Esports Star Tfue Sues To Void His Contract With FaZe Clan

By Gregg E. Clifton on

Fortnite player Turner Tenney, professionally known as “Tfue,” has sued to void his contract with Esports team, FaZe Clan, Inc. Tfue’s action, filed in Los Angeles Superior Court, alleges that the terms of the contract he signed to play for FaZe Clan’s Fortnite team are grossly oppressive, onerous, and one-sided and in violation of California law. His action could have a significant impact on the Esports industry and the players who participate in Esports as professional gamers.

Recognized as one of the world’s best Fortnite players, Tfue entered in an agreement with FaZe in April 2018.

The Complaint alleges that Tfue did not understand the terms of the agreement he signed and that he was exploited by FaZe. It further alleges that FaZe breached its fiduciary duty of loyalty by failing to share profits with him as mandated by the terms of his agreement and by rejecting a sponsorship deal and acting against his best interests. In addition,

Tfue alleges multiple violations of California law, including Section 16600 of the California Business and Professions Code, Section 17200 of the California Business and Professions Code, and California’s Talent Agency Act.

The contract refers to Tfue as an independent contractor. It mandates that he play in tournaments and training sessions, perform three days a month of publicity and promotional services, and participate in the company’s social media campaigns. In addition, Tfue is required to wear clothing bearing FaZe logos and identification, as well as items associated with specific FaZe Clan sponsors.

In exchange for an initial monthly base pay of $2,000 for the first six months of the contract, FaZe had an option to extend its deal with Tfue for an additional three-year period (which the company exercised) and unilaterally increase or decrease his monthly by 25%. The agreement also entitles Tfue to 80% of cash prizes earned from playing in Fortnite tournaments and an equal split with FaZe Clan of income earned from in-game merchandise, appearances, and touring and sign-up bonuses. The agreement also provides finder’s fees for brand deals that feature Tfue that can result in as much as 80% of the deal being retained by FaZe. The contract also limit Tfue’s ability to sign with another esports company at the end of his contract in 2021.

Tfue also seeks repayment of his sponsorship, fees, and commissions, as well as additional compensatory damages and punitive damages. In addition, he seeks to enjoin FaZe Clan’s ongoing alleged violations of California law.

It is probable that the court venue will be challenged. The agreement between FaZe and Tfue contains a choice-of-law provision, which provides that the agreement “shall be governed and construed in accordance with the laws of the State of New York” and the parties “submit exclusively to the state or federal courts in New York, NY for any claim” arising from the contract.

This suit will be watched closely by the industry. The lack of industry regulation and unified structure, employment law issues appear ripe for litigation. Esports team owners should ensure their contracts with players comply with federal and state employment laws and the contract language clearly defines sponsorships and endorsements, compensation, arbitration clauses, hours of service, health insurance, non-competition, and anticipated event participation.

Please contact a member of our Collegiate and Professional Sports Practice Group with any questions.

 

Agents Beware: Representation Agreement May Not Be Enforceable If It Violates State Sports Agent Laws

By Gregg E. Clifton on

A North Carolina law designed to protect student-athletes may determine the enforceability of Prime Sports Marketing’s contract with former Duke University star Zion Williamson. While Williamson is preparing to become a member of the New Orleans Pelicans after his name is announced as the No. 1 selection in the 2019 NBA Draft, he is also preparing for a legal battle in a different court…the U.S. District Court for the Middle District of North Carolina.

Williamson has filed suit against the Florida-based company and its president, Gina Ford, to have the marketing contract he signed with Prime Sports declared null and void. After signing a five-year agreement with Prime Sports and an accompanying letter of authorization reaffirming his desire to have Gina Ford begin representing him as his Global Marketing Agent, Williamson changed his mind.

Williamson alleges the agreement was entered into in violation of North Carolina’s Uniform Athlete Agent Act (UAAA) and should be declared void.

In his complaint, Williamson alleges that Prime Sports and Gina Ford violated the specific provisions of the North Carolina law that forbids a person from acting as an agent in the state unless that person has previously registered with the North Carolina Secretary of State’s office. The law applies to any agency contract, including employment agreements and marketing agreements.

