Four Hurdles On The Way To Adding An NFL Team In London
Yesterday was the NFL’s second of three games in London this season, and it came just days after the NFL announced it would extend its contract to play at least two games a year at Wembley Stadium through 2020 (with an option to add an additional five years). The Jacksonville Jaguars, who played in London for the third consecutive year, extended its commitment to play one game a year in London through 2020 as well.
We’ve gone from one game a year in London . . . to two games a year . . . to three games both last season and this season. And beginning in 2018, the NFL is now committed to two games a year at Wembley and two games a year at Tottenham Hotspur’s new to-be-built stadium. Four games a year – that’s the equivalent of half of a home schedule.
All this begs the question: how long before there’s an NFL team based in London?
Support from Britain’s treasury chief
Earlier this month, Britain’s treasury chief, Chancellor George Osborne, said he’s leading the charge on the UK’s side to bring an NFL team to London permanently.
“I am supporting the NFL to bring one of their 32 teams to London permanently and will work with them to make this happen,” Osborne said. “Hopefully it is something we could achieve in the next few years, maybe four or five years’ time.”
Osborne went on to say his treasury department was working to remove “any barriers” that might exist in the NFL’s quest to place a team in London.
Being compensated in the UK is taxing (pun intended)
One of four major barriers the NFL would have to overcome is indeed within the purview of Chancellor Osborne. The U.K.’s tax rate is so high that some athletes have refused to compete within its borders. Salary, and other income earned while competing in the U.K., is taxed at a rate of up to 45 percent. In 2015, the highest rate in the U.S. was 39.6%. Although U.S. law allows for the athlete to take a credit for foreign taxes paid, that credit is capped at the U.S. tax rate.
Here’s how it works. Let’s use the worst-case scenario, which would be a player on a team based in California, which has the highest state income tax in the country (13.3%). Any salary earned by a player would be taxed at the 45% rate in the U.K., 13.3% in California and another 1.45% for Medicare. The tax credit would max out at 39.6%.
In addition to being taxed on his salary, an NFL player would also be taxed in the U.K. based on his global endorsement income. Under U.K. law, the player’s global endorsement income is taxed based on the time he spends training and competing in the U.K. as a percentage of the total number of days he spends training and competing over the course of the year.
While the amount NFL players are taxed currently for their time in London is likely minimal given they spend just a few days – or at most a week – in the U.K., the burden for a player on a team based in London could be far greater.
If the tax situation doesn’t change in the U.K. with Chancellor Osborne’s efforts, would it discourage free agents from signing with an NFL team in London? Or, as a result, would the NFL somehow compensate these players differently?
“The collective bargaining agreement is coming up, and they could possibly put in some sort of tax equalization,” says Robert Raiola, a CPA who works with numerous NFL players.
Some NFL players could be denied working visas
Once you get past the tax hurdle, you run smack into the potential hurdle of obtaining working visas for NFL players. NFL players currently enter the U.K. under a temporary working visa meant specifically for “sporting visitors.” These working visas are for one-off events only.
Obviously, if there’s a home team in London, the players on that team will need something meant for a longer-term stay. Under current U.K. law, an athletic governing body in the U.K. would have to endorse players’ applications for working visas. It appears an organization by the name of NFL International Limited, a subsidiary of NFL Ventures, Inc. is now recognized by the Home Office as a governing body, which was not the case just a couple of years ago. That’s one less hurdle for the NFL.
Two other issues did come up as I spoke with immigration experts, however. First, it’s not beyond the realm of possibility that the U.K. would require a minimum number of British players on the roster.
This wouldn’t be unprecedented. NFL Europe, the predecessor of the current NFL International Series which ran from 1991 to 2007, went through several different rules of this type. During the 1995 season, at least seven “local” players had to be playing or on the bench if you were the home team, reduced to three for the away team. In addition, prior to 2006, each team was required to field one non-American player on every down of every other series. In 2006, that rule was expanded to include every series.
These aren’t rules which are unique to American-style football. They’re a long-standing part of European law meant to prevent teams from using roster spots on non-Europeans unless the non-European player has skills that are “special and different” from available European options.
The second issue that arises with respect to working visas is with regards to any active player who has a criminal conviction. Under U.K. law, a conviction that carries a sentence of less than a year would prevent the player from getting a working visa for five years from the end of his sentence. A sentence of more than one year, but less than four years, would carry a 10-year ban on working visa approval. Which means you probably won’t be seeing Michael Vick playing in London..
It’s not just about the U.K., you have to get the EU on board
No matter how badly the U.K. wants an NFL team, its membership in the European Union might cause some additional roadblocks for the NFL. The E.U. has two types of labor laws that are important to understand here: competition laws and free movement laws.
The NFL likely won’t have any big issues with the competition laws, because those laws are very similar to the antitrust laws the NFL already must comply with in the U.S. Free movement laws, however, have no U.S. counterpart, and they could present some very real issues for the NFL.
In theory, the NFL Draft would violate competition or antitrust laws. However, it’s exempt because it’s collectively bargained between the league and the NFL Players Association. The same is true for other restrictions on player movement, such as restricted free agency and the franchise tag.
These restrictions on the free movement of players might be cleared under the competition laws, but they seem to be at odds with the E.U.’s free movement laws, which grant all E.U. citizens certain rights with regards to free movement of workers . The question is whether those laws would be deemed to apply to the NFL due to the presence of E.U.-born players like Bjoern Werner and Graham Gano.
Although the E.U.’s competition laws do work much like U.S. antitrust law, there is one restriction the NFL enforces that has no counterpart: the requirement that a player be three years removed from high school before he is eligible for the NFL Draft. With no such restriction within European sports, this would be an issue that would be considered anew in the U.K. and E.U.
The U.K. might have reason to negotiate with the NFL if it believes an NFL team in London would be advantageous for the country, but convincing the E.U. at large could be much more difficult.
Last, but not least, there’s the NFL Players Association
Ultimately, the decision to expand to London rests in the hands of the 32 team owners. Nothing in the collective bargaining agreement addresses the NFLPA’s role in expansion, but that doesn’t mean the NFLPA will simply sit back and watch it happen.
Although the NFLPA doesn’t technically get a vote on expansion, it does have some authority when it comes to changes in working conditions. Travel to and from London is a rather large change in working condition, so that could be where you see the NFLPA come into the picture. Whether that means attempting to prevent a team in London or bargaining for tax equalization or other compensation for players remains to be seen.
“Moving an NFL team – whether to Los Angeles or to London – would obviously impact working conditions for our members,” said George Atallah, assistant executive director of external affairs for the NFLPA. “Changes like that cannot be made in a vacuum and must be done within the framework of the collective bargaining agreement. As such, we are carefully monitoring discussions on all potential franchise relocations.”
The NFL has certainly made progress toward laying the groundwork necessary to place a team in London, but its difficult task isn’t complete yet.
Kristi A. Dosh, Esq; this article was republished with permission from the original publisher, Forbes.