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THOU SHALT NOT COVET THY NEIGHBOUR’S COLLECTIVE

BARGAINING AGREEMENT: COMPARING THE EMPLOYMENT

LANDSCAPE FOR THE MAJOR US SPORTS IN LIGHT OF CURRENT

NBA COLLECTIVE BARGAINING NEGOTIATIONS

INTRODUCTION

The NBA (National Basketball Association) and NBPA (National Basketball Player’s Association) are

currently locked in negotiations trying to find middle ground and enact a new collective bargaining

agreement. Both sides are keenly aware of their symbiotic relationship and the need for both parties to

prosper under the new agreement, but that doesn’t mean there isn’t still plenty of room for disagreement.

Something that is no doubt in the back of the mind for both the NBA and NBPA is the situation in the

three other major US sports: the National Football League (NFL), National Hockey League (NHL) and

Major League Baseball (MLB). Obviously, each sport is different in a multitude of ways. Therefore, the

comparisons between the employment landscapes of each sport cannot provide a perfect measuring stick

for the fairness or desirability of any particular change to the NBA’s collective bargaining agreement.

Nonetheless, it is not unknown for athletes in one sport to glance into their neighbours paddock to check

if their grass is any greener.1 There’s no reason to think that NBA owners don’t also keep tabs on the

profitability of their NBA teams relative to franchises in the other sports as well. In that respect, the other

major US sports do provide some helpful context within which to consider any changes to the NBA’s

collective bargaining agreement.

This paper will analyse the key issues in dispute during the current NBA and NBPA negotiations, and

compare the employment landscape of the NBA to that of the other major US sports. It will be necessary

however, to consider the employment landscape of each sport holistically – not just compare them based

on the key issues in dispute within professional basketball. In Part I the background to the current

negotiations between the NBA and NBPA will be explored. In Part II, the key issues in dispute between

the NBA and NBPA will be defined. Part III will compare the general employment landscape of each of

the four major sports. The key issues in dispute that were defined in Part II will then be compared across

the four major US sports in Part IV. In Part V, conclusions from the analysis will be drawn.

PART I: BACKGROUND TO CURRENT NBA NEGOTIATIONS

A The Legal Necessity of Collective Bargaining

In order to impose employment restrictions on its players, such as the draft, salary cap, maximum

contracts and so on, the NBA must create a collective bargaining agreement with a formally recognised

player’s association. Otherwise, such rules that restrict the employment rights of players would fall foul

of the Sherman Act – antitrust legislation prohibiting conspiracy and restraint of trade in businesses

1 See Arash Markazi, ‘Why NBA beats NFL when it comes to guaranteed contracts’ ESPN (online) 14 July 2015

<http://www.espn.com.au/american-football/story/_/id/13235398/why-nfl-lags-nba-guaranteed-contracts>.

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operating between the States.2 The NBA was found to be subject to the Sherman Act in Washington

Professional Basketball Corporation v National Basketball Association3 because it engaged in the

business of professional basketball across different states and sold broadcast rights for interstate

transmission.

Collective bargaining agreements can supersede the application of the Sherman Act due to the non-

statutory labor exception. The non-statutory labor exception was first outlined in Amalgamated Meat

Cutters v Jewel Tea Co4 as being necessary to reconcile the divergent objectives of the Sherman Act

(which sought to encourage competition) and labor relations legislation that sought to encourage the

collective bargaining process – a cooperative rather than adversarial solution to disputes in labor relations.

Although it was originally conceived to protect the arrangements collectively agreed to in favour of

employees, the non-statutory labor exception has also been applied in professional sports to protect the

leagues’ employment arrangements that are not in the employees favour (such as the draft and salary cap),

but are supposedly necessary to maintain the competitive balance of the competitions.5

Without a collective bargaining agreement, the sporting leagues will be in breach of the Sherman Act.

This is why player associations such as the NBPA have on occasion decertified in order to allow players

to bring antitrust law suits against the league in order to gain leverage in collective bargaining

negotiations.

B The 2011 Negotiations

The negotiations leading to the current 2011collective bargaining agreement was one of the more hostile

and protracted in the sport’s history. The negotiations led to a lockout which eventually shortened the

season from 82 games per team to 66 games. It also led to the union temporarily decertifying in order to

enable players to file antitrust lawsuits against the league. In the end, a deal was reached that saw the

player’s share of Basketball Related Revenue wound back from 57% to 49-51% based on league revenue.

The deal also saw a freeze on minimum salaries for two seasons.6 From the union’s perspective, the deal

was not cause for celebration. They saw their share of revenue significantly decreased without gaining

any substantial concessions from the owners (although they were able to resist the owners’ demands for a

hard salary cap). After the agreement was reached, NBPA executive director Billy Hunter was

unanimously sacked by the union and accused of conflicts of interests and mishandling union finances.7

Perhaps the only saving grace for the 2011 collective bargaining agreement from the player’s perspective

is that the deal allowed for either side to opt-out in 2017 – an option the NBPA has signalled they will

exercise and the reason the negotiations between the NBA and NBPA have already begun.

2 15 USCA § 1 (West 2004).

3 147 F Supp 154 (D SD 1956). 4 381 US 676 (1965). 5 Kieran M Corcoran, ‘When Doest the Buzzer Sound?: The Nonstatutory Labor Exemption in Professional Sports’

(1994) 94 Columbia Law Review 1045, 1056. 6 Michael Schiavone, Sports and Labor in the United States (State University of New York Press, 2015) 123. 7 Ibid 124.

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During the 2011 negotiations, NBA owners were crying poor. The NBA claimed that 22 of the 30 teams

were operating at a loss, and that total losses for the 2010-2011 season were approximately $370 million.8

This was used to justify the owners’ demands to reclaim a significant portion of the players’ share in the

league’s revenues. However, the owners somewhat conveniently ignored a number of factors that painted

a different picture. A Forbes investigation showed that in actual fact only 17 teams lost money in 2010-

2011, five less than that claimed by the league.9 NBPA president at the time, Derek Fisher, also argued

that the owners’ financial struggles wasn’t a result of players receiving too high a share in the league’s

revenues, but was instead a result of the general macroeconomic conditions in the US following the

Global Financial Crisis.10

The NBA also ignored the capital gains that owners could expect to enjoy over

time.11

After purchasing the Golden State Warriors in 2010, Joe Lacob pointed out that over the past 30

years sports franchises have on average appreciated in value at 10% per year.12

Such considerations

should have been included in determining the true financial health and sustainability of the league, instead

of putting all the blame onto the player’s high share of the revenues.

This time around, the league is in no position to suggest they’re in any kind of financial hardship. Not that

they haven’t tried – in 2015, NBA Commissioner Adam Silver claimed that one-third of teams in the

NBA were still losing money.13

However, using a different measure of profitability14

, Forbes reports that

all but one team – the Brooklyn Nets – turned an operating profit.15

Although the increase in the owners’

share of revenue helps, the increase in teams’ profitability has been mostly due to massive increases in the

league’s overall revenues. In 2014 the NBA signed a 9-year media rights deal worth $24 billion that

begins in the 2016-17 season. This represents an increase of 180% of annual media revenue compared to

the previous deal.16

Sponsorships have also increased enormously, with many sponsorship agreements

being renewed or taken over at double (in some cases, quadruple) their previous amounts.17

Highlighting

the importance of considering capital growth when assessing the return on investment earned by owners,

the average NBA franchise is now worth $1.25 billion. This is an increase of 13% over last year and 74%

above the average in 2014 due to the windfall from the media rights deal.18

This means that in the six

8 Paul D Staudohar, ‘The Basketball Lockout of 2011’ (2012) 135 Monthly Labor Review 28, 30. 9 Mike Ozanian, ‘The NBA’s Most Valuable Teams’ Forbes (online) 26 January 2011 <http://www.forbes.com/sites/mikeozanian/2011/01/26/the-nbas-most-valuable-teams-2/#2fc5df1467a2>. 10 Matthew J Parlow, ‘The NBA and the Great Recession: Implications for the Upcoming Collective Bargaining

