Collective Bargaining Agreement

NBA, NBPA Extend CBA Termination Deadline

The NBA and the NBPA have reached an agreement to extend the window during which the league can terminate the Collective Bargaining Agreement, reports ESPN’s Adrian Wojnarowski. The previous 60-day period, which began when the season was suspended on March 11, had been set to expire. The deadline will be pushed back to September, according to Wojnarowski.

It may sound ominous that the NBA will continue to have the ability to “terminate” the CBA, but it’s more of a necessary formality at this point. The “force majeure” provision gives the league that power, but the NBA has no interest in taking advantage of it for now, since both the league and the players’ union want to resume the 2019/20 season in the coming months.

In order for that to happen, the Collective Bargaining Agreement will need to be restructured, so delaying this deadline gives the two sides more time to gather information on the league’s projected financial losses and to work through issues like next season’s salary cap and luxury tax thresholds, as Woj explains. When the time comes, the NBA and the NBPA figure to work together to negotiate the necessary adjustments to the CBA.

“This CBA was not built for an extended pandemic,” Silver said on Friday’s conference call with players, per ESPN. “There’s not a mechanism in it that works to properly accept a cap when you’ve got so much uncertainty; when we’d be going in next season saying, “Well, our revenue could be $10 billion or it could be $6 billion. Or maybe it could be less.”

Besides figuring out salary cap details going forward, the league and the players’ union will have to negotiate a number of other issues, including how the players will be paid for whatever portion of the 2019/20 season can be played, how free agency will work, and what the NBA schedule will look like in 2020/21 and beyond.

NBA Proposes 50% Pay Check Reduction For Players

The NBA has proposed to the National Basketball Players Association that players accept a 50% pay check reduction beginning on April 15, sources tell Shams Charania of The Athletic (Twitter link). According to Charania, the NBPA has issued a counter-proposal that would see players’ pay checks reduced by 25%, beginning in mid-May.

It would be in both sides’ best interest to resolve these negotiations – which were reported earlier in the week by ESPN’s Adrian Wojnarowski – fairly soon, since the players’ next checks are due in 12 days.

Thus far, team owners have assumed the brunt of the financial losses from the NBA’s stoppage of play, but the impact of that lost revenue will soon hit the players, since the league’s Collective Bargaining Agreement calls for approximately a 50/50 revenue split between the two groups.

The NBA already holds 10% of players’ salaries in an escrow account and would normally either pay out or withhold some or all of that money at season’s end, depending on whether the players were overpaid or underpaid over the course of the year, relative to the revenue split.

Given how much money the league projects to lose this season, the amount in that escrow – approximately $380MM, per Eric Pincus of Bleacher Report – likely won’t be enough to cover the players’ half of the losses, which is why the NBA is looking to recoup an additional portion of its players’ salaries.

The exact amount that the NBA gets back from players will depend on whether or not any part of the season can be salvaged this summer and how much revenue the league ultimately loses. As Pincus notes in a tweet, the NBA’s proposal – a 50% reduction beginning on April 15 – may suggest that the league believes its losses this season will total more than the $1.2 billion he estimated in his article.

If the two sides can’t come to a satisfactory agreement that helps maintain the revenue split, the players would simply be delaying rather than avoiding the financial impact of the suspended season. The effects would be felt if and when the NBA invokes the “force majeure” clause for canceled games, which would unilaterally reduce players’ salaries and could result in re-opened CBA negotiations. The salary cap for 2020/21 could also drop substantially if players earn a much larger portion of the revenue split than owners in ’19/20.

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.

Ripple Effect Of Hiatus On Contracts, Cap, Offseason Dates

Given the typically rigid nature of the NBA’s annual calendar, the current hiatus threatens to complicate a number of dates and deadlines that will arrive in the coming months. In his latest Insider-only article for ESPN.com, Bobby Marks takes a closer look at how those dates – linked to contracts and the salary cap – may be impacted, noting that the NBA and NBPA are expected to collectively bargain a set of transition rules once the league establishes a return timeline.

For instance, there are 29 player options and 12 team options that are currently scheduled to be exercised or declined before the end of June. Those dates will almost certainly have to be adjusted. The same goes for certain salary guarantee dates and the expiry dates on traded player exceptions, as Marks explains. Of course, the start of the 2020/21 league year will have to be pushed back too, so players with expiring contracts don’t become free agents on July 1.

