Sports Business: LABOR RELATIONS
THE BASKETBALL'S IN HIS COURT
The NBA contract fight may hinge on an arbitrator's decision
As the official start of the season approaches, the National Basketball Assn. and its players are at a standoff: The players refuse to sign a new collective bargaining agreement, and the NBA is locking them out until they do. On Oct. 5, the impasse led the NBA and Commissioner David Stern to cancel all its preseason games.
But fans shouldn't throw in the towel yet. By mid-October, an arbitrator will rule on whether owners must honor individual player contracts--and pay some of its priciest stars--during the lockout that began in July. Whichever side loses may be a lot more willing to compromise.
The stakes are high: At least $720 million is owed on 220 contracts for the season that is set to begin on Nov. 3. If players lose, they would go without their multimillion-dollar paychecks for as long as the lockout lasts. If owners lose, they will have to shell out an amount equal to 70% of last year's total payroll. "It's a hell of a lot of money for (owners) to gamble if they lose the arbitration," says Jeffrey L. Kessler, the outside lawyer for the National Basketball Players Assn.NO PRECEDENT. The central issue the arbitrator must decide is whether individual player contracts--multiyear pacts between free agents and teams--are part of the collective bargaining agreement, which expired on June 30 and is at the heart of the lockout. The agreement sets such rules as who can be a free agent and the cap on each team's payroll. The owners say the free agent contracts couldn't exist without it. So no agreement, no contracts, no paychecks. "We're legally free to prevent players from working by locking them out, and when you're not working, you don't get paid," says NBA Chief Legal Officer Jeffrey A. Mishkin.
Not so, say the players, pointing out that when the agreement expired in 1988, owners honored individual player contracts as the two sides continued to negotiate. And in a couple of cases, some prescient teams even went on to put clauses in player contracts specifying that players don't get paid during a work stoppage. Since teams failed to do so in the 220 contracts now in dispute, they're still in force, players say.
So who's right? That's unclear, since no precedent exists in federal labor law. "The relationship between individual and collective contracts has never really been addressed before," says William B. Gould IV, the former chairman of the National Labor Relations Board, which enforces federal labor law.
The arbitrator, John D. Feerick, Dean of Fordham University School of Law in New York, must rule by Oct. 18. After he does, the two sides will go back to the table on the collective bargaining agreement. The key issue remains the owners' demand to drop the so-called Larry Bird exception, which lets teams go over the salary cap to re-sign free agents. The clause has driven up total salaries to 57% of the NBA's $1.76 billion revenue last season, far above the current 51.8% cap.
But a huge new pot of money--$2.65 billion from television contracts, a 140% increase--has both parties digging in their heels. Owners want to tighten the salary cap to make sure that they keep more of the new money. Players are just as eager to get their piece. Feerick may break the logjam if he comes down decisively for one side. But the parties must hurry and strike a deal if the season is to start on time. Otherwise, fans could end up feeling like baseball devotees did during the 1995 strike: angry that ball's not being played, and blaming both sides for a spoiled season.By Aaron Bernstein in Washington