Minor League Players Sue MLB for Wage, Antitrust Violations

Two recently filed federal lawsuits may open a new chapter of labor discord between Major League Baseball and its players. Unlike in the past, the disgruntled workers are not major league players but the approximately 6,000 minor league players whom MLB teams employ to play for their minor league affiliates.

In Senne v. Major League Baseball, Case No. 3:14-cv-00608-RS (N.D.Ca.), 43 former minor league players filed a federal class action suit against MLB, its former commissioner, Bud Selig, and all 30 MLB teams. The suit alleges that the defendants failed to pay them minimum wage and overtime in violation of the federal Fair Labor Standards Act. It also asserts violations of the minimum wage and overtime statutes of California, Arizona, Florida, Pennsylvania, Maryland and Oregon—the states where a majority of minor league games are played.

As alleged by the plaintiffs, minor league players work approximately 50 to 70 hours per week during the season, spring training and instructional leagues. Most are paid a marginal signing bonus of a few thousand dollars and earn $3,000 to $7,500 annually, according to the suit. They receive no paid overtime for their work and no salary for spring training, instructional leagues or maintaining their physical conditioning during the offseason. These wages are far below federal and state requirements.

In Miranda v. Major League Baseball, Case No. 3:14-cv-05349-HSG (N.D.Ca.), another group of former minor league players filed a federal class action lawsuit alleging that MLB imposes a set of employment rules restricting minor league player movement between teams, which denies them an opportunity to market their talents and depresses their wages. Most of the general allegations contained in the Miranda complaint are raised in the Senne complaint, but the former asserts an antitrust violation and the latter does not.

The Miranda plaintiffs allege that minor league players are required to sign a uniform players agreement with the franchise that drafts them. These contracts include a provision that the MLB team holds their rights for seven years, thereby barring minor league players from seeking higher wages from another franchise. While players lose their rights to negotiate with other teams, franchises may cut, trade or release players with almost no restrictions. MLB refers to this as its reserve system, and claims it is a necessary component to operating the league.

Both lawsuits claim that MLB and its teams impose a rigid salary structure upon all minor league players which is non-negotiable. MLB teams pay first-year players $1,110 per month and provide only marginal wage increases for each successive year of minor league service. The plaintiffs further allege that MLB has capped signing bonuses for draftees, as well as players it signs who reside outside the United States and are not subject to the MLB draft.

The plaintiffs allege that the current poor working conditions for minor league players arise from two factors. First, minor league players are not and have never been represented by a union. Unbeknownst to most baseball fans, minor league players are not members of the MLB Players Association. Second, minor league players, lacking the ability to collectively bargain, fear challenging the rules imposed by MLB and its teams. Most of the minor league players are young men pursuing their childhood dream of playing professional baseball. They worry that if they challenge their low pay, teams will respond by cutting or releasing them, denying them an opportunity to ever play in the majors.

The result is that a majority of minor league players earn below poverty-level wages. They often live in cramped apartments with several teammates, sometimes along with players’ wives and children. Occasionally, host families provide rooms for minor league players during the season. In order to keep their expenses low, minor league players eat poorly, despite their contractual obligation to keep themselves in good physical condition.

The poor economic conditions of minor league players stand in stark contrast to those of their major league brethren and the industry that employs them both. After decades of struggle, major league players and the MLBPA have secured minimum salaries of more than $500,000 a year. Some major league players earn as much as $25 million a year under guaranteed contracts. These players work for franchises with an average individual market value over $700 million, and in an industry that, in the aggregate, earns revenue exceeding $8 billion.

In a historic irony, minor league baseball players find themselves in the same legal and economic quagmire faced by major league players in baseball’s early history. They earn comparably low salaries and are not represented by a union. They work in an industry with a reserve system under which MLB teams hold their rights for several years, set their wages and may cut, release or trade them, nearly at will. It was these working conditions that resulted in MLB’s lengthy and recurring labor strife and, eventually, the formation of the MLBPA in 1953.