In addition, the law mandates any agent to follow a series of procedural requirements to protect student-athletes from unknowingly forfeiting their remaining NCAA eligibility. Any contract between a registered agent and a student-athlete must contain a specific, capitalized notice in boldface print cautioning the athlete of the rights he will be giving up by entering into the contract. Among the many required notices, the contract must state the following:

WARNING TO THE STUDENT-ATHLETE IF YOU SIGN THIS CONTRACT

  • YOU SHALL LOSE YOUR ELIGIBILITY TO COMPETE AS A STUDENT-ATHLETE IN YOUR SPORT;
  • YOU MAY CANCEL THIS CONTRACT WITHIN 14 DAYS AFTER SIGNING IT. CANCELLATION OF THIS CONTRACT SHALL NOT REINSTATE YOUR ELIGIBILITY.

The agreement Williamson signed with Prime Sports did not contain any of these required notices mandated by the North Carolina law.

Of particular significance will be a judicial determination as to whether Williamson remained a student-athlete when he signed the agreement with Prime Sports and still protected by the North Carolina law. Williamson declared himself eligible to be drafted by an NBA team on April 15, arguably ending his status as an NCAA-eligible athlete. He signed the agreement with Prime Sports on April 20, when he had arguably given up his amateur status and was no longer protected by the state law. While a student-athlete’s declaration for the draft was irreversible at one time, current NCAA bylaws allow a student-athlete to “test the waters” regarding potentially becoming draft-eligible and withdraw his name from consideration as late as May 29 without risking the loss of any remaining eligibility. Here, Williamson lost the option to exercise his rights pursuant to NCAA bylaws and return to Duke University when he signed the contract with Prime Sports.

As the federal court considers Williamson’s complaint and the anticipated defenses and potential counterclaims to be asserted by Prime Sports (which has alleged the potential for $100 million in damages in a pre-complaint letter to Williamson’s attorney), the significance of Gina Ford’s failure to register as an agent with the State of North Carolina before her initial meeting with Williamson could be of crucial importance in determining the enforceability of the agreement between Williamson and Prime Sports.

Jackson Lewis’ Collegiate and Professional Sports Practice Group will continue to monitor this case. Please feel free to reach out to a member of the Group with any questions regarding state and professional league agent registration requirements.

 

 

UPDATE: California SB 206 – Collegiate Athletics: Fair Pay to Play Act Moves Forward

By Gregg E. Clifton on

The Fair Pay to Play Act, introduced by California State Senate Majority Whip Nancy Skinner, has passed an initial hurdle toward becoming law as the California State Senate passed the proposed legislation by a 31-4 vote total. The California Assembly will now consider the measure in the near future.

The proposed legislation (as discussed in our recent blog post on March 1, 2019) would prohibit a California public postsecondary educational institution, athletic association, conference, or any other organization with authority over intercollegiate athletics, from preventing student athletes from earning compensation in connection with the use of the student athlete’s name, image, or likeness. Specifically, any such compensation would no longer affect a student athlete’s scholarship eligibility. The proposed legislation would prohibit direct payments from schools to athletes and would become effective in 2023.

Commenting on the Senate’s approval of her proposed legislation, Skinner commented “The California Senate has spoken loud and clear: Student athletes should enjoy the same right as all other students to earn income from their talent. SB 206 gives our college athletes the same financial opportunity afforded to Olympic athletes.”

Senator Skinner asserts that the vast majority of full-scholarship athletes live at or below the poverty level while generating tens of billions of dollars for their colleges, corporate sponsors and television networks. In support of her legislation,

Skinner further alleges that, “NCAA rules disproportionately harm students from low-income families,” and that the NCAA rules “are particularly unfair to female athletes, because for many young women, college is the only time they could earn income, since women have fewer professional sports opportunities than men.”

The following is a glimpse into the most pertinent language of the proposed Act:

  • A California public postsecondary educational institution shall not uphold any rule, requirement, standard, or other limitation that prevents a student of that institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness. Earning compensation from the use of a student’s name, image, or likeness shall not affect the student’s scholarship eligibility.
  • An athletic association, conference, or other group or organization with authority over intercollegiate athletics, including, but not limited to, the National Collegiate Athletic Association, shall not prevent a student of a California public postsecondary educational institution participating in intercollegiate athletics from earning compensation as a result of the use of the student’s name, image, or likeness.
  • A scholarship from the public postsecondary educational institution in which a student is enrolled that provides the student with the cost of attendance at that institution is not compensation for purposes of this section, and a scholarship shall not be revoked as a result of earning compensation pursuant to this section.
  • For purposes of this section, “public postsecondary educational institution” means any campus of the University of California, the California State University, or the California Community Colleges.

