2 Top Employers To Take Away From Pro Sports Continued Adoption Of Crypto And Blockchain Technology
As cryptocurrency and blockchain technology continue their way into the mainstream, one key industry that stands out for its adoption of blockchain technology is professional sports. Professional leagues and teams were among the first employers to realize the potential use cases of Blockchain technology and its ability to create an unparalleled fan experience. In the past month alone, two of the biggest sports leagues in the world, the UFC and the NBA, have launched various cryptocurrency initiatives designed to improve the fan experience. And the path they have started to follow could provide useful benchmarks for employers across industries as they consider how to properly integrate crypto and blockchain into their businesses.
UFC and NBA leading the way
Mixed martial arts promotion Ultimate Fighting Championship (UFC) has begun paying its fighters’ bonuses in bitcoin payments through a partnership with UFC cryptocurrency partner Crypto.com. Bonuses are paid out through a voting process where fans chose the top three fights from a PPV called the “Fan Bonus of the Night” that began earlier this month at UFC 273.
Meanwhile, the NBA playoffs are in full swing and many series have been very exciting. The playoffs are the NBA’s main season and this year the NBA created “Association” NFTs – unique digital assets recorded on the blockchain that indicate ownership of the asset – which look like digital basketball cards to every playoff player. What’s really interesting is that these NFTs are marketed as “Dynamic” because the player’s image, as well as the background and frame of the NFT, will evolve based on the player’s real-time performance and the performance of his team.
2 key considerations for employers
There are two key considerations that these developments can teach employers in all sectors: the consideration of employee status versus independent contractor status and the importance of collective bargaining where necessary.
Paying Independent Contractors Against Employees
While the two new crypto initiatives should help create a more immersive and engaged fan experience, these projects also highlight issues for employers to consider. First, there’s no doubt that paying employees in cryptocurrency has been a hot topic in 2022, as employers and businesses work hard to figure out what they need to know about this relatively new practice.
UFC fighters, however, are not considered UFC employees. On the contrary, the UFC, like WWE and many other competitive conferences, leagues and professional sports teams, have been known to use independent contractor agreements for their competitors.
Paying independent contractors in cryptocurrency can provide several unique benefits to both the business and independent contractors over their typical payment system. For example, if a company pays an independent contractor in cryptocurrency, the independent contractor will be paid faster. Not only is payment in cryptocurrency inexpensive, but it is almost instantaneous – which can be a significant recruiting advantage for a company to recruit top talent. Given the ever-growing global remote workforce, and especially the diverse pool of talent from different countries, introducing crypto payment can be a seamless and cost-effective payment solution.
Additionally, in the typical business setting, retaining independent contractors can result in massive savings on labor costs, unemployment insurance, workers’ compensation, taxes, and social benefits. It can also reduce potential liability for most wage and hour discrimination laws and issues under the Occupational Safety and Health Administration (OSHA) and labor laws. immigration.
Despite these advantages, the risk of misclassification is significant. This has always been a very contentious issue for litigation in both individual and class suits. Employers considering whether to pay independent contractors in cryptocurrency or fiat dollars should consider the following: It’s the law of the state in which you operate that defines whether someone is truly an independent contractor, not the contract they signed.
Depending on where you operate, the elements of the legal test determining entrepreneur status may be slightly different. However, a misclassification finding, no matter where you are, will expose you to the same set of problems: unpaid wage claims, meal and break violations, unpaid overtime, and related penalties. In some cases, these issues can also turn into complicated class action lawsuits that will undoubtedly place a heavy financial burden on your team.
If you have relationships with independent contractors, whether you pay them by crypto or traditional methods, you should consider consulting your workplace attorney to make sure the arrangement is legally appropriate in your area.
Collective Bargaining Considerations
Another key issue for many employers that can be drawn from these developments relates to collective bargaining obligations. Like just about every professional sports league in the country, many employers have union-represented employees. The National Labor Relations Act requires leagues to negotiate with their players’ union on any changes to players’ wages, hours or other conditions of employment. These categories are interpreted broadly in favor of a collective bargaining obligation.
It is critical to understand the scope of this obligation, as a refusal to bargain can result in an unfair labor practice charge and lengthy proceedings before the National Labor Relations Board. Outside of professional sports, the same requirements apply to employers when trying to make changes to these categories.
In some cases, collective bargaining is relatively straightforward, with each party making proposals and eventually making compromises one way or the other. In professional sports, as well as general social negotiations, negotiations can be endless and confrontational. In the context of professional sports, it is not uncommon for there to be either a strike or a lockout of players by the league. Over the past 20 years, each of the major American professional sports leagues has suffered a work stoppage during labor negotiations.
Items like NFTs, which can impact revenue generation, receive particular attention at the trading table. The key question is usually how the revenue will be split between players (or workers) and owners. For sports that use a salary cap tied to league revenue, parties must also decide whether revenue generated from NFTs should be included. In a typical employer-union relationship, this could include issues such as salary increases, additional paid time off, and improved pension, health insurance, or other benefits.
The NBA, for its part, was one of the first professional sports leagues to develop NFTs. He has been working with blockchain company Dapper Labs since 2019 on the popular NBA Top Shot. Although NFTs are not specifically defined in the current NBA Players Association collective agreement, the league has the right to commercialize “media” (broadly defined to include, among other things, “digital” media). But any use of a Player’s “Player Attributes” for promotional purposes must be jointly licensed by the NBA Players Association. Pursuant to these provisions, “Association” NFTs for this year’s playoffs are jointly authorized by the league and the players’ union.
With regard to collective bargaining, ensuring that there is meaningful bargaining on any changes to an employee’s wages, hours or other terms and conditions of employment is critical. You should pay close attention to the terms used in your CBAs, especially in areas of emerging or evolving technologies or practices such as crypto and blockchain. Again, the best way to determine your legal obligations in this regard is to consult your workplace attorney before going down this route.
Although the law surrounding NFTs is still unclear, NFTs are unquestionably transforming the future of sports memorabilia. We’ll continue to monitor developments in this area, so make sure you’re subscribed to Fisher Phillips’ Insight system for the most up-to-date information. If you have any questions, please contact your Fisher Phillips attorney, the authors of this overview, or any attorney in our Cryptocurrency and Blockchain Task Force or Sports Industry Group.