Reserve Clause

Based from the US sports professional culture, Reserve Clause is a clause or part of the contract that contained in a standard contract but that upon the expiration of the player’s contract he or she has to be retained by the team to which he has signed with. Such signing of contract disallows the player to move to other teams even though the contract expires. He would only be allowed to join other team unless otherwise released by the team. He would be given option, though to ease the burden. His first option is to a) play for another year for the same team, or; b) be released through signing legal documents (Wikipedia, 2007).

The reserve clause came into existence when the United States Supreme Court held a ruling during the 1922 case Federal Baseball Club v. National League (259 U.S. 200). The court said that as a sport, baseball was not primarily a business and that is should not be in an arena of “interstate commerce” as well as it is also against the antitrust law.Prior to this, players were free to move to other team as soon as they have completed their contract and then demand higher salaries. Thus other athletes especially those that are bound by their contracts were getting unequal benefits which in turn demoralized them. With this court ruling, team owners standardized contracts to all players to avoid demand for insignificant high salaries. Now, all players’ contracts are prepared for one year and long-term contracts are avoided. This kind of contract was for the protection of the team as well as players who have been loyal to their teams.

A professional player is said to be in a free agency if he can negotiate freely for a contract to a team while without any obligation from other team. A player is now in a “pool” of free agents from which the player can now scout and sign a contract for a team of his choice.

There are economic drawbacks, however, with free agency. First, this case is not beneficial to teams because it can lead to a battle of biddings. The increased salaries mean the decrease in the profit of the team.
In the European sports, the transfer system has always been a puzzle to outsiders. Why should his previous company hinder a former employee to move to another company? In the world of sports, this is different. In 1963, the case of George Eastham concerning “transfer and retain system” was declared illegal. And yet this system did not stop because it has not been challenged legally.

Retain and transfer system was used in the sport’s world of football to keep wages low. It has similarity with the US Reserve Clause since this system prevents the player to transfer freely to other clubs even he is out of contract. In Europe, this scenario was defended by the owners of the team and presumed that players love to play with the labor market to earn more. So in this case, the players lose their bargaining power, and they cannot request permission from their old club to move to another club.

However, the Bosman case in 1995 has stirred the sports society in Europe. This case has resulted in abolishing the system by the European Court of Justice which controls the number of foreign players in a certain team. The result is the increase in wage dramatically for the top players.

Club members in reaction to this ruling have called for a wage cap to prevent players dictate their wages but this was ruled out to be anti-competitive and fascist under European law. In comparison with the US counterpart, the volume of players’ movement is declining because of the transfer fee and clubs now can sit and spy for any targeted player who will be on a free agent status anytime (Davis, 2007).
But the good news does not end there as some European clubs still requests for a transfer fee from their players who want to transfer but still within the period of their contract. The European Commission is helpless with this system. As of today, clubs and players sign the usual employment contract that indicates contract period. This contract binds the player from moving to other clubs in as much as the club is prohibited to assign players to another club without the players’ agreement. But what happened was that players always move beyond their contract and break this agreement.

Then what happens where there is constant breakage of the rules. This is now the biggest problem faced by the European Commission and the English legal system as it is very difficult to retain players against their will.
Eventually in 1998 after the European Commission began to greatly consider the Bosman case, the commission has come up with proposals. The agreement will commit FIFA in altering their regulations. The changes will focus on preserving transfer fees for new players, and this will be in place as compensation for training costs, providing incentives to develop young players and means to discourage players from moving out illegally. Players ages 18 and below are the most privileged in this proposal. They will have a free movement within clubs in the European Union as long as their club follows a code of conduct and will provide the guarantee for academic education and training. This privilege, however, will be voided if the player’s family moved out of Europe (Foster, 2001)

Work Cited:

• Davis. (2007). Reserve clause [Electronic Version]. Retrieved August 24.
• Foster, K. (2001). Transfer Fees: Still (Il)Legal After All These Years?
• Wikipedia. (2007). Reserve clause [Electronic Version].