NFL Labor FAQ

The NFL labor negotiations are getting increasingly ugly and after the antics of last week lead by Commissioner Goodell and the owners, it is clear that there is no interest in carrying out a good faith negotiation at this time. If we are to believe all the reports from reputable media outlets, the NFLPA has proposed several counter-offers and ideas in order to move the negotiations along. Despite the NFLPA’s best efforts to engage in a legitimate conversation with the NFL, the owners walked away from the table and cancelled the last scheduled meeting.

So as the labor dispute heats up and will continue to get uglier, I’m setting out to provide a reference tool for the casual fan who may not know what the big fuss is about the CBA negotiations.

Q: Who is driving the lockout and what exactly IS a lockout?

A: The owners are opting out of the current CBA which means they are driving the lockout. The players have stated that they would like to renew the current agreement but the owners insist that the current deal is too heavily in favor of the players and they are refusing to renew the current deal. This means that the owners are choosing “no football” over the current CBA and they are willing to forego the season rather than continue along with the current deal.

A lockout exists when the employer (owners) refuse to allow the employees (players) the opportunity to work. This is done in order to refuse player demands or to gain concessions from the players. The owners basically refuse to allow the players to work and to earn a living as a form of leverage to get what they want.

Q: What is a CBA?

A: The CBA stands for Collective Bargaining Agreement which is basically the contract between the league and the union (the players) by which all things are regulated and agreed upon. CBA’s are conducted between employers and unions in order to voluntarily negotiate the terms of the relationship.

Q: What is the single largest issue in the negotiations?

A: Without a doubt, the single largest issue is revenue. Despite all the talk about the 18 game schedule, health benefits, and rookie wage scales, it all comes back to money. The current CBA is structured so that the players receive roughly 60% of the revenue AFTER a $1 billion credit to the owners. This credit is reportedly used for stadium enhancements, marketing and promotions.

Q: What is in dispute in regards to revenues?

A: Despite the NFL being the most popular and most rich sport in North America, the owners insist that the current business model is broken and that they signed a bad deal in the last CBA. For this reason, they are asking for an additional $1 billion credit, bringing the owners “off the top” fee to $2 billion before any revenue sharing.

The players have not flat out said no to this demand, but rather they have requested to review the books of the NFL owners. Several teams are claiming to lose money and the NFLPA has asked to verify this claim in order to properly weigh the demands of the owners. The NFLPA has also offered to do away completely with credits and to reduce their share from 60% to 50% of total revenues.

Q: Just how much money are we talking about here?

A: The NFL grosses approximately $9 billion in total revenues on an annual basis. Under the current structure, the owners would receive $1 billion off the top by way of the “cost credits” and the remaining $8 billion is split 60/40 between the players and owners respectively. This means that the players receive approximately $4.8 billion and the owners receive $3.2 billion plus their $1 billion credit totaling $4.2 billion.

If the owners were to succeed in obtaining the additional $1 billion credit, the players would receive $4.2 billion and the owners would receive $2.8 billion plus the credit equalling $4.8 billion. This obviously reverses the current revenue advantage the players receive under the existing deal.

Q: Why won’t the owners give the union their books to verify their claims?

A: Jeff Pash, general counsel to the NFL and lead negotiator insists that “we’ve given them all of the cost items for which we are seeking credits. They have received an extraordinary amount of financial information.” I can tell you that providing documentation of costs does not in itself justify or validate the claims for the additional $1 billion in credits. They could very well be turning incredible profits and still incurring these costs. The mere fact that these costs exist does not justify the need for additional financial relief. This does not even touch on the issue of cost reasonableness or validity that I’m sure the players are requesting information on as well.

Q: How much money will the NFL lose if a lockout takes place?

A: The NFL is estimated to lose approximately $400 million dollars for each weekend of regular season football that would be missed in the event of a lockout or work stoppage. Players would be losing the number of game checks that are missed. NFL players receive a game check for each week of the regular season for the entire amount of their salary. Therefore, they lose a proportional amount of their annual salary for each week missed in the event of a lockout.

Q: Which side has the leverage, if any, in the event of a lockout?

