Is Riot Games in Violation of the NLRA for Funding its Own Union?
The emergence of esports as a new professional career
In 1972, the world’s first videogame tournament was held at Stanford University with a year’s subscription to “Rolling Stone” as the first place prize. In 2018, New York’s Barclays Center sold out its 20,000-seat arena for the first ever Overwatch League Grand Finals with $1 million to the first place winner. Video gamers are the new professional athletes, and they are getting paid like them too.
Esports is a billion dollar global industry where gamers play on a professional level with coaches, nutritionists, massage therapists, twelve-hour training days, six-figure salaries, and broadcasts on ESPN. The biggest videogames in esports include League of Legends, Fortnite, Counter-Strike, Dota 2, and Overwatch. Kuro Takhasomi from Germany is currently the sport’s top earner with a salary of $4.1 million.
Are esport gamers employees – and if so, of whom?
Riot Games is the developer of League of Legends and runs the League of Legends Championship Series, the professional esports league with ten teams from North America competing. In 2017, Riot Games took a page from conventional sports leagues like the NFL and NBA, announcing its plans to start a players’ association called the North American League of Legends Championship Series Players Association. Its goal is to represent players’ interests at the negotiation table. Because of the structure of esports, there are three parties at play. Riot Games is the publisher and operator of the league, then the team, and finally the players.
Riot Games’ funding of its own union poses an obvious legal question: Are esports players employees of Riot Games, making it a violation for Riot Games to fund their own labor union under the NLRA?
First, a brief primer on the structure of esports tournaments: Riot Games owns the intellectual property, i.e. the League of Legends videogame, and its streaming rights. It operates the League of Legends Championship Series (LCS), the esports league. Although the exact relationship between LCS and Riot Games is unclear, LCS is a subsidiary of Riot Games acting under the same penalties and regulations; the two entities can be seen as two branches of the same tree. Riot Games then licenses its IP rights to a tournament organizer who broadcasts the game via streaming sites like YouTube or Twitch. Players will compete with their teams, and the prize money is usually a combination from Riot Games, the tournament organizer, and other sponsors.
In SuperShuttle DFW, Inc., the NLRB reverted to its pre-Fedex test for distinguishing employees from independent contractors. The relevant factors include: extent of control the putative employer has, amount of supervision and skill required, who supplies the equipment, length of time employed, pay schedule, whether work is part of regular business, and whether the worker has his own business. While no single factor is determinative, the NLRB has shifted its focus from control to entrepreneurial opportunity for gain or loss.
When it comes to control, Riot Games seems to be pulling all the strings. Riot Games franchised the LCS for their 2018 pro season, requiring a $10 million buy in from each of their ten permanent teams. They have also mandated that the minimum salary for every player is $75,000 and that players are guaranteed 35% of league revenues. Therefore, if you are a player and your team is not selected into the LCS, you would not be able to compete in the league. Sources say Riot Games has also mandated teams to give their players employee benefits, including healthcare and 401(k) retirement plans. While Riot Games holds the key to playing in the games, they are also opening a lot of doors for their players.
With multiple-year contracts, baseline salaries, and the fact that the players makes money for Riot Games by promoting their videogame, the big question is: Do the players have entrepreneurial opportunity for gain or loss?
Riot Games holds the intellectual property to the game but does allow players to make money from gameplay streaming and ad revenue based on viewership or subscriptions. It appears that Riot Games places tight restrictions on the role that sponsorships can play with teams and players. Teams cannot wear sponsor gear, sponsors cannot go backstage, and teams cannot promote sponsor content on their YouTube channel. Riot Games has their own sponsors and determines what computers and ads are used during the game.
Although players are more closely linked with their teams and are likely employees of their teams, there is a good chance that Riot Games could be classified as a joint employer because of the amount of control they retain over the management of pro players and their restrictions on external, conflicting sponsorships.
The legal status of the North American LCS Players Association
Assuming that Riot Games can be classified as an employer of LCS players, does this necessarily mean that their self-financed Players Association violates Section 8(a)(2) of the NLRA that prohibits employers from interfering with the “formation or administration of any labor organization or [from] contribut[ing] financial or other support to it”?
Riot Games officials have argued that what the league is funding is not a union but rather a professional organization. Players cannot collectively bargain or strike. What they can do is have a representative at the table to keep players apprised of what is being negotiated and to voice their interests. The association will also provide “legal help, career-planning advice, and represent the players in what Riot calls ‘tri-party’ negotiations between Riot, team owners, and the players themselves.”
The NLRB defines “labor organization” as any organization in which employees participate and that deals with employers over “grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work.” 29 U.S.C. §152(5). In NLRB v. Cabot Carbon Co. the Supreme Court held that an organization does not have to engage in formal collective bargaining to be classified as a labor organization. Instead, it requires a “bilateral mechanism” in which the labor association presents proposals to be considered by the employer. This is more than brainstorming or sharing information and must be a “pattern or practice” over time.
For Riot Games to be in violation of the Act, the organization must have employee participation and be able to present its ideas to Riot Games to be seriously considered. This act cannot be a one-time thing. Here, the association has representatives who answer directly to players to negotiate for them on matters related to working conditions, sponsors, salary, and anything else job related. It seems that this negotiation is an ongoing occurrence and that the union is able to bring ideas to Riot Games for deliberation. Regardless of Riot Games’ assertion that this association is for the benefit of its players, if this association does what it says it will, it may be in violation of the NLRA.