Employment law information by Heath Law LLP, Nanaimo BC. Canadian lawyers experienced with Canadian employees and employment law.

Contrasting and Comparing Salary Arbitration in Professional Sport: Major League Baseball vs. National Hockey League

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Introduction

Salary arbitration ensures fair compensation for players and promotes negotiations between teams and players. Before the arbitration hearing, players and teams have the opportunity to negotiate and reach an agreement on a contract, which may help them avoid the arbitration process. In this blog, we’ll explore the distinct salary arbitration systems used in Major League Baseball (MLB) and the National Hockey League (NHL), shedding light on their differences and the benefits they offer to players and teams.

MLB’s Salary Arbitration

MLB employs the “final-offer” arbitration system to resolve salary disputes between players and their teams. A three-arbitrator panel, handpicked by the MLB Players Association and the MLB Labor Relations Department, is responsible for the arbitration process. The panel considers proposals put forth by both parties in a hearing. During the hearing, the panel weighs several criteria, including the player’s past contributions, career consistency, compensation history, comparative salaries, and the team’s recent performance and public acceptance. After hearing arguments from both sides, the panel chooses either the player’s or the club’s salary figure for the upcoming season.

The final-offer system stimulates negotiations by encouraging each side to present more realistic figures. The arbitrator’s likelihood of choosing the opposing side’s offer motivates compromise, making the more reasonable demand or offer more likely to prevail.

NHL’s Salary Arbitration

In the NHL, both players and teams may elect salary arbitration. The NHL’s salary arbitration system is referred to as conventional arbitration. In this process, negotiators present their offers and arguments to an arbitrator. The arbitrator then makes a final decision, which could either align with one of the offers presented or fall outside of those proposals.

The hearing is presided over by a neutral arbitrator chosen from a group of eight members, all affiliated with the National Academy of Arbitrators. Each side, represented by the NHL Players’ Association (NHLPA)/player and the NHL team, is allotted ninety minutes to present their case, including counter-arguments and comparisons of players from the opposing party. They present their offers by using statistical criteria to identify contracts similar to the player’s and justify where the player stands in relation to those contracts. The arbitrator’s ability to exercise flexibility in salary selection fosters fair and reasonable resolutions, ensuring a well-balanced approach to determining salaries.

 

Conclusion

In conclusion, salary arbitration is an essential mechanism in MLB and the NHL to settle contract disputes between players and teams. The primary distinction between the systems lies in how arbitrators handle the offers. In MLB, the arbitrators must choose one of the two presented offers, while in the NHL’s system, they have the flexibility to select a salary figure not proposed by either side. These arbitration processes actively encourage negotiations, making them vital tools for ensuring equitable compensation and maintaining the competitiveness of both leagues.

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Purchase of a Business – The Importance of Employee Considerations

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Introduction

During the sale of a business, it is essential for both the seller and the purchaser to carefully examine the potential employment issues that may arise. Evaluating these matters during the due diligence process is crucial because hidden employment liabilities, which are often not apparent on the balance sheet, can significantly impact the financial viability of the transaction.

Employment Matters in Share Purchase Transactions

In a share purchase transaction, the purchaser –  by acquiring the vendor’s shares of the company – steps into the vendor’s shoes when it comes to employment issues. This means that existing employment agreements between the employees and the employer remain unaffected, and their terms and conditions continue unchanged. Maintaining employment continuity is of utmost importance in these transactions, and employers can simply inform employees about the share transaction after the closing date.

Employment Matters in Asset Purchase Transactions

In an asset purchase, the purchaser is not automatically obliged to take on the vendor’s employees. Unlike in share transactions, at common law, the sale often results in a termination of employment with the vendor company. Vendors should be aware that the sale of assets does not provide the employer with cause for discharge, reasonable notice, or severance pay. Consequently, the vendor remains liable for such claims, subject to an employee’s duty to mitigate damages or the purchaser agreeing to rehire.

Employment Standards Act of British Columbia

Purchasers must be mindful of section 97 of the Employment Standards Act (“ESA”), which stipulates that if a buyer continues the employment of the employees without any interruption, the buyer will assume the role of the employer and be required to take on all obligations and liabilities. Additionally, section 97 of the ESA states that if the purchaser employs a former employee of the vendor, the benefits contingent on the employee’s length of service, such as vacation, notice of termination, pay in lieu of termination, and severance pay, carry over to the employee’s employment with the purchaser. Consequently, the ESA presumes the purchaser to be liable for the employee’s full length of service with both the vendor and purchaser.

Given the potential liabilities associated with employee terminations, purchasers and vendors often engage in extensive negotiations. To minimize liability, vendors typically prefer the purchaser to hire their entire workforce on the same terms and conditions, rather than selectively retaining specific employees. If the purchaser chooses not to retain all of the vendor’s employees, both parties will negotiate to allocate liability for termination costs.

 

Conclusion

In conclusion, employment matters are critical aspects of business sales that demand thorough consideration from both the seller and the purchaser. Addressing these issues during the due diligence process helps identify potential liabilities and minimizes risks for both parties involved in the transaction. By carefully evaluating employment-related aspects, a smoother and more successful business sale can be achieved.

If you are in the process of initiating a purchase or sale of a business, contact Heath Law by PHONE: 250-753-2202 or send us an email.

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