A: The leverage is decidedly in favor of the owners. Inherently, the owners are significantly more wealthy than the players, generally have additional business ventures to offset struggling sectors within their investment portfolio and the NFL has a guaranteed TV contract. The NFL and its owners have an approximately $4 billion TV contract that is guaranteed even if there is no football in 2011. This significantly sways the leverage towards the owners and will help them “weather the storm” much easier than the players who are used to receiving those 17 game checks.

There is a small and rarely discussed glitch in the guaranteed TV contract for the NFL, however. In the event that the entire season is lost, the NFL must repay the approximately $4 billion plus interest to the networks.

Q: If the CBA expires with no new deal, will there be a draft?

A: Yes, there will be a draft. However there will be no free agency and teams are unable to engage in trades (except for draft picks). That means that players cannot be traded in exchange for draft picks and obviously player for player trades are prohibited. Only picks for picks type trades can be executed.

Q: How much of an effect will this have on Free Agency?

A: According to the NFL, a record 495 players are set to become free agents. In the absence of a CBA, they are unable to be signed by teams. Conventional wisdom is that in the event of a lockout, there will be a chaotic, “feeding frenzy” type situation where teams are scrambling to sign free agents to fill out rosters heading into the season. Obviously, the closer we get to training camp, pre-season, and the regular season, the worse this situation could get.

For players who are slated to be free agents, this obviously affects their free agency by shortening the window by which they can be on the market. Generally speaking, this will likely detrimentally affect these free agents. There are a minority of “premiere” free agents who will likely not be negatively affected and they may actually be able to gain a little leverage due to the frenzy.

Q: Why do the owners want the additional revenue (cost credits)?

A: The owners state that they need this money in order to provide stadium enhancements and to grow the game internationally. According to the owners, without these credits, they are unable to afford the additional cost of these expenses. The NFLPA has asked to see the books in order to validate these claims, but the owners do not appear interested in providing complete transparency. They claim to have provided significant financial information, but complete transparency does not appear to be in the cards.

Specifically, the owners want to help build a new stadium in Los Angeles and to bring a team to L.A. While no one has provided any specifics, it has long been speculated that several current NFL teams could be moved to L.A. including the Vikings, Jaguars, Chargers, and others. he owners also plan to help with new stadiums for the Falcons, Vikings and 49ers.

As you’re aware, the NFL has had pre-season games in Mexico, regular season games in Canada and Europe for the past few years. They are serious about growing the international brand of the NFL, which costs money.

Q: Will the players be affected prior to missing actual game checks?

A: Unfortunately for the players, yes. If the current CBA expires on March 3rd, and at this point it seems a near certainty that it will, the players will lose their medical coverage. This is yet another significant advantage for the owners because by the time we even get to the point where the players will miss game checks, they will already have spent additional money out of their pockets for health care which they normally would not have had to do. Obviously, the players make a ridiculous amount of money by normal standards and they can certainly afford the coverage. But it is an additional cost that they are not used to spending nonetheless.

Q: Can the union do anything to stop the lockout?

A: Aside from somehow coming to an agreement with the owners on a new CBA, the only recourse the union has is to “decertify”. This means that they would dissolve as a union making a lockout by the owners illegal under anti-trust laws.

By decertifying, it would allow the players to bring an anti-trust lawsuit against the NFL challenging the various rules they have in place that restrict players’ ability to make money or that affect working conditions. Examples are the salary cap, the draft, franchise tags, and the lockout itself. Essentially, the players can choose protection under labor law (the CBA) or anti-trust laws which would protect them individually from some of the NFL’s restrictions. There are obviously pros and cons to both, but based on all other major sports, the union provides significantly more benefits and protections to the players than do the anti-trust laws.

The NFL, however filed a complaint with the National Labor Relations Board alleging that the union has not been negotiating in good faith and that it is planning to decertify in order to halt a lockout. The NFLPA has stated that this is a bogus complaint and that they can demonstrate that they have provided multiple offers and counter-offers in an effort to negotiate in good faith. I’m not sure what will come of the complaint with the NLRB, but this is certainly not a good sign for those hoping for a timely resolution to the CBA negotiations.

