Antitrust Law 1. The Origin of MLB's Antitrust Exemption: Federal Baseball 2. Affirming the Aberration: Toolson v. New York Yankees 3. Leaving MLB's Antitrust Exemption Unchanged: Flood v. Kuhn C. The Curt Flood Act D. Fair Labor Standards Act Protections and Exemptions E. Senne v. MLB Alleged FLSA Violations 1. FLSA Minimum Wage and Overtime Violations III. ANALYSIS A. FLSA Section 213(a)(1): "Creative Professional" Exemption 1. The "Salary Basis" Test 2. The "Salary Level" Test 3. The "Duties" Test B. FLSA Section 213(a)(3): The "Seasonal Employee" Exemption 1. Bridewell v. Cincinnati Reds 2. Jeffery v. Sarasota White Sox, Inc. 3. Adams v. Detroit Tigers, Inc. IV. RECOMMENDATION A. MLB Should Settle the Senne v. MLB Lawsuit 1. Protecting MLB's Antitrust Exemption 2. Protecting MLB's Public Image B. Minor Leaguers' Right to Collectively Bargain and Unionize V. CONCLUSION I. INTRODUCTION

   Most fans and casual followers of Major League Baseball (MLB) are acquainted with the meteoric rise in salaries MLB franchises have been paying their major league talent over recent decades. The same cannot be said, however, regarding MLB's compensation of arguably its most valuable commodity--Minor League Baseball (MiLB) players. A lawsuit filed on behalf of current and past minor leaguers alleges that, while major league salaries have increased 2000% since 1976, minor league salaries have increased just 75% over the same period. (1) Senne v. Office of the Commissioner of Baseball pits representatives of the MiLB players versus MLB in a Fair Labor Standards Act (FLSA) lawsuit. (2) The minor leaguers allege that MLB--functionally operating as a cartel--has failed, and continues to fail, to pay the federal minimum wage and mandatory overtime required by FLSA. (3)

   This Note will explore the core, interrelated legal aspects of the Senne lawsuit and examine a possible pair of MLB's FLSA defenses. Through generally analyzing these related legal issues, this Note seeks to answer whether MiLB players are statutorily exempt, non-covered employees under FLSA section 213. (4) Specifically, however, this Note will illustrate why MLB will unlikely achieve dismissal of the Senne complaint purely on the basis of the section 213 exemptions.

   Part II begins by providing background on the structure of professional baseball's labor market, MLB's historic antitrust exemption, the corollary Curt Flood Act, the relevant FLSA protections and exemptions, and concludes by presenting the nature and factual basis for the Senne minor leaguers' FLSA lawsuit. (5) Part III then analyzes whether MLB can effectively defend the Senne claims on grounds that MiLB players are exempt employees under section 213--ultimately concluding it cannot. (6) Part IV therefore concludes by recommending that MLB "play ball" by settling the Senne lawsuit and work with the minor leaguers to form a MiLB player union similar to the Major League Baseball Players Association (MLBPA). (7)

2. BACKGROUND

   This Part develops the foundation of interrelated legal issues essential to answering whether MiLB players are exempt from FLSA protection and, furthermore, understanding why MLB should seek to settle the Senne lawsuit. Section II.A begins with an introduction of professional baseball's cartel-like labor market, which results in the suppression of wages paid to minor leaguers. (8) Sections II.B-C discuss MLB's judicially-created antitrust exemption (9) and Congress's subsequent attempt to limit MLB's protection under its exemption. (10) Section II.D then presents the FLSA minimum wage and overtime compensation provisions, as well as FLSA's statutory exemptions. (11) Finally, Section II.E concludes by setting forth the factual basis for the Senne minor leaguers' FLSA claims. (12)

   1. An Overview of Professional Baseball's Labor Market

      The minor leaguers allege that "MLB has a long, infamous history of labor exploitation dating to its inception." (13) An introduction into the structure of professional baseball's labor market is needed to understand the origin of this exploitation. (14) Abstractly, MLB has a "three-tiered labor market." (15) First, players with three or fewer years of professional experience are subject to the "reserve clause" system. (16) Second, players with three to six years of experience remain subject to the reserve clause system but may settle salary disputes through outside arbitration. (17) Finally, players with more than six years of experience, and not currently under contract with a team, may opt for free agency. (18)

