Reserve clause
Encyclopedia
The reserve clause is a term formerly employed in North America
n professional sports contract
s. The reserve clause, contained in all standard player contracts, stated that, upon the contract's expiration the rights to the player were to be retained by the team to which he had been signed. Practically, this meant that although both the player's obligation to play for the team as well as the team's obligation to pay the player were terminated, the player was not free to enter into another contract with another team. The player was bound to either (A) negotiate a new contract to play another year for the same team or (B) ask to be released or traded.
While once common in sports, the clause was abolished in baseball in 1975, and other sports soon followed suit. The reserve clause system has, for the most part, been replaced by free agency.
in America became popular enough that its major teams began to be businesses worth considerable amounts of money by the standards of the time, and the players began to be paid sums that were well above the wages earned by common workers. To keep player salary demands in check, team owners promulgated a standardized contract for the players, in which the major variable was salary. In this era, all player contracts were for one year. There were no long-term contracts as there are today, because the reserve clause negated the need for them.
The Reserve Clauses initial inception was in 1879, when it was proposed as an unofficial rule known as "the Five Man Rule." It would allow teams to reserve players for each season, unless a player opted out of his contract and did not play in the league for a year. While the rule was not secret, teams started to sign other teams' "reserved players," thus encroaching the rule. These controversies caused the MLB to instate the rule officially on December 6, 1879.
Teams realized that if players were free to go from team to team then salaries would escalate dramatically. Therefore they seldom granted players (at least valuable ones) a release, but retained their rights, or traded them to other teams for the rights to other players, or sold them outright for cash. Players thus had a choice only of signing for what their team offered them, or "holding out" (refusing to play, and therefore, not being paid).
Under the Sherman Antitrust Act
of 1890, two or more non-affiliated companies in any other interstate business, were prohibited from colluding with each other to fix prices or establish schedules or rates. Enforcement of the Act reached its apotheosis in 1910 when the Supreme Court affirmed the government's order to dissolve the Standard Oil conglomerate. Yet it was argued that to keep the national pastime prosperous, the only large-scale professional sport in America during the 1920s of any significance, granting it immunity from the Sherman Act was in the best interests of the game and the nation.
Thus, the United States Supreme Court had held in 1922 in Federal Baseball Club v. National League
(259 U.S. 200) that baseball was an "amusement", and that organizing a schedule of games between independently owned and operated clubs operating in various states, and engaging in activities incidental thereto, did not constitute "interstate commerce" and that therefore antitrust
laws did not apply to such activity, a ruling that, as of now, has never been overturned.
This pass on "trust-busting" essentially codified the reserve clause for many years, and gave what came to be known as Major League Baseball unprecedented power over both players and the independent organizations of the National Association of Professional Baseball Leagues (NAPBL). MLB could dictate not only how and where professional players could move between major league clubs, but, as they took the opportunity of the Great Depression
to establish systems of farm team
s of players wholly owned by the parent clubs placed on 'independent' teams from the NA leagues around the country, they developed a way of expanding control of contracts of virtually the entire pool of professional baseball players.
When other team sports, particularly ice hockey
, football
, and basketball
developed professional leagues
, their owners essentially emulated baseball's reserve clause. This system stood almost unchallenged, other than by the occasional holdout, for many years.
In October 1969, St. Louis Cardinals
outfielder Curt Flood
challenged his trade to the Philadelphia Phillies
. Flood sacrificed the remainder of his playing career to pursue this litigation. Flood's case established that the reserve clause was a legitimate basis for negotiation in collective bargaining
between players and owners, and that the historic baseball antitrust exemption was valid for baseball only and not applicable to any other sport.
Removing the reserve clause from player contracts became the primary goal of negotiations between the Major League Baseball Players Association
and the owners. The reserve clause was struck down in 1975
when arbitrator Peter Seitz
ruled that since pitchers Andy Messersmith
and Dave McNally
played for one season without a contract, they could become free agents. This decision essentially dismantled the reserve clause and opened the door to widespread free agency.
The other sports followed suit.
still referred to the clause as the option clause (and also as the "option and reserve clause").
Decades later, NFL players' mobility was limited by the so-called "Rozelle Rule
", named for the commissioner who first implemented it, which allowed the commissioner to "compensate" any team who lost a free agent to another team by taking something of equivalent value, usually draft picks, from the team that had signed the free agent and giving it to the team the player had left. Fear of losing several future high draft picks greatly limited free agency as no team wanted to sign a veteran player only to learn that it would lose, for example, its next two first-round draft picks. The Rozelle Rule was eventually replaced by "Plan B", which allowed a team to name a thirty-seven man roster the reserve clause would apply to, and all players not included on this list were free agents. Obviously, few top-echelon players were left off this thirty-seven man roster unless they happened to be injured. Courts eventually ruled this plan to be an antitrust violation, and something resembling true free agency came to pro football. Now, exclusive rights to a player are only for the first three years after his selection in the college draft. At the end of the first three years, a player can be a "restricted free agent", allowing his former team to match any offer made to him by another. After four years in the NFL all contracts end with the player becoming an unrestricted free agent without reserve.
