The reserve clause is a term formerly employed in
North American professional sports contracts. 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.
History and baseball
In the late 19th century,
baseballin 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. In order to keep player salary demands in check, team owners promulgated a standardized contract for the players in which the major variable was the 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.
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 Actof 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.
United States Supreme Courthad 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 antitrustlaws did not apply to such activity, a ruling that, as of 2007, 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 Depressionto establish systems of farm teams 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 basketballdeveloped 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 Cardinalsoutfielder Curt Floodchallenged his trade to the Philadelphia Phillies. Flood sacrificed the remainder of his playing career in order to pursue this litigation. Flood's case established that the reserve clause was a legitimate basis for negotiation in collective bargainingbetween 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 Associationand the owners. The reserve clause was struck down in 1975 when arbitrator Peter Seitz ruled that since pitchers Andy Messersmithand Dave McNallyplayed 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.
For many years,
NFLplayers' 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 which 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 to which the reserve clause would apply, and all players not included on this list were to become 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.
NBABasketball went through several phases of compensation and other arcane provisions before reaching almost unrestricted free agency.
The highly contentious negotiations between
National Hockey Leagueowners 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.
Seitz decision, which ended the reserve clause in baseball
Bosman ruling, a European Court of Justicedecision which ended a similar system in European football (soccer)
NHL Collective Bargaining Agreement
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