The Fair Pay to Play Act would not add any specific costs to university athletic budgets or create any financial hardships. In fact, the proposed legislation is completely cost neutral to the higher education institutions while authorizing student athletes to use their unique position to secure financial rewards while still performing at an amateur level and assuming all of the risk of season-long or career ending injury.

Despite the bill’s strong bipartisan support within the California Senate, concerns have been raised by those who oppose the legislation becoming law.

Specifically, several legislators have raised concerns how the NCAA will treat California collegiate sports programs if they follow the requirements of SB 206 and ignore the specific directives and enforceability of relevant NCAA bylaws.

Senator John Moorlach said the bill could result in California schools being excluded from the NCAA, which could eliminate the ability of these programs to participate in specific NCAA events. The California State University systems, the University of California, USC and Stanford University have all publically expressed opposition to the Fair Pay to Play Act.

Jackson Lewis’ Collegiate and Professional Sports Practice Group is prepared to counsel institutions, teams and leagues on any of these issues. The Practice Group will continue to monitor this proposed legislation as it moves on to the state assembly, and similar legislation continues to be introduced around the country. Please feel free to reach out to any member of the Collegiate and Professional Sports Practice Group with questions.

NCAA Considers Restrictions To Curtail Use Of Graduate Student Transfers

By Gregg E. Clifton and John G. Long on

While the focus of the recent Men’s NCAA Basketball Championship Game between University of Virginia and Texas Tech centered around the entertaining overtime finish culminating in Virginia’s first ever basketball championship, another storyline arose involving the runner-up Red Raiders. Specifically, graduate transfers played a role in Texas Tech’s magnificent tournament run due to the ability of these two student-athletes to become immediately eligible under the NCAA’s current Graduate Transfer Exception. Texas Tech is not the only institution taking advantage of this exception in college basketball, as the use of graduate transfers has increased exponentially across Division I. Recent studies conducted by the NCAA indicate that 124 graduate transfers participated for NCAA Division I basketball during the 2018-2019 season.

The current NCAA graduate transfer rule, a unique exception to the rule requiring student-athletes in football, men’s and women’s basketball, and a handful of other sports, to “sit out” their first year at their new Division I institution, has been used by hundreds of student-athletes since its inception. The current rule provides that student-athletes who earn their bachelor’s degree may participate in athletics as a graduate student at another Division I college provided they meet the criteria set forth in NCAA Bylaw 14.6.1 or obtain an NCAA waiver.

NCAA Bylaw 14.6.1 provides a one-time transfer exception a follows:

A graduate student who is enrolled in a graduate or professional school of an institution other than the institution from which he or she previously received a baccalaureate degree may participate in intercollegiate athletics if the student athlete fulfills the conditions of a one-time transfer exception set forth in Bylaw 14.5.5.2.10 and has eligibility remaining per Bylaw 12.8. A graduate student who does not meet the one-time transfer exception due the restrictions of Bylaw 14.5.5.2.10-(a) shall qualify for this exception, provided:

  1. The student fulfills the remaining conditions of Bylaw 14.5.5.2.10;
  2. The student has at least one season of competition remaining; and
  3. The student’s previous institution did not renew his or her athletically related financial aid for the following academic year.

This “graduate transfer” exception was intended to provide academically achieving student-athletes who successfully completed their undergraduate degree – with remaining athletic eligibility available – the opportunity to continue their college athletic career while seeking to achieve an advanced degree at another university in a program not offered at their undergraduate college.

However, the use of this graduate transfer has become increasingly controversial in football and basketball as recent data indicates that the majority of transfer students in these sports earn few credits toward their graduate degree and leave school as soon as their athletic eligibility expires.

In a study tracking the academic paths of graduate transfers following 258 out of 355 student-athletes from 2011 and 2012, the NCAA concluded that a majority of men’s basketball and football withdrew from their graduate program upon the completion of their athletic eligibility.

http://www.ncaa.org/about/resources/research/tracking-division-i-graduate-transfers

 

The alleged inequities caused by the use of this transfer may soon come to an end.

Shortly, the NCAA’s Division I Council will vote on a proposed measure to restrict the ability of student-athletes to utilize this transfer option by punishing the transfer’s destination university in the event that the student-athlete does not complete their graduate-level education. The rule change would require the school receiving the transferring student-athlete to ensure that the student-athlete graduates with a post-baccalaureate degree or risk putting their future teams in competitive harm by limiting available scholarships.Essentially, while a graduate transfer would only have one year athletic eligibility remaining at his new school, in most cases based upon degree requirements, the institution would have to account for a scholarship on its roster for two years.

