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NBA Lockout: Where We Stand at the Doorstep

The weekend was a whirlwind for the CBA negotiations, so I thought it useful (at least for myself) to write down a list of the recent developments to see where exactly we stand as the latest ultimatum on November 9 inches closer.

  • Using the 1998-99 lockout as precedent, we are still almost two months away from a true drop-dead date (last time, the date was February 5, 199). David Stern issued his "ultimatum," but we can only see it as such in the sense that he is tipping the hand that says the owners' offers to the Union are going to begin to get progressively worse. It is a hard stance, yes, but is illusory because it really just indicates that the owners too have a fear of reaching the real deadline.
  • The ultimatum came in the form of a letter that Stern wrote to Union head Billy Hunter. The reason why it is seen as an ultimatum is because Stern used the term "reset," as in, if the Union does not agree to the newest proposal, then the league's demands would roll back to where they were in the summer (see below).
  • Both sides are essentially at a 50% BRI split. The owners have put forth a 50% split to the players many times, and it appears that over the weekend, the players essentially agreed to that as well. Nominally, they still want 51%, but that extra 1% would be a portion that would be dedicated to retired players. It seems to me that the whole BRI split is really kind of a MacGuffin, used to push other mechanisms back and forth so that the pieces fit more nicely.
  • The real issue is the luxury tax and the hard-cap-like effect it can have on teams and players:
"The league still wants to ban taxpaying teams from using the mid-level exception, but on Saturday it offered a concession: Let those teams use a "mini" mid-level exception, worth $2.5 million per year for a maximum of two years, and let them use it only every other year. The NBA still wants to prohibit taxpaying teams from working sign-and-trade deals, which allow them to lure superstar free agents from less-attractive markets by making sure those free agents get the same salary (or close to it) they'd have received by staying with their incumbent teams. The league still wants an escalating luxury tax that starts at $1.50 for every dollar a team exceeds the initial tax level, and it wants to tack on an extra $1 across the board for teams that pay the tax three times in any five-year span - a repeat penalty that would have captured the Lakers, Mavericks, Celtics, Nuggets, Cavaliers and Knicks at various times over the last half-dozen seasons." - Zach Lowe

"The punitive impact would only be felt by a handful of teams that historically have spent at those levels.

They also differ over the length and amount of mid-level exceptions that can be used by tax-paying teams. The players want tax-payers to be able to sign players to four-year mid-level deals starting at $5 million every other year. The league proposed two-year mid-level deals starting at $2.5 million every other year.

Non-tax-paying teams would be able to sign players to mid-level deals starting at $5 million, with the length alternating between four and three years each season under the owners' proposal. The players want straight four-year mid-level deals for non-tax-payers...

The league has not relented on its insistence that tax-paying teams be forbidden to execute sign-and-trade transactions, which the union argues -- when coupled with the other system restrictions -- would dry up the market for free agents in a way that imitates a hard team salary cap." - Ken Berger

  • Here are the current proposals on the table offered by the owners, as compiled by Howard Beck:
    • Salary-cap and luxury-tax levels in the first two years would be be no less than last year's. By Year 3, they will be adjusted downward to conform to the new system.
    • Sign-and-trade deals and the biannual exception will be available only to nontaxpaying teams.
    • Extend-and-trade deals, such as the one signed by Carmelo Anthony last season, will be prohibited.
    • The midlevel exception will be set at $5 million for nontaxpaying teams, with a maximum length between three and four years (alternating annually). The value of the exception will grow by 3 percent annually, starting in Year 3.
    • The midlevel exception will be set at $2.5 million for taxpaying teams, with a maximum length of two years, and cannot be used in consecutive years. Its value will also grow at 3 percent annually.
    • A 10 percent escrow tax will be withheld from player salaries, to ensure that player earnings do not exceed 50 percent of league revenues. An additional withholding will be applied in Year 1 "to account for business uncertainty" stemming from the lockout.
    • Maximum contract lengths will be five years for "Bird" free agents and four years for others.
    • Annual contract increases will be 5.5 percent for "Bird" players and 3.5 percent for others.
    • Players will be paid a prorated share of their 2011-12 salaries, based on the number of games played once the season starts.
    • Team and player contract options will be prohibited in new contracts, other than rookie deals. But a player can opt out of the final year of a contract if he agrees to zero salary protection (i.e., if it is nonguaranteed).
  • Conversely, if the Wednesday deadline is not met and the owners decide to "reset" the negotiations, Beck writes:
  • The "reset" proposal features a flex-cap system that contains an absolute salary ceiling - to be set $5 million above the average team salary. 
  • The N.B.A. would roll back existing contracts "in proportion to system changes in order to ensure sufficient market for free agents."
  • The midlevel exception would be set at $3 million in Year 1, with a maximum length of three years, and would grow at 3 percent annually.
  • Maximum salaries would be reduced.
  • Sign-and-trade rules would remain consistent with the 2005 labor deal.
  • Contracts would be limited to four years for "Bird" free agents and three years for others, but each team could give a five-year deal to one designated player.
  • Raises would be limited to 4.5 percent for "Bird" players and 3.5 percent for others.
  • Changes requested by the union on restricted free agency rules and salary-cap holds would not be included.
  • One of the items mentioned above, sign-and-trade deals, appears to be a a bit of a red herring. As Lowe writes here, the number of times where a non-taxpaying team has signed and traded a player to a taxpaying team over the past six years was a grand total of five. Indeed, as in the case of Shawn Marion it can prove to be the deciding piece of a championship puzzle, but its actual occurrence is decidedly small. The emphasis may be more forward thinking, but if the past is an indication, the owners are fighting for something that has a small impact.
    • Stern's ultimatum aside, it does appear that both the owners and the union have run off the rails:

