United States: 10 Labor And Employment Considerations In Esports*

Electronic sports, known in the industry as "esports," has seen remarkable growth in the last decade. The term "esports" refers to the growing world of competitive, organized video gaming, where professional video gamers play on a variety of different video game platforms and video games ("esports titles") in heavily attended and publicized competitions and tournaments. These competitions are watched by millions of fans across the globe on TV or online, and by others who attend live esports events. Expert projections have shown that this year will be especially significant, with the sport reaching revenues of $1.1 billion in 2019, or year-on-year growth of +26.7%. With a global audience growing to over 453.8 million worldwide in 2019, it is unsurprising that several companies are trying to break into this emerging market. In fact, reports have projected that sponsorship in esports will generate $456.7 million this year alone.

As new companies and individuals attempt to enter this space, it is important to consider several labor and employment consequences. While many of these recurring problems are not exclusive to esports, the unique characteristics of esports highlight the importance of considering these issues before or when employers get into the esports space.

Therefore, U.S. employers that are in—or are considering entering— the emerging esports market should consider the following ten questions/issues:

1. Is the organization equipped to address potential Title VII issues?

The esports community has faced its issues with diversity. There is a documented lack of racial diversity among esports athletes that go pro within the U.S., even though some studies have shown that over 50% of all esports fans are minorities. It is also a community dominated by men. Studies have shown that worldwide, nearly 70% of esports athletes are men, even though reports show that statistically, nearly 50% of women aged 18-29 play video games. When women do enter the esports realm, they unfortunately often become victims of sexual harassment.

With the widely documented cases of harassment that can exist within the esports community, it is important that organizations maintain clear anti-discrimination policies. Title VII prohibits employers from discriminating against employees on the basis of sex, race, color, national origin, and religion. However, in some cases, employers can also be liable under Title VII for the conduct of their employees, particularly if their employees create a "hostile work environment." For example, an employer may be held liable for harassment by non-supervisory employees or even non-employees over whom it has control (e.g., independent contractors or customers on the premises), if it knew, or should have known about the harassment and failed to take prompt and appropriate corrective action. In a gaming community that is male-dominated and is sometimes rife with lewd banter and boorishness, hostile work environment claims can be easily spawned through the comments or conduct of individuals.

To ensure that organizations do not face unwanted litigation or publicity, all organizations should adopt and frequently revisit their employee handbook and anti-harassment or anti-discrimination policies. Especially in the shadow of the #MeToo era, any risks of sexual misconduct should be addressed before problems arise.

2. Will a special immigration visa be needed for foreign competitors?

Because of the globalization of esports, like traditional professional athletes, foreign esports athletes may need to travel to compete within the U.S. And just like these traditional professional sports athletes, these foreign esports athletes will need immigration authorization to enter the U.S.

Depending on the unique circumstances for each esports athlete, to enter the U.S. legally, an athlete may try to obtain: (1) a P-1A visa, (2) a B-1 Visitor visa, and (3) an O-1A visa.

P-1A visas are reserved for "Internationally Recognized Athletes" who are coming to the U.S. temporarily to perform at a specific athletic competition as an athlete, individually or as part of a group or team, at an internationally recognized level of performance. A petition must first be filed with United States Citizenship and Immigration Services ("USCIS") before the athlete can apply for the travel visa abroad at a U.S. Consulate.

While there has been considerable debate of whether esports players can qualify as "athletes" under immigration regulations, 2013 marked the first time that the USCIS recognized an esports player as an athlete and granted him a P1-A visa. However, this does not mean that all esports players are eligible for a P1-A visa. Because each petition is fully evaluated on its own merits, simply because an esports athlete had been granted a P-1A visa in the past does not guarantee that all future esports athletes will receive similar approval.

B-1 Visitor visas are reserved for those entering the U.S. temporarily for business of a legitimate nature. Employers should be aware that competing for prize money in an esports competition would not qualify as a permissible B-1 business activity under current laws. The same would hold true for athletes attempting to enter the U.S. from visa waiver countries. Moreover, any payment received from such athletes would require a special work visa.

