Negotiating the Sporting Contract

NEGOTIATING THE SPORTING CONTRACT

Fundamental issues arise such as the bargaining position of each party.  Generally, the employer, the sports team, will be in the stronger bargaining position in negotiating the contract.  This is particularly the case with the less professional sports, the amateur Olympic athletes.  However, the elite level of each sport, which is by far a minority, will always be in a strong bargaining position, eg Ian Thorpe in swimming; Chris Judd in AFL; Liz Ellis in netball; Archie Thompson in the A-League; Greg Inglis in Rugby League.

For these reasons, the interests of the majority of players is best represented by a players’ association in a collective bargaining arrangement.  This occurs in the AFL, rugby union, football/soccer, cricket, netball, all of whom have some level of collective bargaining and most of whom have Collective Bargaining Agreements which form the basis or backbone of player contractual terms and minimum conditions.

Some sports differ markedly.  Golf and tennis, for example, seem to work on the basis of fees per tournament played.  The higher the finishing position in the tournament, the better the pay cheque.  Fixed income will depend on sponsorships that can be negotiated.

(i) Standard or Fixed Contracts

• A number of team sports utilize standard contracts, especially the major sports such as AFL, NRL, Rugby Union, the A-League, and soon Netball Australia.
• There is little for the lawyer to involve him or her self in with the contract.  It is often better to leave the contract negotiations to the experts, player managers, who know player worth and market values of players.
• In less professionalized sports, such as netball, there are being developed standard contracts (Kate Palmer).
• In other sports, such as the V8 Supercars, each driver negotiates his/her individual contract with the team.

Common Terms

• Prohibition on dangerous activities clause – unless written permission
• No other contracts/sponsors without prior approval
• Acknowledge a club’s and the league’s major sponsors and will not contract with a conflicting sponsor
• Contract contains restraints which athlete accepts are fair and reasonable and necessary in the legitimate commercial interests of the league
• Maintain highest level health cover
• Limitations to use of Intellectual Property and use of image.
• Dispute resolution clauses

Interesting Terms

• Olympic participation – confirms terms of the Olympic Insignia Protection Act 1987 (C’th), doping codes/rules.
• Medal payment scheme: $15k gold, $7500 silver and $5000 bronze plus $3000 games preparation costs on acceptance to team.
• Media guidelines – limited media communication for non-commercial purposes only & name, picture or image not to be used for any advertising purpose during the games.

(ii) Sponsorship Agreements

• Generally not part of the players initial/main contract for playing.  Is a reward for being a known or recognizable player, for high skills, or for being a pin up boy or girl eg. Anna Kournikova, Greg Norman.
• Can be far more lucrative than the pay an athlete receives for participation in sport.
• Standard commercial contract.
• Athlete must be careful about use of the league’s intellectual property, eg AFL logo or AFL club jumper.  Extensive Licensing Operational Guidelines in the AFL.

(iii) Terms Incorporated into the contract: CBA’s, Codes of Conduct, Submitting to Tribunal processes (Weightman/Williams), anti doping policies and IDP’s.

• A number of clauses may be incorporated expressly or may be implied into the athlete’s contract.  In the AFL, all of the terms of the Collective Bargaining Agreement are expressly incorporated into the Standard Playing Contract.  In addition, all Rules, Regulations, By-Laws, Code of Conduct and the Memorandum and Articles of Association of the AFL are incorporated into the player’s contract.
• Greg Williams case – abiding by the tribunal decision is a matter of contract law.  Tribunal rules are part of the players’ contract.  Problem then was no appeal process then available.  Importantly, however, the Court of Appeal (and urgent stay in the High Court denied) held that the court should not interfere with the affairs of a private organization unless some rule had been breached eg. natural justice, a decision that no reasonable tribunal could reach had been made.
• Did the parties intend to create contractual relations: WA case, Ermogenous

The Common Law position is stated by the Court of Appeal in the Williams Appeal case [1] .  The Court there referred to all of the leading cases as to how natural justice is to be accorded by tribunals.  Tadgell JA observed that ‘there are some kinds of dispute that are much better decided by non-lawyers or people who have a special knowledge or expertise in the matters giving rise to the dispute than a lawyer is likely to have’ [2] .  Later, his Honour noted ‘that the courts will not discourage private organisations from ordering their own affairs within acceptable limits’[3].

The reason for this reluctance to intervene is that private organisations create rules by which their members agree to be bound.  Each member understands those rules, it is said.  In the case of disciplinary hearings, a procedure is laid down for members to be disciplined should a breach of those rules occur.

Under the AFL regulatory framework, for example, the Player Rules, which provide for disciplinary procedures, are contractually binding on the parties.  When a player signs a contract to play AFL football, he contracts with the AFL, and his club is a third party to that contract.  ‘The Player and the AFL Club agree with the AFL to comply with and observe the AFL Regulations, the AFL Player Rules, the Code of Conduct, the Memorandum and Articles of Association of the AFL…’ [4].  The Disciplinary code is thus expressly incorporated into each player’s contract.

