NRL draft and the legal perspective

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Over the past month, a lot has been said and written in relation to the introduction of a draft in the NRL. Many have stated that due to the 1991 findings of the courts in Adamson versus New South Wales Rugby League, the introduction of a draft is impossible.

This case was decided in 1991, over twenty years ago. Since that time, rugby league and professional sport in Australia have undergone considerable changes.

Also, the financial state of individual clubs and of the competition today is drastically different to that in 1991.

Restraint of trade cases generally take the view that a contract to restrain an individual’s liberty of action in carrying on his or her trade, business, occupation or profession and all restraints of trade of themselves are contrary to public policy and therefore void, unless the restraint is:

(i) reasonably necessary to protect the interests of the person in whose favour it is imposed;
(ii) not unreasonable as regards the person restrained; and
(iii) not unreasonably injurious to the public.

In 1991, one hundred and fifty four rugby league players commenced an action arguing that the `internal draft’ system which regulated the movement of players between clubs where they were not under contract was an unreasonable restraint of trade.

The NSWRL argued, among other things, that the internal draft system had the objectives of ensuring an even competition, financial viability for the clubs, and to limit the mid-season “plundering” of the weaker clubs of their good players.

Initially, the court held that the restraint imposed by the internal draft was reasonable, considering the legitimate interests of NSWRL, the clubs and the players.

On appeal, the Federal Court found for the players. The Court declared the internal draft system was void as an unreasonable restraint of trade because the NSWRL could not show that the restraint was reasonably related to the objects of the League or the clubs, and afforded no more than adequate protection to the interests of the League and the clubs.

The Court said that, in trying to secure an internal draft, the NSWRL was trying to ensure its financial viability by maintaining a strong and well matched competition.

Unlike other industries, professional sport requires evenly matched teams because one-sided events are less attractive commercially.

The rationale of the initial decision was, as the teams did not have equal salary caps (due to the financial position of some of the clubs at the time), the need for an internal draft was necessary to maintain the financial viability of the clubs.

It has been argued that the salary cap is a restraint of trade. When first implemented for the 1990 season, it was uneven ranging from $1,500,000 to $800,000, as determined by the league’s analysis of each club’s financial situation.

Currently the NRL salary cap is set at $4,400,000 for the 25 highest paid players at each club.

This initial judgement seems to be remarkably prescient considering the fall out following Super League, and the clubs’ weakened position due to the deregulation of Poker Machine licences.

As previously mentioned, the restraint of trade doctrine places the onus on the party imposing the restriction – the club – to show that it is no more than what is necessary to protect their interests.

In order to maximise interest the NRL has to maintain an attractive competition whereby there is a high degree of uncertainty about the result of any competition, the economic power of certain clubs to acquire the best players must be limited.

Since 1991, professional sportsmen playing rugby league have opportunities to ply their trade elsewhere. Rugby union has become a professional sport, players have the opportunity to play AFL or play overseas. This supports a claim that an internal draft is not an unreasonable restraint of their trade.

The third and final component of the test for unfair restraint of trade is whether the restraint acts against the interests of the public.

It would be difficult for those against an internal draft to argue that a competition where weaker teams will get increasingly weaker due to the poaching of players by more successful teams is in the interests of the public.

It could be argued that the public is best served by a robust competition.

If the NRL was to reintroduce an internal draft in combination with the salary cap it could legitimately argue that it was reasonable to do so in order to protect the game and therefore the player’s interests as well as those of the public.

Therefore, there is no legal barrier to the reintroduction of a draft in the NRL.

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