Agreement Renegotiation’ (2010) 6 DePaul Journal of Sports Law & Contemporary Problems 195, 196. 11 Schiavone, above n 6, 119. 12 David J Berri, ‘Did the Players Give Up Money to Make the NBA Better? Exploring the 2011 Collective

Bargaining Agreement in the National Basketball Association’ (2012) 7 International Journal of Sport Finance 158,

160. 13 Kurt Badenhausen, ‘New York Knicks Head The NBA’s Most Valuable Teams at $3 Billion’ Forbes (online), 20

January 2016 <http://www.forbes.com/sites/kurtbadenhausen/2016/01/20/new-york-knicks-head-the-nbas-most-

valuable-teams-at-3-billion/#39c5ee042d3a>. 14 The measure of profitability preferred by Forbes is Earnings Before Interest, Tax, Depreciation and Amortisation

(EBITDA). 15 Badenhausen, above n 13. 16 Kevin Draper, ‘What The NBA’s Insane New TV Deal Means For the League And For You’ Deadspin (online)

10 June 2014 <http://deadspin.com/what-the-nbas-insane-new-tv-deal-means-for-the-league-a-1642926274>. 17 Badenhausen, above n 13. 18 Ibid.

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years under the 2011 collective bargaining agreement, the average value of NBA teams has increased by

almost 240%.19

It won’t come as any surprise then if the NBPA come to the bargaining table demanding the owners

return most, if not all of the 6-8% share in revenue the players relinquished in 2011. But there are other

issues on the table as well, such as maximum salaries, minimum salaries, rookie scales, and the minimum

age. These issues are of different importance to both sides and of differing importance within the players

group as well.

PART II: KEY ISSUES IN CURRENT NBA NEGOTIATION

A Salary-cap size/Share of league revenue

At the end of the day, the paramount issue in collective bargaining negotiations is the revenue split

between the owners and players. All other issues can take a back seat to the amount of money that is

transferred from the league to the players. This will no doubt again be the central and most contentious

issue in negotiations, especially given the large concessions made by the players in the last round of

collective bargaining and the apparent profitability of the majority of teams since that deal was agreed to

in 2011. Players will no doubt want to reclaim a significant portion of the revenue share that they gave up

in 2011, whereas the owners will be hesitant to give up their ground they gained.

B Maximum Salaries

The removal of max contracts has also been touted as a topic for negotiation in the new CBA.20

The issue

of removing maximum contracts may actually create more tension within the playing group itself, rather

than between ownership and players.

From the owners’ perspective, maximum contracts haven’t really had much of a beneficial effect. For

starters, maximum contracts don’t really reduce the total amount an owner can spend on player payroll.

Secondly, removing maximum contracts may also increase competitive parity in the league. Maximum

contracts don’t provide much incentive for a player to stay on their current team and also reduces the

disincentives for players to collude amongst themselves to form ‘super-teams’ like the Miami Heat in

2010-2014 (a team that included superstars Dwayne Wade, Chris Bosh and LeBron James). Super-teams

are teams where a group of (usually) three superstar players agree to join the one franchise with some or

all of them accepting slightly less money than the maximum in order to all fit under the salary cap.

Maximum contracts don’t provide a powerful disincentive to form super-teams because each superstar

player only needs to take a slight pay cut to enable the team to fit all players under the cap. In contrast,

players in a system without maximum salaries would have to sacrifice potentially tens of millions of

dollars in order to play on a team with two other superstars. Dallas Mavericks owner Mark Cuban claims

the issue of removing maximum contracts was discussed in the CBA negotiations of 2011 but didn’t go

19 This is calculated using the average value in 2011 of $369 million. See Ozanian, above n 6. 20 Steve Kyler, ‘NBA AM: Can The NBA Avoid A Lockout In 2017?’ Basketball Insiders(online) 8 September

2015 <http://www.basketballinsiders.com/nba-am-can-the-nba-avoid-a-lockout-in-2017/>.

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anywhere. While he is not necessarily against the removal of maximum contracts, Cuban says such a

decision would need to involve a trade-off; namely, the removal of guarantees in NBA player contracts in

order to protect teams from expensive, long-term commitments to players who may get injured.21

The issue of maximum salaries is likely to be divisive within the playing group itself, as its removal

would stand to benefit only a very small percentage of players at the expense of everyone else. For the

2015-16 season, only 35 players are contracted to earn more than $15 million. That is just under 7% of all

players contracted for that season.22

Removing maximum contracts will allow star players to earn more

(arguably an amount closer to their ‘fair’ value) but will also erode the NBA’s middle class. The star

player’s gains would come at the expense of reducing the salaries of everyone else earning more than the

league minimum as these players are the beneficiaries of the excess money that teams can’t offer to

players already being paid the maximum amount.

Whether this is ‘fair’ is a question for the NBPA to decide internally amongst its members. On the one

hand, a union is supposed to look after all its members. On the other hand, star players have a legitimate

argument that they have a right to be compensated according to a free market for the huge amounts of

revenue they bring to their team. The fact that max-salary players like Chris Paul (President) and LeBron

James (first Vice-President) feature prominently in the NBPA’s executive committee suggests there is a

chance that the players may push for the abolition of the cap on individual salaries.

C Minimum age limit

The current age of eligibility for basketball players wishing to join the NBA is 19.23

The age of eligibility

for the NBA draft was an issue in the 2011 negotiations, with the NBA owners wanting the age of

eligibility raised to 20 years and the players wanting it lowered to 18.24

However, the issue was deemed

too low a priority to lose more games over, and so the status quo in favour of ending the lockout.

But the difference in opinion persists, and the age limit will again be an issue for negotiation.25

Owners

want to raise the minimum age because this allows colleges to develop young players for longer at no cost

to NBA owners. Theoretically, this means NBA teams can spend less money developing prospects who

are not yet NBA-ready but show enough potential to be drafted. It also lowers the risk of teams picking

promising players in the draft who fail to develop as professionals.

On the other hand, players are disadvantaged from an increase to minimum age because it shortens their

careers and therefore their earning potential. There is also an opinion that the minimum age limit is

21 Kelly Dwyer, ‘Mark Cuban warns that players working on unlimited contracts would have to give up guaranteed

deals’ Yahoo! Sports (online) 8 October 2014 <http://sports.yahoo.com/blogs/nba-ball-dont-lie/mark-cuban-warns-

that-players-working-on-unlimited-contracts-would-have-to-give-up-guaranteed-deals-220526723.html>. 22 Kyler, above n 20. 23 NBA & NBPA, Collective Bargaining Agreement (8 December 2011) art X s 1(b)(i) (‘NBA Collective Bargaining Agreement’). 24 Mike Tokito, ‘NCAA basketball again the rope in NBA tug-of-war between owners and players on draft age’

OregonLive (online) 18 March 2015 <http://www.oregonlive.com/march-

madness/index.ssf/2015/03/college_basketball_again_the_r.html>. 25Ibid; Kyler, above n 20.

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paternalistic and racially prejudicial – there are stricter age requirements in the NBA and NFL (sports

dominated by African-American athletes), than in the NHL and MLB (predominantly Caucasian sports).

Raising or lowering the age limit is a proposition that only affects future NBA players, meaning players

already in the league don’t really have any skin in the game. This is reflected in the low priority it was

given in 2011, however the fact that the issue is again in discussion indicates that both the players and the

owners are serious in their desires to change the current rule.

