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Guest post: The CHL’s European goalie ban, from a legal perspective

Russian Nikita Serebryakov could be one of the last goalies from overseas to play in the CHL (Terry Wilson, OHL …

The Canadian Hockey League's decision, announced last week, that it would cease including goaltenders in its annual import draft beginning in 2014 raised many questions. One of which is whether it is technically legal to do so while forwards and defencemen from abroad are still fine and dandy. Fortunately, Fraser Mackinnon Blair (@fmblair) has taken a look into the matter.

Please note: the contents of this article are not to be construed as legal advice. The author of this article is a recent graduate of law school, but is not a lawyer.

Beginning in 2014, the Canadian Hockey League in conjunction with Hockey Canada will forbid its clubs from selecting European goaltenders in its annual two-round import draft. Clubs will still be permitted to draft European goaltenders in this year’s draft, but may only do so in the draft’s first round.

The ban is being justified as an attempt to increase the calibre of Canadian goaltending by increasing the number of Canadian goalies minding the 60 CHL creases. However, according to Buzzing the Net's Cam Charron, only 11 of the 68 CHL goalies who qualified for the games played threshold were from Europe, so it’s hard to view this as a pandemic. The CHL has not altered its policy regarding the eligibility of American-born goaltenders.

While we can debate whether the CHL’s decision will have any effect on the calibre of future Canadian goaltenders elsewhere, it is apparent that the decision raises issues relating to anti-competitive behaviour.

Competition law in Canada is structured under the Competition Act, the purpose of which is to "maintain and encourage competition in Canada." In general commercial matters, it tries to accomplish this purpose by, amongst other things, prohibiting restrictive trade practices, exclusive dealing, price maintenance, bid rigging and other cartel-like behaviour.

Interestingly, the federal government has seen it fit to make specific provisions for both amateur and professional sports leagues within the Competition Act. Section 6 of the Act completely exempts “agreements or arrangements between or among teams, clubs and leagues pertaining to participation in amateur sport” from the prohibitions of the Competition Act.

However, teams, clubs and leagues that are involved in professional sports are subject to Section 48 of the Act. Section 48 prohibits conspiracies, combinations, agreements or arrangements among persons that unreasonably limit an individual’s ability to (1) participate in professional sport and (2) negotiate with a club in a professional league or participate in professional sport. While many violations under the Act will result in serious fines, a contravention of Section 48 is punishable by up to five years in prison.

As an aside, many if not most professional sports leagues that operate in Canada may be in violation of Section 48 for things such as amateur drafts, restrictions on player movement and roster limits. However, the Act does not apply to any conduct that is subject to a collective bargaining agreement. If you recall, that same sort of exemption exists under the equivalent American legislation (anti-trust laws). Attempting to skate around that exemption was the basis for the NFLPA's, NBPA's and NHLPA's recent attempts at decertification.

Since there is no collective agreement between the CHL and its players, it is not immune from the Competition Act unless a court determines that the CHL is an amateur sports league.

Section 6 of the Act defines an amateur sports league as one "in which the participants receive no remuneration for their services as participants." This provision, specifically the meaning of the term "remuneration" has never been interpreted by a Canadian court, so we don’t know exactly how much or what kind of remuneration is required to lose the amateur status.

Although Hockey Canada considers the CHL to be a "non-professional league" at least two factors suggest otherwise. First, and most obvious, CHL players receive a weekly stipend from their respective clubs. The amount varies depending on the experience of the individual player, but it is a cash payment from the club to the player in exchange for the player playing hockey for the Club.

Secondly, major junior hockey players have been considered employees of their respective clubs pursuant to other Canadian laws. Most notably, in a case between the Canada Revenue Agency and the Brandon Wheat Kings that was argued under the Employment Insurance Act, the Tax Court of Canada held that the WHL “players are employees who received remuneration — defined as cash.” The court also noted that the “business of the Wheat Kings is simply the business of hockey. It is a commercial organization.”