Contract incentives will also be an issue worth keeping an eye on. Marks observes that during the lockout-shortened 2011/12 season, players’ incentives were prorated based on the fact that the league played 66 games instead of 82 games. The NBA could take similar measures this season. For instance, if a player needs to play 1,000 minutes to earn a bonus and his team ends up playing just 70 of 82 games, his incentive requirement would be adjusted so he only needs to play 70/82nds of 1,000 minutes (854 minutes).

Marks’ article is jam-packed with interesting info and is worth checking out in full if you have an Insider subscription. Here are a few more highlights:

  • Although the NBA’s basketball related income for 2019/20 is projected to take a huge hit as a result of this hiatus and the controversy with China in the fall, it’s too early to say what that will mean for the 2020/21 salary cap, according to Marks. In situations like this, the NBA and NBPA generally negotiate in good faith a cap adjustment that satisfies both sides, so we’re unlikely to see a big drop-off next year.
  • Still, with the cap for the next year or two no longer expected to increase by nearly as much as the NBA initially projected, the ripple effect could be significant. Maximum-salary contract extensions scheduled to go into effect next season or in 2021/22 for players like Jamal Murray, Ben Simmons, Pascal Siakam, and Damian Lillard won’t be as lucrative as previously estimated, and teams will no longer have as much cap or tax flexibility as expected. As Marks points out, that could influence players with option decisions — they may be more inclined to opt in for ’20/21, with less leaguewide spending power available in the offseason.
  • Resuming the regular season – rather than just jumping straight to the playoffs – may not be a top priority for many fans, but there are reasons why the NBA won’t want to skip that step, Marks writes. Teams that wanted to make roster moves prior to the postseason wouldn’t get a chance to do so if the NBA moves straight from its current moratorium to the playoffs. For example, in that scenario, the Thunder wouldn’t get the opportunity to convert two-way player Luguentz Dort to their 15-man roster. As such, the NBA may want to play a few regular season games or at least give teams a few days to make necessary roster moves.

NBA, NBPA Plan On Moratorium For Roster Moves, Contracts

The NBA and the National Basketball Players Association plan to enter an agreement on a moratorium period while the NBA season is suspended, according to Shams Charania of The Athletic (Twitter link).

Similar to the July moratorium, this period would freeze moves such as free agent signings and trades (not that trades would be permitted anyway at this time of year). As Charania explains, it would also prohibit action on player and team options, and would freeze 10-day contracts.

According to Charania (via Twitter), the preliminary timeline for the moratorium period is expected to be March 12 through April 10. That timeline would be reassessed as April 10 approaches.

Postponing the actual scheduled games only represents part of the logistical challenge facing the NBA during its hiatus. There are a number of contract- and CBA-related questions that must be answered in the coming days and weeks, especially if the league ultimately intends to push the 2019/20 league year beyond June 30.

John Hollinger of The Athletic discussed a handful of these questions in a Thursday article, pointing to 10-day contracts, incentive bonuses, option and salary guarantee deadlines, and contracts that expire on July 1 (for both players and coaches) as issues that must be addressed. As Bobby Marks of ESPN and Eric Pincus of Bleacher Report note (via Twitter), the NBA and NBPA would have to come to an agreement on what changes will be made if the end of the season is pushed into July or August.

Hollinger, Marks, and others have also pointed out that the league’s Collective Bargaining Agreement includes “force majeure” language in the event that games are canceled for reasons outside of the NBA’s control, such as an epidemic. Theoretically, the league and its owners could trigger that provision and could aim to recoup 1/92.6th of players’ salaries for each lost regular season game.

ESPN’s Adrian Wojnarowski writes that players have been made aware of that force majeure clause, but there have been no discussions between the league and the union so far about the provision, since there’s still a belief the season can just be postponed rather than canceled. According to Charania, players will receive their next check in full on March 15.

NBA Could Terminate Dinwiddie’s Contract If He Goes Forward With Digital Investment Plan

Spencer Dinwiddie has plans to convert his three-year, $34.4MM contract into a digital investment vehicle that would allow investors to buy a digital token backed by his contract, something that would allow the guard to secure a large upfront payment. The league, which sought outside legal counsel on the matter, is not approving Dinwiddie’s venture for a variety of reasons, as Shams Charania of The Athletic learns.

