Major League Baseball and Workers’ Comp

Largely overlooked amidst the hoopla surrounding last weekend’s Super Bowl, DeMaurice Smith, the executive director of the National Football League Players Association, weighed in on an obscure bill currently working its way through the Illinois state legislature. If enacted into law, the proposed legislation — presently dubbed Illinois Senate Bill 12 — would amend the state’s workers’ compensation laws to decrease the benefits provided to professional athletes who sustain career-ending injuries on the playing field.

This possibility led Smith to threaten that, if Senate Bill 12 were to be signed into law, the NFLPA would officially encourage players to steer clear of signing with the Chicago Bears. As Smith stated over the weekend, “If you’re a free-agent player and you have an opportunity to go play somewhere else… isn’t a smarter financial decision to go to a team where a bill like this hasn’t passed?”

The fact that the NFLPA would take such a public stance against the proposed Illinois legislation raises the question of what potential impact Senate Bill 12 would have on Major League Baseball players, and, more generally, how workers’ compensation laws affect MLB in the first place.

To begin, workers’ compensation provides a level of financial security to workers by requiring employers to pay into an insurance fund which can then be used to provide medical and disability benefits to employees who sustain serious injuries on the job, regardless of who was at fault for the accident. While the specifics of these systems may vary by state, in exchange for these guaranteed benefits employees typically  must forgo initiating any lawsuits attempting to hold their employers liable for their injuries in a court of law.

In addition to providing compensation for an employee’s medical bills, workers’ compensation may also provide injured parties with either temporary or permanent disability payments (depending on the employee’s long-term prognosis for recovery). Temporary disability benefits provide short-term wage replacement for the period of time during which the employee is physically unable to work and thus not earning a salary. Meanwhile, for employees whose workplace injuries are so severe that they will never again be able to return to their prior jobs, workers’ compensation systems typically provide permanent disability benefits for the rest of the anticipated duration of their working careers.

Professional sports teams are generally required to provide their employees — including their players — with these workers’ compensation benefits just the same as any other business. In some cases, however, these legal obligations to their players may be rendered at least partially superfluous by a league’s collective bargaining agreement.

Under MLB’s CBA, for instance, baseball teams are generally obligated to cover the full cost of any medical care that a player requires for a baseball-related injury, regardless of the financial benefits to which the player may have been entitled under workers’ comp. Similarly, because MLB players continue to receive their normal salaries while on the disabled list, they generally do not require temporary disability benefits from workers’ comp during the playing season.

In these cases, because MLB teams are already covering their players’ medical and short-term disability costs, the teams are then entitled to recover whatever workers’ compensation funds their players would have normally received for their injuries.

Historically, individual MLB teams were responsible for securing their own workers’ compensation insurance. In 2003, however, MLB created a league-wide, group insurance policy for all of its franchises, covering any workplace-injury-related claims filed by their employees. This plan has reportedly reduced the league’s collective workers’ comp exposure by nearly 50%.

Although MLB players typically will not rely on workers’ compensation for medical or temporary disability benefits, players may turn to the system for long-term disability benefits should they suffer a career-ending injury. This is where Illinois’ proposed legislation would come into play.

Under Illinois’ current workers’ compensation statute, an employee who sustains a career-ending injury may be eligible for permanent disability benefits based upon their so-called “wage differential,” the difference between the employee’s pre- and post-accident salaries. Take, for example, an employee earning an annual salary of $60,000 prior to sustaining a career-ending injury. If this same employee is only physically perform able to perform a job paying $30,000 per year after getting hurt, then under Illinois law, he or she would be entitled to two-thirds of the difference between his pre- and post-injury salaries — or, in this case, a long-term workers’ compensation disability benefit of $20,000 per year.

Currently, the state’s workers’ compensation system provides these wage-differential benefits to permanently disabled employees up until they reach the age of 67. Under Senate Bill 12, however, the duration of these long-term benefits would be shortened for professional athletes.

