NFL Labor Armageddon: A Different Kind of March Madness

Think back to 11 years and a few months ago, when the media and other attendant crazies incited mass hysteria around the turn of the millennium. A massive computer bug would attack the Earth, shutting down the Internet and all computer systems. Power grids would fail, airplanes would fall from the sky, and human growth would be so stunted that people would soon communicate in only 140 characters or less.

The Earth didn't stand still on Jan. 1, 2000, nor will it on Friday, when we all wake up in the aftermath of the expiration of the National Football League's current collective bargaining agreement (CBA). Faced with the prospect of no pro football come autumn, it seems for millions of Americans like the end of days.

For the first time in the NFL's history, its owners seem willing to lock out their players to get out of their current labor deal. During the three previous NFL work stoppages, in 1974, 1982, and 1987, it was the players who went on strike.

With a $9 billion business hanging in the balance, the league and its union, the National Football League Players Assn., led by NFL Commissioner Roger Goodell and NFLPA Executive Director DeMaurice Smith, respectively, are working tirelessly to get a deal done—the two parties have spent more than 50 hours over the past week and a half in federal mediation. While neither side is talking publicly, mediator George Cohen summed it up best, saying that despite the progress, "very strong differences remain" on the core issue, which encompasses a proposed 18-game regular season, instituting a rookie wage scale, benefits for retired players, and dividing the roughly $9 billion annual revenue pie. In Washington, it remains to be seen whether the Commish or Mr. Smith, both CBA negotiation rookies, will blink first.

NFL executive and lead negotiator Jeff Pash has said the cancellation of an entire offseason and preseason would result in a $1.7 billion loss of revenue through 2015 ($400 million per week in the short term if games are lost, according to the Associated Press), and some teams are already planning for the worst. But even if a new CBA isn't signed by Mar. 4, it doesn't automatically mean a lockout for the league's players. If the players and owners are making progress in negotiations, the deal could be extended. And with six months left until the start of the 2011 regular season, we're not talking about Football Armageddon just yet.

Owners' View, and Coaches Too

Even though the NFL has amassed an estimated $1 billion lockout fund to cover some short-term expenses if games aren't played, the league's 32 owners were dealt a Troy Polamalu-caliber blow on Tuesday, when U.S. District Judge David Doty of Minnesota ruled that the league violated the existing CBA by negotiating a special provision in its TV rights contracts that would ensure the owners were paid $4 billion even if there was no NFL season. Moreover, Judge Doty determined that the players were also entitled to damages from the owners' action and has ordered a special hearing to award them.

A league spokesman claims that despite the ruling, the owners are ready for any contingency, and they're certainly much more concerned about the big picture than this war-chest setback. Besides making the case for an 18-game regular season—arguing that it's what NFL fans really want, despite the increased likelihood of fatigue and injuries for players—the crux of the owners' position is that their operating costs now outpace the NFL's revenue growth and thus less money should go to the players.

Currently, about $1 billion is immediately skimmed off the top of the NFL revenue bucket to cover costs, and then the players share about 60 percent of the remaining revenue. Arguing that the escalating cost of building stadiums, the league's international push, and its own television entity, the NFL Network, are factors that didn't exist when the current CBA was defined, the owners want to take an additional $1 billion before the players get their share. By reinvesting that money into the game, they say, they're expanding the pie for everyone. The players, however, see it as an 18 percent pay cut after all the math is done.

From the NFL's Park Avenue headquarters to practice facilities, freezes abound. Goodell has sworn to take a $1 salary until a new CBA is signed (instead of his reported $10 million annual compensation), and more than half of the league's teams have announced ticket price freezes as a measure to accommodate fans.

The San Diego Chargers just joined 11 other NFL teams that had opted out of the league's pension plan, and the team's highest-paid personnel and coaches will take immediate pay cuts in the event of a lockout. The Kansas City Chiefs preemptively laid off 11 employees, while the New York Jets plan immediate employee furloughs and have said they will cut salaries of football operations staff by 25 percent. League-wide, virtually every assistant coach has a lockout clause in his contract, meaning sharply reduced salaries and possible termination down the road for hundreds of coaches and their families.

Player contact is now also a serious issue for NFL front office staff and coaches. During last week's NFL Combine in Indianapolis, coaches and general managers were briefed on how, in the event of a lockout, they could contact current players and college players registered for next month's NFL Draft. Lest anyone overlook how serious the situation is, one agent with multiple coach clients shared with the media assembled in Indy that "contact with players or their agents during a potential lockout would be grounds for firing with cause—meaning remaining years and money owed on contracts would be voided."

The Players' Side

There is one thing that virtually everyone involved in the current NFL drama can agree on: The league's players have a much shorter shelf life than its owners or staff. With most players averaging only a handful of years in the league, every paycheck counts—as does every workout, every physical therapy session, and every (covered by league health insurance) doctor visit.

To counter the owners' widely anticipated plans to lock them out, the NFLPA plans to decertify as a union by Thursday night—if it decertifies, there is no longer a legal collective bargaining unit for the players as defined by the National Labor Relations Board, and federal antitrust laws from which the NFL is currently exempt would apply. The move would also allow the NFLPA to file for an injunction to prevent the owners from locking players out. (This strategy worked to the players' advantage after the union decertified in 1989.)

Among the players' ranks, free agents would be the first lines affected. The free agency market wouldn't open on Friday as scheduled if a deal isn't reached or the deadline extended— Peter Ruocco, the NFL Management Council's senior vice-president of labor relations, said during last week's media briefings that "495 players would lose unrestricted free agency on Mar. 4 and 74 players would lose accelerated salaries they were due, representing hundreds of millions of dollars." Trades would also be put on hold, and rookies, who after the draft would normally be put immediately into the NFL's off-season program, would be left to work out and imagine playbooks on their own. What's more, their agents would not be able to negotiate any kind of contracts, rookie wage scale or no.

Even as they're now serving as financial advisers and insurance brokers for their clients as never before, player agents, of course, stand firmly behind the NFLPA. Said noted agent Drew Rosenhaus to the New York Daily News, "There's unity among the agents [and] certainly among the players. There's great confidence in the leadership. There's a tremendous plan should there be a lockout."

Added NFLPA President Kevin Mawae at the end of the union's press conference last Thursday: "It's unfortunate that we have a $9 billion business with a bunch of owners that don't understand that it's just about the business for them, and it's not. It's about the fans that come together as a community. … They don't come to watch a shield. They don't come to watch a logo. They come to watch their stars perform so that they can be happy and draw together as a community. That's what it's about. All we ask for is financial transparency and justification and let us play."

Government Joins the Scrum

While a federal mediator is overseeing the current discussions between the NFL and the NFLPA, league spokesmen have quietly been discouraging lawmakers from poking their noses into football's CBA negotiations. Apparently, that's a busted defensive play.

On Wednesday, U.S. Representative Sheila Jackson Lee, a Democrat from football-crazy Texas, announced that she would convene a Congressional briefing on the potential nationwide economic impacts of an NFL lockout on Thursday afternoon in Washington D.C., so that other lawmakers could gauge the potential negative effects on jobs and small businesses. (Both the NFL and NFLPA have been invited to participate.) By our estimates, according to NFL data and economic impact studies conducted in communities with NFL franchises nationwide, the direct economic impact on communities of each NFL home game, per franchise, is $15 million. The indirect economic impact—comprising seasonal stadium workers, parking attendants, transit, restaurants, bars, merchandise, TV advertising, and the like—is four to five times that amount. Clearly, the NFL, the players, and lawmakers locally and on Capitol Hill are hoping to stiff-arm this Armageddon before it has a chance to cause permanent injury.