Q: What are the risks of decertification?

A: While the benefits can be great such as they were in 1989 when the NFL union decertified and brought anti-trust lawsuits against the NFL to force free agency, the risks are incredible. If the union were to decertify, the players would lose all benefits contained in the CBA such as pensions, insurance and medical benefits.

One of the big negotiating points for the players involve post-career benefits, thus decertification would not be taken lightly.

Q: Can the owners stop the decertification?

A: They will certainly try, and the complaint filed with the NLRB yesterday is their first attempt to proactively stop the union from decertifying. The NFL will claim that the decertification isn’t legitimate and that the union is still acting behind the scenes directing the players. The NFL will use the previous union decertification in 1989 against them by saying that it was only used as a bargaining tool as it was re-established only a few years later. In this context, the owners will likely have a legitimate argument.

Q: Can the owners do anything other than force a lockout?

A: Actually, yes. Again, I’m not a lawyer so I’m summarizing as I understand the legal verbiage, but the owners do have the opportunity to “implement their last, best offer”. This means that at the end of the negotiations, if they are still at an impasse, the owners are able to implement changes to the previous CBA which represents their “last best offer”.

Long story short, the labor law allows the owners to implement their last best offer and the players are forced to accept it, deny it, or decertify the union. This is significant because it places the decision in the hands of the players. The owners are no longer causing the lockout, if there is no football it is because the players did not accept the offer.

Players Launch NFL “Let Us Play Day” effort to avoid Lockout

 

We’ve been hearing about the impending NFL lockout for what feels like two years as the current NFL Collective Bargaining Agreement (CBA) is set to expire this March. The owners, the Commissioner and the NFL Players Association have all been posturing and negotiating publicly this entire time and as we approach the 11th hour of the negotiations, both sides will undoubtedly step up their efforts.

The NFLPA launched an effort today they are dubbing “Let Us Play Day” in order to get the word out to NFL fans everywhere in order to help their efforts to avoid a lockout next season. The verbiage has recently changed drastically from everyone saying there would be a 100% chance of a lockout for a significant portion of the 2011 season, if not the entire season. As of the last month or so, NFL experts are now predicting that there will be a lockout but that it won’t last past training camp and would end during the pre-season at the very latest.

Despite the positive movement, the players don’t appear willing to relent. Obviously, the best solution for both sides is to get a new CBA in place before the current one expires. The NFL has stated that if a new CBA is not in place by the expiration in March, the player’s health benefits would be waived.

So what exactly are the players doing for “Let Us Play Day”? Here is the letter I received imploring fans to spread the word and get the player’s message out there.

 

I personally believe the player’s efforts will be wasted and that they are in a no win situation. If there is a lockout, they won’t be able to last very long whereas the NFL and the owners have a guaranteed TV contract in place even if there is no football. Not to mention, the owners have countless times more resources to withstand a work stoppage than do the players and so they have countless times more leverage should a work stoppage occur.

Not to mention, most fans just want football. They don’t care that the NFL players are getting a raw deal relative to the other major sports. Fans know that the players make a ridiculous amount of money to play a game and they don’t care about the specifics of the negotiations. They just want football.

As it stands now, there are still a couple major sticking points that neither side seems willing to move on. The first is the 18 game schedule which the players have every right to not only despise, but to call out the NFL’s blatant hypocrisy and inconsistency as it relates to this issue. The NFL wants to add two games which will increase the risk of injury and yet they are constantly preaching player safety. Obviously, there will need to be concessions by the owners in terms of roster sizes, pre-season schedules, and compensation in order to move this forward.

The other major sticking point is the issue of revenue distribution. The NFL wants to take back a percentage of the player’s revenue distribution that the players won in the last negotiation. The players obviously want to keep the fruits of their labor in the previous negotiation and will also point out that the NFL takes something like $1B off the top of the earnings before the distribution is made.

By all accounts, this will be much ado about nothing for fans as the lockout will most likely be minimal, if at all. But there are major repercussions for the future of the league that are a part of these negotiations. For more information about the player’s efforts check out the NFL Lockout website and the other links listed in the letter above.