NHL

Legal Look: Could the NHLPA disclaim interest?

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Eric Macramalla, TSN Legal Analyst
1/5/2013 6:15:14 PM
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We've heard it too many times during these NHL CBA talks: 'today is the most important day in these negotiations.' This declaration suggests that a particular day is of such critical importance that it could so dramatically shape the future path of negotiations. Certain days have been important - yes. However, no single day has been critical.

Until today. Until now.

Without a doubt, today is the most important day of these negotiations. Either the sides get real close to settlement, or the head of the NHLPA Donald Fehr at 6:01pm could very seriously consider dissolving the NHLPA (or disclaim interest) setting in motion a series of events that could drastically change the NHL landscape and end the season.

NHL players are once again authorizing the NHLPA to file a disclaimer of interest. That vote ends at 6pm ET tonight. Contrary to some reports, voting to authorize the NHLPA to disclaim interest does not need the unanimous support of the players. All the NHLPA needs is 50% of players plus one to support the disclaimer. In any event, this vote will once again pass overwhelmingly, and like the first vote, expect close to 97% of players to support the move.

A disclaimer of interest dissolves the NHLPA and converts it into a trade association. That means that the NHLPA has revoked its ability to collectively bargain on behalf of the players. It's not a very formal process, and can be as quick as Donald Fehr sending a letter to the Commissioner's office declaring the NHLPA no longer represents the players as a bargaining agent.

So that means no more collective bargaining like we've seen.

Once the NHLPA is dissolved, the players can then turn around and sue the NHL for antitrust violations, like the collective boycott that is the lockout and stuff like the salary cap and free agency restrictions. Remember, the 30 NHL owners are seen as competitors at law, and competitors can't get together and fix the marketplace. Things like a salary cap and free agency restrictions are marketplace fixing, and that's unlawful. However, since these restrictions are found in the CBA, the NHL is protected. The CBA is the protective bubble that insulates the NHL from antitrust liability. However, once the NHLPA dissolves, the CBA exception insulating the NHL from liability disappears and the NHL can now be sued for marketplace fixing.

So that's why the NHLPA would dissolve itself - because the threat of litigation or actual litigation can extract leverage in negotiations. Remember if ever a court said that the NHL lockout was illegal (or an antitrust violation), the NHL could owe the players billions of dollars for stuff like lost pay.

As far as events, it could unfold like this: a disclaimer of interest followed shortly by the players filing a lawsuit alleging that the NHL's activities are antitrust violations (like the lockout).

This brings us back to today. Will the NHLPA disclaim? A lot will depend on proximity to a deal. It won't be enough that the sides are kinda or sorta close to a deal. The sides will need to be real close to a deal to avoid the NHLPA dissolving. If Fehr concludes that they are not sufficiently close to brokering a deal, expect him to pull the trigger on dissolving the NHLPA. It may be encouraging that the sides spent 12 hours in mediation yesterday. However, until everything is agreed upon, nothing is agreed upon.

So unless there is a clear path to settlement, expect to see a disclaimer. It could happen immediately at 6:01pm on Saturday or later on.

Will a disclaimer kill the NHL season? The NHL has said repeatedly that dissolving the NHLPA will immediately end the season. That's possible - but may not be the case. The reason the NHLPA dissolves is in fact to save the season in the short term. By dissolving, the threat of litigation is intended to encourage the NHL to hammer out a deal. That's what we saw with the NBA. The NBPA dissolved on November 14, sued the next day and we had a deal on November 26. So while the NHL could reflexively cancel the season right after a disclaimer, that may not happen. And if the past is any indication, it won't happen.

If the NHLPA dissolves itself, the complexion of these negotiations would change dramatically. By dissolving, the NHLPA could no longer collectively bargain on behalf of the players. So instead of having Fehr lead CBA negotiations on behalf of all players, the NHL would now need to negotiate with the lawyers of individual players that filed the lawsuit. So the negotiations go from CBA talks to lawsuit settlement talks.

So in theory, Fehr would no longer play an active role. However, his brother Stephen would be front and centre since he's actually not employed by the NHLPA. Instead, he's outside counsel, and in that position he would be able to negotiate with the NHL as part of lawsuit settlement talks. Maybe now we understand why, in part, Stephen was not hired as an NHLPA employee, but rather just retained as an outside advisor.

The NHL will argue (and has already) that the only reason the NHLPA has dissolved is to gain leverage, and once they get what they want, they will just re-assemble the NHLPA. There is no real intention on the part of the NHLPA to abandon its players. On top of that, the NHL will argue that NHLPA executives will still be directing things behind the scenes. This is the NHL's sham argument.

Indeed, if disclaiming interest is just a negotiating tactic, it probably won't be allowed. Still, while it may look like a ploy, there is also another side to the argument: it's not merely a tactic, the NHLPA has no intention of re-forming the union and it will stay a trade association.

If that happens, all bets are off. Staying a trade association would completely change the NHL landscape and could result in a brave new world filled with uncertainty and risk for both the league and its players. Basically, it would blow up the existing business model.

As well, it is a basic labor law principle that employees have the right to decide whether they want to be unionized. By arguing that the disclaimer is a sham, the NHL is effectively trying to force players to stay unionized, which the NHLPA has called "repugnant".

First, though, let's deal with the differences between a union and trade association. A union promotes the interests of its workers and can collectively bargain on their behalf - just like we've seen Fehr do now for months. In contrast, a trade association promotes the industry itself. The big difference is that a trade association can't engage in collective bargaining with NHL owners. Instead, the association supports individual NHL players in the assertion of their non-labor law rights.

So that means the association helps players with things like group licensing activities (like letting a video game company use a player's likeness), creating off-ice income opportunities and encouraging players to engage in charitable and civic activities. Overall, an association looks to improve the business conditions of all its players and helps in promoting and enhancing their careers. All of this, though, is outside the context of labor law. That's reserved for unions.

One more important point - actually really important: no union means no CBA which means no protective CBA bubble protecting the NHL for its antitrust violations like the salary cap and free agency restrictions.

So that's where that potentially dramatic change comes in. With the threat of antitrust liability looming over the NHL's business model, we could see the end of the salary cap, free agency restrictions, draft, etc. Anything that constitutes the owners working together to fix the marketplace could vanish.

There is a risk for players - big one. The premise is that a certain level of cooperation among owners/competitors is needed to run the league effectively. If that is forcibly removed, the values of teams could drop and some teams - along with its players - could disappear. The NHL could also try and void all contracts saying that they should be cancelled since they were tied to the CBA.

Mild chaos.

Of course, neither the players or the league want to kill the golden goose. However, Fehr may come to the conclusion that the NHLPA has exhausted its usefulness and the players are better served by a trade association. Doesn't seem too likely - but that threat looms and may play a role in getting settlement sooner rather than later.

So to disclaim or not to disclaim? Guess we'll see.

And if we see a disclaimer, this could go in any number of directions.

One thing is clear - if the sides remain far apart by this evening, things could go south in a hurry.

Eric Macramalla is TSN's Legal Analyst. He can be heard each week on TSN Radio 1050 and seen on SportsCentre and That's Hockey. You can follow him on Twitter @EricOnSportslaw.

Donald Fehr (Photo: The Canadian Press)

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(Photo: The Canadian Press)
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