As far back as the 1880s, MLB players understood that the reserve system was the source of their poor economic conditions. Under those rules, MLB teams held the rights to the players with whom they signed contracts (there was no draft until 1965) for their entire playing career. Players signed one-year contracts that included a provision that gave the team a one-year option after the contract expired. As enforced by MLB, all MLB players were required each year to sign a new one-year contract with a one-year option or not play baseball.

Attempts to challenge the reserve system as an antitrust violation failed before the U.S. Supreme Court in a trilogy of cases. In Federal Baseball Club of Baltimore v. National League of Professional Baseball Clubs, 259 U.S. 200 (1922), a unanimous court held for the first time that the business of baseball was exempt from the federal antitrust statue, based, in part, on the court’s conclusion that baseball was a local activity not affecting interstate commerce. The court later affirmed baseball’s antitrust exemption in Toolson v. New York Yankees, 346 U.S. 356 (1953), and Flood v. Kuhn, 407 U.S. 258 (1972).

Both Toolson and Flood involved cases in which a minor and a major league player, respectively, challenged MLB’s reserve system. In the latter case, Curt Flood, the St. Louis Cardinals’ major league centerfielder, asserted that he was traded to the Philadelphia Phillies without his consent after 12 years of MLB service, in violation of the federal antitrust law. Although the Flood court recognized that baseball involved interstate commerce, the court upheld its prior precedents on stare decisis grounds.

One month after the Toolson decision, MLB players formed the MLBPA, and in the 1960s they hired Marvin Miller as the MLBPA head. He began negotiations with MLB. Through collective bargaining from 1968 through 1975, the parties reached agreement upon a series of basic agreements in which the MLBPA obtained concessions from MLB.

These concessions included recognition of the MLBPA as the exclusive bargaining agent of MLB players, creation of an independent grievance and arbitration procedure, steady increases in minimum salaries for MLB players, and the first negotiated limitation, albeit minor, to the reserve system—providing a player veto right to a trade if he has 10 years of major league service and five years with one team.

Two years after the Flood decision, the MLBPA brought two grievances pursuant to the parties’ agreement on behalf of two MLB pitchers. Both grievants played for their respective team during the season based on their contracts’ one-year option after refusing to sign a new contract. Following the season, they argued they were now free agents. After a lengthy hearing, labor arbitrator Peter Seitz sustained their grievances.

Following the decision, which MLB unsuccessfully appealed, the parties collectively bargained further restraints on the reserve system as applied to major league players. Although MLB’s rules concerning teams’ rights over players are complex and constantly changing, MLB players today achieve free agency after six years of major league service. But MLB teams still hold the rights to minor league players for seven years.

In 1998, MLB and the MLBPA collectively bargained to lobby Congress to enact the Curt Flood Act of 1998, an amendment to the federal antitrust statute. This amendment granted MLB players, for the first time, limited antitrust protection for issues “directly relating to or affecting employment of Major League Baseball players.” But it prohibited courts from interpreting the amendment “as a basis for changing the application of the antitrust laws” beyond major league players’ employment matters.

In light of this legal history, the Miranda plaintiffs are unlikely to prosecute successfully their antitrust violation against MLB and its teams, unless the Supreme Court decides to revisit the issue. Based on prior precedent and the Curt Flood Act, MLB and its teams have a strong argument that baseball’s judicially created exemption still applies to minor league baseball and its reserve system. In fact, MLB and its teams made such an argument in a pending motion to dismiss.

In contrast, the Senne plaintiffs have a strong case on the merits. MLB may defend on the ground that it is exempt from the FLSA’s provisions because it is an “amusement or recreational establishment” under the federal minimum wage law. However, the U.S. Court of Appeals for the Sixth Circuit has rejected the applicability of this exemption to MLB, in Bridewell v. Cincinnati Reds, 155 F.3d 828 (6th Cir. 1998). Furthermore, MLB is purportedly lobbying Congress to exempt minor league players from the FLSA—an indication that it recognizes the current exemptions do not apply.

Reprinted with permission from the June 30, 2015 edition of “The Legal Intelligencer”© 2015 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 – reprints@alm.com or visit www.almreprints.com.