The Labor Exemption, and Why College Sports Doesn't Have One

A salary cap is, on its face, competitors agreeing on how much they will pay their workers. Under antitrust law that is a textbook restraint. Pro leagues get away with it because of the labor exemption, which protects terms reached through collective bargaining with a union.

College sports has no collective bargaining. So the NCAA's limits on what athletes could be paid never had that protection, and when athletes sued, courts tested those limits as ordinary restraints of trade. The NCAA kept losing. That, more than anything, is why it wants Congress.

Where it comes from. No statute creates it. The Supreme Court implies it from the federal labor laws, which favor private collective bargaining and require it in good faith. The logic is that the law cannot require employers and a union to bargain together while forbidding the agreements that bargaining produces.

What it covers. It applies where needed to make the collective bargaining process work. In the leading sports case, the Court held that it shields an agreement among several employers bargaining together to implement after impasse the terms of their last best good faith wage offer. The NFL had imposed a fixed salary on developmental-squad players over the union's objection, and the players' antitrust verdict was thrown out.

Baseball too. The Curt Flood Act opened major league player employment to antitrust, but expressly says it does not affect the application to organized professional baseball of the nonstatutory labor exemption. A bargained term in baseball is protected the same way as in any other league.

What it needs. A bargaining relationship. The protection attaches to terms reached through, or incident to, collective bargaining with a recognized union. Take away the union and the exemption has nothing to attach to.

"Leagues can cap salaries because sports are special." They can because the cap was bargained. The same cap imposed without a union would be tested like any price-fixing agreement.

"The House settlement is like a CBA." It is a class-action settlement. It binds its parties and its class; it is not a collective bargaining agreement, and it does not carry the labor exemption.

"Players who decertify their union lose everything." The opposite is the point of the tactic. Without a union there is no exemption, and players can sue. That is why decertification has been used as leverage in pro sports.

"Congress could just call it a labor exemption." It could pass a statutory exemption, but that is a different thing, and it would not come with the bargaining that justifies the judicial one.

NFL, NBA, NHL, MLB. Each has a union and a collective bargaining agreement, so caps, drafts and free-agency rules reached in bargaining are protected.

MLB also retains parts of its older judicial exemption, but for major league player employment it now stands where the other leagues do: protected by the labor exemption, exposed without it.

NCAA. No union, no collective bargaining agreement, no labor exemption. Its compensation rules have been reviewed under the Sherman Act's rule of reason, which is how athletes won in the Alston line of cases and how the House settlement came to exist.

Whether Congress substitutes a statute for bargaining. The Senate's Protect College Sports Act would put a revenue cap in federal law and add an antitrust exemption, giving schools protection they could otherwise get only by bargaining with a union.

Whether athletes organize. Any recognized bargaining unit would change the analysis entirely, and bring the labor exemption with it.

Employee status. The labor exemption presupposes employees. Litigation and agency action on whether athletes are employees decide whether bargaining is even possible.