The legislation would effectively curtail the current use of graduate transfers with one year of remaining eligibility because if the player is unable to complete his graduate school degree requirements within one year, the school would be forced to use an additional second scholarship year for the transferring student even though he had no athletic eligibility remaining.

The rule, which could become effective as soon as August 1st, would apply to only three sports, football, men’s basketball and women’s basketball. The potential loss of scholarship penalty will have a greater impact on the basketball transfers, as the potential loss of one of thirteen scholarships will have a much greater effect on the hardwood than it will on the gridiron and each school’s potential 85 football scholarships.

Expressing his support for the proposed legislation,

Sun Belt Conference Commissioner Karl Benson stated, “The graduation requirement is fair, it’s reasonable. The elimination of the hired player for one season without any academic requirement has not been good for the NCAA.”

 

 

 

 

Visas For eSports Gamers On The Rise

By Khuong B. Nguyen, Amy L. Peck and Gregg E. Clifton on

Professional athletes who are “internationally recognized” are eligible for the P-1 visa and eSports (video games) at the professional level have become such major athletic events that eSports players have been granted these visas more and more often. https://www.collegeandprosportslaw.com/labor-law-and-sports/the-esports-industry-the-top-ten-labor-and-employment-law-issues/

In 2013, the USCIS for the first time recognized an eSports player as an athlete and granted him a P-1A visa. This is a flourishing sport that has succeeded in attracting mass attention. For instance, Riot Games’ League of Legends, known as “LOL,” reportedly in 2016 was the “biggest game in the world” with over 100 million users. https://www.businessinsider.com/lol-league-of-legends-monthly-active-users-2016-9 In that same year, more people watched the LOL World Championships than watched the NBA finals. https://sites.psu.edu/jlia/1256-2/

Once the USCIS made its initial decision that eSports was a professional sport, Danny “Shiptur” Le, an LOL gamer, became the first professional video gamer to receive a P-1 visa. https://www.theverge.com/2013/8/11/4611180/league-legends-gamer-gets-visa-recognizing-him-as-pro-athlete Le came to the U.S. to live, train, and then compete in the world championships with prize money (at that time) of $1 million. Prior to this, gamers could come to the U.S. on B visitor visas to compete because prize money was an exception to the “no U.S. remuneration rule.” https://www.collegeandprosportslaw.com/immigration/1528/ Le needed the P-1 visa because he was earning a salary from a U.S. business, which disqualified him from the B visitor visa. Today, many gamers are salaried.

Since 2013, other gamers have received P visas as athletes with an “internationally recognized high level of achievement; evidenced by a degree of skill and recognition substantially above that ordinarily encountered so that the achievement is renowned, leading or well known in more than one country.” https://www.uscis.gov/working-united-states/temporary-workers/p-1a-internationally-recognized-athlete It is also possible for an eSports athlete to apply for an O-1A visa as an individual of extraordinary ability demonstrated by sustained national or international acclaim.

The O-1A visa is valid for up to three years and can be extended in increments of up to one year. The O-1A visa does not distinguish between individual and team events.

The P-1A visa for an individual (versus a team) is valid for a limited amount of time, usually the amount of time needed to compete in a tournament or competition, but not longer than five years for an individual. However, the visa can be extended for an additional five years in order to continue or complete the event, competition, or performance. The P-1A visa distinguishes between individual and team events and imposes different rules.

Whether a P or an O visa, the USCIS has a great deal of discretion and may not (and does not) always find that eSports meet the requirements.

Recently, a player on the Overwatch League team, Chengudu Hunters, was refused entrance and the team was forced to travel to the U.S. without him. Previously, in the inaugural season of Overwatch League, the Shanghai Dragons also dealt with visa issues after signing two players mid-season. This uncertainty makes it difficult for team owners interested in recruiting players from abroad.

But eSports are becoming more and more like other professional sports and this may help to allay USCIS’ doubts about this new category and its participants.

Not only are there eSports leagues and eSports owners, but there are eSports franchises. LOL has established a player’s association that is like a union and eSports may even make its debut in the 2024 Paris Olympics. https://www.bbc.com/sport/olympics/43893891 It has been suggested that with wealthy and famous owners comes lobbying power that might lead to formal immigration legislation for gamers as athletes. https://sites.psu.edu/jlia/1256-2/

For more information about the visa options for eSports athletes, please reach out to your Jackson Lewis Sports Practice or Immigration attorney.

