Billy Hunter and the Absurdities of U.S. Labor Law

(A guest post — with apologies for the lack of embedded links … I’m having internet issues).

As a former union organizer and labor lawyer, the nepotism allegations against Billy Hunter strike me as simultaneously depressing and absurd. Depressing because they remind me once again of the sad persistence of corruption within U.S. unions. Absurd because they highlight how today’s labor law seems like just another strategic resource in battles over product market rents, rather than a foundation for a more just economy and society.

A quick primer: Hunter, the Executive Director of the National Basketball Players’ Association (“NBPA”), allegedly employed family members directly, steered lucrative business to Steptoe & Johnson just as they hired his daughter as special counsel, and sought to have the NBPA invest millions in a failing bank where his son was a board member. Hunter himself is fantastically well paid by the NBPA, pulling down around $2.4 million per year. “There’s nothing illegal” has been Hunter’s less-than-compelling defense so far. He may be correct, though if such conflicts were not properly disclosed then he may be in violation of his fiduciary duties to the players and the union.

We’ll have to await more details — perhaps to be uncovered by the U.S. Attorney’s investigation — to understand why nobody called foul. Perhaps the NBPA Executive Board is captive to Hunter; perhaps they didn’t fully understand the transactions, either due to obfuscation or through their own lack of due diligence; or perhaps they understood fully but felt that such costs were worth bearing so long as Hunter delivered a strong contract.

While the NBPA is no ordinary union there may be some broader lessons here regarding union corruption.

While the prevalence of union corruption is often grossly overstated, it clearly remains an issue. More interestingly, it is a peculiarly American phenomenon. While not nonexistent in other OECD countries, I’ve heard of no parallel to the McClellan Committee, nor to the frequent prosecution of low-level union officers for corruption. The culprit, as usual, may be the peculiar structure of U.S. labor law, which emphasizes localized bargaining among small groups of workers with single employers, mandates that only one union represent workers in a particular bargaining unit, and applies the terms of collective bargaining agreements only to members of that bargaining unit. By contrast, continental European countries often encourage national-level bargaining among multiple unions, and apply such agreements to all workers within the job classification or industry. Local decisions are worked out by “works councils” with few if any permanent staff or resources.

The perversities of the U.S. system are clear: employers only have to pay union wages if a union is formed at their workplace, so they have incentives to fight unionization and undermine existing unions. Union leaders, meanwhile, run small, local, private fiefdoms. While the LMRDA guarantees union members’ democratic rights, a creative and successful union leader can often stay in office as long as he or she wishes — and, crucially, faces virtually no competition from other unions. This creates significant principal/agent problems. Placed in such a situation, and answerable only to members lacking much formal education or financial literacy, union leaders can exploit their positions of trust for personal gain. They can misuse funds, or they can cut employers a break in contract negotiations or contract enforcement in exchange for gifts.

It may be hazardous to draw specific lessons from the Hunter affair since athletes’ unions are so weird. Compared to most workers, athletes have tremendous individual bargaining power and face fairly minimal collective action problems, particularly in small leagues like the NBA. It would be interesting to see whether similar issues have come up at FIFPro — the global football (soccer) players union — and its national-level affiliates. Nevertheless, I can’t help thinking that Hunter may have acted quite differently if the NBPA didn’t enjoy exclusive representation rights, and if he had faced competition from an upstart workers’ organization. Similarly, perhaps some of the culture of autocracy from within non-athletes unions has influenced the NBPAs operations. At the same time, there’s apparently plenty of nepotism at the NBA generally, which might have done more than anything to normalize Hunter’s acts.

On to the absurdity: the troubles within the NBPA, and the recent turnaround within the NFLPA, highlight another of labor law’s failures. While current labor law makes it difficult for workers to organize, those workers who do organize soon find that employers owe fairly minimal duties to bargain. That’s why the NFLPA decertified itself last year so as to sue the owners under antitrust law. The irony is rich, since common law antitrust doctrines thwarted the emergence of industrial unionism in the late 19th and early 20th centuries. The NFLPA’s move was a nakedly strategic use of law to gain bargaining power, not the sort of iterative process of collective bargaining envisioned by labor law’s framers.

Not that there’s anything wrong with that: unions and employers have been using law strategically forever. But the move does lay bare the artifactual quality of athletes’ unions — and, perhaps, all unions. The fact that athletes can organize easily due to sociological factors means they can turn unionization on and off at will. Like business partners or corporate founders, some of their market power comes from the legal name which they take “off the shelf” to designate their collective association. All workers should all be so lucky.

In closing, one specific allegation against Hunter deserves special mention: his insistence that the NBPA not follow the NFLPA’s strategy of decertification. According to YahooSports, “Steptoe’s attorneys and Hunter insisted to players the NLRB would hear the players’ case in relatively fast order.” Um … seriously??? As Ben Sachs observed trenchantly a few years ago, “the last fifty years of experience suggest that there is nothing ‘rapid’ about the NLRB.” In the run of cases, a lawyer who predicts a “quick” NLRB hearing should be laughed out of the room, fired, or sued for malpractice. I’ll let you draw your own conclusions regarding Hunter’s motivation.

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