There is a Franchise tag
option that is similar to the reserve clause; however, teams can only tag one player each year, although they can tag the same player for consecutive years. Franchised players are eligible to receive at least 120% of their previous year's salary, and players tagged "non-exclusive" can accept offers from other teams; if the original team does not match the offer, they receive draft picks as compensation. In recent years, many teams have opted not to exercise their right to designate the Franchise tag.
went through several phases of compensation and other arcane provisions before reaching almost unrestricted free agency. This year, 2011, the NBPA and NBA Owners Association are coming to an agreement on terms of contracts.
in 1972, with all but one -- against Chicago Black Hawks star Bobby Hull
-- ultimately thrown out by lower courts. The appellate court, however, sided strongly with the WHA and Hull, calling the NHL's business practices monopolistic, conspiratorial, and illegal. While the reserve clause was not explicitly struck down, the court did effectively block any further injunctions based on the reserve clause, rendering it useless. (The WHA, meanwhile, voted at its founding to abolish the reserve clause.) The end of the reserve clause in hockey remains a significant part of the WHA's legacy, as it ultimately resulted in the evolution of the NHL's modern free agency system.
The highly contentious negotiations between National Hockey League
owners and players that led to a lockout, wiping out the entire 2004–05 NHL season, were in part about free agency; the previous system precluded unrestricted free agency before the player reached 31 years of age. Most younger hockey free agents were restricted free agents whose teams could retain them by matching an offer from another club or making a "qualifying offer," which usually consisted of a ten percent raise above the pay in the former contract. Following the 2004-05 lockout, owners eventually agreed to phase in a much lower age for unrestricted free agency (27 years of age or 7 years in the NHL, whichever comes first) in exchange for the players meeting owners' principal demand in the new NHL Collective Bargaining Agreement
—an overall salary cap
.
North America
North America is a continent wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere. It is also considered a northern subcontinent of the Americas...
n professional sports contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
s. The reserve clause, contained in all standard player contracts, stated that, upon the contract's expiration the rights to the player were to be retained by the team to which he had been signed. Practically, this meant that although both the player's obligation to play for the team as well as the team's obligation to pay the player were terminated, the player was not free to enter into another contract with another team. The player was bound to either (A) negotiate a new contract to play another year for the same team or (B) ask to be released or traded.
While once common in sports, the clause was abolished in baseball in 1975, and other sports soon followed suit. The reserve clause system has, for the most part, been replaced by free agency.
History and baseball
In the late 19th century, baseballBaseball
Baseball is a bat-and-ball sport played between two teams of nine players each. The aim is to score runs by hitting a thrown ball with a bat and touching a series of four bases arranged at the corners of a ninety-foot diamond...
in America became popular enough that its major teams began to be businesses worth considerable amounts of money by the standards of the time, and the players began to be paid sums that were well above the wages earned by common workers. To keep player salary demands in check, team owners promulgated a standardized contract for the players, in which the major variable was salary. In this era, all player contracts were for one year. There were no long-term contracts as there are today, because the reserve clause negated the need for them.
The Reserve Clauses initial inception was in 1879, when it was proposed as an unofficial rule known as "the Five Man Rule." It would allow teams to reserve players for each season, unless a player opted out of his contract and did not play in the league for a year. While the rule was not secret, teams started to sign other teams' "reserved players," thus encroaching the rule. These controversies caused the MLB to instate the rule officially on December 6, 1879.
Teams realized that if players were free to go from team to team then salaries would escalate dramatically. Therefore they seldom granted players (at least valuable ones) a release, but retained their rights, or traded them to other teams for the rights to other players, or sold them outright for cash. Players thus had a choice only of signing for what their team offered them, or "holding out" (refusing to play, and therefore, not being paid).
