Decertification threat a strong message
Breaking down the process and its potential game-changing effects on NBA negotiations
As detailed by ESPN's Marc Stein and Chris Broussard, at least 50 dissatisfied NBA players had a conference call Thursday to lay the groundwork for potentially decertifying the players union. According to the New York Times, this group of players intends to push for the dissolution of their union if this weekend's talks fail to make satisfactory progress or result in an unacceptable deal.
By decertifying, the players would be throwing a counterpunch after being on the ropes for many months. They already have conceded 4.5 percent of league revenues -- moving from 57 percent in the last agreement to a proposed 52.5 percent -- along with accepting many system changes that favor the owners. Meanwhile, the owners' hard-line stance has hardly swayed in the two-plus years the sides have negotiated.
The mere threat of decertification would provide the players with much-needed leverage in the labor dispute. Anticipating such a move, the league filed a federal lawsuit, calling it an "impermissible pressure tactic," and saying it has had a "direct, immediate and harmful" effect on the negotiations. The suit seeks a declaration from the court that the lockout does not violate antitrust laws in the event the union decertifies.
A hearing took place this week in Manhattan, N.Y., in which the union asked the judge to dismiss the suit. The judge has asked for additional briefs from both parties before rendering a decision.
Decertification owes its power to the uneasy truce between labor laws and antitrust laws. The antitrust laws prevent employers from banding together to restrain competition. For example, if all the banks in a city agreed that they would not pay their tellers more than $30,000 per year, it would almost certainly be an illegal case of "price fixing." Likewise, if the banks laid off all their tellers and refused to rehire them unless they agreed to take a pay cut to $30,000, it would almost certainly be an illegal "group boycott." These types of agreements -- which restrain competition -- are addressed by the antitrust laws.
However, collective bargaining encourages the very type of behavior that the antitrust laws make illegal. To resolve this inherent conflict, there is something called the "non-statutory labor exemption," which shields collective bargaining agreements from attack under antitrust law. This protection extends even after the agreement expires -- so long as a bargaining relationship continues to exist.
Here's the key to the whole process: This bargaining relationship continues to exist as long as the union is in place. If the players dissolve the union, the bargaining relationship dissolves with it. Without the bargaining relationship, the league is no longer shielded from antitrust laws.
Much of the economic structure of the NBA -- such as the salary cap, maximum salaries, rookie-scale salaries and the luxury tax -- could be challenged under the antitrust laws as a form of price fixing if there was no union. The lockout itself could be challenged as a group boycott.
In many normal businesses, employers fight unionization and would be thrilled if the employees decided to get rid of their union. But in the sports world, employers benefit from the existence of the union -- so the employees can use the dissolution of the union as a threat.
So far the NBA players have kept the dispute within the realm of labor law by continuing to negotiate as a union. If the players dissolve the union -- either by decertifying or through a related process called a disclaimer of interest -- they surrender their collective bargaining rights, lift the shield of protection provided by the non-statutory labor exemption, and shift the venue from labor law to antitrust law.
After decertifying, the players could then bring an antitrust suit against the league, challenge any rules that constitute a restraint of trade, and ask the court to end the lockout. They could also seek treble (triple the amount) damages -- up to $6 billion per year. The odds of winning are not 100 percent certain (they never are), but the risk to the owners would be enormous. Such a case could take years to resolve.
Once the union decertifies, the collective bargaining process would be over -- there literally would be no union with which the owners could negotiate. Billy Hunter, Derek Fisher and the other players on the executive committee would no longer be in charge -- as a practical matter, control would pass to attorneys. The players also could not reassemble the union for one year without the league's consent. However, such consent obviously would be granted if the two sides eventually cut a deal.
Once the union decertifies, the owners could pursue one of three strategies:
• They can end the lockout, open the doors to the players and start doing business without a salary cap or any of the other mechanisms that existed in the CBA. They would be abandoning the very protections for which they are locking out the players, and which they have enjoyed for decades.
• They can end the lockout, open the doors to the players and unilaterally impose a new set of work rules without collective bargaining. This strategy would surely result in an antitrust challenge by the players. It would also implement an economic system the owners don't want, as the new rules would be designed to withstand such a challenge.
• They can continue the lockout, hoping to wear down the players. This strategy would also be met with an antitrust suit, and the owners would be hoping that the players wear down before the hammer falls. This is the most likely of the three scenarios.
The league's federal lawsuit would also become irrelevant if the union decertifies, because the league sued the union and its executive committee. Those bodies would no longer exist.
In order to decertify the union, at last 30 percent of the players must sign a petition stating that they no longer wish to be represented by the players' association. This petition is filed with the National Labor Relations Board, the same organization that is overseeing both sides' unfair labor practice charges. The NLRB then verifies the petition and schedules an election. If a majority of players then vote for decertification, the union is dissolved.
This process would take until at least after the new year before an election is scheduled. Union attorney Lawrence Katz also believes the NLRB would block any decertification petition until it rules on the earlier charges, which would cause further delays. "In my opinion, they could not process the petition for a vote because of the pending petition," he said.
So why would the players explore decertification now? Such a move would be like throwing a grenade into the negotiating room. "We aren't talking about decertification as a negotiating tactic," said David Holmes, a corporate attorney based in Houston. "We're talking about war."
If 50 players are involved, then this is clearly more than just hot air from a few hard-line players. It puts pressure on both sides. Faced with an increasing likelihood of a player revolt, the league may be more inclined to compromise in this weekend's scheduled negotiating sessions. Even if this is all just posturing from a group of dissatisfied players, it is not a development NBA commissioner David Stern and the owners want to see.
It also puts pressure on Hunter, Fisher and the rest of the union negotiating committee. Amid rumors that Fisher was trying to find a way to sell the players on a 50-50 split of revenues, this threat sends a strong message: You need to hold the line, because we have other options.
While this move is surprising, it is not an unprecedented step for NBA players, who filed antitrust lawsuits in 1970 and 1987, and nearly decertified in 1995. For better or worse, decertification would be a game-changer.