D Minimum salaries and rookie salaries

It is highly likely that minimum salaries and rookie salaries will be increased in any new CBA that is

eventually negotiated. While the increase in revenues due to the new $24 billion media rights deal flows

through to the salary cap automatically by virtue of the salary cap being tied to revenues, there is no such

automatic adjustment to minimum and rookie salaries. Therefore the current minimum and rookie scales

do not reflect the surge in NBA revenues and will need to be addressed in the new CBA.

PART III: THE EMPLOYMENT LANDSCAPE OF THE NBA, NFL, NHL AND MLB The issues in dispute between the NBA and NBPA should not be considered in a vacuum, but in the

context of the wider employment landscape. Before considering how the key issues in dispute compare to

the situation in the other three major US sports, it is necessary to first look at the general employment

landscape of each sport. This section will compare the general employment environment of the four sports

and is structured around the two most important issues for athletes: salary and freedom of movement.

A Salary

1. Floors, Caps and Taxes

Salary is the first and foremost measure of the employment conditions for athletes. In many ways, money

cures all other ills. But athletes and sporting leagues are in a quite unique conundrum that leads all four of

the major sports leagues to restrict the free market for employment (how un-American). The conundrum

is this: whilst players and owners are both engaged in fierce competition with their opposing players and

owners on the field, the nature of professional sport is that the contest must be engaging and interesting to

the public in order to maximise revenues. There’s an incentive then for players and owners not to

completely crush their opposition and dominant the league year in, year out. This desire for profit

maximisation through equalisation of the competition has given rise to different methods of attempting to

find a competitive balance (such as through a salary cap or luxury tax) that has the indirect effect of

artificially lowering the compensation paid to players.

The NBA, NFL and NHL all use a salary cap while MLB does not. The NFL and NHL both utilise a hard

cap, meaning that teams are prohibited from spending on team payroll above the cap with no exceptions.

The NBA utilises a soft cap, meaning that teams are permitted to spend above the cap through certain

limited exceptions.26

26 See NBA Collective Bargaining Agreement, above n 23, art VII s 6 for list of exceptions.

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The soft cap is obviously not as effective as a hard cap at equalising competition in the league between

high-spending and low-spending teams, so the NBA also use a luxury tax. A luxury tax is also used in

MLB where it is called a ‘competitive balance tax’. A luxury tax works by penalising teams who spend

above a certain threshold – in the NBA the threshold is set at 53% of Basketball Related Revenue (BRI),

minus projected benefits (i.e. non-salary benefits owed to players) and then divided by the 30 teams.27

For

the 2015-2016 season this equated to a Tax Level of $84.74 million.28

The tax rate starts at $1.50 per

every dollar over the tax rate, but increases as teams go further above the Tax Level. There is no limit to

how much over the Tax Level a team can go and therefore no limit to the tax rate they pay, except for a

practical limit that teams will eventually run out of exceptions under the salary cap. There is also a

penalty of an extra $1 of tax per dollar over the limit for teams that remain above the tax rate for more

than three seasons, known as the repeater tax. In MLB the threshold for the competitive balance tax is set

at $189 million in 2016 where teams are taxed at 17.5%, with the tax rate increasing according to the

level at which a club was taxed in the previous year. The maximum tax rate for teams subject to the

competitive balance tax is 50% (i.e. 50 cents per dollar).29

Like the salary cap, a luxury tax also has the

effect of compressing player compensation because teams have to pay an amount in excess of what the

player actually receives in order to sign them to a contract. The NBA’s tax likely has a far more potent

chilling effect on players’ salaries than the competitive balance tax does in MLB due to the much higher

rate that teams are taxed at.

The NBA, NFL and NHL also utilise a salary floor to protect players from miserly owners, or teams

attempting to ‘tank’ for higher draft picks. In the NBA teams must pay the salary floor of 90% of the

salary cap each season.30

If any team’s payroll falls beneath this floor, then the difference is split pro rata

between the players on the roster, or by another method as reasonably determined by the NBPA.31

Teams

in the NFL are required to spend 89% of the salary cap each year, with any shortfall to be paid to the

players on that club’s roster in accordance with the reasonable directions of the NFLPA.32

In the NHL the

salary floor is roughly 87% of the salary cap.33

2. Average Salaries

Given the importance of compensation to players, it may be useful to compare the average salaries of

players from each sport. The mean and median salaries (in $US) are given in Figure 1 below:34

27 Ibid art VII s 12(a)(17). 28 Larry Coon, NBA Salary Cap/Collective Bargaining Agreement FAQ (20 March 2016) q 21

<http://www.cbafaq.com>. 29 MLB & MLBPA, 2012-2016 Basic Agreement, (2011) art XXIII(B) (‘MLB Basic Agreement’). 30 NBA Collective Bargaining Agreement, above n 23, art VII s 2(b)(1). 31 Ibid art VII s 2(b)(2). 32 NFL & NFLPA, Collective Bargaining Agreement, (4 August 2011) art 12 s 9 (‘NFL Collective Bargaining

Agreement’). 33 NHL & NHLPA, Collective Bargaining Agreement Between National Hockey League and National Hockey

League Players’ Association, (15 February 2013) art 50.5(b) (‘NHL Collective Bargaining Agreement’). 34 Tom Gerencer, ‘How Much Money Does an NBA Player Make?’ MoneyNation (online) 13 November 2015 <http://moneynation.com/how-much-money-does-an-nba-player-make/>; Tom Gerencer ‘How Much Money Does

an MLB Player Make?’ MoneyNation (online) 27 April 2016 <http://moneynation.com/how-much-money-does-an-

mlb-player-make/>; Tom Gerencer, ‘How Much Money Do NFL Players Make?’MoneyNation (online) 5 January

2016 <http://moneynation.com/how-much-money-do-nfl-players-make/>; Spotrac, NHL Salary Rankings

<http://www.spotrac.com/nhl/rankings/>.

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Figure 1:

Mean Median

NBA $5.24 million $2.51 million

MLB $4.38 million $1.5 million

NFL $2.15 million $860,000

NHL $2.8 million $1.8 million

The mean value reveals how much money is available per player in each sport, however the median value

is more insightful as to the situation of the ‘average’ player. The extremely high salaries earned by the

elite in each sport skews the mean average upwards, whereas the median provides the mid-point in

salaries where 50% of athletes make more and 50% make less, thus providing a more accurate picture of

what the ordinary player earns. The median average is quite significantly lower compared to the mean in

each of the sports, suggesting in each sport there are far more players near the minimum than at the upper

end of the scale. Basketball players appear to have it best, with a median salary significantly higher than

the other sports.

It is important to keep in mind, however, that this is largely due to the very exclusive club that is

professional basketball players in America – if all 30 teams in the NBA carried the maximum number of

15 players on their roster, the league can only have a maximum of 450 players at any given time. Even

when one considers that due to turnover during the year, the actual number of players who spend some

time on an NBA roster in a given year may be slightly higher than that number, the NBA still employs

fewer players each year than the other sports. In 2016, MLB employed 908 athletes,35

the NFL employed

1000,36

and the NHL employed 764.37

This obviously means that the NBPA’s pie of player revenue

doesn’t need to be cut in as many pieces. From an employment perspective, the limited number of roster

spots in the NBA is somewhat mitigated by the fact that basketball is more popular around the globe than

the other sports, meaning players on the fringe of the NBA have other opportunities to play professionally

overseas.