Finally, O-1A visas are for individuals who possess extraordinary ability in the sciences, arts, education, business, or athletics, or have a demonstrated record of extraordinary achievement in the motion picture or television industry and have been recognized nationally or internationally for those achievements. A petition must first be filed with USCIS before the athlete can apply for the travel visa abroad at a U.S. Consulate.

The visa process, especially for individuals in unique positions like esports athletes, is unfortunately unpredictable. Therefore, before determining which visa your esports athlete should apply for, you should consult counsel to ensure that he or she qualifies for the proper non-immigrant visa. Failing to consider the immigration consequences of international travel for these foreign esports athletes can expose these athletes to potential liability, rendering them subject for removal or denial of entry into the U.S.

Conversely, American athletes traveling abroad should consult about obtaining the right visa to compete in the country to which they are traveling.

3. Have the esports athletes been classified as "employees" or "independent contractors"?

Like all employers, as more esports athletes are added onto teams or become part of an organization, these entities should always consider: are these athletes "employees" or "independent contractors"?

While employers may prefer to characterize esports athletes as independent contractors, the legal consequences of a misclassification cannot be understated. Unfortunately, there is no single or simple way to determine whether an athlete is an "independent contractor" or "employee," and the relevant legal test may change according to the applicable law. For example, while the "economic realities test" may be relevant for compliance with the Fair Labor Standards Act ("FLSA"), the "ABC Test" may be used in other situations.

Misclassification as an "independent contractor" or an "employee" can open the employer up to significant tax, wage and hour and benefit liabilities. For example, under the FLSA, an employer may be liable for the amount of unpaid wages and overtime, an equal amount in liquidated damages, and attorney's fees and costs. 29 U.S.C. § 216(b). It can also expose employers to liabilities under antidiscrimination laws, the Employee Retirement Income Security Act of 1974 ("ERISA"), or workers compensation statutes. Further, it could also potentially expose an employer to unwanted or unanticipated tort liability to third parties for injuries that may be caused by independent contractors.

Therefore, employers should not only tread carefully in their classification of esports athletes to ensure compliance with relevant federal and state laws, but to avoid costly liabilities under these laws.

4. What is the scope of the contract?

There are a wide variety of employment contracts used in the esports industry: they can range from professional services and endorsement agreements, to appearance agreements. However, as a corollary to the point above, it is important to make sure that those issuing these agreements carefully craft their language to ensure that (1) they are creating the intended relationship between the employer and the individual, and (2) that these contracts would withstand scrutiny. For example, athletes should scrutinize whether the language creates an employee/employer relationship. Also, athletes should be careful to consider whether an underlying agreement includes any confidentiality or non-compete provisions.

As with all agreements, esports employment agreements should be drafted with careful attention to their specificity, and all parties should be able to understand the obligations incurred and the legal relationships created.

5. The effect of restrictive covenants?

Restrictive covenants are commonly used as contractual devices in employment relationships and employment agreements. They are typically used to safeguard an employer's competitive interests, or confidential/trade secret information. The most commonly used restrictive covenants in the employment context include: non-compete agreements; confidentiality agreements; and non-solicitation agreements.

While U.S. federal laws may be implicated in these types of agreements, restrictive covenants are primarily governed by state law. Most states, through statute or common law, will only find that a restrictive covenant is enforceable if it is "reasonable." For example, to determine whether a restrictive covenant is "reasonable," states like Virginia will consider the restrictive covenant's function, geographic scope and duration.

In employment arrangements involving employees such as esports athletes, which compete across state lines, and often internationally, what is a "reasonable" restrictive covenant will be an issue. Can an esports athlete on one team be restricted from quitting his or her position on one team, and joining a rival team in a different state or country? Can the athlete be restricted from joining another esports league or after leaving one team, recruiting a teammate to join them on a new team? What if the esports athlete attempts to join a rival team, but as a player of a completely different game or platform? Can a team protect its proprietary strategies/tactics or knowledge base from being used by esports athletes who leave the team? These are all questions that may be open for debate, and may even be litigated in the near future.

