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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.

Contents

History and baseball

NFL

NBA

NHL

See also

History and baseball

In the late 19th century, baseball in 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 case. 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 Act of 1890, two or more non-affiliiated 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.
Thus, the United States Supreme Court had 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 antitrust laws 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 (NABPL). 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 Depression to 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. Where could you go play if you bucked MLB, if they owned all of the players not only on their major league teams, but on most of the professional clubs playing from New York to San Diego?
When other team sports, particularly ice hockey, football, and basketball developed 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 the early 1970s, things began to change. St. Louis Cardinals outfielder Curt Flood learned in October 1969 that he had been traded to the Philadelphia Phillies (by means of a radio broadcast that he had happened to hear in his car). Flood decided to litigate this, ruining the rest of his playing career in the process, but establishing new principles. Most important were the establishment of the principles that items such as the reserve clause were a legitimate basis for negotiation in collective bargaining between players and owners, and also that the historic baseball antitrust exemption was valid for it 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 Association and the owners. The reserve clause was struck down in 1975 when arbitrator Peter Seitz ruled that since pitchers Andy Messersmith and Dave McNally played 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.

NFL

For many years, NFL players' 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 of 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; in the next period of the career, a player can be a "restricted free agent", allowing his former team to match any offer made to him by another; after six years in the NFL all contracts end with the player becoming an unrestricted free agent without reserve.

NBA

NBA Basketball went through several phases of compensation and other arcane provisions before reaching almost unrestricted free agency.

NHL

The highly contentious negotiations between National Hockey League owners 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.

See also

★ Seitz decision, which ended the reserve clause in baseball

★ Bosman ruling, a European Court of Justice decision which ended a similar system in European football (soccer)

★ NHL Collective Bargaining Agreement