3. Guarantees: is a contract worth the paper it’s written on?

Another important element to consider is whether contracts in each sport are guaranteed. In the NFL, it is

commonplace for contracts to not be guaranteed – meaning that while a player may have signed a 6-year

deal worth tens of millions of dollars, he may be cut from the roster at any point and not be entitled to

payment for any years he did not play. There is nothing in the NFL collective bargaining agreement that

mandates or prohibits guarantees in contracts, although it is convention in the NFL though to offer very

little by way of guaranteed money.

This is in contrast to the NBA. While the NBA is similar to the NFL in that there is no general

requirement to guarantee contracts, the convention is different. In the NBA, nearly all contracts are

guaranteed, the exceptions being for fringe players used to fill out rosters, and the final years of expensive

long-term deals. Some NBA contracts are required to be guaranteed by the CBA, these being sign-and-

35 Spotrac, MLB Salary Rankings <http://www.spotrac.com/mlb/rankings/>. 36 Spotrac, NFL Salary Rankings <http://www.spotrac.com/nfl/rankings/>. 37 Spotrac, above n 34.

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trade contracts, rookie scale contracts, qualifying offers to restricted free agents and offer sheets to

restricted free agents.38

Like the NBA, contracts are fully guaranteed in MLB baseball. This is provided for in MLB’s uniform

player contract which expressly requires the team to pay a player the balance of their salary in the event

of termination.39

The position in the NHL is that contracts are guaranteed one-third of their remaining

salary if they are less than 26 years of age, or two-thirds if they are over 26 years of age.40

4. Salary arbitration

Players in the NFL and NBA do not have the opportunity to engage in salary arbitration. Salary

arbitration is not necessary in these sports due to the rules around new entrants to the league being able to

negotiate their own contracts in the NFL, and players being subject to rookie scales before eventually

hitting free agency in the NBA.

In MLB however, salary arbitration remains necessary under the collective bargaining agreement because

players have no leverage under the reserve clause which remains in place for the first 6 years of a player’s

career. After this point players become free agents and have the opportunity to leave their club, giving

them the leverage to negotiate their own salaries. The current collective bargaining agreement makes

players eligible for salary arbitration after three years of service, or after two years of service if they fall

into the ‘super twos’ category (the top 22% of players based on days of service who have at least two

years but less than three years of service).41

The NHL also has a very complex salary arbitration system because of rules surrounding restricted free

agents.42

Basically, in order to provide teams with some protection from players leaving in free agency,

some players are deemed restricted free agents and the player or team can elect to have their salary

determined by an arbitrator because they are shielded from the free market.

5. Pensions

It is easy to forget about a league’s pension plan when considering player compensation – after all, most

ordinary people don’t even start thinking about their retirement plans until after the age at which most

professional athletes’ careers are well and truly over. But such oversight is not the case in player unions

who have been fighting for increases to player pensions for decades. Player pensions are also incredibly

important in the context of athletes given they have very short careers compared to ordinary members of

the public.

In the NBA, players are fully vested in the pension plan after 3 years of service. Players may choose to

begin collecting the pension at the age of 50 or 62, with the benefits being much greater per year if the

player elects to wait. If a player collects at age 50, the minimum benefit is $19,160 per year and the

maximum benefit achieved for service of 10 or more years is $60,000 per year. If the player chooses to

wait until 62, the minimum benefit is $60,000 per year and the maximum is $200,000. The NBA also has

38 Coon, above n 28, q 64. 39 MLB Basic Agreement, above n 29, sch A cl 7(e). 40 NHL Collective Bargaining Agreement, above n 33, Exhibit 1 (Standard Player’s Contract) cl 13(d). 41 MLB Basic Agreement, above n 29, art VI(E)(1). 42 See NHL Collective Bargaining Agreement, above n 33, art 12.

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a 401(k) with an employer matching program that allows the league’s contributions to exceed the

player’s.43

As a result of their strong union and long history of fighting for player pensions, MLB players have one

of the best pension programs in American sports. Players are fully vested after playing only 43 games,

which is only slightly more than a quarter of a season. The benefits are similar to that in the NBA, with

players receiving a maximum benefit of $200,000 at the age of 62 if they had 10 or more years of service.

The minimum benefit is around $34,000 per annum. The MLB pension is also a joint-survivor plan,

meaning the spouse of a vested player is entitled to the benefits even if the player passes away.44

In the NFL, players are fully vested after 3 seasons and can begin collecting the pension at age 55. The

NFL based their pension the number of credited seasons a player accrues. For the seasons 2015-2017

seasons, players will receive a pension of $7,920 per year, increasing to $9,120 per year for each year a

player is credited between 2018 and 2020. This is less than the pensions given to NBA players, however

the NFL also offer other post-retirement benefits such as an annuity and 401(k). The annuity plan began

in 2014, whereby after four credited seasons in the NFL a player receives $80,000 per season between

2014-2017 and $90,000 per season from 2018-2020 which will be converted into an annuity that the

player will receive from the age of 35. The 401(k) program also offers players a 2:1 match from their

employer up to $26,000 once players has two credited seasons in the NFL.45

Players’ pension was a high priority issue for the NHLPA in the most recent collective bargaining

agreement in 2013.46

Under the new plan, players are eligible to receive a pension after playing in one

NHL game.47

Benefits are based on credited service, which includes games where players are not

available to play due to injury or other reasons.48

Players may begin claiming their full benefit from age

62, or a reduced amount from age 45. The amount of the pension is based on the maximum annual

amount permitted for a tax-qualified pension plan. To qualify for the maximum a player must have played

the equivalent of all 82 games per season for 10 seasons: this would give an annual benefit of $255,000

per year.49

For the sake of comparison, a player who plays in all 82 games for one season will be entitled

to a benefit of $20,500 per year.50

B Freedom of movement

When considering the overall employment environment for an athlete in team sports, it’s also important to

take stock of a player’s ability to move between teams. Freedom of movement for players has an effect

43 See NBA Collective Bargaining Agreement, above n 23, art IV s 1-2; Jimmie Kaylor, ‘How 6 American Sports

Pay Their Players’ The Cheat Sheet (online) 24 April 2016 <http://www.cheatsheet.com/sports/which-american-pro-

sports-league-has-the-best-retirement-plan.html/?a=viewall>. 44 Kaylor, above n 43; Kevin Baumer, ‘MLB Players Earn A Pension After Just 43 Days In The Majors’ Business

Insider Australia (online) 27 January 2011 <http://www.businessinsider.com.au/nfl-nhl-nba-mlb-retirement-

pension-plans-lockout-2011-1>. 45 Kaylor, above n 43. 46 Chris Johnston, ‘Johnston on NHL: Pension plan was vital in CBA talks’ Sportsnet (online) 6 June 2013 <http://www.sportsnet.ca/hockey/nhl/johnston-on-nhl-pension-plan-was-vital-in-cba-talks/>. 47 NHL Collective Bargaining Agreement, above n 33, art 21.13. 48 Ibid art 21.14. 49 Ibid art 21.16. 50 Ibid.

11

beyond increasing their bargaining power in salary negotiations; it also affects an athlete’s liberty to live

and work in a city and organisation of their choosing. This part will compare each league’s stance on free

agency and player drafts, as well as trade compensation and no-trade clauses which may also inhibit a

player’s movement.

1. Free Agency and compensation

Free agency is the ultimate freedom a player could ask for – once a player is out of contract, it allows

them to negotiate a contract on their preferred terms with any team of their choosing. All of the sports

allow players to eventually obtain free agency. Some sports also provide teams with compensation in the

form of additional draft picks if they lose players in free agency under certain circumstances. This has a

cooling effect on player movement because teams are effectively required to ‘trade’ draft assets in order

to sign certain players in free agency.

In the NBA, free agency rules are complicated and there are both restricted and unrestricted free agents.