California Bill Would Allow College Athletes to Keep Amateur Status While Securing Marketing Opportunities

By Gregg E. Clifton and Iciss R. Tillis on

The opportunity for college level student-athletes in California to take advantage of potential marketing opportunities while still maintaining their amateur status could soon become a reality.

A report from the National College Players Association and Drexel University Sports Management Program concluded that 82 percent of full-scholarship athletes who live on campus and 90 percent of full-scholarship athletes who live off campus live at or below the federal poverty level. Members of the California legislature reacted by introducing SB 206, which would allow student-athletes at all 24 public and private colleges and universities that participate in Division I to secure financial remuneration by being paid directly from private or commercial sources for the unique value of their name, image, or likeness while still performing as a student-athlete.

The proposed legislation expressly restricts the NCAA’s ability to prevent student-athletes from participating in any such marketing opportunities.

The Fair Pay to Play Act, introduced by California State Senate Majority Whip Nancy Skinner, would prohibit a California public postsecondary educational institution, athletic association, conference, or any other organization with authority over intercollegiate athletics from preventing student-athletes from earning compensation in connection with the use of the student-athlete’s name, image, or likeness. Specifically, any such compensation would not affect a student-athlete’s scholarship eligibility. “Public postsecondary educational institution” means any campus of the University of California, the California State University, or the California Community Colleges.

Commenting on SB 206, Senator Skinner stated, “For too long, college athletes have been exploited by a deeply unfair system. Universities and the NCAA make huge amounts of money from TV deals and corporate sponsorships of their teams.” She continued,

“Athletic talent has value, and college athletes deserve to share in that value. The Fair Pay to Play Act allows athletes to finally be compensated for their hard work — work that generates billions of dollars for their schools, corporate sponsors and media networks.”

The Act would not add any specific costs to university athletic budgets. In fact,

the proposed legislation is completely cost neutral to the higher education institutions.

Student-athletes would be able to use their unique position to secure financial rewards while still performing at an amateur level and assuming all of the risk of season-long or career ending injury. The bill’s co-sponsor, Sen. Steven Bradford added, “This is more than a sports issue. This is a civil rights issue about basic fairness. For decades, young athletes have been generating billions of dollars for their colleges, universities, and corporate sponsors, but many are not only enduring the daily challenges as collegiate athletes, they are also struggling just to get by financially. It is time to right this historic wrong.”

Jackson Lewis’ Collegiate and Professional Sports Practice Group is prepared to counsel teams and leagues on any of these issues. The Practice Group will continue to monitor this proposed legislation and similar legislation that has been introduced around the country. Please feel free to reach out to any member of the Practice Group with questions.

The ESports Industry-The Top Ten Labor and Employment Law Issues

By Gregg E. Clifton and Khuong B. Nguyen on

While Major League Baseball and the NFL often speak of growing revenue, Esports has enjoyed a meteoric rise in popularity and an accompanying increase in revenue streams of its own. Buoyed by investments into Esports organizations from international stars like Michael Jordan and Drake, and the increasing popularity of Esports stars like Tyler “Ninja” Blevins and his gaming streams to millions of fans on Twitch, 2018 was a record-breaking year for the Esports industry. As revenue grew an estimated $900 million, estimates show that the industry that got its start in a dimly lit home basement could grow to a whopping $1.7 billion by 2021.

However, as with any industry that is experiencing unprecedented growth, numerous legal issues and concerns accompany that growth. As an emerging sport, Esports lacks formal organization amongst the many games within which players compete. Only recently have leagues developed, such as the Overwatch League and even then, teams are unaware or unsure of the many developing legal issues. Specifically, labor and employment issues are plentiful when it comes to players, their teams, the team owners, and the multitude of other parties that are involved. The following list is just a snapshot of the legal issues that the Esports industry faces in the coming years.

