Contractual relations in the NFL, Premier League & MLS: a comparison – Part 2

Published 09 April 2013 | Authored by: Ryan Becker

In Part 2 Ryan Becker looks at the issue of image rights in the Premier League and examines Major League Soccer’s approach to contractual relations with its players which differs greatly from both the NFL and Premier League.

A unique concept to (English) Premier League (‘EPL’) contracts is the “image contract.” The images contract is any contract whereby a player transfers to any person (‘the transferee’) the right to exploit his image or reputation either in relation to football or non-footballing activities. The particulars of any image contract must be set out in the contract with the club. The club has the right to use the image of the player in connection with promotion of the Club, its playing activities, the Club brand, and football related products or services. This is not allowed if the Club uses the player’s image to imply any brand or product endorsement. Additionally, this does not prohibit or prevent the player from entering into other arrangements in relation to advertising, marketing, or promotions.Players are however required to, through agreements between the leagues and Professional Footballers Association, comply with any reasonable request made on behalf of the League to allow their Image to be used to enable the League to fulfil its Commercial Contracts, UK Broadcasting Contracts, Overseas Broadcasting Contracts, Radio Contracts and Title Sponsorship Contracts.

While the player is providing or performing services set out in the contract, the player is only permitted to wear such clothing that is approved by an authorized Official of the club. The player must have written consent to display any badge, mark, logo, trading name, or message on an item of clothing. The contact does not prohibit endorsements or wearing of certain brands of football boots or goalkeeper gloves.

EPL players are entitled to take an aggregate the equivalent of five weeks paid holiday time, determined by the club. The club is prohibited from unreasonably refusing the player to take three consecutive weeks. Clubs are required to release the player as required for the purposes of fulfilling the obligations in respect of representative matches to his national association pursuant to the statutes and regulations of FIFA.

 

MLS

The structure of standard player agreements in the MLS is much different than it is in the NFL or in the EPL. Unlike those leagues, standard player agreements in the MLS are executed through the league itself and not through the individual clubs. Therefore, players are under contract with the MLS, not the individual teams. The reason for this is that the MLS operates as a single business entity. Owners of MLS clubs are essentially granted the right to operate that club rather than fully own that club. And though individuals do technically own the MLS franchises, the reality of ownership is untraditional; their investment is more an investment into the MLS rather than an investment into the individual team. The individual teams essentially operate as franchises of the league. This is opposite of most major sports leagues in which each club is an independent business entity. The main purpose of the single entity function of the MLS is to promote long-term stability and growth of the league to ensure its existence long into the future. 

As a result of the single entity structure of the MLS, the individual player contracts are less favorable than contracts in other major sports leagues. The single entity function specifically limits the earning potential for MLS players while they are playing in the MLS. Like the NFL, the MLS has a strict salary cap. The MLS’ salary cap is often referred to as a ‘salary budget’ because the league gives the teams a firm budget of what it can spend on its players. The salary budget for active roster for the 2013 MLS season is $2,950,000. 

MLS rosters are composed of, at most, 30 players. Only the salaries of players in roster spots 1-20 count against the team’s salary budget. Players in rosters spots 1-20 are referred to as active roster players. Players occupying roster spaces 21-30 are considered off budget players and do not count against the team’s salary budget. A team is not required to fill roster spots 19 or 20; therefore, a team has the option to spread their salary budget across 18 active roster players. If a club has less 18 or less active roster players, a minimum salary budget charge of $46,500 will be imputed against a team’s salary budget for each unfilled roster slot. The maximum budget charge for a single player is $368,750. That is the highest amount any non-designated player can make. To put this in perspective, the maximum contract of a non-designated MLS player is $36,250 less than the minimum amount an NFL rookie can be contracted for. 

