Last week, Reps. Brett Guthrie (R-Ky.) and Cheri Bustos (D-Ill.) introduced a bill in the House of Representatives (the “Save America’s Pastime Act”) that would amend federal law, specifically the Fair Labor Standards Act (“FLSA”), to expressly exempt minor-league baseball players from overtime and minimum-wage standards, quite possibly at the request of Major League Baseball (“MLB”). There was strong and immediate reaction criticizing the proposed legislation, so strong that Rep. Bustos reversed course within 24 hours. MLB felt the need to respond with a statement that has also drawn strong rebuke, covered in detail here.
With its co-sponsor no longer in support, it is safe to assume the bill is dead. But given that this proposed legislation was largely a response to a series of lawsuits against MLB under federal law, it is worthwhile to examine the litigation challenging MLB’s wage practices.
While Senne v. Office of the Commissioner of Baseball is the most significant pending litigation, it is not the only one challenging Minor League Baseball’s (“MiLB”) wage practices. [Note that MLB and MiLB are used interchangeably here because individual teams select, employ and release minor-league players with no input from MiLB affiliates]. In Miranda v. Selig, former minor-league players challenged the MiLB compensation system on the basis of federal antitrust law, alleging MLB and its 30 organizations unlawfully collude to artificially restrain player movement and depress minor-league salaries through the use of the minor-league version of the reserve clause, which provides the organization up to seven minor-league seasons of control before the player would become a minor-league free agent. The origin, wisdom and consequences of MLB’s vaunted antitrust exemption have been covered in great depth, but it has continued to be fairly effective in defeating suits like this one. Consistent with the exemption, a federal district court in California granted MLB’s motion to dismiss, ruling that the antitrust exemption precluded any challenge to the MiLB reserve clause on antitrust grounds. The Miranda plaintiffs have appealed the case to the Ninth Circuit Court of Appeals, where it is awaiting oral argument before an appellate panel. Barring a surprise reversal from the Ninth Circuit that directly contradicts both Supreme Court precedent and its own decision in the City of San Jose/A’s relocation case, MLB should be safe from antitrust scrutiny on this issue.
Enter the Plaintiffs in Senne, who challenged the same underlying conduct but avoided the antitrust exemption. Led in part by former minor leaguer turned attorney (and Effectively Wild guest) Garrett Broshuis, the purported plaintiff class of minor leaguers alleged violations of the Fair Labor Standards Act (“FLSA”) and a series of similar state laws concerning minimum wage and overtime pay. Having mostly survived motions to dismiss and a motion to transfer the case to Florida (eight teams were dismissed on jurisdictional grounds), the Plaintiffs successfully moved for preliminary class certification under the FLSA.
FLSA representative actions like this one differ from other federal class actions; in fact, courts generally refer to them as “collective actions” in order to distinguish the more widely used federal standard. Under the process laid out in the FLSA, an employee may bring a lawsuit on behalf of “similarly situated” employees, a less stringent standard than required by the federal class standard. This more lenient standard is intended to be more favorable to the employee, at least at the initial stages of a case. If granted, preliminary certification allows the plaintiffs to provide notice to other potential members of the collective action. Those potential members then must “opt in” by filing written consent to benefit from a judgment in the litigation. Once discovery is completed and the facts are before the court, defendants are permitted to ask the court to decertify the proposed action whereby the court will decide whether to permit the claims to be tried as a collective action.
The court granted preliminary certification of the collective on October 20, 2015. The court found that Plaintiffs succeeded in identifying uniform policies and provisions described in the Uniform Player Contract in connection with the alleged violations, including no pay for offseason work, fixed pay without regard to whether players worked more than 40 hours in season, and fixed wages in-season without regard to number of hours worked for minimum-wage purposes. Notably, the court did not reject any of MLB’s principal defenses, including that the FLSA either does not apply to minor leaguers or, even if it does apply, minor leaguers meet criteria for certain statutory exemptions for seasonal and entertainment employees or creative professionals. Instead, the court simply disagreed with MLB on whether the Plaintiffs are similarly situated to other minor league players based on their allegations. Thus, this was not a determination of whether MLB has violated the law, but rather simply that the Plaintiffs met their threshold showing.