    "If I were a player reading all this, I'd be asking myself: What are we fighting over? Why am I going to give up a year of income -- for some players, 15-25 percent of their career earnings -- so that lawyers can raise their voices, spew venom, stomp their feet and play right into the owners' hands?

    "We don't even know who Kessler is," one agent said Sunday. "We don't have any access to this guy whatsoever. Who is this guy? Now he's saying whether or not the deal is a fraud?"

    And if I were a player, I'd be asking myself this, too: Who is leading us down this path?"


    "But whatever authority has been stripped from Hunter, the same can be said of Stern, who must know at this late date that a 50-50 deal is all he can get past a unified contingent of rogue, hardline owners who are pushing not for a deal, but for annihilation...

    "Honestly, I think [Stern] has lost control of this thing," said an agent who has long favored decertification. "There's no way in the world David Stern wants an NBA season blown up when the owners already have gotten as good a deal as he's gotten them."

    • The hard-line owners currently are: Paul Allen, Dan Gilbert, Robert Sarver, Michael Heisley, Ted Leonsis, Mikhail Prokhorov, and Michael Jordan.
    • On the other side of the equation, the two people that appear to have the most resolve are Derek Fisher and NBPA attorney Jeffrey Kessler.
    • The Union is looking for one final meeting before the Wednesday deadline. However, it seems as if the hard-line owners would just as soon skip over that kind of meeting, since the deadline, which would arrive with their preferred BRI split and salary cap stipulations, is essentially their negotiating position.
    • The Union, faced with the Wednesday ultimatum, may have one final hammer they can throw. There has been increased discussion with the players filing for decertification, which while potentially effective would delay things by 45 days (the period required before players can actually vote). However, there is a second option, as Berger reports. According to Gabe Feldman, who is the Director of Sports Law at Tulane University, the Union can also be dissolved through a legal tactic called "disclaimer of interest."

    "The National Labor Relations Board has long permitted a labor union to disclaim its interest in representing employees in a bargaining unit. For a disclaimer to be effective, it must be clear, unequivocal and made in good faith.Conduct inconsistent with the intent to withdraw as bargaining representative, such as continuing to collect dues from unit members, picketing, or initiating new grievances, will negate the effect of the purported disclaimer." - Brian Love, Diekemper, Hammond, Shinners, Turcotte & Larrew, P.C.

    • The advantage of a disclaimer of interest is that the players would no longer have to wait 45 days in order to officially decertify (which sends the negotiation down a completely different trail). Instead, the Union is dissolved immediately and the players can then sue the owners in court. The disadvantage of this route is that it is more likely to be seen as a "sham," where the players are still unofficially acting as a union. If the court decides this is the case, then the players would lose legal standing.
    Feldman concludes:
    "It could go either way. It could cause enough owners to be skittish and want to avoid the risk of anti-trust litigation -- because if they lose there, it's a huge loss. ... The other side is that it could cause Stern and the owners to say, 'We're not going to let you manipulate labor law by threatening us with an anti-trust suit and we're going to take a stand."

    At the end of the day, it appears that the Union is going to have to face a grave self-examination - why exactly are they fighting this battle? If it is for the basketball and the lifestyle, then cut a deal now. However, if they really do fight for some higher principle, then as Basil King once wrote,

    "Go at it boldly, and you'll find unexpected forces closing round you and coming to your aid."