Bargaining Goals, Bargaining Processes, and Bargaining Outcomes - Term Paper Example

?The 2004-05 NHL Lockout: Bargaining Goals, Bargaining Processes, and Bargaining Outcomes Table of Contents Table of Contents 2 Introduction 3 About NHL 4 The Lockout of 2004-05 5 Causes for the Lockout and Bargaining Goals 6 The Processes & Outcomes of Bargaining 8 Conclusion 10 Works Cited 11 Introduction The classic lockout in 2004-05 witnessed a loss for the complete season of National Hockey League (NHL). The lockout lasted for 310 days and was considered as the longest shutdown in the history of sports. And also, losing out on an entire season, resulting from a labor disagreement, occurred for the first time in the record of professional sports based league (Staudohar, “The Hockey Lockout Of 2004-05”). The first declaration was made on 16th February, 2005 by the commissioner of the National Hockey League, Gary Bettman. Abandonment of the season of NHL due to a dispute happening out of a disagreement on collective bargaining amid the owners of the league and the union of players’ was stated (Chan & Et. Al., “The NHL Lockout”). The sport of hockey was always on a remote fourth when it came to the extent of popularity in contrast with the other major sports’ league of the nation. It was predicted that due to the cancellation of the season, it will push away the league from the screen of the radar. The damage due to the lockout not only affected the business partners and the fans but also the huge number of people who earned their livelihoods from the industry (ESPN, “Lockout Over Salary Cap Shuts Down NHL”). Therefore, in this study the causes and the outcomes of the lockout will be investigated in details. About NHL The National Hockey League started to be played from the year 1917. The NHL was structured in Canada 30 years prior to 1917. The NHL was successful in creating itself to be the leading hockey league in North America and began expanding in 1967 by adding more teams to its ‘Original Six’ and they were Chicago, Montreal, Detroit, Boston, Toronto and New York. Presently, the NHL includes 30 teams out of which most are in the United States and the rest are in Canada. The NHL was counted among the four most important sports leagues of America which included the National Football League (NFL), the Major League Baseball and the National Basketball Association (NBA). Although being in the most important leagues of America, the sport of hockey always ranked fourth in popularity. This was partially because of the fact that the other three games i.e. baseball, football and basketball had an extensive appeal, the sport of hockey had mostly niche audience. Majority of the hockey fans were found in the northern United States and in Canada. This was because of the cold climate that facilitated developing an attention in ice hockey. The uniqueness of the sport of hockey appeals more to its reactionary fans compared to the public in general. For instance, it is only in the sport of hockey where it is legitimate for the players to fight with one another throughout the game. It was however argued by the reactionary fans that fighting was an element of entertainment and necessity in the game whereas the casual spectators were shocked by it. Efforts were made to lessen the violence in the NHL in attempt to make it more appealing to the general public. This endeavor proved to be unsuccessful as it was not only futile in attracting new viewers but also incurred loss on loyal fan-following of NHL. This and a range of other different reasons declined the popularity of the game in the current years. The networks of television after becoming aware of the meager ratings with regard to televised hockey reduced the shows of the game to the extent where the sport had become nearly immaterial. Thus, the reaction in general to the news of lockout was a combination of unresponsiveness and acceptance (Chan & Et. Al., “The NHL Lockout”). The Lockout of 2004-05 The NHL encountered the first lockout prior to the season of 1994-95. The disagreement was however settled and an agreement of collective bargaining was arrived which lasted till the season of 1998-99 that was later stretched to 2003-04 and a decreased agenda of the game was played. There existed a continuous assumption all through the season of 2003-04 that the players and the league were poles apart when it came down to chief issues and probability of another lockout prevailed. There were negotiations taking place between both the sides on a fresh collective bargaining that started soon after the end of the season but slowed down shortly. The lockout formally started from 16th of September, 2004, the day when the season was programmed to commence. No agreement was arrived on the compulsory deadline of 16th February, 2005 that was mentioned by the league. The complete season was annulled in spite of last-minute attempts by both the parties. All the discussions had come to a halt and as a result of which most of the former players of NHL went overseas to be a part of the European leagues or in the North American leagues, for instance, the new World Hockey Association. Though both the sides stayed hopeful about the fact that the play would recommence for the season of 2005-06, but no one agreed to surrender to the demands of each other and moreover the likelihood of appointing replacement players were already discussed by the NHL (Chan & Et. Al., “The NHL Lockout”). Causes for the Lockout and Bargaining Goals The lockout was an outcome of the disagreement regarding a ‘salary cap’. The disagreement was between the players as well as the owners of the NHL. The owners claimed that 75% of the team’s income was used up in the form of salaries to the players’. The union of the players’ did not support this (Silver, “The 2004-05 Hockey Lockout”). A table representing the average salaries in 1993-94 till 2003-04 in the NHL is given below: Source: (Staudohar, “The Hockey Lockout Of 2004-05”). The above table represents the salaries in the NHL in average since the season of 1993-94. The salaries got more than tripled during the course of this season. As the income was not in velocity with the salaries, the league claimed that a loss of around $1.8 billion was incurred in the preceding decade. The rise in the salaries of NHL in that particular period was considerably superior to the parallel increases in the other most important leagues such as the Major League Baseball (MLB), the National Football League (NFL) and the National Basketball Association (NBA). After an inspection of the financials, it was established that the league lost an amount of $273 