The majority of free agents in the NBA are unrestricted free agents, the exceptions being players drafted

in the first round whose team options have been accepted, and veteran free agents who have been in the

league for three seasons or fewer – these situations give rise to restricted free agency. Restricted free

agency gives teams the right of first refusal over a player; meaning they have the opportunity to match an

offer from another team to avoid losing the player to that team. The NBA does not provide any

compensation to teams who lose players through free agency.

The NFL also has a system of restricted and unrestricted free agents based on ‘accrued seasons’ – accrued

seasons are basically seasons where a player was receiving full pay for 6 or more games. There is also a

category of ‘exclusive rights players’ that applies to players with less than 3 accrued seasons whereby

such players may only negotiate and sign contracts with their current team.51

If a player has accumulated

3 accrued seasons, but not 4, then they are restricted free agents. This means that depending on the

contract offered by their incumbent team, the team may have a right of first refusal or the right to receive

compensation if the player chooses an offer from a rival team. Compensation may take the form of a draft

selection in the first round, second round, or round in which the restricted free agent was originally

selected, depending on the value of the qualifying offer tendered to the restricted free agent.52

Players

with four or more accrued seasons are unrestricted free agents and may negotiate and sign with any

team.53

MLB players are eligible for free agency after six years of service.54

There is no restricted free agency, so

teams are unable to compel a player to stay. There is also provision made in the CBA for compensating

teams who lose players via free agency in certain circumstances: that is, free agents who are offered 1-

year, guaranteed deals worth an amount greater than or equal to the average of the 125 highest salaries

from the previous year. Teams that sign such qualified free agents from a rival club must forfeit their first

round draft pick unless that pick is in the top ten, in which case they forfeit their second round pick.55

51 NFL Collective Bargaining Agreement, above n 32, art 8. 52 Ibid art 9 s 2. 53 Ibid art 9 s 1. 54 MLB Basic Agreement, above n 29, art XX(B). 55 Ibid art XX(B)(4).

12

The NHL also has a system of free agency and compensation, including restricted and unrestricted free

agency categories. Unrestricted free agency applies to any free agent player that is 27 years old or has

accrued 7 years of NHL experience; is at least 25 and has 3 years experience but has played less than a set

number of games; players who have had their contracts bought out; and players who do not meet any of

the preceding criteria, but have not been offered a contract. Restricted free agency applies to all other

players coming out of contract. Teams have the choice of matching rival offers for free agency or

accepting compensation from the rival team. Compensation takes the form of draft picks based on the

compensation due to the player under his new contract.56

2. Draft

All four major US sports utilise a draft to bring players into their respective leagues. The draft is designed

to distribute new talent to the worst performing teams from the previous season. Generally speaking, draft

order is determined by the reverse order of the standings from the previous season, but rules vary between

the sports whether the top picks are assigned by lottery and whether teams are permitted to trade picks.

The most important aspects of the draft from an employment rights perspective are the age of eligibility,

rookie salary, and length of contracts that apply to draft selections. These issues are expected to feature

prominently in the current NBA-NBPA negotiations and will be analysed in Part IV.

If players do not want to play for the team that drafts them, they have limited options. In the NBA, the

team that selects a draftee has the exclusive rights to negotiate and sign that player up until the following

year’s draft. This means in order to avoid playing for the team that drafted them, a player must sit out an

entire season.57

MLB allows a draftee to re-enter the draft in a subsequent year after being selected, and

also prohibits the same team from selecting the player unless he consents to the selection.58

A similar

system is in place in the NFL.59

In the NHL the rules vary depending on where the draftee comes from,

where he goes to play instead of the NHL, and the age at which he was selected. In most scenarios the

team that drafts a player has exclusive rights to negotiate until the next draft, unless the player is 20 or

younger in which case the team may retain the their exclusive rights for a number of years.60

3. No-trade clauses

No-trade clauses are valuable to players because it in effect allows them to veto any trades that may send

them to a team they do not wish to play for.

In the NBA, a player must be in the league for 8 years and played for their team for at least 4 years before

they are permitted to include a no-trade clause in any new contracts.61

The MLB collective bargaining

agreement contains what is known as the 10/5 rule – a player with 10 years of service in the major league,

the last 5 of which were spent with the one club are automatically granted the right not to be traded

56 NHL Collective Bargaining Agreement, above n 33, art 10. 57 NBA Collective Bargaining Agreement, above n 23, art X s 4. 58 MLB, First Year Player Draft: Official Rules <http://mlb.mlb.com/mlb/draftday/rules.jsp>. 59 NFL Collective Bargaining Agreement, above n 32, art 6 s 4. 60 NHL Collective Bargaining Agreement, above n 33, art 8.6. 61 NBA Collective Bargaining Agreement, above n 23, art XXIV s 2(b).

13

without consent.62

Baseball, football and Hockey players can negotiate a no-trade clause in their contracts

from any time that they are a free agent.63

C Analysis of the General Employment Landscape

NBA players fare rather well overall when one compares their compensation to the other sports. Although

they are subject to a salary cap, NBA players have the highest mean and median salaries of the sports.

They are protected through a salary floor, but so too are the other salary capped sports. NBA players share

the benefit of guaranteed contracts with baseball players, although this is a matter of convention, not

contractual agreement as it is in baseball. NBA players’ pensions pale in comparison to that of MLB

which vests earlier and has superior benefits, except at the top end. The NBA pension also appears

inferior to the NHLPA’s, who made improving their pension a point of emphasis in 2013. At least the

NBPA’s pension is favourable to that of the NFL which is quite poor considering the very short career of

many NFL players that means few will get to enjoy the main benefits which only vest three or four years

into a footballer’s career.

Basketball players also fare quite well in terms of freedom of player movement. Players in all sports are

subject to a draft upon entry into the league. NBA players in most cases will achieve free agency sooner

than baseball and hockey players, however free agency is restricted for the more valuable players. At least

restricted free agency in the NBA protects players financially by granting the incumbent team a right of

first refusal, and it does not impede the free agency market by requiring compensation. This also removes

the need for salary arbitration which is present in NHL and MLB.

PART IV: COMPARISON BETWEEN THE NBA, NFL, NHL AND MLB ON THE KEY

ISSUES IN NEGOTIATIONS Having considered the general employment landscape for each of the leagues, now let’s turn to a

comparison of each league’s position on what is expected to be the key issues in dispute between the

NBA and NBPA. Rumours around the current negotiations between the NBA and NBPA suggest that the

main issues in contention are players’ share of revenue (which is linked to size of the salary cap),

maximum contracts, age of eligibility for the NBA draft, and the level of minimum and rookie scale

contracts. While it can be useful directly comparing each league’s position on issues, the wider context of

each sports’ collective bargaining agreement should kept in mind. The employment conditions of each

sport need to be considered holistically, not one issue at a time.

A Share of revenues/Salary cap size

1. NBA

Over the years, owners have shown a willingness to pay a high proportion of revenue to players if they

are unencumbered by limits to payroll expenditure; in 1977 player salaries as a proportion of team gross

62 MLB Basic Agreement, above n 29, art XIX(A). 63 Ibid art XX(B)(2)(b)(vi); NFL Collective Bargaining Agreement, above n 32, art 9 s 3(e)(ii); NHL Collective

Bargaining Agreement, above n 33, art 11.8.

14

revenues peaked at 70%.64

That relentless spending and a tendency for teams to engage in an ‘arms race’

of player expenditure is no doubt a powerful motivator for owners to limit payroll spending through a

salary cap and to keep that cap as low as the players association will allow.

Under the existing collective bargaining agreement, NBA players receive a ‘designated share’ of revenues

(including both salary and benefits) between 49% and 51% of Basketball Related Income (BRI).65

As

discussed in Part I above, this is 6-8% less than the players received under the previous CBA. The

definition of BRI to be found in Article VII of the NBA CBA spans 22 pages and is non-exhaustive.