Since the decision in October, a number of developments have occurred. First, the parties have engaged in extensive discovery, which consists of the exchange of potentially relevant documents and the depositions of potential witnesses from both sides. The Plaintiffs also provided notice to potential members of the class as required by the FLSA, and over 2,200 current and former minor leaguers opted in to the FLSA collective prior to the deadline. Finally, the Plaintiffs and MLB filed further motions concerning certification. The Plaintiffs have now asked the court to certify this case as a class action under the federal standard in addition to the FLSA, while MLB has requested the court decertify the action under the FLSA and opposed class action status under the Federal Rules.
A hearing on both the FLSA and class action motions is scheduled for Friday, July 8th. The distinction between these two procedural mechanisms is subtle, but can have wide-ranging implications. A class action under the federal standard requires those who do not wish to be a part of the suit to affirmatively opt out, while, as discussed above, an FLSA collective action only covers those who have chosen opt in to the suit. While 2,200 FLSA collective members is certainly a substantial number that presents significant risk to MLB, the number of class members covered by the federal class procedure could ultimately include many times that number of players, as the allegations relate back to the 2011 season. In one of its filings, MLB estimates there are approximately 200 players on an active MiLB roster for each of the 30 clubs each year, making the potential class much larger than the FLSA opt-in collective.
If ultimately successful on the merits, the suit would likely have significant ramifications for MLB and its franchises. Most importantly, it would require MLB to restructure the minor-league pay system to ensure that players are compensated in accordance with the FLSA minimum-wage and overtime provisions. This would result in not just an increase for in-season salaries, but also the need for enhanced policies to monitor hours worked in-season and potentially even in the offseason. The increased costs and enhanced procedures could cause some teams to reevaluate how many minor-league affiliates they employ (though perhaps not, given exploding revenues and few alternate opportunities to spend on acquiring talent). The 22 franchises which remain in the case would also be required to pay damages for lost wages and overtime to those who opted in to the suit. A favorable decision could also increase the likelihood of a minor-league players union, as players would likely have more leverage in negotiating terms and conditions and make it more acceptable for players to join efforts that may upset their franchise.
Lastly, it is worth noting that, when considering the context of the Senne action, the timing of the proposed Save America’s Pastime Act is no accident. While we can only speculate as to whether settlement negotiations are ongoing, there is no doubt that MLB and its lobbyists made certain that the bill would be announced prior to this hearing. The possibility of a legislative override in the event the suit is successful introduces greater risk to the Plaintiffs and could, at least theoretically, make them more likely to settle before the legal issues of this case are adjudicated on the merits. It should also be noted that similar suits have failed in other contexts. The first case alleging minimum-wage and overtime violations against MLB was brought by unpaid volunteers at the FanFest convention at the 2013 All-Star Game in New York. That suit, Chen v. Major League Baseball, was dismissed at the district court level and recently affirmed by a Second Circuit appellate panel. Another action challenging wage practices for scouts under both the FLSA and antitrust law, Wyckoff v. Office of the Commissioner of Baseball, is currently awaiting a ruling on MLB’s motion to dismiss (the two scouts are represented by the same counsel as the Senne Plaintiffs). The Eleventh Circuit has also previously rejected a minimum wage and overtime suit under the FLSA filed by a groundskeeper from the Sarasota White Sox. These legal precedents, while not directly on point, put settlement pressure on the Plaintiffs as well.
Though the stated goal of the Plaintiffs in Senne is to reform the minor-league system, a settlement should certainly not be ruled out given the uphill climb the Plaintiffs face, both this week and beyond. MLB also faces significant risk, both in terms of potential damages and the changes an unfavorable ruling could usher in. No matter which way the court rules, the decision will have a significant impact on MLB and the minor-league system.