NBA AM: NBA Labor Deal Close Or Far Apart?
So Many Problems So Little Time: As the NBA version of Groundhog Day the movie continues. The NBA and its Players find themselves at their biggest impasse of the labor process, which ironically is also when they are at the closest point of a deal in four months.
On Saturday, Players’ Association officials rejected the NBA’s latest proposal for a labor deal saying the deal presented was not in any way acceptable. Sources close to the process called the deal “98% there”, which brings a litany of questions to the forefront, especially with a deal clearly so close.
The Players Association has requested all of its team representatives to take part in a meeting Tuesday to go over where things stand, but the Players’ Association is adamantly refusing to put the latest offer from the NBA to a full vote of the Players.
The Players’ Association is worried that a full vote would yield an emotional response from players who’d likely take a bad deal just to get back to work rather than a thought out response to the parts of the deal the Players’ Association still feel needs work.
NBA Commissioner David Stern made it clear early Sunday morning that the NBA’s current offer would expire at the close of business on Wednesday at which point the NBA would return to its initial negotiating stance which includes a 47% share of revenue going to the players, a harder NHL-style Flex Cap, large percentage rollbacks in existing contracts and shorter contracts with fewer guarantees in NBA deals.
Earlier last week more than 50 players took part in what agents are calling a “fact finding” call on decertifying their union and its believed that early Sunday that group started to mobilize to assemble enough votes to petition the National Labor Relations Board to force the NBAPA to hold a full vote on decertification.
As we have covered a few times in this space, the mechanism to force decertification is a long one. If the Players want to forcible dissolve their union, they must have 130 votes on a petition. The NLRB has 45 days in which to rule on the petition and force the Players Association to hold a vote. The Players would need 226 votes in favor of decertification in order for the Association to be forcefully decertified.
At any point in the process the Players’ Association could, under their own action, call for a full vote. So while much is being made of the 45-day window required to force decertification, the Players Association can fast track that if it chose to.
No one in the process believes decertification can yield a deal quickly especially if the process is allowed to play out as some are scripting it.
There are some that believe if the Players begin a forcible decertification process the fear of the legal battle that follows might be enough to force the NBA and its Owners to relent on the handful of remaining system issues.
It’s been said that the 45-day window before a full vote is held could shift the balance of power a bit and get a compromise out of the NBA.
There are others that feel decertification at this point in the process will simply blow up the deal on the table and destroy any chance for a regular NBA season.
Tuesday will be interesting, as all 30 team representatives could demand a full vote from the Players, if that occurs the odds of a deal before the NBA’s Wednesday deadline is real, simply because so many of the rank and file want to go back to work.
If the 30 NBA team reps opt to hold the Players’ Association line that the offer is not worthy of a vote, the odds that more games are officially cancelled becomes real and more importantly the implosion of the 2011-2012 NBA season becomes more likely as each side would retreat from the compromises on the table.
The Problems: Would it surprise to know that just six items are preventing a deal in the NBA? The NBA has said it adopted five of the six compromises presented by federal mediator George Cohen into their latest offer, but even those compromises were not good enough to reach a deal Saturday. Here is what’s left:
BRI Split: According to David Stern, federal mediator George Cohen proposed a “band” split of Basketball Related Revenue (BRI) that would start at 49% and swell to 51% based on revenue growth.
The short of the process is that every year the NBA and the Players would define a revenue projection, if the final number comes in higher than expected, any dollars over that projected number would be shared 57-43, with 57% going to the players.
The idea here is that if both sides agreed that the revenue goal for the year was $4 billion, they would set a salary cap and tax system around that number, however any monies over that agreed $4 billion would be shared at a greater rate to the Players.
There were also protections for underperforming years in which the players share could drop to 49% if the floor falls out from under the league.
The Players had proposed dropping their share of BRI from 52.5% to 51%, only if 1% were to be applied to a retired Player’s fund.
The Players have flatly refused the NBA’s band idea, saying that the terms required to achieve 51% are almost impossible to achieve making this offer a 50/50 offer by another name.
Both sides have warmed up to 51%, all that needs to occur here is to massage the terms of how 51% is obtained and both sides are there on BRI split, something no one thought they’d ever see given where this started.
The most obvious compromise if for the NBA to expand their band to 52%, making 52% the harder number to achieve, lower the criteria on 51% so it’s more easily obtainable and the gap on this issue closed.
Mid-Level Exceptions For Tax Teams: The NBA was ardently opposed to Luxury Tax teams having the ability to continue stockpiling contract dollars. They wanted to prohibit Luxury tax teams from using salary cap exceptions.