Broadly speaking, BRI includes such things as gate receipts, broadcast revenues, licensing and

merchandise. The actual percentage of BRI that players are entitled to is determined by the difference

between actual BRI and projected BRI: players are entitled to 50% of BRI plus or minus 60.5% of the

difference between BRI and projected BRI for that year. That is, if actual BRI exceeds the projected BRI,

players receive 60.5% of this difference, but must relinquish 60.5% of the difference between actual and

projected BRI if the actual BRI for that year falls short of the projection

The salary cap only makes up part (albeit a significant part) of the players’ designated share. Under the

current agreement, the salary cap is 44.74% of projected BRI less projected benefits and divided between

the 30 teams. For the 2015-2016 season, the salary cap equalled $70 million.66

Under the previous 2005

collective bargaining agreement the salary cap was based on 51% of projected BRI and equalled $58.044

million in season 2010-11.67

The higher absolute figure reflects the huge increase in NBA revenues since

the 2011 CBA was signed. If the NBPA are able to negotiate a higher designated share through current

negotiations, they will presumably incorporate this by reinstating a salary cap based on a higher share of

projected BRI.

In a recent memo to teams, the league provided updated projections of the salary cap through to the 2020-

21 season: the league projects that the salary cap will be $107 million in 2017-18, and rise up to $112

million by the 2020-21 season.68

The huge spike is a result of the new media rights deal taking effect and

will obviously be even higher if the NBPA is able to negotiate a new CBA featuring an increase to the

players share in revenues.

2. MLB

Major league baseball is in some respects the envy of all other US sporting player associations in that the

sport has no salary cap. The MLBPA has been staunchly opposed to a salary cap since its inception.

When asked in 2011 to comment on the NFL adopting a salary cap, legendary former leader of the

MLBPA Marvin Miller said “No legitimate union could ever agree to a salary cap...[Doing so is] not

representing their goal in the law: to improve the wages, hours and working conditions of its members.”69

64 Schiavone, above n 6, 99. 65 NBA Collective Bargaining Agreement, above n 23, art VII(b) s 12(b)(3). 66 NBA, Salary cap for 2015-16 season jumps to $70 million (8 July 2015) <http://www.nba.com/2015/news/07/08/nba-salary-cap-2016-official-release/>. 67 Larry Coon, NBA Salary Cap/Collective Bargaining Agreement FAQ (23 October 2011) 10

<http://www.cbafaq.com/salarycap05.htm>. 68

Albert, ‘NBA Increases 2016-17 Salary Cap Projection to $92M, Tax to $111M’ on Heat Hoops (16 April 2016)

<http://heathoops.com/2016/04/nba-increases-2016-17-salary-cap-projection-to-92m-tax-to-111m/#more-27917>. 69 Miller interviewed by Jon Wertheim, “Marvin Miller on Barry Bonds, Drug Testing, and the NFL Labor

Situation, Sports Illustrated, April 12, 2011 <http://www.si.com/more-sports/2011/04/12/marvin-miller>.

15

The owners of MLB teams sought on a number of occasions to impose a salary cap but were rebuffed

each time by the players’ union.70

Due to the lack of a salary cap, MLB has the biggest discrepancies in team payroll expenditure of the four

major US sports. The highest team payroll in 2016 belongs to the LA Dodgers with $245,972,753, and the

lowest payroll is that of the Milwaukee Brewers who only spent $64,304,325.71

This does not appear to

have the negative effect on competitive balance that one might think. Since 1980, MLB has had 20

different championship franchises, compared to10 in the NBA, 15 in the NHL and 16 in the NFL which

all do feature a salary cap. While this may suggest that salary caps do not improve competitive balance, it

should also be noted that there are other explanations for this apparent anomaly. Berri et al (2005) offer

the explanation that it is the incredibly small population from which the NBA draws its athletes that is the

main contributor to its competitive imbalance.72

Competitive imbalance caused by population size has

also been found in studies of MLB and NHL.73

The theory is that in leagues that draw from larger

populations, the very best athletes can be spread across more teams, whereas in sports that have smaller

populations, superstar level players are rarer and can only be spread across a few teams – since basketball

players generally speaking have to be very tall, the pool of available athletes is smaller. When one also

considers the disproportionate impact individual players can have on basketball as opposed to baseball (or

any of the other sports), it becomes even clearer how a select few teams with access to star players for a

number of years can come to dominate the championship tally.

Because there is no salary cap, there is no fixed amount of revenue that players receive from MLB. Since

2006, the share of MLB revenue going towards major league players has fluctuated between 48.4% and

51.7% each year.74

3. NFL

The NFL uses a hard-cap, meaning there are no exceptions to allow a team to exceed the cap. The salary

cap is calculated to be equal to the Guaranteed Player Cost Percentage minus non-salary player benefits

(such as pension payments). Revenue for the purpose of calculating the Guaranteed Player Cost

Percentage includes what is defined as ‘All Revenues’ (AR) – somewhat of a misnomer considering that

All Revenues does not actually include all revenues. AR is defined broadly and non-exhaustively and

expressly includes such things as gate receipts, broadcast revenues, and third-party leases of stadiums.

Specific revenues deemed to be unconnected to the performance of players on the field are expressly

excluded.75

The Guaranteed Player Cost Percentage under the current CBA is 47% of revenue and is

equal to $143.28 million in 2015.76

70 See Schiavone, above n 6, 38-39. 71 Spotrac, MLB Team Payroll Tracker <http://www.spotrac.com/mlb/payroll/>. 72

Berri, D J et al, ‘The short supply of tall people: Explaining competitive imbalance in the National Basketball

Association’ (2005) Journal of Economic Issues, 39(4), 1029. 73 See Berri, above n 12, 162-163. 74 Ronald Blum, ‘Players share of revenue steady, but Cuban prospects getting big deals’ The Globe and Mail (online) 21 March 2016 < http://www.theglobeandmail.com/sports/baseball/players-share-of-revenue-steady-but-

cuban-prospects-getting-big-deals/article29321879/>. 75 NFL Collective Bargaining Agreement, above n 32, art 12 s 1. 76 Claire Groden, ‘NFL May Owe Players Over $100 million After Being Caught in Accounting ‘Fiction’’ Fortune

(online) 23 February 2016 < http://fortune.com/2016/02/23/nfl-salary-cap/>.

16

4. NHL

The salary cap in the NHL is a hard cap like the NFL’s, meaning that there are no exceptions that allow a

team to exceed the cap. Similar to the NBA and NFL, the NHL has guaranteed the players will receive a

certain proportion of Hockey Related Revenues (HRR), a non-exhaustive list of which includes gate

receipts, broadcast revenues, club website revenues, publications, and merchandise sales. A non-

exhaustive list of non-hockey related revenues is also expressly excluded.77

Under the previous CBA, hockey players received 57% of HRR, however, like in the NBA, under the

collective bargaining agreement signed in 2013 the players saw their share of revenues drop dramatically.

Under the current agreement, hockey players now split HRR with owners 50:50. In season 2015-2016 the

salary cap in the NHL was set at $71.4 million per team.78

5. Analysis of share of revenues/salary cap size

The four major US sports all have a similar split of revenues between owners and players of around 50%.

The three collective bargaining agreements with salary caps also appear to define the pool of revenue in

similar ways, including the main sources of revenue from broadcast rights and gate receipts. The NBPA

will therefore be unable to say that the other sports have a more favourable split of revenues for players.