6. What would unionization in esports look like?

Athletes within the popular North American sports leagues have unionized, forming players associations. As parallels are increasingly drawn between esports and traditional professional sports like basketball or football, talks have increased about whether esports athletes should similarly unionize.

Unlike traditional North American sports, esports athletes face unique challenges in any potential unionization efforts. Below is a list of such potential issues, all of which would have to be addressed before esports athletes could successfully unionize:

  • Are the esports athletes that may attempt to unionize "employees" or "independent contractors"?

As mentioned above, this is a particularly problematic issue in the context of esports and has been handled differently in certain leagues, teams and organizations. In American competitive leagues like Overwatch, some gamers are full-fledged employees of the teams they represent, complete with a salary, medical benefits and a 401(k). In other arrangements, these athletes may be considered self-employed or independent contractors. Because the National Labor Relations Act ("NLRA") only applies to "employees" and not independent contractors, such athletes would be barred from unionization if they are categorized as independent contractors.

  • What would the appropriate "bargaining unit" be among these esports athletes?

The unique characteristics of esports organizations/teams and competitions will make unionization efforts in esports different from other popular North American professional sports. For example, unlike professional basketball or football, where only one game is played within the league, in esports, there are several different video game titles in which esports athletes can compete; different major professional leagues a player can join; and different esports organizations/teams that exist independently from the professional leagues. Therefore, esports athletes could potentially organize across organizations, teams, employers, leagues or even esports titles. However, as we have noted in previous blogs, the NLRB's unit analysis has undergone significant changes in the past few years, particularly in light of PCC Structurals, Inc., 365 NLRB No. 160 (Dec. 15, 2017). With the NLRB's framework, and in a sport where the athletes within one esports organization or team can compete within several different video game titles, compete in different countries, experience widely different competitions, and have different compensation models, can the diverse spread of athletes within a single organization form a single bargaining unit? Or could it be argued that they lack a sufficient community of interest? Can these esports athletes organize across organizations, teams, employers, leagues or esports titles?

  • Can the athletes garner sufficient support from the player base to form a union?

Under the NLRA, at least 30% of the player base for a particular league or team would need to support unionization in order to proceed to an NLRB election. Because many of these teams and organizations have players from outside the U.S., over whom the NLRB would not have jurisdiction, these foreign players would not count toward the 30% figure. Moreover, in esports, video game titles are constantly falling in and out of favor among fans and players alike, especially as updated versions of these games are released every few years. Initiating, supporting, and maintaining a union for a short-lived esports title may disincentivize players from pursuing unionization.

7. Does the team comply with the Americans with Disabilities Act of 1990 ("ADA")?

Like other traditional sports, there are always a few competitors seeking to gain an unfair edge on their competition. While some professional baseball players or football players may rely on HGH or steroids to improve their muscle mass or stamina, many esports athletes have relied on amphetamines such as Adderall to increase their concentration, focus or reflexes, and to stay sharp throughout long days of competition. In a sport where split-second reactions and stamina are key tools to victory, some esports athletes without attention deficit hyperactivity disorder ("ADHD") or attention deficit disorder ("ADD") consider these performance enhancing drugs ("PEDs") like Adderall or Ritalin as putting their performance over the edge.

With the documented use of these PEDs, several organizations, such as the Electronic Sports League ("ESL"), have developed anti-doping regulations or lists of banned substances. In the background however, lies the ADA, which prohibits most employers from discriminating on the basis of disability in the workplace and requires covered employers to make reasonable accommodations for individuals who suffer from a disability, unless the accommodation would impose an undue hardship on the employer.

Some of these banned substances, such as Adderall or Ritalin, are legitimately used to treat ADD, which is recognized under the ADA. Therefore, even though there are several legitimate reasons to eliminate doping within esports, there are professional esports athletes that may actually need these drugs or suffer from legitimate psychological conditions like ADHD. For these athletes, it is important that teams, leagues and organizations consider the ADA and the protections it provides to employees.