“At the request of Spencer Dinwiddie and his advisors, we have reviewed a number of variations of their digital token idea,” said Dan Rube, the NBA’s Executive Vice President and Deputy General Counsel. “All of the ideas presented would violate collectively bargained league rules, including rules prohibiting transferring a player’s right to receive NBA salary, gambling on NBA-related matters, and creating financial incentives to miss games.”

The NBA wants to work with Dinwiddie to find common ground, Charania writes. Dinwiddie has met with the league twice over the past month in an attempt to find a resolution that allows him to move forward with his venture. The guard has made several changes to the structure of his investment vehicles that would appease the league and attempted to alleviate concerns about “third-party assignment” or the transferring of his contract, which would violate the Collective Bargaining Agreement.

The latest hangup is over Dinwiddie’s 2020/21 player option, which is worth $12.3MM. Token holders would be invested in his decision on that option, though the Nets’ guard recently altered the payout mechanism for investors, reducing the risk to zero should he opt in and giving them potential upside should he opt out. Because of his option, the league views selling the digital token as gambling, since his investors would be potentially wagering millions of dollars on whether he becomes a free agent as well as his availability to play games in the league.

Dinwiddie still plans on moving forward with his venture, as he believes the NBA’s lack of approval is without cause. Dinwiddie carrying out his plan could bring penalties such as a suspension, a fine, or even the termination of his contract, though that would be an extreme measure.

Charania hears from a source that Dinwiddie’s goal is to design a method that can further improve a player’s economic options while adhering to the league’s concerns. The National Basketball Players Association recently release a statement supporting Dinwiddie.

“The NBPA’s mission is to support its members and we are currently assisting Spencer and his business associates in seeking to address the League’s concerns,” the NBPA said in a statement. “Our hope is that a resolution satisfactory to all parties can be achieved.”

For now, the two sides are in a standstill over the combo guard’s plan. Dinwiddie has played in 13 games for Brooklyn, starting two in place of Kyrie Irving. He’s averaging 18.5 points and 4.8 assists per game and the Nets are 5-8 on the season.

More Details On NBA’s Anti-Tampering Proposals

As we relayed on Saturday, the NBA issued a league-wide memo to inform all 30 teams of potential changes to the league’s anti-tampering policies. The NBA has proposed increasing the maximum allowable fines for tampering violations and requiring team owners to submit proof that no tampering occurred when they sign new players.

With the NBA’s Board of Governors set to vote on the new rules this coming Friday, September 20, ESPN’s Zach Lowe shares a few more details on what exactly the league is proposing. As Lowe notes, not all of these rules will necessarily be approved, but the Board of Governors will consider them.

  1. A requirement that a team reports within 24 hours any instance of a player or his representative asking the team for “unauthorized benefits” (ie. a benefit that is not permitted under the league’s CBA).
  2. Prohibiting players from inducing players already under contract to request trades.
  3. A requirement that teams preserve all communications with players and agents for one year.
  4. Introducing new channels for team employees to anonymously report tampering or rules violations.

The first two items on this list seem directly related to Kawhi Leonard‘s recent free agency. There were whispers in July that Leonard’s camp made requests that fell outside the purview of the CBA, and we know that he had a hand in encouraging Paul George to request a trade with the Clippers.

We’ll have to wait until Friday to see exactly what the league’s new anti-tampering policies look like, but it appears that players and teams hoping to get a head start on free agency will have to be more careful than ever going forward.

NBA Ponders Changes To Scheduling, Number Of Regular Season Games

As one of the more progressive leagues in the world, the NBA continues to explore changes to enhance the quality of its product. Altering the schedule to reduce the number of games per season is among the changes the league is exploring, Kevin Arnovitz of ESPN.com passes along.

All conversations are in the earliest of stages, though top executives from around the league recently had a “brainstorming session,” in which ideas on changing the schedule and adding a mid-season cup and/or postseason play-in tournament were discussed. Arnovitz suggests the talks were “very exploratory,” adding that even if changes were proposed and implemented, it wouldn’t happen before the 2021/22 season.