  1. FLSA
    • Are a team’s players independent contractors or employees covered by the FLSA? Team owners must be aware that the potential relationship with players must be analyzed pursuant to current legal tests such as the “economic realities” test to make such a determination.
  2. Child Labor
    • It is not uncommon for top-tier competitors to be below the age of 18 in the Esports industry. Federal and state child labor laws must be considered as they govern the employment of minors.
  3. Title VII
    • Employment anti-discrimination laws, such as Title VII and its state counterparts, bar discrimination based on race, color, religion, sex, national origin, and other characteristics.
  4. NLRA
    • The NLRA guarantees the right of employees to organize and bargain collectively with their employers, and to engage in other protected concerted activity. Recently, Riot Games launched a League of Legends North American League Championship Series players association to give its professional players a voice in negotiations between players, teams, and Riot Games. While the association is not yet a union under the NLRA, the NLRA will govern should real talks of unionization continue to grow. All Esports team owners must become familiar with the legal rights that they possess as well as the legal rights of the professional players.
  5. Gambling
    • By 2020, the total value of money/items wagered around major Esports titles is projected to be valued at $12.9 billion. While there is currently a lack of regulation with respect to Esports match fixing, some Esports stakeholders have come together to deal with issues of common interest such as match fixing and to protect the integrity of the sport.
  6. Player Contracts
    • As with all major professional sports, increased revenue generation will lead to increased focus on contract negotiations and the potential terms contained on those agreements. Players and team owners should be aware of and take into account federal and state employment law issues when drafting player contracts.
  7. Team Handbooks and Policies
    • Policies, procedures, and standards for the team workplace should set expectations and comply with appropriate league codes of conduct and competition.
  8. Immigration Issues
    • Many Esports professionals are not based in the US. Team owners recruiting foreign players onto their teams must comply with all U.S. immigration laws, such as securing the appropriate visa for each foreign player.
  9. Athlete-Agent Laws and Regulations 
    • Agents and organizations representing athletic talent must navigate a broad array of federal and state laws and regulations governing the sports industry and team owners will need to be able to navigate the multi-tiered regulatory environment.
  10. Team Doping
    • While Esports players aren’t injecting themselves with steroids, players have admitted to abusing amphetamines such as Adderall when competing in tournaments in order to improve their reflexes and concentration. The Electronic Sports League currently conducts random drug-testing at their events. Teams that want to enforce a drug testing policy for their players need to be cautious of the Americans with Disabilities Act, which has recognized Attention Deficit Disorder under the act.

Jackson Lewis’ Collegiate and Professional Sports Practice Group is prepared to counsel teams and leagues on any of these issues. The Practice Group will continue to monitor the rapidly developing Esports industry and any regulations that may be implemented. Please feel free to reach out to any member of the Collegiate and Professional Sports Practice Group with questions.

State Legislators React to Proposed Federal Title IX Regulations with State Law Proposals

By Gregg E. Clifton, John G. Long, Susan D. Friedfel and Monica H. Kheterpal on

While colleges, universities and educational professionals await the Department of Education’s (DOE) proposed new Title IX regulations, which will dictate a revised process by which allegations of sexual misconduct must be handled, the state legislatures in Missouri and Arizona are currently considering legislation that would adopt many of Secretary DeVos’s anticipated regulatory modifications.

Click here to access the full article on this Title IX development.

Super Bowl Sunday Considerations Following the Murphy Decision?

By Gregg E. Clifton and Thomas L. Petriccione on

Millions of Americans will tune in on Sunday, February 3rd to the Super Bowl to watch one of the biggest sporting events of the year. This year’s game will again feature the New England Patriots, but it will be the first Super Bowl since the Supreme Court’s landmark case Murphy v. National Collegiate Athletic Assn., No. 16-476 (May 14, 2018), which struck down the federal ban on state-regulated sports wagering.

In that decision, the Supreme Court ruled that the Professional and Amateur Sports Protection Act (PASPA) (28 U.S.C. §3701 et seq.), which made it illegal for states to “authorize” a “lottery, sweepstakes, or other betting, gambling, or wagering scheme based … on one or more competitive games in which amateur or professional athletes participate” was illegal. The Court concluded that PASPA violated the 10th Amendment of the U.S. Constitution and formally removed the federal ban on sports betting.

The decision returned the power of individual states to legalize and regulate sports betting at the state level. The Court’s decision allowed states to enact their own gambling laws. Currently, eight states (Delaware, Mississippi, Nevada, New Jersey, New Mexico, Pennsylvania, Rhode Island, and West Virginia) have specific legislation authorizing some form of licensed and regulated sports gambling. In addition, New York and Arkansas have passed some form of gambling legislation. However, Murphy and the various state statutes passed have not given private citizens the right to begin conducting wagering pools.

