Why The NBA May Dodge A Lockout

SI.com looks at the roles of basketball-related income, important dates and key players, including Adam Silver, Michele Roberts and LeBron James, play in current CBA talks.

With the NBA and NBPA making progress towards an agreement on a new collective bargaining agreement, the league and its players are poised to avert a contentious and protracted labor dispute that would imperil the 2017–18 NBA season. Sources familiar with the negotiations have confirmed to SI.com that the NBA and NBPA have agreed in principle on many terms.         

Those sources, however, caution that no deal has been reached and additional negotiation sessions are required. As in any labor negotiation, an agreement in principle on certain terms is contingent upon eventual agreement on the remaining terms. CBAs are incredibly detailed and complicated. The current CBA for the NBA and NBPA covers 42 articles over 390 pages, a length that grows to 510 pages when accompanying exhibits are included. Much can happen between a stage where there is agreement on many or most terms in a potential labor deal and finalizing that deal. Nonetheless, if progress continues, the NBA and NBPA should be able to finalize the labor agreement’s terms within a matter of weeks.

“Weeks”—and not months or years—is a key word, as timing is of the essence. While the NBA’s current CBA is set to run through the 2020–21 season, either side can opt out of the current CBA on or before Dec. 15, 2016. That date is only 52 days away. If either side opts out, the current CBA would be set to expire on June 30, 2017. If, however, a deal is reached prior to Dec. 15, 2016, neither side will opt out. In that latter scenario, a labor agreement would remain in place for many seasons to come. The agreement would serve as an extension of the current CBA, with changes likely made on a gradual basis over the next several years.

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The important role of Basketball Related Income

The value of a new CBA is not only in how its terms might improve the league. It is also in how it would prevent the cancellation of games—and the accompanying loss of business, fans and goodwill.

Consider what would happen if the NBA and NBPA fail to negotiate a deal by Dec. 15. One or both sides would probably exercise the opt-out. Of the two sides, the NBPA is regarded as more likely to opt out. This is due to, among other reasons, player dissatisfaction with the allocation and configuration of “Basketball Related Income” (BRI), a collectively bargained number that includes certain, but not all, types of revenue generated by NBA broadcasts, apparel, arena signage and other properties.

In the current CBA, the league and players share BRI almost evenly. BRI is linked to the size of the NBA’s annual salary cap figure, with higher BRI translating into a higher salary cap for teams. Expressed in its most simplified form, higher BRI means more NBA players make more money. With substantially increased TV money now flowing into the league, players seek a greater share of BRI or a broadening of how BRI is defined, or both.

The NBA has its own set of concerns that make opting out a possibility. In recent years, the league has stressed that independent-audited records show that many NBA teams lose money. While this may sound surprising in light of the 9-year, $24 billion TV deal the league negotiated with ESPN and Turner Sports in 2014, teams’ expenses can be quite significant and teams in relatively smaller markets tend to negotiate smaller regional TV deals.

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If either side opts out, brace for a lockout

In a world where one side opts it, that decision would set in motion a sequence of events that could endanger the 2017–18 NBA season. This is because if the current CBA expires on June 30, 2017, the NBA would almost certainly “lock out” NBA players on the next day, July 1.

A lockout is when an employer denies its employees the conditions of their employment. Those conditions include wages, health care and access to the employer’s facilities. Such a denial is designed to pressure the employees into agreeing to certain, and often management-friendly, terms of employment. In an NBA lockout, the league and its teams would collectively refuse to negotiate with NBA players. By locking out its players, the NBA would hope that those players, who are accustomed to living on lucrative salaries and some of whom may not save much, would eventually acquiesce to league demands. A lockout is also an important step to prevent players from claiming that the terms of an expired CBA remain in effect. In essence, a lockout tells the employees: agree to the employer’s demands or your employment is suspended.

The NFL and NBA used lockouts in 2011 following expiration of their respective CBAs. NFL and NBA players stopped being paid and were forbidden from entering their teams’ practice and training facilities. The two leagues’ respective players’ associations, the NFLPA and NBPA, tried to combat the lockouts by “disclaiming interest”—a process whereby a players’ association announces that it no longer represents its players and thus does not bargain on their behalf. The immediate effect of a disclaimer of interest is that players are, in theory, free to negotiate with teams. Teams refuse to do so, however, because the league has locked out those players.

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The real purpose of a disclaimer of interest is to enable players to file antitrust lawsuits against the league. Many popular rules in the NFL and NBA—such as salary caps, rookie wage scales and age eligibility rules—could be found unlawful if scrutinized under federal antitrust law. These rules are exempt from such scrutiny, however, so long as they resulted from collective bargaining. Indeed, under federal law, collectively bargained rules that primarily affect the wages, hours and other working conditions of employees are exempt from antitrust scrutiny. Collectively bargained rules can become vulnerable to antitrust scrutiny, however, when the collective bargaining relationship ends. Therein explains why the players’ association would disclaim interest: players could then sue the NBA and contend that the league and its teams, which are competing businesses, have joined hands in an unlawful conspiracy to impose anti-competitive restrictions on salary and employment.