While “load management” issues have caused debate over the league’s 82-game schedule, Arnovitz writes that executives from teams and the league have made an economic case for shortening the number of games. Increasing the scarcity of events and ensuring that each game would be more competitive – with fewer marquee players sitting out – are among the arguments for a change.

Supporters of a schedule alteration believe that the pair of potential tournaments would also help to offset the revenue decline that comes with reducing the games on the schedule.

Arnovitz hears that there isn’t much interest in drastically cutting down the number of games. Options discussed ranged from implementing a 58-game schedule to simply cutting just a handful of contests.

The NBA would need to collectively bargain any changes to the schedule, as the CBA requires the league to make reasonable efforts to increase revenue. A reduction in games could be seen by the players as an attempt to reduce Basketball Related Income.

Latest On LeBron James’ Future

Cavaliers owner Dan Gilbert cannot offer LeBron James a stake in the franchise in an effort to retain his services, Michael McCann and Jon Wortheim of Sports Illustrated point out. The Collective Bargaining Agreement prohibits players from holding direct or indirect interest in the ownership of a team, thus the NBA would not approve a contract with any type of ownership provision, the story continues. The league has also been vigilant in preventing players and owners from intermingling their business interests, the SI duo notes. James can opt out of his contract or try to force a trade to a desired destination this summer.

Here’s some other interesting notes regarding the possibility of James playing elsewhere next season:

  • The Rockets would need to either gut their roster or make a trade with the Cavaliers to add James, but the latter option is complicated by the team’s roster composition, Jonathan Feigen of the Houston Chronicle writes. The Cavaliers would likely want quality young talent to kick-start a rebuild in any James trade and the Rockets don’t have enough of those players while trying to match up salaries to absorb James’ $35MM contract, Feigen adds. The most desirable option for the Rockets is to dump Ryan Anderson‘s contract ($20.4MM next season and $21.3 MM in 2019/20) on a team with ample cap room, according to Kevin Pelton of ESPN. But Houston probably doesn’t have enough first-round picks to package with Anderson to get a third party to bite, Pelton adds.
  • There are major obstacles to any possible pursuit of James’ services by the Celtics, DJ Bean of NBCSports.com notes. It’s highly unlikely that Boston would include Gordon Hayward in any deal, considering the high-level free agent chose Boston last summer and hasn’t even played a full game with the franchise, Bean continues. There’s also the sticky problem of trying to reunite James with Kyrie Irving, who asked out of Cleveland last summer. Acquiring James now would likely damage the team’s long-term prospects for being the dominant team in the league, given the assets they’d likely have to trade, Bean adds. Logically, the only big contract the Celtics would be willing to move is Al Horford‘s deal, according to Steve Bulpett of the Boston Herald.
  • James’ decision will have more to do with his family than basketball, former teammate Dwyane Wade predicts, as Manny Navarro of the Miami Herald writes. “I don’t really think for him the basketball decision is ‘Oh, let me go team up with three All-Stars.’ I think at this point in his life it’s more so of a lifestyle thing,” Wade said. “Where is my family going to be the most comfortable at? Where am I going to be the happiest at? Because basketball-wise he’s so great, he can take along whoever.”
  • The Lakers and Sixers are the favorites to land James while the Cavs are just a 5-1 shot to retain him, according to Bovada sports book, Keith Pompey of the Philadelphia Inquirer tweets. The odds rundown can be found here.

League, Union Formally Discuss One-And-Done Rule

Draft eligibility rules have been a topic of conversation between the NBA and the Players Association, Adrian Wojnarowski of ESPN writes, and earlier today league commissioner Adam Silver and union executive director Michele Roberts went so far as to formally speak with the government’s Commission on College Basketball in Washington, D.C.

The commission – which includes executives, retired players and political figures – was formed in the wake of recent FBI investigations regarding corruption.

The meeting between the three parties is said to have been strictly informational in nature and, ultimately, what the NBA decides to do with regard to incoming players is up to the league and the player’s union.

As Wojnarowski writes, there’s a growing belief that Silver seeks to end the one-and-done rule implemented by his predecessor in 2005. In order for such a change to happen though, the union would potentially need to accept a mandate declaring that players who do choose to enter college would be obligated to stay for two years prior to declaring for the draft.

Silver has previously said publicly that the current one-and-done rule isn’t working for the college game.