WestlawNext Canada insight Blog

CED: An Overview of the Law - Sports

Sports

by john barnes



See the LabourSource Advantage for yourself

V.1-7: Professional Sports

Click here for access to this CED title and its related Canadian Abridgment links on Westlaw Canada

 

V.1: Ownership, Financing and Management of Teams

See Canadian Abridgment: ADR.III.3 Alternative dispute resolution | Relation of arbitration to court proceedings | Stay of court proceedings; BKY.XIX Bankruptcy and insolvency | Companies' Creditors Arrangement Act; BUS.III.3.b Business associations | Specific matters of corporate organization | Shareholders | Controlling shareholder; CON.I.1 Contracts | Nature of contract | What constitutes contract; CON.III.1 Contracts | Formation of contract | Consensus ad idem; EST.II.3 Estates and trusts | Trusts | Constructive trust; EST.III.2 Estates and trusts | Trustees | Powers and duties of trustees; EST.III.3 Estates and trusts | Trustees | Breach of trust; EST.V.6 Estates and trusts | Charities | Administration of charities; MUN.XIX.1.d.i Municipal law | Municipal finance | Expenditures | Discretionary expenditures | Grants; RST.IV Restitution and unjust enrichment | Benefits conferred under ineffective transactions; TAX.II.6.f.xviii Tax | Income tax | Business and property income | Expenses | Meals and entertainment; TAX.V Tax | Provincial taxation

The sale of major league franchises in Toronto1 and Vancouver 2 has prompted disputes over shareholders' rights. Less profitable franchises in the Canadian Football League have faced bankruptcy proceedings.3 Litigation has also occurred relating to the purchase of a Junior A hockey team.4

Most teams are privately owned commercial ventures that derive revenue from marketing programs, advertising and sponsorship5 and the sale of other property rights.6 Teams and leagues do, however, benefit from various forms of public subsidy,7 including the use of publicly owned or financed stadia8 that run the risk of losing the team to another city.9

V.2: Sports Broadcasting

See Canadian Abridgment: CMN.I.2 Communications law | Constitutional jurisdiction | Broadcasting; CMN.II.1 Communications law | Regulatory commissions | C.R.T.C. (Canadian Radio-television and Telecommunications Commission); CMN.III Communications law | Regulation of radio and television

 Litigation has occurred regarding copyright1 and ownership rights

2

 in broadcasts of professional sports events. Cases have also considered advertising rights associated with broadcasts of professional games.3  

V.3: The Competition Act

See Canadian Abridgment: CML.VI Commercial law | Trade and commerce; REM.II Remedies | Injunctions

The Competition Act includes a specific section dealing with agreements and combinations in professional sport. 1 The Act does not apply to arrangements in amateur sport.2 "Amateur sport" is defined as sport in which the participants receive no remuneration for their services as participants.3

Agreements and arrangements between teams in the same professional league that relate to opportunities for players or competitors or that relate to "the granting and operation of franchises in the league" are not subject to the general conspiracy provisions of the Competition Act. Such agreements and arrangements are only illegal where they are "unreasonable".4 Restrictions on the sale and relocation of franchises may be reviewed under the Act as potential abuse of a dominant position,5 although a league is entitled to pursue legitimate business interests when maintaining restrictions.6

It is an indictable offence to conspire or arrange: to limit unreasonably the opportunity for another person to participate as a player or competitor in professional sport;7 to impose unreasonable terms or conditions on participants;8 or to limit unreasonably the opportunity for another person to negotiate with or play for the team of his or her choice.9 This provision is directed against the exclusion or "blacklisting" of players, oppressive contractual clauses (e.g. a power of perpetual renewal or other devices effectively tying a player to one team) and league devices that grant teams exclusive negotiating rights.10

In determining whether an arrangement is "unreasonable", the court is directed to consider whether the sport is organized on an international basis and whether the arrangement should for that reason be accepted in Canada.11 The court is also directed to have regard to the desirability of maintaining a reasonable balance among the teams or clubs participating in the same league.12 American courts have frequently ruled on contractual and other restrictions placed on players and teams. In the case of international professional leagues, the Canadian court may consider those decisions in determining whether a restraint is reasonable.

 Arguments based on the Competition Act13 have been advanced in some actions brought against decisions or regulations of sports associations.14

V.4: Labour Relations and Players' Associations

See Canadian Abridgment: ADR.VIII Alternative dispute resolution | Judicial review of arbitration awards; CIV.XIII.3.c.ii.D Civil practice and procedure | Disposition without trial | Stay or dismissal of action | Grounds | Another proceeding pending | Criminal proceeding; EST.III Estates and trusts | Trustees; LAB.I.4.c Labour and employment law | Labour law | Industrial disputes | Lockouts; LAB.I.5.c Labour and employment law | Labour law | Bargaining rights | Certification; PEN.III Pensions | Surplus funds; REM.II Remedies | Injunctions; TAX.II.19 Tax | Income tax | Non-residents

Individual service contracts in professional sport coexist with Collective Bargaining Agreements ("CBA") that establish general benefits and conditions of employment. The CBA deals with matters such as free agency rights1 and minimum financial entitlements. The negotiation of individual contracts is authorized by the CBA; this practice may occur where the employee negotiates terms that exceed and do not derogate from benefits in the CBA.2

Rights and procedures recognized in provincial labour law3 apply to the local operation of American-based major leagues4 and to franchises located in the province.5

The pension society of the National Hockey League has been held liable for failing to apply funds for the benefit of retired players.6