The general position is that courts have declined to interfere with the decision of a domestic tribunal by whose decision the parties have agreed to abide except on a strictly limited basis [5].   This includes where parties have come to an agreement or contract for the regulation of their affairs.

However, in the recent case of Minardi v Federation Internationale de Automobile the Victorian Supreme Court was prepared to grant an interim injunction permitting a formula one team to participate in a qualifying session following an urgent ex parte application. [6]

To further clarify the AFL’s desire to keep any resort to the Courts as a last option, the AFL Player Rules provide that persons must exercise their appeal rights before ‘commencing any proceedings or becoming a party to any proceedings in a Court of law’.[7]   In motor sport, the case of Webb v Confederation of Australian Motorsport Limited [8]   was concerned with precisely that issue.   Mr Webb’s application to the Court was dismissed as he had failed to exhaust all of the remedies and appeals available to him from within the sport, as was required by the rules of the sport, motor racing in the Porsche cup class.

Earlier this year, the case of Team Dynamik v Confederation of Australian Motor Sport (CAMS) [9]  has highlighted the Courts’ reluctance to intervene in domestic tribunal matters.  Team Dynamik was charged on 2nd September, 2004, with offences carrying maximum fines of over $250,000.00 for testing their race car at an unapproved time and location which gave them a potentially unfair advantage over other teams.  At first instance they were fined a total of $104,000.00.  On appeal by both parties, the fines were increased to $132,000.00, and costs were awarded against Team Dynamik. [10]

At the hearings before both the Stewards and the V8 Supercar National Court of Appeal (“V8 Appeal Court”), Team Dynamik were not permitted legal representation.[11]   Team Dynamik sought an injunction in the Victorian Supreme Court preventing the Stewards hearing from going ahead for a number of reasons, including that the disciplinary rules denied Team Dynamik natural justice by the refusal of legal representation[12]  .  The injunction was refused.

Cummins J was of the view that it was ‘premature for this Court to intervene’[13]  , as the inquiry had not commenced, and the technical issues were better dealt with by experts in the field of motor racing, which included the plaintiff. [14]  The parties had submitted voluntarily to the sports’ rules, and they should be exhausted.

In the cases of Dale Weightman & Anor v Tasmanian Football League and Craig Carter & Anor v Tasmanian Football League, [15] the articles of association of the league did not properly confer authority on persons to act as a Tribunal, and the suspensions imposed on the plaintiffs were declared void, and therefore the disciplinary tribunal which had imposed suspensions had acted without power.  The court also criticized the articles of association because they lacked meaning in some parts, and were obscure meaning in others.

• Anti Doping Policies and IDP’s:

1. World Anti Doping Code: All major professional and Olympic Sports have been forced to adopt WADA compliant anti doping codes.  This means that if an athlete in that sport tests positive to certain drugs, he or she will automatically be disqualified from all WADA compliant sports for the period of the ban.  This creates anomalies, eg Wendell Sailor – restraint of trade; Lazaridis – not a “drug cheat” but has been branded as such.
   What is the WADA Code?  What are its main provisions and how do they affect athletes?  Is that a major change from previous anti-doping policies?  Who bears the onus of proof?  How widely does the ban apply?
2. Sports’ Illicit Drugs Policies: Some sports have developed their own testing regimes essentially to regulate the use by athletes of illicit or recreational drugs.  These are designed to discourage use of such drugs and attempt to educate athletes on the risks involved in such behaviour.
3. Government IDP’s: It is expected that a number of sports may adopt any Government IDP expressly, although each may have an obligation to follow it as it is expected to be legislatively enforced.  Civil liberties issues will arise.
4. Restraint of Trade issues:
5. ASADA may participate in any hearings involving breaches of an anti doping policy in any sport, and will almost certainly monitor the implementation of the WADA compliant drugs Code.  Eg. FINA forced the review of the Ian Thorpe elevated lutenising findings, which led to Thorpe recently being cleared, even though ASADA had already found nothing supicious in the elevated testosterone/lutenising.  ASADA do not generally clear a person without good reason.
6. Contracts in Amateur Sport: affiliation agreements; will the courts interfere?All leagues under the control of AFL Victoria agree to and sign an affiliation agreement with AFL Victoria, which agrees to certain operating high standards, sound financial practices, and not bringing AFL Victoria into disrepute.A league will have to have made a fairly serious mistake before a court will interfere because of eg. Williams case, Cameron v Hogan, Team Dynamik injunction appl’n, most amateur sports do not attract the doctrine of restraint of trade as the athlete is not carrying on a trade.  TPA doesn’t apply.  Athletes have agreed to the rules.  Courts will generally wait until all internal appeal avenues have been exhausted before intervening.

   Minardi v FIA, Vic SC urgent application.