There were compromises made before Sunday with the NBA relenting on the use of Larry-Bird rights for Luxury tax teams.
On Sunday mediator George Cohen introduced the idea of a Mini Mid-Level, that would be worth $2.5 million for two years for Tax paying teams, something NBA said it would adopt into its offer.
Sign-And-Trade Deals For Tax Teams: The mediator, according to David Stern, recommended that sign-and-trade deals be prohibited for tax teams, which lines up with where the NBA wants to see the rule set.
The Players have a huge objection because it limits the pool of teams competing for a free agent player, but more importantly the teams at or near the tax line are typically the better teams.
The Players view this prohibition as removing a player’s ability to join a good team, and they are opposed to anything that restricts movement.
There is no compromise point on this one, either the NBA relents or they stand firm.
CBS Sports’ Ken Berger is reporting that exactly FIVE sign-and-trade deals have been done in the last six years by Luxury Tax teams, not exactly a huge shift in power or dollars.
One source pointed out that the NBA is pursuing a repeat offender plan for chronic tax paying teams. If that provision is passed it’s should act as a deterrent for stockpiling of contracts making a league imposed restriction almost moot. This is an area where the NBA could relent and it would be viewed as a significant gain in the deal for the Players.
Length of Mid-Level: The two sides have debated on how long a new reduced value Mid-level exception should be with the NBA wanting a three-year deal starting at $5 million, where the Players side wanted a four-year deal starting at $5 million.
The valuation is set, so the compromise the NBA adopted is that on alternating years NBA teams would have the ability to issue different length deals.
For example in year one of the CBA a team could offer a four-year deal worth $20 million. The following year they could only issue a three-year deal worth $15 million. In year three they’d get the ability to issue another four-year deal.
Sources familiar with the process said it sounded like the use of the four-year/three-year would be at team discretion, so a team could opt to use their three-year exception this year and save their four-year exception next year.
Teams would not be required to issue contracts of that length; they could do shorter deals. However, it sounds like they would have to classify which slot they were using at the time of the deal signing.
Repeater Tax Penalty: The NBA has been adamant that they want some kind of penalty for teams that exceed the Luxury Tax on a regular basis.
What’s been talked about is an additional Luxury tax charge for teams that have been in the Luxury Tax more than three times in a five year span.
The new Luxury Tax that both sides seem to have agreed on has an escalating tax based on tiers over the tax line, with a tax that will increase for every $5 million spent beyond the established line, starting with a tax of $1.50 for every dollar over the tax line. That number increases to $1.75 after $5 million, $2.25 after $10 million and $3 after $15 million.
The Repeater tax penalty proposed by the NBA was an extra $1.50 to each of those tiers, the Players proposed a $.50 additional penalty. The compromise was a flat $1 additional charge to each tax tier for teams that exceed the Luxury Tax line for too many seasons within the life span of the deal.
An informed source said the only way bringing down the ceiling will fly with the rank and file is if the NBA in turn increases the minimum teams are allowed to spend.
Under the old labor deal teams only had to spend 75% of the salary cap, allowing for some teams to spend as little as $43 million last season. There is a desire to see that floor raised if the ceiling will be lowered.
The Cliff Provision: For years there has been a reward system of sorts for teams that stayed under the Luxury Tax line.
In fact the swing from the double-dollar penalty of the Luxury tax to the rebate from being a non-tax payer was so great that the Players have viewed it as a cliff, and its often referred to as the Cliff provision.
In essence teams that are under the tax used to share the tax collected by the tax-paying teams. In some instances collected Luxury Taxes have exceed $80 to $90 million and are shared with the teams that did not pay tax.
Bonusing them, if you will, for being under the tax.
The Players have argued that between the reward paid for being under the tax and the newer harsher penalty for being over the tax, teams are incentivized to stay under the tax in too many ways.
The Players have proposed that the NBA reducing the percentage of tax dollars from 100% going to teams under the cap to 50%.
The NBA did not adopt that concept into their offer, which is a problem for the Players as they see the “Cliff” provision as a hindrance to open spending.
That is the nuts and bolts of where things stand on pseudo-major issues.
If you are asking yourself ‘why haven’t both sides made a deal on this?’ you are not alone. There has been far more progress made than either side wants to admit in the press and it seems one more productive meeting and some additional concessions and the deal is ready to be voted on.
Here is hoping that today’s Players’ Association meeting calls for one more round of talks, because the gap is not nearly as great as some would have you believe.
Clever Mr. Stern: If you have followed the NBA labor process closely, you may recall that when NBA Commissioner David Stern addresses the media he rarely if ever discusses specifics of the talks. Details of what’s been offered or discussed in the room are either not addressed or explained in detail by Deputy Commissioner Adam Silver.