Under the Sherman Antitrust Act
Sherman Antitrust Act
The Sherman Antitrust Act requires the United States federal government to investigate and pursue trusts, companies, and organizations suspected of violating the Act. It was the first Federal statute to limit cartels and monopolies, and today still forms the basis for most antitrust litigation by...
of 1890, two or more non-affiliated companies in any other interstate business, were prohibited from colluding with each other to fix prices or establish schedules or rates. Enforcement of the Act reached its apotheosis in 1910 when the Supreme Court affirmed the government's order to dissolve the Standard Oil conglomerate. Yet it was argued that to keep the national pastime prosperous, the only large-scale professional sport in America during the 1920s of any significance, granting it immunity from the Sherman Act was in the best interests of the game and the nation.
Thus, the United States Supreme Court had held in 1922 in Federal Baseball Club v. National League
Federal Baseball Club v. National League
Federal Baseball Club v. National League, , is a case in which the U.S. Supreme Court ruled that the Sherman Antitrust Act did not apply to Major League Baseball.-Background:...
(259 U.S. 200) that baseball was an "amusement", and that organizing a schedule of games between independently owned and operated clubs operating in various states, and engaging in activities incidental thereto, did not constitute "interstate commerce" and that therefore antitrust
Antitrust
The United States antitrust law is a body of laws that prohibits anti-competitive behavior and unfair business practices. Antitrust laws are intended to encourage competition in the marketplace. These competition laws make illegal certain practices deemed to hurt businesses or consumers or both,...
laws did not apply to such activity, a ruling that, as of now, has never been overturned.
This pass on "trust-busting" essentially codified the reserve clause for many years, and gave what came to be known as Major League Baseball unprecedented power over both players and the independent organizations of the National Association of Professional Baseball Leagues (NAPBL). MLB could dictate not only how and where professional players could move between major league clubs, but, as they took the opportunity of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
to establish systems of farm team
Farm team
In sports, a farm team, farm system, feeder team or nursery club, is generally a team or club whose role is to provide experience and training for young players, with an agreement that any successful players can move on to a higher level at a given point...
s of players wholly owned by the parent clubs placed on 'independent' teams from the NA leagues around the country, they developed a way of expanding control of contracts of virtually the entire pool of professional baseball players.
When other team sports, particularly ice hockey
Ice hockey
Ice hockey, often referred to as hockey, is a team sport played on ice, in which skaters use wooden or composite sticks to shoot a hard rubber puck into their opponent's net. The game is played between two teams of six players each. Five members of each team skate up and down the ice trying to take...
, football
American football
American football is a sport played between two teams of eleven with the objective of scoring points by advancing the ball into the opposing team's end zone. Known in the United States simply as football, it may also be referred to informally as gridiron football. The ball can be advanced by...
, and basketball
Basketball
Basketball is a team sport in which two teams of five players try to score points by throwing or "shooting" a ball through the top of a basketball hoop while following a set of rules...
developed professional leagues
Sports league
League is a term commonly used to describe a group of sports teams or individual athletes that compete against each other in a specific sport. At its simplest, it may be a local group of amateur athletes who form teams among themselves and compete on weekends; at its most complex, it can be an...
, their owners essentially emulated baseball's reserve clause. This system stood almost unchallenged, other than by the occasional holdout, for many years.
In October 1969, St. Louis Cardinals
St. Louis Cardinals
The St. Louis Cardinals are a professional baseball team based in St. Louis, Missouri. They are members of the Central Division in the National League of Major League Baseball. The Cardinals have won eleven World Series championships, the most of any National League team, and second overall only to...
outfielder Curt Flood
Curt Flood
Curtis Charles Flood was a Major League Baseball player who spent most of his career as a center fielder for the St. Louis Cardinals. A defensive standout, he led the National League in putouts four times and in fielding percentage twice, winning Gold Glove Awards in his last seven full seasons...
challenged his trade to the Philadelphia Phillies
Philadelphia Phillies
The Philadelphia Phillies are a Major League Baseball team. They are the oldest continuous, one-name, one-city franchise in all of professional American sports, dating to 1883. The Phillies are a member of the Eastern Division of Major League Baseball's National League...
. Flood sacrificed the remainder of his playing career to pursue this litigation. Flood's case established that the reserve clause was a legitimate basis for negotiation in collective bargaining
Collective bargaining
Collective bargaining is a process of negotiations between employers and the representatives of a unit of employees aimed at reaching agreements that regulate working conditions...
between players and owners, and that the historic baseball antitrust exemption was valid for baseball only and not applicable to any other sport.