While office camaraderie and positive working relationships may result from coworkers socializing over the game, employers may suffer lost productivity in the days leading up to and following the event. Employees may spend work time discussing the upcoming game and earlier playoff match-ups, as well as related statistics and player injuries. They may coordinate social events and discuss the game itself at work. Betting on the outcome (such as through workplace pools) also may occur in the office or plant.

While employers can maximize the game’s positive effects on workplace morale, they should think about the following:

Is Gambling Permitted at Work; Applicable Limitations?

Before deciding whether to sponsor or permit office pools, employers should examine their state law.

Even in the post-Murphy era, sports betting is still currently considered to be illegal in 42 states. With an increase to nearly $6 billion in wagers expected to be made on this year’s Super Bowl, only about 10% is expected to be made through the legal gambling options now available.

It is important for all employers to remember that gambling, including intra-office gambling, is generally illegal.

Some states, including Florida, have a statutory prohibition against gambling activities when “real money” changes hands. The Florida law specifically provides, “whoever sets up, promotes or plays at any game of chance … for the disposal of money or other thing of value … shall be guilty of a misdemeanor of the second degree,” Fla. Stat. Section 849.11. If employers conduct business in a state in which workplace gambling is potentially illegal, such as Florida, they should notify their employees that the gambling activity is expressly prohibited and that employees will be disciplined if they engage in such prohibited conduct on the job.

Despite this general restriction, some states make an exception for “informal” or “social gambling.”

While the definition varies, social gambling usually occurs in a strictly social context, where the persons involved know each other beforehand and no profit is made. (The NFL’s copyright of the Super Bowl game prohibits third parties from charging admission to view the contest.) In most states that recognize this, betting among friends and colleagues would fall within the social-gambling exception. While office pools may be permitted in certain states under these circumstances, some state laws may limit how much prize money, if any, can be awarded. Gift certificates to restaurants and gym memberships may be safer prizes rather than the employer condoning the exchange of money in the workplace. Further, if there is a pool in the workplace, employers should ensure everyone understands that participation is completely voluntary, and that no negative action will be taken if an employee chooses not to participate. Once again, it is imperative that you check your state or local laws before authorizing any type of office gambling activity.

* * *

With thought and planning, the Super Bowl may be a way to creatively build morale and camaraderie in the workplace. However, as with any other part of employment relations, employers must keep legal considerations in mind. The Collegiate and Professional Sports Practice Group is available to discuss the potential effect of the game on your workplace.

 

New Legislation Proposed In The State of Washington Pushes For Student-Athlete Compensation In Defiance of NCAA Bylaws

By Gregg E. Clifton on

As colleges and universities and student athletes await the long anticipated decision from U.S. District Court Judge Claudia Wilken in Alston v. NCAA regarding whether scholarship limits imposed by the NCAA violate anti-trust laws, a bill introduced in the State of Washington could provide student athletes in the state with the opportunity to be paid by sponsors or companies seeking their endorsement while they are playing for a university or college in the state.

Washington State Representative Drew Stokesbary of Auburn, Washington has introduced House Bill 1084. The bill provides that every student enrolled at an institution of higher education within the State of Washington should have “an equal right” to earn compensation for services provided; to be paid for the use of his or her name, image and likeness, and to hire agents to represent the student’s interests.

The language contained in Representative Stokesbary’s proposed legislation continues that:

“students should not be compelled to choose between forfeiting these rights and participating in intercollegiate competitions”.

The bill would not authorize a state institution of higher education to make direct financial payments to student athletes. However, it would allow a current student athlete to receive financial payment for his appearance and the use of his name, image or likeness on behalf of a commercial enterprise or for the student athlete’s endorsement of a specific company, such as a clothing or shoe manufacturer. The only proposed restriction is that the compensation received by the student athlete must be in a manner consistent with the fair market value for their services, similar to how professional athletes are currently compensated.

Current NCAA bylaws prevent college student-athletes from receiving payments for such endorsements or hiring agents to negotiate those potential endorsement agreements. The proposed legislation would make it a violation of Washington state’s consumer protection laws to enforce any such NCAA rules against college athletes in Washington or to prohibit or suspend any athletic team from competing in an intercollegiate competition or otherwise penalizing a university because a student-athlete has received financial remuneration for their services.

Jackson Lewis’ Collegiate and Professional Sports Practice Group will continue to monitor the proposed legislation and provide updates on developments in this area. Please feel free to reach out to any member with questions.

 

 

 

LexBlog