7. Event Specific Athlete Contracts

• At the Commonwealth Games in Melbourne, 2006, and at the FINA World Swimming Championships in Melbourne, 2007, athletes were required to sign an event entry form/declaration.  That document contained the terms and conditions of entry to each event, and included submitting to certain intellectual property restrictions, anti-doping policies, etc.  eg FINA: “I agree to be bound by and fully comply with all FINA Rules set out in the FINA handbook”.
• Athletes must sign an agreement with their national Olympic Committee prior to participating in the Olympic Games.  In Australia this is an agreement with the Australian Olympic Committee.  That agreement has wide ranging disclaimers by the athlete agreeing not to hold the IOC or AOC liable for anything in any circumstance, and agreeing to surrender all commercial arrangements during the Games.  Logos on clothing are limited to certain sizes.
• Contracts such as the Comm Games agreement which adopts the CGF Constitution and Regulations requires that CGF own all IP rights and revenue and that any disputes are resolved exclusively by CAS (Art 28).  (Ad hoc division of CAS set up in Melbourne, with rep’s from o/s and oz and registry from Switzerland able to settle disputes).  Olympics is same, and Courts are expressly excluded from the process (Raguz v Sullivan).  Some 60 disputes resolved by CAS before the Sydney Olympics.
• Issue: although athletes are agreeing to these contracts, how many read them?  They agree to be bound by the “Commonwealth Games Federation Constitution” – how many would have seen it or know what it says?
• Schroeder publishing case.

Whilst it is difficult to challenge restrictions in player agreements which apply during the period of the contract only, the House of Lords in a case relating to a music publishing agreement alluded to the need to take into account the relative bargaining position of each party to a contract[16] .  The Court there acknowledged that where a person enters a contract to provide his or her services exclusively to another for a specified period, this will necessarily include restrictions during the period of contract upon the rights to enter into any lawful activity he or she chooses.  The restraint of trade doctrine will not normally apply to these restrictions as they do not require justification.  “But if contractual provisions appear to be unnecessary or to be reasonably capable enforcement in an oppressive manner, then they must be justified before they can be enforced”.[17]

Lord Diplock in Schroeder made reference to the public policy considerations surrounding equality of bargaining between parties in commerce:

“The public policy which the Court is implementing [in restraint of trade cases] is not some 19th century economic theory about the benefit to the general public of freedom of trade, but the protection of those whose bargaining power is weak against being forced by those whose bargaining power is stronger to enter into bargains that are unconscionable”.

Humphries agrees that the bargaining position of each party is a matter that can be applied in cases such as Adamson where a player signs a contract with a club agreeing to submit to the rules of the league.  Without signing such a standard form player contract, the player would not be able to enter the NSWRL competition.  Humphries submits that in this instance “there was a real inequality of bargaining power between the league and its players”.[19]

These principles have been approved in the case of Barnard v. Australian Soccer Federation and have the effect that Australian Courts have indicated that they are prepared to apply the doctrine of restraint of trade to provisions which only operate during the life of the agreement.

The bargaining position of each party is an important factor in determining whether or not the restraint was reasonable or in fact entered into freely and with full knowledge of its consequences.  In assessing whether a restraint is reasonable you must consider the degree of choice the athlete or individual had at the time the contract or arrangement was entered into.

Footnotes

[1] Above n 12; see also Micklethwaite v Essendon District Football League, [2003] VSC, 363, Unreported decision of Kellam, J, 5^th September, 2003, for an example involving district football in Victoria where Kellam, J, was reluctant to interfere with the tribunal decision on an injunction application by the suspended player.

[2] Ibid, 549.

[3] Ibid.

[4] Clause 10.1, AFL Standard Playing Contract.

[5] Tadgell JA, above n.12, 549; see also Hann v Swain & Ors, unreported Victorian Supreme Court decision of Gobbo, J, No. 5012 of 1993, 5.

[6] Decision of Habersberger J, 4^th & 5^th March, 2005, T80104; it is suggested that this decision will be confined to its facts as (i) the application was ex parte, (ii) the application was withdrawn before documents were filed with the court even by the plaintiff, and (iii) very little law was canvassed at the hearing.

[7] Rule 24.23.

[8] Unreported Supreme Court of New South Wales, Common Law Division, 14 November, 2002, Dunford, J [2002] NSWSC 1075.

[9] Team Dynamik Pty Ltd v Confederation of Australian Motor Sports and Ors [2004] VSC 363.

[10] As well the team’s cars will now start the final round of racing in 2004 and the first round of 2005 one full lap behind the rest of the field.

[11] On Friday 26 November 2004, Team Dynamik Pty Ltd lodged an appeal through CAMS, as the recognised national motor sport controlling body, to the Federation Internationale l’Automobile International Court of Appeal against the decision of the V8 Supercar National Court of Appeal, CAMS press release, 29th November, 2004, at http://www.cams.com.au/content.asp?PageID=Article&ObjectID;=480.

[12] Team Dynamik Pty Ltd v Confederation of Australian Motor Sports and Ors [2004] VSC 363.

[13] Ibid, para 32.

[14] Ibid, para 33.

[15] (1995) 4 Tas R 342.

[16] A Schroeder Music Publishing Co. Ltd v Macaulay [1974] 1 WLR 1308.

[17] Ibid, 1314.

[18] Ibid, 1315.

[19] Humphries, above n 39, 97.