Removing the reserve clause from player contracts became the primary goal of negotiations between the Major League Baseball Players Association
Major League Baseball Players Association
The Major League Baseball Players Association is the union of professional major-league baseball players.-History of MLBPA:The MLBPA was not the first attempt to unionize baseball players...
and the owners. The reserve clause was struck down in 1975
1975 in baseball
-Major League Baseball:*World Series: Cincinnati Reds over Boston Red Sox ; Pete Rose, MVP*All-Star Game, July 15 at County Stadium: National League, 6-3; Bill Madlock and Jon Matlack, MVPs-Other champions:...
when arbitrator Peter Seitz
Seitz decision
The Seitz decision was a ruling by arbitrator Peter Seitz on December 23, 1975 which declared that Major League Baseball players became free agents upon playing one year for their team without a contract, effectively nullifying baseball's reserve clause...
ruled that since pitchers Andy Messersmith
Andy Messersmith
John Alexander "Andy" Messersmith is a former Major League Baseball right-handed pitcher. He was the 12th overall pick of the 1966 amateur draft by the California Angels...
and Dave McNally
Dave McNally
David Arthur "Dave" McNally was a Major League Baseball left-handed starting pitcher from until . He was signed by the Baltimore Orioles and played with them every season except for his final season with the Montreal Expos.McNally has the unique distinction as the only pitcher in Major League...
played for one season without a contract, they could become free agents. This decision essentially dismantled the reserve clause and opened the door to widespread free agency.
The other sports followed suit.
NFL
On June 18, 1921, the NFL ratified its first constitution. The reserve clause ratified in the constitution was similar to that of baseball's at the time. The reserve clause stipulated that a team had the first opportunity to sign a player after the length of the contract had expired. If the team chose not to offer a contract, then the player could try to sign with a team of his choosing. Theoretically, the reserve clause bound the player "...to his employer in perpetuity". The reserve clause had been abolished in the NFL in 1948 when the option clause was created.. The option clause replaced the reserve clause when the reserve clause was abolished in the NFL constitution in 1948. The option clause stated that a team may choose to automatically keep a player on their team for another year, at the same pay, after his contract had expired. The term, option clause, was not used by the print media and it was instead referred to as the reserve clause. Nevertheless in the NFL's attempt to gain antitrust exemption from Congress in 1957, Bert BellBert Bell
De Benneville "Bert" Bell was the National Football League commissioner from 1946 until his death in 1959. As commissioner, he helped chart a path for the NFL to facilitate its rise in becoming the most popular sports attraction in the United States...
still referred to the clause as the option clause (and also as the "option and reserve clause").
Decades later, NFL players' mobility was limited by the so-called "Rozelle Rule
Pete Rozelle
Alvin Ray "Pete" Rozelle was the commissioner of the National Football League from January 1960 to November 1989, when he retired from office. Rozelle is credited with making the NFL into one of the most successful sports leagues in the world....
", named for the commissioner who first implemented it, which allowed the commissioner to "compensate" any team who lost a free agent to another team by taking something of equivalent value, usually draft picks, from the team that had signed the free agent and giving it to the team the player had left. Fear of losing several future high draft picks greatly limited free agency as no team wanted to sign a veteran player only to learn that it would lose, for example, its next two first-round draft picks. The Rozelle Rule was eventually replaced by "Plan B", which allowed a team to name a thirty-seven man roster the reserve clause would apply to, and all players not included on this list were free agents. Obviously, few top-echelon players were left off this thirty-seven man roster unless they happened to be injured. Courts eventually ruled this plan to be an antitrust violation, and something resembling true free agency came to pro football. Now, exclusive rights to a player are only for the first three years after his selection in the college draft. At the end of the first three years, a player can be a "restricted free agent", allowing his former team to match any offer made to him by another. After four years in the NFL all contracts end with the player becoming an unrestricted free agent without reserve.
There is a Franchise tag
Franchise Tag
In the National Football League, the franchise tag is a designation a team may apply to a player scheduled to become an unrestricted free agent. The tag binds the player to the team for one year if certain conditions are met. Each team has access each year to only one franchise tag and one...
option that is similar to the reserve clause; however, teams can only tag one player each year, although they can tag the same player for consecutive years. Franchised players are eligible to receive at least 120% of their previous year's salary, and players tagged "non-exclusive" can accept offers from other teams; if the original team does not match the offer, they receive draft picks as compensation. In recent years, many teams have opted not to exercise their right to designate the Franchise tag.
NBA
The National Basketball AssociationNational Basketball Association
The National Basketball Association is the pre-eminent men's professional basketball league in North America. It consists of thirty franchised member clubs, of which twenty-nine are located in the United States and one in Canada...
went through several phases of compensation and other arcane provisions before reaching almost unrestricted free agency. This year, 2011, the NBPA and NBA Owners Association are coming to an agreement on terms of contracts.