B Maximum Salaries

The top five salaries (in $US) in each sport from 2016 are given in Figure 2 below:79

Figure 2:

NBA MLB NFL NHL

1 Kobe Bryant

(LA Lakers) $25,000,000

Clayton

Kershaw

(LA Dodgers)

$34,571,428

Drew Brees

(New Orleans

Saints)

$30,000,000

Patrick Kane

(Chicago

Blackhawks)

$10,500,00

2 LeBron James

(Cleveland

Cavaliers)

$22,970,500

Zach Greinke

(Arizona

Diamondbacks)

$34,000,000

Eli Manning

(New York

Giants)

$24,200,000

Jonathan

Toews

(Chicago

Blackhawks)

$10,500,000

3 Carmelo Anthony

(New York Knicks) $22,875,000

David Price

(Boston Red

Sox)

$30,000,000

Ben

Roethlisberger

(Pittsburgh

Steelers)

$23,950,000

Alex

Ovechkin

(Washington

Capitals)

$9,538,462

4 Dwight Howard

(Houston Rockets) $22,359,364

Justin

Verlander

(Detroit Tigers)

$28,000,000

Matt Ryan

(Atlanta

Falcons)

$23,750,000

Evgeni

Malkin

(Pittsburgh

Penguins)

$9,500,000

5 Chris Bosh

(Miami Heat) $22,192,730

Miguel Cabrera

(Detroit Tigers) $28,000,000

Joe Flacco

(Baltimore

Ravens)

$22,550,000

P.K. Subban

(Montreal

Candiens)

$9,000,000

77 NHL Collective Bargaining Agreement, above n 33, art 50.1. 78 NHLPA, NHLPA, NHL Announce Team Payroll Range for 2015-16 (23 June 2015)

<http://www.nhlpa.com/news/nhlpa-nhl-announce-team-payroll-range-for-2015-16>. 79 Spotrac, NBA Salary Rankings <http://www.spotrac.com/nba/rankings/>; Spotrac, MLB Salary Rankings

<http://www.spotrac.com/mlb/rankings/>; Spotrac, NFL Salary Rankings <http://www.spotrac.com/nfl/rankings/>;

Spotrac, NHL Salary Rankings <http://www.spotrac.com/nhl/rankings/>.

17

The highest NBA salary is lower than that in MLB and NFL, despite the NBA having the highest average

salary of all four sports (see Part III(A)(2) above). This would appear to be anomalous given the

significant value that elite basketball players have to their respective teams, both on the court and on the

balance sheet. Basketball players play both offence and defence, and stay on the court for a large

percentage of the game. Add in the fact that only 5 players are on court for a team at any time, and it

becomes clear that elite players can have a far more substantial effect on a team’s on-court performance

than in the other major sports. Additionally, NBA players have been shown to have a staggering

economic effect to their team. When LeBron James left the Miami Heat to return to his hometown of

Cleveland to play for the Cavaliers, estimates of the Cavaliers value almost doubled to $1 billion.80

This is

because superstar players increase revenues from almost all sources – gate receipts, broadcast revenues,

merchandising, and increasing the chances of participating in the lucrative playoffs. The fact that the

superstars of the NBA are paid less than their contemporaries from other sports is a direct result of the

maximum salary restrictions that are present in the NBA through the collective bargaining agreement.

The maximum contract in the NBA is based on length of service and calculated by reference to the salary

cap. For players with 0-6 years in the NBA, the maximum salary is 25% of the cap, for 7-9 year veterans

the maximum is 30% of the cap, and for 10+ year veterans the maximum is 35% of the cap. Provision is

also made to allow players to earn 105% of their previous year’s salary if that would be more beneficial to

the player. A provision known as the ‘Derrick Rose Rule’ allows a 5th year player coming to the end of a

rookie scale contract to sign a maximum deal worth 30% of the salary cap (instead of 25%) if they meet

certain performance requirements, namely winning all-star selection twice, being named to one of the all-

NBA teams twice, or winning a regular season most-valuable-player (MVP) award.81

The rule was

brought in under the 2011 CBA to more fairly compensate high calibre players on rookie scale contracts,

such as Chicago Bull Derrick Rose who won the league MVP award in his 3rd

season.

The NHL has a maximum salary of 20% of the salary cap. In 2015-16, this means the maximum contract

for a player was 20% of the $71.4 million salary cap, equating to an annual salary of $14.28 million. The

NHL collective bargaining agreement stipulates that a maximum multi-year contract must fix the salary to

be paid based on the maximum for that year – if the salary cap increases the following year and the

player’s contract falls below 20% of the new, higher salary cap then the player’s contract still remains

unchanged.82

MLB and the NFL have no maximum salaries. Although, theoretically the NFL does have a practical limit

to an individual’s salary given they need to fit a minimum number of players on the roster without

exceeding the hard salary cap.

80 Scott Soshnick, ‘James Pushes Cavs Valuation Past Billion-Dollar Mark’ Bloomberg (online) 12 June 2014

<http://www.bloomberg.com/news/articles/2014-07-11/james-pushes-cavs-valuation-past-billion-dollar-mark>. 81 NBA Collective Bargaining Agreement, above n 23, art II s 7. Also note that the cap is calculated differently for the overall salary cap and maximum salaries. In 2005 each side negotiated a different formula for calculating the

salary cap (44.74%) than for calculating maximum contracts (42.14%). This means the max salaries are actually

slightly lower than the percentage of the cap would indicate. See NBA Collective Bargaining Agreement, above n

23, art II s 7(f). 82 NHL Collective Bargaining Agreement, above n 33, art 50.6.

18

It is quite clear that maximum salaries unnaturally constrict the salaries of NBA players. NBA players

have the highest mean salary, meaning there is more money per player in basketball than any of the other

sports. Combine this with the fact that the nature of basketball means on court results can be dominated

by superstar individuals, and one would think that elite basketball players should be the highest paid

athletes in US team sports. Critics of maximum salaries suggest the top players in the league could be

earning double the current maximum salary, and player agent David Falk claims that LeBron James alone

would be paid $20-$30 million more per season if there was no such thing as max contracts.83

But as

discussed in Part II(B) above, removing maximum salaries will obliterate the NBA’s middle class. The

playing group overall is not paid any more or less by having maximum salaries, but if the superstars are

going to be paid $30 million more per season, that’s $30 million less under the salary cap for teams to pay

non-superstar players, affecting players just above the league minimum all the way up to fringe all-stars.

The issue of maximum salaries is therefore not really one that is ultra divisive between the NBPA and

NBA – some owners have suggested they are open to it (such as Mark Cuban, on the proviso that they are

not guaranteed). It is, however, a potentially divisive issue for the NBPA internally – do they push to

abandon maximum salaries to make the system better reflect the value of its superstars, but at the cost of

lower salaries for the vast majority of other players? The superstars of the league are also able to

supplement their income more effectively off the court through endorsements. The NBA’s top-10 highest

paid players made 46% of their overall income through endorsements in the 2015-16 season. LeBron

James has also just pioneered a new type of sponsorship deal with Nike – a lifetime sponsorship contract

that ties James’ earnings to shoe sales and is expected to net the superstar upwards of $500 million.84

While it is understandable that the superstar players may wish to be paid their full value by the team, it

may be a tough argument to make to their teammates who will surely be worse off if maximum contracts

are removed. Given the importance of a players’ union remaining united throughout a CBA negotiation,

this may be an issue that the superstars concede to their more run-of-mill brethren, even though it is a

restraint not present in either MLB or the NFL. Perhaps as an internal compromise, the NBPA could seek

to instead increase the percentage of the cap that determines the value of a maximum contract.

