United States: It's Not Just A Game – Addressing Employment Law Issues In Esports

Here at Foley & Lardner LLP, we continue to track legal trends and developments in the sprawling esports and video gaming industry, which continues to experience remarkable commercial growth on a global scale.

The vast video gaming ecosystem is comprised of a wide range of stakeholders, including game publishers, professional and amateur teams, leagues, tournament and event organizers, broadcasters and other media distributors, sponsors and advertisers. And, last but not least (as this is a labor and employment law blog), there are the skilled players who are central to the growth of competitive video gaming known as esports.

While professional leagues, competitions, and teams of players form around various game titles such as Overwatch, League of Legends, Call of Duty, and Fortnite, legal risks often rise in lockstep with commercial growth and opportunity. Those legal risks can become heightened for nascent businesses that myopically focus on revenue and growth, while giving little attention to the operational aspects of how that business will grow. Indeed, the internet landscape is littered with warnings to industry stakeholders about various legal issues they should – but may not – be considering as they endeavor to grow their businesses and operations. These issues include, for example, data privacy and the use and protection of intellectual property. Invariably, labor-management relations and other workplace and employment-related issues are found at or near the top of every list.

As team operators hire players to compete in leagues and other competitions, they are submitting themselves – perhaps unwittingly – to a panoply of labor and employment laws and regulations that may govern the team-player relationship. In a prior post, we addressed the culture of gaming and the challenges of conforming the behavior of players and other team personnel to workplace laws concerning sexual harassment and other forms of prohibited employment discrimination.

Recently, workplace issues in esports were back in the spotlight when one of the world’s most recognized professional Fortnite players, Turner Tenney (known as “Tfue”), filed a lawsuit against his esports team, FaZe Clan, in a California court. In his lawsuit, Tfue seeks to undo his allegedly oppressive three-year contract with the team and asserts that the team unlawfully deprived him of business opportunities and failed to pay him his share of team sponsorship revenues. Central to the case are the personal branding opportunities that Tfue claims to be unfairly missing and are somewhat unique to professional gamers, who, outside of competitive gaming activities, spend hours connecting with and creating media content for millions of fans and followers through internet streaming platforms like YouTube and Twitch.

While the merits of the Tfue-FaZe Clan case are uncertain and difficult to assess, it does highlight the varied and complex legal issues bound up in the team-player relationship. Those issues are critically driven by whether the team does (or should) engage the player as an independent contractor or as an employee. Improperly classifying a player as an independent contractor can trigger significant legal issues and problems for a team relating to income and employment tax withholding, wage and hour laws, workers’ compensation and other benefits, media and intellectual property rights, unionization and unfair labor practices, and control of player business and sponsorship activities and other conduct.

The worker classification question is only the beginning. Additional concerns relating to the engagement of players by teams include the impact of child labor laws as to players who are under the age of 18 (and there are many such players in professional gaming), as well as cross-border considerations, including immigration laws and the procurement of visas for foreign players competing in the United States and for American players competing abroad.

Irrespective of its merits, the Tfue-FaZe Clan case should serve as a wake-up call for esports and the larger video gaming industry. It is a reminder that commercial and revenue growth is best built on the creation – not at the expense – of a proper operational and legal business foundation. Carefully constructing or reassessing player contractual relationships should be part of that proper foundation. To do that requires input from sophisticated legal counsel and business advisors, preferably before the potential storm clouds form and unleash their fury. As President John F. Kennedy once wisely said, “The time to repair the roof is when the sun is shining.”

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.

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