million in the season of 2002-03. It showed that 19 teams lost money and the other 11 teams earned profit. In a previous internal report, it was seen that a major portion of the annual income of 76% was spent by the league on the salaries of the players. The union did not agree to these facts (Staudohar, “The Hockey Lockout Of 2004-05”). The existing financial state of affairs made the Commissioner Gary Bettman to encourage a concept which was called “cost certainty” by him. The idea of this concept was that the salaries of the players needs to be directly tied to the income which implied that irrespective of the poor performance of the NHL, it would still remain profitable. To go ahead with the introduction of the concept, a ‘salary cap’ was proposed by the owners which meant an utmost permitted payroll for each team that was directly linked to the league income. This concept had proved to be quite successful when implemented in the NBA and the NFL. Apart from the aspect of cost certainty, the ‘salary cap’ would also help to keep in equilibrium the level of talent over the teams, making the play competitive and improving the overall product quality. The players of NHL stated of not accepting any kind of ‘salary cap’ and that the compensation of the players ought to be linked to their market value. They too proposed an idea of income sharing that according to them would offer most of the benefits of a ‘salary cap’. While there were proposals from both the sides, the league and the players still appeared to be far apart to arrive at an agreement of any kind (Chan & Et. Al., “The NHL Lockout”). The Processes & Outcomes of Bargaining In the initial stages of the process of negotiation the union proposed a 5% rollback on the salaries of the players, luxury tax above $50 million on payrolls and also a rollback on the salary cap of the rookies to the level of 1995. However, the negotiations simmered down to the league being firm on a salary cap and the union being stubborn of getting salaries depending on the conditions of the market and not agreeing to cap payrolls. At this stage and for an extended period, the disagreement grew about the philosophical approach of each sides rather than just numbers. The inflexible positions of both the sides resulted in the lockout. In 2004 December, the union proposed for a wage cut by 24% and lowered the payroll quantity to $45 million on which the luxury tax was supposed to be levied. Gary Bettman still discarded the offer and carried on insisting on a ‘salary cap’ and promising the players a certain percentage of income as wages thereby raising the assurance to 54%. This counter offer of the owners was further rebuffed by the union. The other important shift in the positions of the parties took place in a last minute effort in saving the season. In a major compromise where the demand that salaries were not supposed to increase 55% of the income was discarded by the league, throwing away the idea of cost certainty. The union responded in compliant with the ‘salary cap’. However, after certain exchanges with guidance from the Conciliation Service and the Federal Mediation, the numbers still did not match. On 13th July, 2005, a settlement was arrived at by the NHL and the union where the appalling ‘salary cap’ was swallowed by the union (Staudohar, “The Hockey Lockout Of 2004-05”). The way, by which the constituents that influence the determination of salary in the NHL act together under the fresh collective agreement, it would differ noticeably from the preceding ten years. There is a slight doubt about the fact that inflation in relation to player compensation would continue to happen in the NHL. However, linking of the salaries to the overall income of the league would restrict the function played by the owners, agents and general managers to influence the system. The intention behind the new agreement is that increase in the salaries of the players would be an indication of the growth of the league in terms of economic growth and the players market for services would be the one to be less inefficient and include all the thirty teams. It was hoped that the introduction of the new system would result in justice to both the parties and as a result an unnecessary war similar to the lockout of 2004-05 would never resurface again (Baillie, “An Investigation into the Collective Bargaining Relationship Between the NHL and the NHLPA, 1994-05”). Conclusion From the above study, it can be clearly recognized that the lockout of NHL resulted from the owners’ wish to shed off financial losses that were incurred as an outcome of the fading recognition of the sport of hockey in America in the current years (Chan & Et. Al., “The NHL Lockout”). After all the resistance from the union, the result ended much in the favor of the owners. It appeared that the union had undervalued the requirement of financial restructuring. It would have been beneficial for the players as well as the owners’ if the proposal had been accepted before the cancellation of the season. The union head Goodenow had to stand down from his position although he had still 3 years left over in his contract. Though the union had to succumb to the ‘salary cap’, it did not create such a threatening impact. The payroll cap was assumed to control costs and at the same time encourage partnership among the players as well as owners. The guarantee of 54 percent made to the players implies that the more the owners make money, the more is the chance for players to earn, so in a way their destinies are linked with each other (Staudohar, “The Hockey Lockout Of 2004-05”). It was stated that for the introduction in the public sector of “free collective bargaining” old habits needs to be broken for the process and employers should desist from legislative interference and it is necessary for unions to admit and be familiar with the prevailing picture of economic reality of that particular time (Gunderson, M. & Taras, D. G., “Canadian Labour and Employment Relations”). Works Cited Baillie, Jim. “An Investigation into the Collective Bargaining Relationship Between the NHL and the NHLPA, 1994-05”. August 01, 2011. Industrial Relations Centre, 2005. Chan, Benny. & Et. Al. “The NHL Lockout”. August 01, 2011. Mcafee, 2005. ESPN. “Lockout Over Salary Cap Shuts Down NHL”. August 01, 2011. NHL, 2005. Gunderson, Morley. & Taras, Daphne G. Canadian Labour and Employment Relations Pearson Education Canada, 2009. Silver, Alexandra. “The 2004-05 Hockey Lockout”. August 01, 2011. Time Specials, 2011. Staudohar, Paul D. “The Hockey Lockout Of 2004-05”. August 01, 2011. Monthly Labor Review, 2005. Read More