Digital Business04.05.2022 Newsletter
E-sports are no longer in their infancy. The industry has experienced dizzying growth over recent years, accompanied by a significant increase in professionalism.
This development has also not gone without labour law consequences. In the early years, the top players in professional e-sports were more like freelancers. There were no contractual regulations defining the relationship between them and the clans or teams. The high fluctuation of players and the low turnover generated (if any) also meant that there was no need to define the relationship between the player and clan or team.
Binding agreements necessary
However, developments over the last few years now paint a different picture. Highly remunerated sponsorship contracts, substantial prize money and competition for the best talent are also creating a need for binding agreements in e-sports and demand compliance with applicable laws. The industry is in the process of adjusting boundaries and peculiarities that have already been established for years in other industries, such as professional soccer, for example.
You might ask yourself whether gaming can even be classed as work. The answer to this question will determine whether labour law in its entirety, with its protective norms and obligations, also applies to the e-sports sector. In fact, there is not a simple answer to this, as it depends on the specific individual case. As long as gaming is purely an end in itself and the player primarily plays for recreational purposes, gaming ought not to be classed as work. Even if the player occasionally earns prize money, or receives (small) payments to tie him or her to a particular clan, this does not alter the situation.
Economic interest and submission to instructions are important factors
However, the greater the time commitment and the more significant the economic interest pursued by the player with e-sports, the more likely it is that the gaming activity can indeed be classed as work.
It is fundamentally not possible to draw a definitive line - for example a specific annual income from prize money, sponsorship money and clan salaries. Ultimately, the deciding factor will be whether the player pursues a substantial economic interest and, conversely, satisfies such economic interest of the clan.
Whether an employment relationship exists also depends on whether the player is bound by instructions. Professional clans work with coaching and support staff, have fixed training and game schedules, sponsor appointments and other commitments. It is not uncommon for clan players to also be bound by certain behavioural guidelines in both virtual and real terms. The teams or clans also often provide a significant part of the infrastructure, such as their own servers, (analysis) tools or uniform team outfits.
On this basis, it is often relatively easy to determine the existence of an employment relationship in the high-performance sector. Likewise, for the many informal clans or teams up to the semi-professional level the answer is clearly negative. In between lies a grey area in which each individual case must be considered separately.
The existence of an employment relationship has various consequences for the player on the one hand and the clan or team on the other.
German Youth Employment Protection Act to be observed in case of an employment relationship
In the case of underage pro-gamers, the German Youth Employment Protection Act [Jugendarbeitsschutzgesetz - JArbSchG] must be taken into account, which generally precludes employment on Saturdays, Sundays and public holidays. As long as e-sports are not classed as sports within the meaning of Sec. 16 (2) No. 9 or Sec. 17 (2) No. 6 JArbSchG, correspondingly young pro-gamers would not be allowed to appear at commercial tournament events. And even during the week, only work between 6:00 a.m. and 8:00 p.m. would be possible (Sec. 14 (2) JArbSchG). This includes training times.
Caution in case of fixed-term employment relationships
Due to the high level of stress involved in professional computer gaming and the high demands on concentration, skill, endurance, reaction and hand-eye coordination, the time window within which pro-gamers can play at the highest level is likely to be limited to a few years, with the result that the question of permissible fixed-term employment relationships also arises in the field of e-sports.
Since the fixed-term nature of an employment relationship cancels out the statutory protection against dismissal, fixed-term employment without a material reason is only possible under strict restrictions. Among other things, a maximum duration of two years applies to a contract that has been concluded for a fixed term without a material basis for such limitation. In professional sports, especially in soccer, there is a prevalence of fixed-term contracts that are linked to a material reason and therefore also permit longer terms. We refer, for example, to the framework conditions of the professional soccer leagues for such material reason. These include the - from the outset limited - time in which sportsmen are able to perform at peak levels, the intra-club squad development, and transfer opportunities to other clubs. This has also been recognised by the German Federal Labour Court [Bundesarbeitsgericht, BAG].
However, e-sports have not yet been unanimously recognised as a type of sport. Therefore, it remains to be seen to what extent the case law that has been handed down on the admissibility of fixed-term employment contracts in professional soccer can be applied to the area of e-sports. Incidentally, this also includes the question of the extent to which pro-gamers can be contractually bound to a clan, and whether and to what extent transfer payments can also be agreed in professional e-sports.
Protection against dismissal also a factor
The termination of employment with a pro-gamer also gives rise to the classic labour law issues. Of particular relevance here is doubtlessly to what extent the declaration of an ordinary notice of termination according to the German Unfair Dismissals Act [Kündigungsschutzgesetz, KSchG] is possible in cases where a sustained drop in performance can be observed in a pro-gamer. On the other hand, the termination of an employment relationship for behavioural reasons - up to and including extraordinary termination - is an option if players violate anti-doping agreements, cheat or engage in other significant misconduct such as repeated rage-quitting, or if they in any other way significantly damage the reputation of the clan or team.
Since - as far as we can see - no labour court has yet dealt with the special features of employment relationships in the area of e-sports, further developments need to be closely followed. In principle, however, the traditional instruments and mechanisms of labour law are also suitable for dealing with the legal challenges of e-sports. However, industry participants should swiftly work towards ensuring that German labour law does not become a disadvantage in global competition and slow down the growth of the industry because, for example, the stars of the scene are not allowed to perform within the framework in which they actually deserve to work due to the German Youth Employment Protection Act and the German Working Hours Act [Arbeitszeitgesetz, ArbZG].
Click here for more articles about gaming and e-sports:
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