Contracts Sports Law

Is An NBA Labor Dispute On The Horizon?

The National Basketball Association’s (NBA) collective bargaining agreement (CBA) is the contract between the National Basketball Players Association (NBPA) and the NBA Board of Governors (the commissioner and all thirty owners) that sets out the litany of regulations by which the league operates. The CBA outlines the rules for, among other things, player contracts, trades among teams, revenue sharing, and determining how the salary cap is calculated. The term for the CBA that was signed on the dawn of Christmas 2011 concludes at the end of the 2020-21 NBA season. Either the NBPA or NBA can select to end their obligations earlier by deciding to opt out of the current agreement after the 2016-17 season.

All signs seem to point to NBPA electing to opt out early. Recently, the NBPA issued a letter addressed to all players and certified agents suggesting that players receive their salary over an 18 month period, rather than the customary 6 or 12. This move allows players to still receive checks in the event a lockout or strike shortens, or completely eradicates, the 2017-18 season. With a potential strike or lockout looming, players deciding to receive their salary over an extended course of time that may encompass a period where they are out of work negates a major bargaining chip for owners. As often acknowledged during negotiations, players needed their paychecks more than previously imagined, thus promoting internal pressure among them to end the lockout and get back to work. Now, with paychecks being disbursed over a longer period, players should be better prepared to outlast owners at the bargaining table.

A major reason for the 2011 lockout was that owners were beginning to lose significant amounts of money. Due to factors such as rising expenses that includes player salaries and slowing revenue growth caused in part by the economic downturn in 2007-08, 22 out of 30 teams collectively lost $370 million 2009-10. For the two seasons prior, teams lost a reported $340 million and $300 million, respectively. As a result, in order to transfer more money into the owners’ pockets, the league revamped its economic system; under the current CBA, players now receive roughly 50 percent of all basketball related income, as opposed to the 2005 CBA, wherein players received 57 percent of basketball related income.

It is now the players who may assert that they are the ones not making enough money. In addition to the drastic change in revenue split, a number of other factors have played a role in flipping the parties at the bargaining table. The past two NBA teams purchased – the Milwaukee Bucks and the Los Angeles Clippers – have gone for then-record prices, selling for $550 million and possibly $2 billion, respectively. A financial analyst recently stated that the New York Knicks could be worth upwards of $3 billion. Additionally, the league is the next one in line for negotiating a new TV deal, which many in the media believe will profit the league more money than imaginable. All these factors further promulgate the belief that players are earning less than they are due when coupled with the on-goings of this year’s NBA offseason. Many teams with big star free agents, such as the Knicks with Carmelo Anthony and the Miami Heat with its Big Three (Lebron James, Dwayne Wade, and Chris Bosh) have floated the idea to its stars to take less money than what they may be actually worth for the benefit of the team. Grantland’s Zach Lowe reported that the NBPA fears that teams are utilizing the complicated nature of the salary cap as recently constructed in the 2011 CBA to “force sacrifices from players who have already turned over so much to owners swimming in NBA cash,” instead choosing to coax them into lower salaries when they have the financial means to bring back all their players with raises. Lowe goes on to quote Ron Klempner, the interim executive director of the NBPA and author of the aforementioned letter issued to players, who states that, financially speaking, “I am concerned that the sacrifice [the players] are making is not as much for the good of their teams as it is for the good of the owners.”

All this is to say don’t be surprised when the NBPA elects to opt out after the 2016-17 season and attempts to play hardball with the league and its ever-growing profitable owners during collective bargaining. When involved in collective bargaining, each side shares a mutual obligation to meet at reasonable times and discuss in good faith with respect to wages, hours, and any and all other terms and conditions of employment. Bad faith bargaining is determined from a pattern of behavior, not any one individual incident. Each party must provide all requested, relevant information that aids in the formation of an agreement. For example, when league owners made claims they were losing money as a result of the 2005 CBA, they had to provide full financial data to the NBPA to substantiate their losses. At the time, there was frequent debate regarding whether the stated losses were an accurate reflection of the league’s financial health. Now, in an age where media reporters have their thumb on the pulse of the behinds scenes of a league and can tweet out a story for millions to see, any claim of financial despair could be deemed as bad faith bargaining by the league owners.

Collective bargaining comes with other legal requirements as well. Parties cannot engage in “surface bargaining,” which is when one side utilizes tactical delays or other actions that demonstrate insincere efforts to reach an actual agreement. Nor can parties utilize boulwarism, better known “take-it-or-leave-it” demands. Mandatory issues (those listed in National Labor Relations Act, Section 8(d)) must be discussed and can be pushed to impasse. Voluntary issues are only to be discussed if both parties agree and cannot be pushed unilaterally to impasse. When impasse is reached, the parties have five options at their disposal: (1) the employer can unilaterally implement its “last, best offer”; (2) the parties can seek the assistance of a third party intervener; (3) the parties may agree to continue working under the old agreement until a new one is finalized; (4) the employer may lockout its employees; or (5) the employees may go on strike.

Few want a repeat of the lockout shortened 2011 season. Yet, that does not mean that the NBPA is not willing to step up to the line and fight for what many believe is the current taking advantage of players by owners under this newly structured CBA. The wheels have already been set in motion with advanced warnings to players to better prepare themselves this time around. Finding a common ground to alleviate extreme team revenue loss was the main reason behind the lengthy negotiations of 2011. With reports calculating that Lebron James’ next NBA salary should start at around $50 million despite the fact his max contract starting salary would be closer to $20 million, and many pundits promoting the revocation of the max contract rule, expect the NBPA to start equipping its players with other tactical strategies to better stave off the potential effects of the summer of 2017.