“Tfue” v. Faze Clan Exposes Tip of the Employment Law Issues Iceberg Facing the Industry

In 1956, without an agent or attorney representing him, an 18-year-old Curt Flood signed his first professional baseball contract. Twelve years later he wrote a letter to then Major League Baseball Commissioner Bowie Kuhn protesting the system that produced such contracts with onerous provisions allowing professional baseball players to be bought, sold and traded between teams as if they were property. Unsatisfied with Kuhn’s response to the letter, Flood sued him in a lawsuit that would ultimately reach the United States Supreme Court.

The esports world was rocked last month after Turner “Tfue” Tenney filed a lawsuit against his former eSports team FaZe Clan, Inc in Los Angeles Superior Court. While it is somewhat of a stretch to compare this case with Flood’s lawsuit against Bowie Kuhn, Tenney’s suit is undergirded by many of the same employment relationship tensions which were behind Flood’s suit, and it offers a glimpse at just a few of the many employment and labor related legal issues that the burgeoning esports industry will need to address if it hopes to continue to grow.

Tenney, 21 years old, joined FaZe Clan in 2018 and is presently considered one of the world’s best Fortnite players. His lawsuit challenges the validity of the “Gamer Agreement” he signed with FaZe Clan, Inc. on rather narrow legal grounds. He claims the contract is unenforceable under California statutory law because FaZe Clan acted as an unlicensed talent agent and because the contract contains provisions that illegally restrict his ability to pursue his profession. FaZe Clan has claimed the contract is valid and enforceable, and has denied any wrongdoing. On the surface, the dispute highlights the need for great care to be taken in drafting eSport and gaming contracts to create provisions which will stand up to court challenge if required. This should be lesson enough for eSport industry interests to note. Lying just beneath the surface of the legal claims asserted by Tenney, however, are clues to a myriad of other potential labor and employment law-related issues the industry would be wise to understand exist.

Perhaps one of the most fundamental questions to be answered when determining rights and responsibilities in the employment and labor law area is the legal status of the parties involved. Is there an employer/employee relationship? Is the relationship that of an independent contractor? The Tenney lawsuit illustrates that, in the esports setting, the answer to this most basic question remains open to debate. Tenney claims that the “team” of which he was a member was acting as his agent in violating California’s Talent Agency Act. This is not what would be thought of as a “typical” employer/employee relationship. The esports industry is still in its infancy and there are as yet no overall governing or organizational bodies in place. Tournament organizers range from established leagues to game developers to small volunteer or non-profit organizations. Gamers play individually or as members of “teams”, some highly organized and structured, and some much less so. It remains an unanswered, and perhaps under current conditions unanswerable, as to whether gamers are employees, independent contractors, performers or athletes. This is significant because with no definitive answer the field is open for argument in any particular circumstance what the gamer’s legal status is and thus how, if at all, established employment and labor law should apply to them. As a result, this leaves open for now how, if at all, eSports teams or leagues might be liable for failure to comply with such basic labor and employment laws as those found in the Fair Labor Standards Act (FLSA) or the National Labor Relations Act (NLRA) which apply only to protect employees and are not applicable to independent contractors. Organizers and teams are cautioned that incorrectly classifying as independent contractors workers who under established legal standards would be considered employees has potential legal implications and can also significantly impact the organizer’s or team’s ability to exercise control over the gamer’s business activities or conduct.

The esports industry skews very heavily to a younger demographic. In his lawsuit, Tenney points out that he was only 20 years old when he signed the Gamer Agreement with FaZe Clan. In fact, many of the top esports gamers are below the age of 18. This means that teams, leagues and other promoters need to consider whether federal and state child labor laws and regulations are implicated by their operations. Child labor laws aside, Tenney claims that young gamers are regularly exploited by the esports entertainment companies for whom they play. He points, for example, to a “finder’s fee” provision in his Gamer Agreement which he claims purportedly entitles FaZe Clan to retain up to 80% of the revenue paid by third parties for Tenney’s “services”. Whether it is true or not that esports organizers, leagues and teams prey unfairly upon young gamers, those active in the industry should be aware that such a perception can be created and how that perception can be exacerbated by pointing to provisions like the “finder’s fee” provision in the FaZe Clan Gamer Agreement.

Curt Flood ultimately lost his legal battle with Bowie Kuhn. However, the events set in motion a decade of labor market activity during which the face of Major League Baseball was substantially changed. Players won the right to free agency. Pension contributions were escalated, and salary arbitration rights secured. Players became entitled to negotiate contracts with agent representation. Travel pay and conditions were improved among other things. It is still too early to tell what the outcome of the Tenney lawsuit against FaZe Clan will be. However, one thing of which esports organizers, leagues and teams can be certain is that this lawsuit will not be the last. As the popularity of esports continues to grow at a rapid rate and as the amount of money flowing into the industry continues to swell, all of the incentives will be in place for gamers to challenge their actions in the courts.