Though the MLS establishes a maximum salary each player can earn, each team has the ability to offer two players more than the predetermined maximum salary. Players in these roster spots are known as designated players. Teams have the option to purchase a third designated player slot for a one-time fee of $150,000. The one-time fee is dispersed to other clubs who do not exercise their option to buy their third designated player roster slot. No matter what the financial agreement made between the club and the designated player is, the effect on the salary budget will only be $368,750. That is true unless the designated player joins in the middle of the season, then the league will impute a salary budget charge of $175, 000 against the team.

The salaries for the designated player are greater than their effect on the team’s salary budget. If any team wishes to sign a designated player the league most approve it. Unlike the non-designated player contracts, the financial burden of designated players is the responsibility of the individual team, not the league.

Not only are the financial terms of the contract less favorable to the athletes the actual conditions and rights are much worse than the NFL or the EPL. Until the new MLS CBA, which was ratified in 2010, MLS player contracts were not guaranteed. Now, MLS player contracts are guaranteed for all players who are at least 24 years old and have a minimum of three years of service in the MLS. 

An interesting component of the MLS contracts is that at the conclusion of the season, each team has the ability to buyout one of their player’s contracts in an effort to free up salary budget space. The team is responsible for paying for the buyout. Buyouts are only permitted in the off-season. Buyouts limit the long term stability of player contracts.

An example of the limited rights of the MLS players is the right to first refusal. MLS teams hold this right. The right to first refusal gives the team the first chance to add that player back to their roster if that player purports to sign with another MLS team. The right of first refusal applies only within the MLS. Therefore, if a player from the MLS decides to sign with a club in the EPL, the MLS team does not have the right reject the transfer based on the right of first refusal. A team regains the right to first refusal indefinitely if they made an attempt to re-sign the player. The right to first refusal limits the ability of an player to change teams, even after their contract has expired. This is a direct contrast to the Bosman ruling in European football (mentioned in Part 1).

The team buyout right and the right to first refusal limit the rights and freedoms of MLS players. In the majority of standard player contracts there is not much room for negotiation. Unless you are a designated player, you do not have much, if any, bargaining power. With the single entity function and the lack of free agency, the clubs hold the power in the MLS. As with the NFL, players do have the option to insert additional terms into their contracts through the addition of an addendum to the standard player contract. 

Under the standard player agreement, MLS players are required to make reasonable requested appearance on behalf of the team or the league. Each player is limited to four appearances a year unless seven people from your team have done three appearances on behalf of the league or the team. The MLS also requires players to comply with reasonable media request including photo shoots and interviews on behalf of the league. The standard contract does not set a boundary on the amount of these obligations. Additionally, most media appearances are completed without an additional form of compensation; however, if the appearance is strictly for a commercial enterprise, the MLS is required to pay the player a fee (albeit a rather small one). 

The MLS also severely limits a player’s rights, while in contract, off the pitch. Because the standard player contract is executed with the league, the MLS possess the right to terminate a player’s contract. If a player performs an action that is detrimental to the league, the league can lay off the player for no further compensation.

The single entity structure of MLS does not allow for the arms race in spending that has occurred in the EPL. Though the rights and earning potential of the players are limited because of this structure, the single entity structure of the MLS has created a great deal of parity within the league. In the seventeen seasons of the MLS there have been nine different champions, and twelve different league finalists. It is a parity that is unfounded in most sports leagues. Additionally, attendance at MLS games is greater than ever. In 2012, MLs outstripped the average attendance of both the National Basketball Association and the National Hockey League. The increase in fan attendance is an extremely pleasing trend for both the league and the MLS players. 

In the future, once the MLS has the financial and long-term stability the league will need to change the single entity structure. Until then, the limits on the financial incentives and the lack of individual player rights mean the league will to continue to fail to attract the elite players in the world. In order to continue to grow the single entity function of MLS will need to lapse into a more traditional model of sports ownership. 

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About the Author

Ryan Becker

Ryan Becker

Ryan is in his final semester of law school at the University of Mississippi. He graduated magna cum laude with a degree in Sports Management from Florida State University in 2010. Ryan has worked in for numerous sports agencies in the States and has gained valuable experience working with contracts which have ranged from professional team deals to athlete endorsement agreements.

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