That changed late Sunday.
For the first time in this process David Stern explained to the world, but more importantly to the NBA Players and agents, what was on the table and the laundry list of compromises he and his side agreed to in order to make a deal.
The so-called ultimatum issued by the NBA came from David Stern’s mouth and was direct, solemn and as serious as we have seen from the normally smug and defiant Stern.
There was no little smirky grin. No playful jabs at the media. Stone cold seriousness.
Well played, Mr. Stern.
And the desired effect was heard. More than a dozen players responded to text messages saying maybe it was time to take the deal. More than a few agents claimed the season was genuinely in jeopardy if the NBA Players’ Association didn’t put this offer to a full vote, although none expected they would.
If David Stern’s goal was to put the fear of a lost season and destroyed talks into the hearts and minds of the basketball world, he did just that in a ballroom early Sunday morning.
Say what you want about David Stern, but he is tactical, calculating and as good at this process as anyone in sports.
Coincidentally is anyone surprised that Players’ Association director Billy Hunter did not address the press on Sunday or that Derek Fisher who normally addresses the press with a small army of Players standing behind him was alone at the podium?
Union attorney Jeffery Kessler was the most defiant voice from the Players side, a known nemesis of David Stern.
It’s interesting how the theater of this is playing out.
With inches to go in order to reach a deal there is a growing belief that one more set of meetings on Tuesday, and a few more tweaks to the deal in the works could yield a compromise and all of the parties involved are playing their parts just right.
What They Are Saying: On a whim yesterday I reached out to a small handful of NBA agents who in an off-the-record way shared their thoughts on where things stood and on whether they would urge their clients to accept the offer on the table.
Here were some of the notable concepts:
None of the agents felt their clients should take the deal as constructed. All had serious issues with one aspect of the deal or another, but all thought it was close enough to work with if some minor tweaks were made.
None of them were overly concerned about the BRI split, because the NBA is guaranteeing that the salary cap and the Luxury tax numbers won’t go down significantly.
Annual increases in those areas are a concern, but the agents for the most part are bullish about where the NBA is headed in terms of fan support and revenue growth.
One agent pointed out that with BRI it’s not about the percentage as much as the value of the pie itself.
Would you rather have 52% of $4 billion or 50% of $6 billion?
The concept behind it is that far too many teams cannot maximize their local dollars because they cannot compete.
The concept was that the NBA made over $4 billion with 8 to 10 teams no one would pay to see play. If that number decreases to the 3 or 4 teams rebuilding or going through a regime change how much does BRI improve if the 8th seed in every conference is above .500. How much more valuable are the TV rights to the first round of the playoffs if the last two seeds are not sweep candidates?
The other concept was what’s the value of the local TV deal for a competitive team that’s a playoff contender versus a lottery team? How about at the box office?
The end comment was if the NBA is producing $4.1 billion with 10 dog teams, what’s it worth when that number is lower, is that how the NBA jumps to $5 billion?
One comment every agent made was wondering about the blow back from this process on free agency. On cue and without prompting every agent consulted wondered aloud how their clients or other free agents would respond to the likes of Dan Gilbert, Paul Allen and even Michael Jordan when it came time to talk contracts. There is a real sense of negativity from the rank and file towards the owners pushing for huge concessions.
All concede that their clients would take the five-year, $50 million deal from one of the hardliners, but when it came to exception deals and minimum dollar deals they were not sure how their groups would respond to owners that have affected their livelihood.
One agent made a very good point on decertification, which every agent consulted thought was a bad idea because it would absolutely destroy any shot at a season.
The concept that rang true in this is that if the Players’ Association is going to pass on the deal that is on the table, they owe it to their constituents to clearly define what happens next.
The agent explained if the Player’s Association does not have a plan in place for the next course of action with a realistic and plausible end game, they cannot walk away from this offer.
Each agent has their own pet peeve issue… one was adamant that the Escrow system, which deducts 8% from each player’s salary to insure the BRI split is met must be reduced… Another agent was adamant that restricted free agency be removed in this deal… One agent wanted the changes to the rookie contract system to allow players to hit their first big payday sooner… another wanted clearly defined exit clauses tied to revenue growth.
In all, the agents consulted agreed that one more labor meeting and a little more give on the NBA side and there was a deal they thought could get ratified if the Player’s Association put it to a vote, although all seriously doubted that would happen without a massive player revolt.
Most of the agents consulted didn’t have serious enough issues with the deal on the table to blow up the season over it, so there is some optimism that cooler heads may prevail.
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