By Ed Edmonds, Professor Emeritus of Law, Notre Dame Law School
Over eight years after attorneys from Korein Tillery, LLC, in St. Louis, Missouri, and Pearson, Simon & Warshaw, LLP, in San Francisco, California, filed a class action complaint on behalf of minor league baseball players in the United States District Court for the Northern District of California charging the Office of the Commissioner of Baseball, Major League Baseball, Bud Selig, and three MLB teams with a violation of both state and federal wage and hours laws (Senne v. Kansas City Royals Baseball Corp., N.D. Cal., Case No. 14-cv-00608-JCS (“Senne”)) the parties notified the court on May 10, 2022, that they had reached a settlement in principle based on a confidential memorandum of understanding. (Letter available at Letter to the Court Regarding Settlement, https://www.baseballplayerwagecase.com/documents). The settlement also prompted a request to adjourn a pre-trial conference scheduled for that day plus the jury trial set for June 1. The parties also asked for a July 11, 2022, date for filing a motion for preliminary approval of the settlement agreement.
After years of both sides clashing over the certification of an appropriate class and the impact of Congress passing the Save America’s Pastime Act on the federal claim in the action, the settlement was triggered by Chief Magistrate Judge Joseph C. Spero’s March 15, 2022, 181-page order covering eight specific motions. (Case 3:14-cv-00608-JCS Document 1071 Filed 03/15/22 (“Spero Order”)). Judge Spero key determination was “that Plaintiffs are entitled to summary judgment in their favor on the threshold question of whether the members of the FLSA collective and the Rule 23 classes meet the definition of ‘employee’ under the FLSA and the relevant state laws. Conversely, the Court finds that Defendants are not entitled to summary judgment that outside of the Championship Season the class and collective members are not ‘employees.’” (Spero Order, 51) Spero’s finding of the players’ employment status was critical in pushing Major League Baseball to offer favorable settlement terms while also minimizing any additional damage to their positions that a trial would produce. Judge Spero also addressed several specific issues raised by the Save America’s Pastime Act including its impact on the Florida law claims, four motions involving multiple experts’ testimony, and other technical issues.
Because the critical issue for Judge Spero was the determination of the scope and reach of the employment status of the players, this summary will concentrate on his conclusion that the Supreme Court’s economic realities test applies instead of the primary beneficiary test and that the players are year-long employees and not trainees or creative professionals or artists.
Judge Spero began his discussion of whether plaintiffs are “employees” by noting that the “primary dispute” between parties was stated in the Court’s July 21, 2016, Order as whether or not the applicable test was the primary beneficiary test announced by the Supreme Court in 1947 in Walling v. Portland Terminal Company, 330 U.S. 148 (1947), or the economic realities test established in 1985 in Tony and Susan Alamo Foundation v. Secretary of Labor (Alamo), 471 U.S. 290 (1985). (Spero Order, 50). In selecting the Alamo economic reality test, Judge Spero quoted from the earlier Order:
it cannot be denied that minor league players expect to receive – and do in fact receive – compensation in return for playing baseball for the Clubs. This basic fact distinguishes this case all of the cases discussed above that applied Walling. These are not unpaid interns, students who were receiving clinical training in connection with licensing requirements, or amateur student athletes participating in a long tradition in which no compensation had ever been paid or expected. (Spero Order, 50)
Spero turned certain statements by the Kansas City Royals in their supplemental answer against Major League Baseball and the Office of the Commissioner by determining that the Royals’ statements constituted judicial admissions and conclusively resolved the employment question because those “admissions that Plaintiffs were or are ‘employees’ of the Clubs are binding.” (Spero Order, 53).
Next Spero refused to reconsider the earlier Order determining that applicability of the Alamo economic reality test because defendants did not present a motion for reconsideration or challenge that holding. (Spero Order, 53-54) The Court also cited the common draft and the Uniform Player Contract (UPC) as determinative including section IV of the UPC that states that “players’ ‘duties and obligations’ under the UPC are in ‘full force and effect throughout the calendar year [,] UPC § VI(B).” (Spero Order, 54).
Additionally, the Court was not persuaded by defendants’ arguments based on two recent cases. The Court distinguished the “unpublished” Fourth Circuit ruling in Armento v. Asheville Buncombe Cmty. Christian Ministry, Inc., 856 F. App’x 445, 455-56 (4th Cir. 2021) regarding the correct determination of employment status, and Judge Spero found that Eberline v. Douglas J. Holdings, Inc., 982 F.3d 1006, 1016 (6th Cir. 2020), cert. denied, 141 S. Ct. 2747 (2021) did not support defendants’ arguments. In Eberline, cosmetology students were found to be employees for general cleaning and janitorial work performed while part of a vocational program leading to a license. The Sixth Circuit’s use of the primary-beneficiary test supported the FLSA’s goal of avoiding exploitation of trainees when the additional work did not relate to the educational goals of the program. Major League Baseball’s argument here would produce the opposite “zone of exploitation” result. Further, players signed a contract that “expressly requires that Plaintiffs perform service throughout the calendar year for a period of seven years.” (Spero Order, 58). The seven-year term matches the long-standing term duration for a personal services contract in California. Judge Spero pressed the point by stating that:
These are not students who have enrolled in a vocation school with the understanding that they would perform services, without compensation, as part of the practical training necessary to compete (sic) the training and obtain a license. Nor are they comparable to the individuals in Walling – the seminal decision establishing the primary beneficiary test – where the plaintiffs received training before being hired with no guarantee that they would be hired at the end of the training and the trainees did not displace the company’s regular employees. (Spero Order, 58).
Judge Spero next turned to the question of whether Major League Baseball was a joint employer of minor league players by examining a four-part test from the Ninth Circuit’s 1983 decision in Bonnette v. California Health & Welfare Agency. The economic reality test’s four Bonnette factors are the power to hire and fire, the control over work schedules or conditions of employment, the determination of the rate and method of payment, and, finally, the maintenance of employment records. After a detailed analysis of all four factors, the Court concluded that MLB was a joint employer under FLSA and all state laws in question except California. (Spero Order, 59-85). Judge Spero quickly addressed the California cases in one paragraph before granting player plaintiffs summary judgment in that state as well. (Spero Order, 85).
Judge Spero also granted players summary judgment on the question of whether or not travel time to away games during the Championship California League season was compensable to players. (Spero Order, 88-97).
The Court also considered at length the creative artist or creative professional exemption to FLSA requirements pressed vigorously by Major League Baseball. After analyzing the requirement of “invention, imagination, originality or talent in a recognized field of artistic or creative endeavor” behind the exemption, the Court decided that “the omission of any type of professional sport in the regulation is a strong indication that professional baseball is not a ‘recognized’ field of artistic or creative endeavor and that professional athletes were not intended to fall under this exemption.” (Spero Order, 104).
Judge Spero spent over 30 pages discussing the application of the seasonal amusement or recreational establishment exemption before determining that fact questions existed that precluding a grant of summary judgment for either party. (Spero Order, 105-38).
The Court’s lengthy opinion provide the plaintiff players with tremendous leverage in forcing a settlement. Judge Spero did award the plaintiffs $1,882,650 for the California Wage Statement Claim, but the total amount of damages will wait until the July 11 filings. Furthermore, there are substantial attorney’s fees surrounding this lengthy litigation. Also, how will the ruling on spring training and travel time impact minor league players’ salaries? Keep in mind that major league players are also not paid during spring training.