Specifically, the proposed bill would reduce the maximum age at which professional athletes can receive permanent disability benefits from 67 years old down to 35 (or five years after the injury, whichever is longer). This means that, while a player who sustains a career-ending injury today could potentially receive two-thirds of the difference between his annual playing salary and any post-injury employment he may procure for upwards of 40 or more years, if the Illinois bill becomes law then these benefits would end decades earlier. This difference could potentially cost players hundreds of thousands or even millions of dollars over the course of their lifetime.

Proponents of Senate Bill 12 — including, not surprisingly, all five of Chicago’s major professional sports teams — contend that the rule change is justified due to the short duration of a professional athlete’s career, which rarely extend much beyond 35, let alone all the way to 67. Indeed, in some cases, it’s possible that a borderline major leaguer would stand to earn more from 30-plus years of workers’ compensation benefits than he would during a relatively brief, injury-free MLB career.

If enacted into law, Senate Bill 12 would undoubtedly have the greatest impact on NFL players. Not only do football players face a much higher risk of sustaining a career-ending injury on the playing field, but their contracts are also not guaranteed. This means that a team is free to release a player after he suffers a serious injury, without any obligation to pay the player any future salary he is owed under his contract.

So while the availability of long-term disability benefits may very well prove to be an important consideration for NFL football players — thus making the NFLPA’s stance against Senate Bill 12 a more potent threat for the Chicago Bears — it’s unlikely to pose as significant a concern for MLB free agents, who are far less likely to suffer a career-ending injury, and in any event will continue to receive the full amount owed under the entire length of their contract even if they get hurt.

That having been said, even if Senate Bill 12 is unlikely to deter most free-agent players from signing with the Cubs or White Sox, the proposed legislation could have a significant impact on the teams’ players in the earlier stages of their careers. Unlike most free agents, who will often be financially set for life regardless of the availability of any workers’ comp benefits, players who suffer career-ending injuries in the first few years of their careers may have a greater incentive to pursue long-term disability benefits under workers’ comp.

For instance, former Baltimore Orioles relief pitcher Stu Pomeranz filed a lawsuit against the team back in 2014 in an attempt to receive workers’ comp disability benefits after suffering a career-ending back injury that brought his brief, three-game major-league career to a premature end. For players like Pomeranz, two-thirds of the difference between a major-league minimum salary and whatever income they are able to earn outside of baseball could very well result in a substantial long-term workers’ compensation disability benefit. In all likelihood, these are the types of Cubs or White Sox players likely to be most affected by Senate Bill 12.

Somewhat ironically, however, for this same reason the proposed legislation is unlikely to have a significant impact on most of the Chicago teams’ minor-league players. Indeed, because minor leaguers receive such paltry salaries, they are unlikely to be in line for significant workers’ compensation benefits under Illinois law, as the difference between their baseball and non-baseball salaries will usually be rather insubstantial.

Finally, it’s worth noting that, even if Illinois does enact Senate Bill 12 into law, the state will not be the first to take steps to limit the benefits paid to professional athletes under its workers’ compensation laws. Both Florida and Massachusetts, for instance, have long excluded professional athletes from their workers’ compensation systems, preventing players from the Marlins, Rays, and Red Sox — among other sports — from receiving long-term, permanent disability benefits. Meanwhile, other states have limited the degree to which professional athletes are eligible for workers’ compensation benefits under their own state laws in other ways.

All in all, then, although Illinois’ proposed Senate Bill 12 is unlikely to affect the decisions of MLB free agents, it could have an effect on less well-compensated players working for the Cubs or White Sox.

Nathaniel Grow is an Associate Professor of Business Law and Ethics at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.

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Mike NMN
Mike NMN

Nice work, Nathaniel. Good description, balanced, thorough. Without getting into politics, would you expect this initiative to be nationalized in some form? I know Workers Comp claims are function of state law, but is Federally preemptive legislation possible?