 The former operation of the NHL Players' Association has been the subject of civil action and of investigations by the Law Society of Upper Canada and by American criminal authorities.7

V.5.(a): Service Contract–General

See Canadian Abridgment: BUS.II.1 Business associations | Creation and organization of business associations | Associations; CML.VI Commercial law | Trade and commerce; CON.III Contracts | Formation of contract; CON.VII Contracts | Construction and interpretation; CON.IX Contracts | Performance or breach; CON.X.5 Contracts | Discharge | Right to rescind after repudiation; CON.XIII Contracts | Novation; CON.XIV Contracts | Remedies for breach; LAB.II.3 Labour and employment law | Employment law | Interpretation of employment contract; LAB.II.5 Labour and employment law | Employment law | Wages and benefits; LAB.II.6.b Labour and employment law | Employment law | Termination and dismissal | Notice; LAB.II.6.c Labour and employment law | Employment law | Termination and dismissal | Remedies; REM.I.3 Remedies | Damages | Damages in contract; REM.II.2.d Remedies | Injunctions | Availability of injunctions | Mandatory injunctions; REM.II.2.f.viii Remedies | Injunctions | Availability of injunctions | Injunctions in specific contexts | Amateur sports associations; RST.VI Restitution and unjust enrichment | Benefits arising through wrongful acts; TAX.II.19 Tax | Income tax | Non-residents; TOR.VII Torts | Fraud and misrepresentation

Contracts in professional sports1 are subject to the ordinary rules of contract law: "Contracts in the field of professional sports stand in no different position than contracts in any other commercial venture. If either of the parties breaks the contract, he becomes liable for such damages as may be proved against him".2 Disputes as to the interpretation of contracts are now usually subject to the league's arbitration procedures.3

Professional athletes are usually employed under the league's Standard Player Contract ("SPC") that sets out uniform conditions of employment. The terms and conditions of employment will be settled by the signed written record.4 A contract of personal service in professional sport is not a contract uberrimae fidei, voidable for breach of a duty to disclose material facts; in the absence of mistake, misrepresentation or duress, the contract will be enforceable.5

The SPC typically binds the player to play for and train with the team, to maintain good physical condition and to abide by team and league rules. The contract obliges the team to pay salary6 and other benefits; such obligation may apply where the player is injured in the club's service. The contract may give the team the power to "cut" the player by terminating the contract,7 the power to trade the player by assigning the contract,8 and the power to extend the player's service by exercising a one-year option of renewal.9

An obligation of exclusive service during the period of the contract is valid and enforceable; it is not a covenant in restraint of trade.10

A version of the SPC of the Canadian Major Junior Hockey League obliging an infant player to pay a disproportionate fee to his junior team for development has been held to be unbeneficial and unenforceable.11

A team is not obliged to pay salary to a player under a "guaranteed" contract where the player wilfully refuses his or her services or engages himself or herself to play for another team.12

Where a team does not clearly exercise an option of renewal and where the player does not sign a new SPC, there is no contractual obligation between the parties.13

An injunction will not issue to prevent breach of a player's contract where irreparable damage has not been proven or where such an injunction will deny the player the chance to earn any livelihood.14 Neither will an injunction issue to prevent a player performing with a team that is not a market competitor.15 An injunction will not be granted where it has the effect of restoring the player's employment and so enforcing the service contract.16

Where a player is found to be in breach of a valid service contract, damages will be assessed on ordinary principles. Such damages will cover the expense of acquiring a replacement player and, where specifically proven, may compensate for training costs and lost team revenue.17

V.5.(b): Service Contract– Contract Negotiation and Duties of Agents

See Canadian Abridgment: CML.I Commercial law | Agency; TOR.IX Torts | Inducing breach of contract; TOR.X Torts | Interference with contractual relations

Studies have considered the duties of sports agents in representing players and systems of regulation to control the agency business.1 An agent who negotiates a player's contract is bound to perform the services in a prompt and competent manner.2 The agent is also bound by duties of trust and confidence when representing the client's interests.3 Disputes may occur when a player switches to another agent or organization.4 The terms of agreement between an agent and the agency organization may include obligations not to solicit employees and clients of the organization.5

V.6: Promotion and Protection of Personality

See Canadian Abridgment: REM.II.2.f.xiv.A Remedies | Injunctions | Availability of injunctions | Injunctions in specific contexts | Intangible property rights | Copyright; TOR.VII Torts | Fraud and misrepresentation; TOR.XIII Torts | Invasion of privacy; TOR.XXI Torts | Wrongful appropriation of personality

Well-known athletes have a valuable commercial asset in their right of self-promotion and in the right to authorize the use of photographs or other images of themselves. Action may lie to compensate for damage caused to the athlete's public reputation1 or to prevent wrongful use and appropriation of the image.2 However, no wrong is committed where a photograph does not specifically exploit the personality of the player or use the image for product endorsement.3 There is no misappropriation when the celebrity has licensed or given over the personality right.4

V.7: Ownership of Trophies

See Canadian Abridgment: PER.II Personal property | Bailment and warehousing; PER.III Personal property | Choses in action

The ownership of the Stanley Cup and the duties of the Stanley Cup trustees have been contested in litigation1 and discussed in academic commentary.2 In a settlement in 2006, it was acknowledged that the trustees can award the Cup to a team outside the National Hockey League in a year when the NHL is not operating.3

 

Click here to download footnotes

© Copyright WestlawNext Canada, Thomson Reuters Canada Limited. All rights reserved.