Given that an employee-employer relationship has been found in the past and that the court has considered the operation of a major junior hockey club to be a commercial enterprise, it is difficult to imagine how the CHL could successfully argue for its amateur status under the Competition Act. As a result, there is a good chance that the CHL is subject to Section 48 as a professional sports league.

The ban would almost certainly meet the requirements of under Section 48, with the only contentious issue being whether the restriction on European goalies is a reasonable limit on the opportunities to participate. Here, it is likely that the CHL would argue that it has an obligation to foster the development of elite Canadian hockey players (including goaltenders) and the limit is necessary to increase the calibre of Canadian goaltending.

Arbitrary ban problematic?

From a legal standpoint, there are a number of problems with this argument. First, the measure does not provide any exceptions; it is a permanent and outright ban. It therefore runs the risk of being overboard and applied in circumstances where its underlying purpose would not be served.

Second, the vast majority of goaltenders in the CHL are Canadian born. Furthermore, the alleged decline in calibre of Canadian goaltenders at the major junior, professional and international levels is probably exaggerated and is definitely based on a relatively small sample of years. As a result, the purpose underlying the ban is flawed.

Third, the ban is arbitrary. American-born goaltenders will still be allowed to play under the new regime. Fourth, it cannot be justified on the basis of maintaining a reasonable balance amongst CHL clubs. If anything, a reverse-order European draft should (at least in theory) facilitate competitive balance at the major-junior level.

In sum, it appears that the legal footing upon which the CHL's European goalie ban rests seems about as reliable as Carey Price in a Stanley Cup playoff game. Of course, this all depends on someone actually initiating a challenge to the validity of the measure. In most cases, the Commissioner of Competition pursues violations of the Competition Act, so that’s something that we’ll have to monitor.

In addition, it is also possible for private citizens to apply to the Commissioner to inquire into allegedly anti-competitive conduct. The wrinkle here is that the law requires that the application be made by six persons who are at least 18 years of age, residents in Canada and who are also privy to the alleged act in question. Given that the measure deals with (a) minors and (b) Europeans (non-residents), it’s going to be difficult to find enough people with the characteristics necessary to make an application. I would think that the owner and manager of any CHL club would be sufficiently connected to the decision to lodge an application, but it’s hard to fathom that any one of them (let alone six) would challenge an act of the CHL.

Good faith proviso

Lastly, it is important to note that the ban also raises issues under the various human rights laws applicable in Canada. For example, under the Ontario Human Rights Code, discrimination in the realm of employment on the basis of place of origin is prohibited. Section 13 of the Code also prohibits the announcing of an intention to discriminate through public notice or representations. It would be worthwhile to explore the comments made by the CHL, Hockey Canada and the relevant decision makers to see how careful they were with their language.

A violation of the code will not attract any sanctions if it is for a reasonable and bona fide purpose. If it is shown that the requirement was (1) adopted for a purpose that is rationally connected to the function; (2) adopted in good faith and (3) reasonably necessary to accomplish its purpose or goal, in the sense that it is impossible to accommodate the claimant without undue hardship, then there will not be a violation. For the reasons canvassed above, it is difficult to imagine the first and third requirements being met.

Interestingly, Section 16 of the Code allows for discrimination on the basis of citizenship where the requirement for Canadian citizenship is "adopted for the purpose of fostering and developing participation in cultural, educational, trade union or athletic activities by Canadian citizens." As a result, a carefully worded bylaw that restricts the CHL clubs from employing non-Canadian citizen goalies may immunize the CHL from a claim under the Code. However, given that the CHL will continue to allow American-born goaltenders to participate in the CHL, it is unlikely that the CHL will be able to rely on this exception. In other words, the distinction appears to be drawn on the basis of the goalie’s place of origin, and not his citizenship status. This is definitely a subtle, but very significant distinction.

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