Do workers have an inherent right to see their compensation grow at the same rate as their company’s revenue?
There’s no law or case precedent in the U.S. that compels that result. But in a new court filing, UFC warns Cung Le, et al. v. Zuffa (UFC) could trigger novel and disruptive economic rules for American businesses.
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Last Wednesday, UFC petitioned the U.S. Court of Appeals for the Ninth Circuit for permission to appeal a district court judge’s class certification of an antitrust lawsuit brought by six former UFC fighters.
UFC contends Judge Richard Boulware’s Aug. 10 order could “unleash a new breed of antitrust class actions” that pose “drastic and unprecedented consequences” and “put courts in the role of effectively setting compensation” for workers.
Boulware certified a class that consists of over 1,200 fighters who were in one or more UFC bouts that took place, or were broadcast, in the U.S. from Dec. 16, 2010, to June 30, 2017.
As the plaintiffs see it, UFC has abused its position as the leading MMA promotions company to pay fighters less. They depict UFC as a monopsony, with too much market control over the buying of elite pro MMA fighters’ services.
UFC seeks for the Ninth Circuit to intervene and reverse the class certification, arguing the case presents “an important opportunity to clarify the certification requirements for class actions alleging suppression of compensation.”
The petition criticizes Boulware for “embracing” an “unprecedented theory” that UFC has violated antitrust law “by not increasing the compensation of fighters in direct proportion” to growth in revenues.
UFC warns this theory will incentivize “workers and contractors” in other industries to claim injury under antitrust law if their “individual compensation levels did not grow at the same rate as the company’s overall revenue.” MMA and pro sports in general are obviously different from many workplaces, but a court ruling on worker compensation in one situation can become precedent for others.
Although UFC fighters’ compensation levels vary by how often a fighter fights and wins, fighters collectively receive a smaller share of revenue compared to players in the four major team-based sports (NFL, NBA, MLB and NHL).
But UFC has pushed back, noting UFC fighter compensation has increased by over 600% since 2005. NFL, NBA, MLB and NHL players have also unionized and negotiated shares of revenue as part of the give-and-take of collective bargaining. UFC fighters are contractors who individually negotiate compensation.
UFC insists grouping fighters together fails to meet the necessary elements of class certification under federal law. Such grouping, UFC argues, “erroneously” glosses over “individualized differences” in fighters’ contracts. Some superstars, like Conor McGregor or Jon Jones, have earned many millions of dollars while less prominent and less successful fighters earn far less.
Even if the aggregate pool of compensation for fighters would be higher with a greater share of revenue, UFC contends “that proves nothing about the impact on each individual fighters’ pay.” The fighters therefore shouldn’t be in the same litigation class, UFC argues.
UFC also depicts the fighters’ calculation of alleged damages of $1.6 billion, which under antitrust law could be automatically trebled to $4.8 billion, as illogically excessive.
Those figures “vastly exceed” the $235 million in net income Zuffa—UFC’s owner and operator—reported during the class period. That net income would only cover about 15% of $1.6 billion and just 5% of $4.8 billion.
The former fighters will contest these arguments in a forthcoming court filing. They’ll likely stress Boulware supported many of their arguments and illuminate anti-competitive features of MMA earning opportunities.
UFC would probably respond by emphasizing how competing MMA promotions have landed lucrative media and broadcast contracts and how some prominent fighters have turned down UFC to join rivals. In May, Francis Ngannou rejected what was reportedly the largest UFC contract offer outside of McGregor to join the Professional Fighters League. It’s difficult to envision a comparable athlete in football, basketball, baseball or hockey turning down the NFL, NBA, MLB or NHL, respectively, for another league.
Le v. Zuffa has been in court since 2014 and will probably remain in litigation for several more years.
But negotiating a settlement could prove challenging. If UFC agrees to change its business model to peg fighter compensation to revenue, it’s not clear how that would individually impact fighters or those who work other jobs at UFC.