Legal Analysis
MLS Could Retain Single-Entity & Offer Free Agency
MLS owners are vehemently opposed to free agency. MLS players believe it's essential. And UCLA School of Law Professor Steven Bank may have a compromise to satisfy both sides.
BY
Steven Bank
Posted
February 11, 2015
4:13 PM
IN A PREVIOUS COLUMN I argued that the major stumbling block in MLS’ collective bargaining negotiations with the MLS Players’ Union was not the concept of free agency per se, but rather the potential that true free agency could undermine the league’s status as a single entity. This could fundamentally shift the balance of power in current and future labor deals by making the league more susceptible to an antitrust suit if negotiations broke down. Even if the parties did agree to some form of free agency subject to a salary cap this time around, the loss of leverage could push the league ever closer to the kind of unrestricted free agency in future negotiations that owners contend would be unsustainable.
In the past week, the level of rhetoric on these issues has only escalated. MLS Commissioner Don Garber told the Orlando Sentinel that, "Our system is one that our owners fought hard to protect, it’s one that they bought into, particularly the new owners who have bought into the league, and that’s that our owners will not bid against each other for player services. And that’s a key aspect of our entire system.” February 11, 2015
4:13 PM
Let’s take an example of a current player to see how this might work in MLS. Gyasi Zardes of the Los Angeles Galaxy is certainly a hot commodity after his display for the U.S. national display against Panama. According to the MLS Players’ Union data, he played in 2014 with a base salary of $125,000 and total guaranteed compensation of $198,000. Not chicken feed by any means for a 23-year-old, but it wouldn’t be surprising if another MLS team—say, the San Jose Earthquakes—would be willing to pay him more. Under the UC System, San Jose could offer him total guaranteed compensation of $213,840—a raise of 8% or $15,840—and the L.A. Galaxy could match that.
MLS and the Players’ Union could agree to a higher maximum percentage for salary raises offered in intra-league transfers—perhaps 20%, or $39,600 in Zardes’ case—but in either case it wouldn’t permit a bidding spiral that would jack up player costs leaguewide. San Jose could try to lure away Zardes with promises of a more prominent role on and off the field or a training environment more conducive to his development, but the offer of a raise probably wouldn’t be sufficient motivation on its own to induce Zardes to relocate. Nevertheless, the system would allow Zardes the opportunity to choose where he wanted to play at the end of his contract and the offer would generate a raise for him, which would provide at least some form of market-based mechanism for rewarding players.
If, however, Fulham came calling and offered £250,000, or roughly $380,775, in total compensation, then San Jose could up its offer to match or beat Fulham’s and the Galaxy could match that. If a bidding war developed at that point, it would be between MLS and Fulham, and not between San Jose and LA.
This single-entity version of free agency could be attractive to both MLS’s investor-operators and to players. It prevents one deep-pocketed investor-operator from driving up everyone’s costs by starting to offer extravagant salaries to pedestrian players. At the same time, it allows players to move freely and to get fair market value for their services—but in a manner that is consistent with the principles of a single-entity structure. Would both sides agree to it? It's hard to say.
Players may complain that getting a competing offer from a non-MLS club is too high a bar and MLS may worry that encouraging players to get competing offers may actually lead some of their best players to take them and leave the league. Both complaints, however, are effectively present under the current system, making this proposal much less radical than it sounds. When coupled with an increase in the salary caps and minimum salaries, this could be a compromise that both sides could agree upon.
Steven Bank is Paul Hastings Professor of Business Law and Faculty Director, Lowell Milken Institute for Business Law and Policy, UCLA School of Law. He has taught courses in tax and business entity law, including a soccer law seminar entitled “Law, Lawyering, and the Beautiful Game.