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Key players in labor negotiations from left to right: Commissioner David Stern, Deputy Commissioner Adam Silver, NBPA Executive Director Billy Hunter and President of the NBPA Executive Committee Derek Fisher

CBA Basics: Owners, players and the negotiations


Posted Jul 5 2011 1:20PM

Labor Central
The Issues
Glossary

The NBA's collective bargaining agreement -- the blueprint for all business that takes place between the league and its players in this multi-billion dollar industry -- expired on June 30, putting the league into a state in which no player-related business can take place until a new CBA is hammered out.

Both sides have insisted that reaching a new agreement is important to maintain the soaring popularity that the league enjoyed in a very successful 2010-11 season. But the issues are varied and complex, and the sides made little headway in negotiations on a new accord before the CBA expired. The ensuing lockout of players marks only the second work stoppage in league history. The 1998-99 season was marred by a lockout that limited that season to 50 games.

If the players and owners have agreed on anything during these months-long yet often sporadic negotiations, it is that achieving labor peace is not easy. The sides remain apart on several important issues.

Tops among them, as is often the case: money.

The NBA is pushing for a dramatic adjustment to the league's economic system. NBA commissioner David Stern claims that the NBA has lost more than $1 billion since the current CBA went into effect in 2005-06, including $380 million in 2009-10 and more than $300 million in 2010-11. He has said that 22 of the league's 30 teams lost money last season.

National Basketball Players Association executive director Billy Hunter has disputed both the league's figures and its accounting methods. The players note that the NBA, by its own accounting, is coming off a season of record revenues, which has led to bigger player payrolls and the highest cap on salaries ever.

The league contends that costs -- mainly player salaries -- have skyrocketed out of control, and that the system of doing business outlined in the last CBA is no longer workable.

Here's a look at some major issues that face the two sides in the negotiations. (For a more detailed glossary of some of the basketball labor terminology used below, click here.)

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The Salary Cap

What you need to know: In their desire to bring costs for players under control, owners have called for a cap on salaries. These caps have been described, at various times, as "soft" or "hard" or even "flex." The last agreement included a salary cap, too, but it could be exceeded through various exceptions (see glossary). The players would be satisfied with a cap like that one, but the owners are adamant in their call for a "hard" cap that teams cannot exceed.

Bottom line: An insistence on a hard cap has proven to be the major sticking point in these negotiations. The union flat-out doesn't want one. The league says it has to have one.

Salary Cap Exceptions

What you need to know: These are rules that allow teams to exceed the cap under certain circumstances. A new agreement could limit these, which would help owners with a little cost certainty but make it more difficult to sign certain types of players. A new agreement, too, could bring new exceptions, such as the "franchise" tag that's used in the NFL. An enhancement of Bird rights (see glossary) is another possibility. "Amnesty" provisions could be reinstated to allow teams tax relief for current contracts, too.

Bottom line: Despite the owners' insistence, an NBA with a "true" hard cap, one without any exceptions, will be hard to come by given the union's stringent resistance to the idea.

Split of Basketball Related Income

What you need to know: Players earned 57 percent of all Basketball Related Income (see glossary) in the former agreement. Owners are demanding that number come down.

Bottom line: The league is dead-set on scaling back the percentage of BRI the players receive. The union, predictably, wants to keep the percentage at or near where it is now.

Revenue Sharing

What you need to know: Owners and players are in agreement on the need for increased revenue sharing among teams as a way to make more teams profitable and competitive. Somewhere around $60 million was shared in the 2010-11 season. That won't be enough for either side in any future agreement.

Bottom line: What owners do with their half of revenue would seem to be a mostly owner-controlled issue, but players in a collectively bargained agreement must sign off on any revenue-sharing plan. They want more money to be shared among teams, more than some of the league's richer teams are willing to offer.

Guaranteed Contracts

What you need to know: Owners reportedly favor a system that would allow them to cut their losses on so-called "bad" contracts for underperforming players. That could mean shorter-term contracts and less guaranteed money.

Bottom line: Guaranteed contracts have been a staple in the NBA for years. The union isn't going to give up what they have without a fight. In negotiations before the lockout, the owners agreed to come off their stance.

Contraction

What you need to know: Stern has said that the idea of eliminating at least a couple of teams in order to enhance the league's bottom line -- and its on-court product -- is on the table.

Bottom line: Contraction remains a longshot for a few reasons. One, there's a question as to whether any teams, even those losing money, would be willing to sell. Two, other cities may be willing to take on a struggling NBA franchise, so many argue that relocation should be considered before contraction. And, of course, cutting teams would mean fewer jobs for players. That's something the union would fight.