8. How old are the athletes?

Part of the appeal of esports and video games is their accessibility across all age groups. However, age may be "nothing but a number" in esports competitions, until it comes to complying with child labor laws. If an esports athlete is under 18, an entity should ensure that the team complies with the applicable federal and state wage and hour laws regarding child labor.

For example, in California, child labor is heavily regulated under California's Labor Code and its Education code. California may also apply different regulations depending on the age of the minor (e.g., minors 14 or 15 may be treated differently from minors that are 16 or 17). Penalties in some states, such as California, can be civil or even criminal, and include fines and imprisonment. Ensuring that your organization carefully documents the age information of these esports athletes is integral to ensuring compliance with these state wage and hour regulations.

9. Dispute resolution provisions?

In anticipation of any potential legal disagreements, employment agreements will often include a dispute resolution provision. They are used to set out the mechanism for the resolution of disputes between contractual parties, such as the employer and the employee. These types of provisions can dictate things like: choice of law; jurisdiction; forum; venue; or adjudicating body. These provisions also control whether legal disputes will go to court, or whether they can be settled in alternative dispute resolution arenas, such as mediation or arbitration. Especially in the context of an industry where disputes can easily become international in nature, these provisions are important to ensure the predictability of potential legal costs.

While typically, these dispute resolution provisions can be largely controlled by the agreement of the parties, there are instances where such provisions may be challenged. For example, even if parties come to a mutually agreed-upon forum-selection clause dictating venue, a court could still decide that the forum-selection clause is unenforceable. It should be noted, however, that a failure to include such provisions can expose employers to arguments of "lex fori" or "forum non-conveniens." Such challenges are not only complex, but can make dispute resolution even more expensive.

Employers in the esports industry should consider the various dispute resolution avenues available to them. In addition to litigation, mediation and commercial arbitration, there are esport-specific arbitral bodies and decision makers. For example, in 2016, the World Esports Association ("WESA") launched the Arbitration Court for esports, which is governed by special WESA arbitration rules.

10. Is there gambling involved?

In the same way that sports betting has become a multi-billion dollar industry, gamblers have looked toward esports betting as a new frontier for wagering. Since the Professional and Amateur Sports Protection Act ("PASPA"), which prohibited sports betting across the majority of states, was struck by the U.S. Supreme Court in 2018, states have begun to pass or consider sports betting legislation. While to date, Nevada and New Jersey are the only states that have passed laws that specifically address the legality of esports betting, many other states have introduced legislation that specifically address or affect the legality of esports betting, including Illinois, Indiana, Maryland, Massachusetts, New Jersey and Tennessee.

Therefore, because of the constantly evolving nature of sports and esports betting regulations after PASPA, all entities organizing esports competitions should be wary of allowing wagers on competitions. It is important not only to consider pending or passed esports legislation, but to also monitor the effect of sports betting legislation on esports competitions, as many of these proposed sports betting laws are broad enough to encompass esports.

Conclusion

Esports is growing and evolving quickly, and many experts consider 2019 to be a turning point for the emerging industry. Just as with any new industry, the primary issue facing esports employers, organizations and entities is applying the concepts of old existing laws and regulations to an industry that was never contemplated when writing these laws. While there is legal precedent for the issues mentioned above, there is always uncertainty in applying these older laws and principles to new industries.

Our Firm's Esports Team will continue monitoring these issues.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
6 Aug 2019, Seminar, Los Angeles, United States

The semi-annual seminar addressing changes and developments in state and federal wage and hour laws is a unique one-day program and hundreds of California employers, personnel managers, controllers, attorneys, payroll managers, and supervisors attend each year.

10 Sep 2019, Other, New York, United States

This unique one-day program addresses the New York and federal wage and hour laws, including changes and developments in the field.

17 Sep 2019, Other, San Francisco, United States

Description

Learn everything you need to know about Digital Identity! #digitalidentity

 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions