Force Majeure Provision Opens Window To New CBA

The COVID-19 pandemic has drastically impacted the 2019/20 NBA season and it could have a lasting effect on the financial structure of the league.

The “force majeure” provision in the latest CBA covers a variety of catastrophic circumstances, including epidemics and pandemics, and it calls for players to lose approximately one percent of their salary per canceled game. It’s automatically triggered once games are canceled, though the league has simply “suspended” the season at this point.

Adrian Wojnarowski of ESPN.com reports that if the force majeure provision is triggered, the league has the ability to re-open and renegotiate the current Collective Bargaining Agreement, which runs through 2025. There have been no conversations yet between the NBA and the Players Association about utilizing this feature.

The league and the union are discussing withholding 25% of players’ remaining salaries in an escrow in the event that the remainder of the regular season is canceled, per Wojnarowski. If no agreement is reached on withholding players salaries beginning on April 15, players would continue to be paid in full and would be required to pay back a portion of their salaries down the road if games are canceled.

Under the current CBA, the league holds 10% of players’ salaries in escrow and returns it to them at the end of the season. However, the amount of projected revenue lost for the 2019/20 season exceeds the $380MM that the league has in escrow, so players and teams will likely attempt to work out an arrangement to mitigate those losses.

Another variable is how players get paid. Around 10% of players including LeBron James, are paid their full salary in 12 installments between November 15 and May 1. The overwhelming majority of players receive their income spread out over a full year – November 15 to November 1 – though some players receive larger installments as part of the payout structure. The NBA doesn’t want a scenario where it has to chase down players to recoup payment.

The league, as Woj adds, is hopeful that it can resume part of the regular season before entering the postseason. It has no plan to announce the cancellation of the season, preferring to continue to look for ways to salvage the campaign.