Other Issues

Rookie salary scale

Drug policy

NBA Development League

Conduct and discipline rules

Pensions

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BASKETBALL RELATED INCOME

Generally, income received as a result of basketball operations. The sources include broadcast rights, gate receipts, sponsorships, proceeds from NBA properties, percentage of arena naming rights, suite proceeds, concessions, merchandise sales, etc.

Players were guaranteed 57 percent of BRI in the expired agreement. The BRI figure for 2009-10 was approximately $3.6 billion, with players guaranteed nearly $2.1 billion in salary and benefits.

LUXURY TAX

An amount levied on teams that exceed the salary cap. The luxury tax level for 2010-11 was $70.307 million. Teams whose player payroll exceeds that figure pay a dollar-for-dollar tax. For example: A team with a payroll of $75.307 million pays $5 million in luxury tax.

The luxury tax is split evenly among the teams that do not pay the tax. Each gets 1/30th of the pot. The remaining money is controlled and used at the NBA's discretion.

SALARY CAP

The limit teams can spend on salaries. The salary cap for 2010-11 was $58.044 million, an increase from $57.7 million from the previous season. It's calculated by multiplying projected Basketball Related Income (see above) by 51 percent, subtracting player benefits and then dividing the result by 30 (the number of teams in the league). The minimum team salary, by the way, is set at 75 percent of the salary cap. That was $43.533 million in 2010-11.

The league wants a "hard" cap, which would strictly disallow teams from exceeding a calculated payroll limit. The salary cap in the last agreement could only be described as "soft," because it includes several methods that teams can go over the cap (see Salary Cap Exceptions).

SALARY CAP EXCEPTIONS

Rules that allow teams to exceed the cap if the player meets certain criteria. Here were some of the exceptions in the last agreement:

Qualifying Veteran Free Agent (Bird Exception): Used for a free agent, eligible for up to the maximum salary, if he played for that team for some or the entire prior three seasons, or if he changed teams by trade.

Early Qualifying Veteran Free Agent (Early Bird): Used for a free agent eligible for a salary of up to the greater of (a) 175 percent of the player's salary in the last season of his prior contract or (b) 108 percent of the average player salary for the prior season. The player had to play for the team for some or the entire prior two seasons, or changed teams by trade.

Non-Qualifying Veteran Free Agent (Non-Bird): Used for a free agent who is neither a "Bird" nor an "Early Bird" player. He could sign up to (a) 120 percent of the player's salary in the last season of his prior contract, (b) 120 percent of the player's applicable minimum salary for the current season or, (c) if the player is a Restricted Free Agent, his qualifying offer amount.

Bi-Annual: Could be used to sign one or more players to contracts with first-year salaries totalling up to $2.08 million for 2010-11. Could be used only every other year.

Mid-Level Salary: Was used to sign one or more players to contracts with first-year salaries that provide for a total of up to 108 percent of the average player salary for the prior season. Set at $5.765 million for 2010-11. Could be used every year.

Rookie: Teams could sign their first-round Draft picks for up to 120 percent of the Rookie Salary Scale amount, as negotiated in the CBA.

Minimum Salary: Teams could sign a player to a one-year or two-year contract at the applicable minimum salary determined by years of service.

Disabled Player: Teams could replace a player who suffered a season-ending injury with one player making up to 50 percent of the injured player's current salary.

Traded Player: If a team traded a player's contract to another team, that team could replace the traded player with one or more players acquired by trade. Teams have up to one year to complete transaction to comply to the salary cap rules.

OTHER POINTS OF INTEREST

In the last CBA, the maximum length on contracts between a team and its Bird free agents, or between a team that is extending rookie contracts, was six years. For the minimum salary exception or bi-annual exception, it was two years. Rookie contracts were two years, plus two one-year team options. All other contracts, including extensions, could be as long as five years.

The maximum player salary, per year, has been based on a player's years of service and a percentage of the salary cap. For players with fewer than seven years of experience, the maximum salary in the last year of the old CBA was $13,603,750. Between 7-10 years, it was $16,324,500. Ten or more years, $19,045,250.

The last agreement had an allowance for a player's annual salary to either increase or decrease, as negotiated on the contract's signing. Contracts with Bird or Early Bird players could be negotiated to be increased or decreased after the first year by up to 10.5 percent of first-year salary. For all other contracts, it was 8 percent in both directions.

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