      1. The Reserve Clause

         In essence, the reserve clause "perpetually ties a player to a specific team unless the owner of that team trades the player or sells the player's contract to another team." (19) No player is permitted to participate in professional baseball until the player has signed a Uniform Player Contract (UPC). (20) Until 1976, the reserve clause had been mandated in all player contracts. (21) Since 1976, (22) however, the reserve clause has tied a player to his team but only for the first six years of his career. (23) Predictably, the wage paid to the worker (player) is therefore less than the wage that the player could earn in a competitive market. (24) The reserve clause effectively empowers "the owners [to] engage in monopolistic exploitation of the players." (25)

         MiLB players do not receive benefits of collective bargaining and union representation, further suppressing the minor league wage. (26) Major leaguers, on the other hand, have enjoyed the protections of collective bargaining and unionization since 1968. (27) The MLBPA helps players negotiate collective bargaining agreements (CBA) (28) which allow MLB players to "enjoy[] increased contractual mobility and explosion[s] in salaries." (29) Minor leaguers enjoy no union representation, even though they comprise the overwhelming majority of professional baseball players. (30) The MLBPA only represents "players ... who hold a signed contract with a Major League Club," (31) and does not directly represent the interests of MiLB players. (32)

         According to the Senne plaintiffs, "[efforts to unionize minor leaguers have been unsuccessful because minor leaguers fear retaliation by the seemingly omnipotent [League and its franchises]." (33) The reserve clause and minor leaguers' lack of union representation "enables owners to keep [minor league] players' salaries remarkably low." (34) The reserve clause is the essential feature of the MLB labor market insofar as it provides owners with a monopsony and, hence, is the fundamental basis for the minor leaguers' FLSA allegations. (35)

         Players become salary arbitration eligible "[o]nce [they have] been on a [40-man] roster for three seasons and [are not] locked up" with a long-term contract. (36) MLB's salary arbitration procedure--known as final offer arbitration (FOA)--was first implemented for the 1974 season, and has remained relatively unchanged since. (37) When an eligible major league player files for arbitration in FOA, both the player and team must submit final salary offers, and an arbitration hearing is scheduled. (38) Negotiations between the player and team may continue between the time offers are made and the hearing convenes. (39) A player's arbitration case will be "withdrawn from arbitration" if a negotiated settlement is agreed upon prior to the hearing. (40)

         A third-party arbitrator will settle the issue of the player's salary for the next season if the team and player fail to reach a settlement prior to the arbitration hearing. (41) The arbitrator must select the player's final offer or the team's final offer as a binding salary for one season. (42) Arbitrators are not permitted to reach a compromise between the two offers. (43)

         FOA is more advantageous to the players than the reserve clause because it gives them an opportunity to negotiate with their team. (44) Negotiations lead to the narrowing of salary positions, increasing the prospect of settlement. (45) In terms of earning power, however, professional baseball players' earning capacity is maximized when the player reaches "free agency." (46)

      3. Free Agency

         Players with six or more years of MLB service, i.e., on the 40-man roster, who have not executed a contract for the next season are eligible to become free agents. (47) In free agency, all teams have the option to "competitively bid for a player's services." (48) Understandably, free agency's competitive bidding nature is highly desirable to MLB free agents. (49)

         In theory, both the player and team "benefit[] from ... lucrative [free agency] transaction[s]." (50) That is, players strive for financial security, whereas teams crave the talents and services of the player. (51) However, an issue arises when players sign excessive deals in free agency:

         Free agents are invariably paid for their past, rather than their future, production. Stated otherwise, age is the central, and acknowledged, inefficiency of MLB's labor system. A glance at the list of free agents in any winter will show that most are over thirty-years old and exiting their physical prime. (52) The current labor model is arguably flawed. (53) Despite its drawbacks, however, free agency is the best opportunity for professional baseball players--like the Senne plaintiffs--to make a lucrative living playing professional baseball. In fact, the cartel-like nature of the reserve clause--which dampens salaries paid to minor leaguers--has its roots in a judicial doctrine unseen in modern U.S. antitrust jurisprudence.

   2. MLB's Exemption from U.S. Antitrust Law

      MLB's exemption from U.S. antitrust regulation is the result of three Supreme Court decisions. The trinity of cases, which still govern today, has been the subject of much questioning and disdain. The doctrinal...