If this all sounds complicated, it is, but the important point is that in a lockout, NBA players would attempt to exit the NBPA and seek to bring antitrust litigation against the NBA and its teams. That would commence an unwelcomed battle that could cause some frustrated NBA fans to become interested in other sports and entertainment options.

As you may recall, New England Patriots quarterback Tom Brady went to court against the NFL—and I’m not referring to the Deflategate litigation. Brady, along with 14 other named players, sued the NFL in March 2011 over the legality of the NFL lockout. Carmelo Anthony and 13 other named players brought a similar lawsuit against the NBA over its lockout in November 2011. While the NBA and NBPA resolved their labor dispute not long after Anthony filed his lawsuit, Brady’s lawsuit was litigated at both the district court and appellate court level. He was initially awarded an injunction that temporarily halted the lockout. That injunction, however, was lifted on appeal. The NFL persuaded the U.S. Court of Appeals for the Eighth Circuit that a Great Depression-era law, the Norris-LaGuardia Act, prevents federal courts from issuing injunctions while labor and management are at impasse. If the NBA and its player went to court, the 2011 Brady case would be crucial precedent in favor of the NBA. That is another reason why the NBPA wants to avoid being locked-out this time around.

If they can reach a labor deal over the coming days and weeks, the NBA and NBPA will thankfully avoid terms like “lockout,”  “impasse,” “disclaimer of interest” and “the Norris-LaGuardia Act.” While those terms can generate a small fortune for sports attorneys, most NBA fans don’t want to hear anything about them. Fans instead want to hear about how well Kevin Durant, Stephen Curry and Klay Thompson will mesh, how long a 31-year-old LeBron James can remain the world’s best basketball player, who might be selected first in the 2017 NBA Draft and other interesting basketball topics. The same attitude is true of the NBA’s broadcast partners and the restaurant, security, parking and many other types of workers who generate income through NBA games being played.

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Roles of Adam Silver, Michele Roberts, Chris Paul and LeBron James

One particularly encouraging sign for the NBA and NBPA is that the two sides have engaged in constructive and regular talks for months. In many sports labor disputes, leagues and players’ associations wage contentious and sporadic discussions in the months preceding a deadline, only to then hastily attempt—and fail—to put together a deal right before a CBA expires. Not so with the NBA and NPBA this year.

It is thought that the NBA-NBPA’s positive dynamic largely reflects the personalities of NBA commissioner Adam Silver and NBPA executive director Michele Roberts. In their leadership positions, Silver and Roberts are ultimately responsible for their respective sides’ bargaining interests. Silver and Roberts are often described in similar ways: intelligent, pragmatic and respectful of differing views. Both realize that the NBA is doing extremely well and that it makes sense for all involved to continue that success without interruption. One thing is for sure: Silver and Roberts are on much better terms than were their predecessors, David Stern and Billy Hunter, respectively, in 2011.

In an interview with SI.com, former NBPA executive director Charles Grantham stresses that the NBA’s favorable economic landscape facilitates how Silver and Roberts negotiate. “The hawks that want to change the system,” Grantham observes, “simply aren’t there this time around—there’s nothing worth disrupting the NBA’s business over and there’s no appetite for radical change.” Grantham, who is now Director for Sport Management and Associate Professor in Seton Hall University’s Stillman School of Business, notes that the “great NBA finals” between the Cleveland Cavaliers and Golden State Warriors in June, coupled with the “very prosperous free agent signings this past summer” engender a bargaining dynamic whereby continuity is much more valued than disruption.

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Also playing a positive role in the negotiations is the leadership of Chris Paul and LeBron James in the NPBA. Paul and James—the NBPA’s president and first vice president, respectively—are somewhat unorthodox leaders. As max contract players, their own interests are not aligned with those of most NBA players. James, in fact, has been an outspoken critic of max contracts, and for good reason: even though James, who will earn $31 million in 2016–17, is the NBA’s highest paid player, he is simultaneously the league’s most underpaid player: as the NBA’s best player, James would earn much more if his contract wasn’t limited by a collectively bargained “max.” Both Paul and James are also both 31 years old. They are thus on the older side of NBA players, whose average age is a little under 27 years old.  

Despite Paul and James holding a differing vantage point from that of most NBA players, gains for players in the next CBA are expected to mostly benefit non-stars. A higher minimum pay and a higher free agent exemption, for example, are thought to be likely terms. If Paul and James have concentrated their energies on looking out for less prominent NBA players, it would signal their desire to strike a deal that would enjoy wide support by NBPA members.

Michael McCann, SI's legal analyst, provides legal and business analysis for The Crossover. He is a Massachusetts attorney and the founding director of the Sports and Entertainment Law Institute at the University of New Hampshire School of Law.