NHL
The reserve clause was the basis for the NHL's injunction against the large number of players who had signed with the rival World Hockey AssociationWorld Hockey Association
The World Hockey Association was a professional ice hockey league that operated in North America from 1972 to 1979. It was the first major competition for the National Hockey League since the collapse of the Western Hockey League in 1926...
in 1972, with all but one -- against Chicago Black Hawks star Bobby Hull
Bobby Hull
Robert Marvin "Bobby" Hull, OC is a former Canadian ice hockey player. He is regarded as one of the greatest ice hockey players of all time and perhaps the greatest left winger to ever play the game. Hull was famous for his blonde hair, blinding skating speed, and having the hardest shot, earning...
-- ultimately thrown out by lower courts. The appellate court, however, sided strongly with the WHA and Hull, calling the NHL's business practices monopolistic, conspiratorial, and illegal. While the reserve clause was not explicitly struck down, the court did effectively block any further injunctions based on the reserve clause, rendering it useless. (The WHA, meanwhile, voted at its founding to abolish the reserve clause.) The end of the reserve clause in hockey remains a significant part of the WHA's legacy, as it ultimately resulted in the evolution of the NHL's modern free agency system.
The highly contentious negotiations between National Hockey League
National Hockey League
The National Hockey League is an unincorporated not-for-profit association which operates a major professional ice hockey league of 30 franchised member clubs, of which 7 are currently located in Canada and 23 in the United States...
owners and players that led to a lockout, wiping out the entire 2004–05 NHL season, were in part about free agency; the previous system precluded unrestricted free agency before the player reached 31 years of age. Most younger hockey free agents were restricted free agents whose teams could retain them by matching an offer from another club or making a "qualifying offer," which usually consisted of a ten percent raise above the pay in the former contract. Following the 2004-05 lockout, owners eventually agreed to phase in a much lower age for unrestricted free agency (27 years of age or 7 years in the NHL, whichever comes first) in exchange for the players meeting owners' principal demand in the new NHL Collective Bargaining Agreement
NHL Collective Bargaining Agreement
The NHL collective bargaining agreement is the basic contract between the National Hockey League team owners and the NHL Players Association , designed to be arrived at through the typical labor-management negotiations of collective bargaining...
—an overall salary cap
Salary cap
In professional sports, a salary cap is a cartel agreement between teams that places a limit on the amount of money that can be spent on player salaries. The limit exists as a per-player limit or a total limit for the team's roster, or both...
.
See also
- Seitz decisionSeitz decisionThe Seitz decision was a ruling by arbitrator Peter Seitz on December 23, 1975 which declared that Major League Baseball players became free agents upon playing one year for their team without a contract, effectively nullifying baseball's reserve clause...
, which ended the reserve clause in baseball - Baseball's Reserve System: The Case and Trial of Curt Flood vs. Major League Baseball - (www.walnutparkgroup.com)
- Bosman rulingBosman rulingUnion Royale Belge des Sociétés de Football Association ASBL v Jean-Marc Bosman is a 1995 European Court of Justice decision concerning freedom of movement for workers, freedom of association, and direct effect of article 39 of the EC Treaty...
, a European Court of JusticeEuropean Court of JusticeThe Court can sit in plenary session, as a Grand Chamber of 13 judges, or in chambers of three or five judges. Plenary sitting are now very rare, and the court mostly sits in chambers of three or five judges...
decision that ended a similar system in European football (soccer)Football (soccer)Association football, more commonly known as football or soccer, is a sport played between two teams of eleven players with a spherical ball... - NHL Collective Bargaining AgreementNHL Collective Bargaining AgreementThe NHL collective bargaining agreement is the basic contract between the National Hockey League team owners and the NHL Players Association , designed to be arrived at through the typical labor-management negotiations of collective bargaining...
Sources
- Algeo, Matthew (2006), Last Team Standing. Philadelphia:Da Capo Press. ISBNInternational Standard Book NumberThe International Standard Book Number is a unique numeric commercial book identifier based upon the 9-digit Standard Book Numbering code created by Gordon Foster, Emeritus Professor of Statistics at Trinity College, Dublin, for the booksellers and stationers W.H...
ISBN 978-0-306-81472-3 - Lyons, Robert S. (2010). On Any Given Sunday, A Life of Bert Bell. Philadelphia:Temple University Press. ISBN 978-1-59213-731-2
- Ruck, Rob; with Paterson, Maggie Jones and Weber, Michael P. (2010) Rooney:a Sporting Life. Lincoln:University of Nebraska Press. ISBN 978-0-8032-2283-0
- Willis, Chris (2010). The Man Who Built the National Football League:Joe F. Carr. Lanham, MD:Scarecrow Press, Inc. ISBN 978-0-8108-7669-9