C Minimum age limit

All four major US sports have a minimum age limit of some description preventing players that are too

immature (physically and arguably mentally) from entering the professional league via the draft. The

NBA and NFL have more restrictive minimum age requirements than MLB and the NHL which only

require athletes to have graduated high school or turned 18 respectively. This difference correlates with

the different racial participation between NBA and NFL, which has high rates of African-American

participation, and MLB and the NHL which are seen as sports predominantly played by Caucasians. The

correlation has opened up the NBA’s age restrictions to criticism for being racially prejudicial.

83 Ken Berger, ‘Max money explained: For every Anthony Davis, there’s a Greg Monroe’ CBS Sports (online) 9 July 2015 <http://www.cbssports.com/nba/writer/ken-berger/25237635/nba-max-money-explained-for-every-

anthony-davis-theres-a-cory-joseph>. 84 Kurt Badenhausen, ‘LeBron James Tops the NBA’s Highest-Paid Players 2016’ Forbes (online) 20 January 2016

<http://www.forbes.com/sites/kurtbadenhausen/2016/01/20/lebron-james-tops-the-nbas-highest-paid-players-

2016/#5eb71892486a>.

19

1. NBA

In order to be eligible for the NBA draft, a player must be 19 years of age in the calendar year that the

draft is held and, if a US player, at least one year removed from high school. Most players from the US

play basketball for a college for at least one year, but players are beginning to experiment with playing

professionally overseas. This is likely to become an increasingly attractive option for the top high school

prospects as globalisation makes it easier for NBA teams to scout players playing overseas. It is becoming

more economical to send scouts around the world to watch prospects live in action, and the increasing use

of technology such as game film makes it easier for scouts to assess the potential of overseas players

without seeing them in the flesh. Emmanuel Mudiay is an example of the success players can have going

overseas instead of to college. After initially committing to play basketball for Southern Methodist

University in Texas, Mudiay instead signed a $1.2 million contract to play for Guangdong Southern

Tigers for one season in the Chinese Basketball Association.85

Despite only playing 12 games in the

Chinese Basketball Association due to injury, Mudiay was still drafted seventh overall by the Denver

Nuggets in the 2015 NBA Draft, illustrating that American players may not suffer any real disadvantage

to their prospects of being selected early in the NBA draft if they elect to play overseas instead of at

college.

The NBPA wants to reduce the age limit down to 18, and remove the requirement to be one year removed

from high school. This had been the rule up until the 2005 CBA, and allowed superstars such as Kevin

Garnett, Kobe Bryant and LeBron James to enter the NBA straight out of high school. However, there

have also been a number of high-profile busts, the most notable of which was Kwame Brown who was

selected with the number one overall pick in 2001 before bouncing between seven teams over his 12 year

career with averages of 6.6 points and 5.5 rebounds per game.86

The players union want the age limit

decreased because the current rule potentially shortens the careers of elite high school players by at least a

year. It also places athletes at risk of serious injury while playing as an amateur in college that could harm

or even end their career before it begins. NBPA general counsel Gary Kohlman also discussed the racial

undertones of the NBA’s policy, suggesting ‘if they were white and hockey players they would be out

there playing. If they were white and baseball players they would be out there playing’.87

Kohlman is

drawing parallels between the NBA and NFL which both have higher age limits designed to funnel high

school athletes into college, and are both sports that feature predominantly African-American athletes.

This is in contrast to MLB and NHL which do not heavily feature African-American athletes and do not

have similar limitations on their draft entrants. The age limit is therefore construed by some as being a

racially motivated social policy that is overly paternalistic.

Despite the demands of the NBPA, the NBA has signalled a desire to actually raise the age of eligibility

for the draft to 20 years. The league has been careful to stress the reason behind their desired policy isn’t

social engineering, but to allow teams to have more information on players before they draft them and

85 Adrian Wojnarowski, ‘Souce: Emmanuel Mudiay agrees to $1.2 million deal to play in China’ Yahoo! Sports

(online) 22 July 2014 <http://sports.yahoo.com/news/source--emmanuel-mudiay-agrees-to--1-2-million-deal-to-

play-in-china-150156352.html>. 86 J Francis Wolfe, ‘Top 15 NBA Players Who Were Busts Out of High School’ The Sportster (online) ‘1 April

2015<http://www.thesportster.com/basketball/top-15-nba-players-who-were-busts-out-of-high-school/?view=all>. 87 Zach Harper, ‘NBPA attorney alleges NBA age limit has racial undertones’ CBS Sports (online) 5 March 2015

<http://www.cbssports.com/nba/eye-on-basketball/25094557/nbpa-attorney-alleges-nba-age-limit-has-racist-

undertones>.

20

invest millions of dollars into their development.88

Former journalist and current Golden State Warriors

coach speculated that one of the reasons players were so against having a minimum age was due to

pressure from players’ agents, who have more influence over the collective bargaining procedure than one

might think.89

Agents have an interest in removing or lowering the age limit because this enables players

to hit free agency earlier, and therefore earn higher contracts sooner. This translates into agents receiving

high commissions earlier too.

2. Age of Eligibility in MLB, NFL and NHL

There is no age limit for players entering the MLB draft, however they do need to have graduated high

school.

Like the NBA, the NFL is dominated by African-American athletes and also has a minimum age

requirement to declare for the draft. The age limit in the NFL is even more prohibitive than the 20 year

minimum age being pushed by the NBA – in the NFL, 3 seasons must have been played since a player’s

high school graduating year.90

This would make most players a minimum age of 21 before they are

eligible to be selected in the NFL draft.

The minimum age for entrants into the NHL draft is 18. Like baseball, it is considered a predominantly

played by Caucasians and compared the NBA and NFL there are very few restrictions in regards to age or

education for athletes wanting to turn professional.

The NBA is therefore trying to bring itself into line with MLB and the NHL. However, if the NBA gets

its wish and raises the age of eligibility for the draft to 20, then this will bring the NBA closer to the

position in the NFL and possibly reignite the racial controversy.

D Minimum salaries and rookie salaries

Each of the four sports has a minimum salary stipulated in their respective collective bargaining

agreements. The rules surrounding contracts for rookies vary quite considerably.

1. NBA

Minimum salaries for players not subject to a rookie scale contract are based on years of NBA experience.

In the 2015-16 season, minimum yearly NBA salaries ranged from $525,093 for a first year player to

$1,499,187 for a veteran with 10 or more years experience. The minimum salaries are scaled upwards

each year under the CBA at roughly 3.5% per annum.91

Players selected in the first round of the NBA draft are subject to rookie scale contracts, with the amount

of compensation a player receives based on how high in the first round a player is selected. For draftees

selected in 2016, the salary ranges from $4.9 million for the number 1 overall selection, down to

88 Ibid. 89 Steve Kerr, ‘The Case for the 20-Year-Old Age Limit in the NBA’ Grantland (online) 8 May 2012

<http://grantland.com/features/steve-kerr-problems-age-limit-nba/>. 90 NFL Collective Bargaining Agreement, above n 32, art 6 s 2. 91 NBA Collective Bargaining Agreement, above n 23, art II s 6, Exhibit C.

21

$976,300 for the 30th overall pick.

92 Teams have the option to sign rookies subject to the rookie scale for

any amount between 80% and 120% of the applicable scale amount.93

Rookie scale contracts also have a

fixed length of at least 2 years, with a team option for a 3rd and 4

th season. Players selected in the second

round (there are only two rounds in the NBA draft) do not face any of these restrictions and are

commonly placed on minimum salaries.

2. MLB

The minimum salary for MLB players in 2016 is $507,500. The minimum salary is adjusted upwards to

account for inflation, but cannot be adjusted downwards in the case of deflation.94

Rookies are not prescribed a salary like they are in the NBA. Because players are not eligible for free

agency until they have 6 years experience in the major league, their salary is largely determined by their

team who are able to sign rookies for at or near the minimum. This is why salary arbitration (available

after two years for some players, after 3 years service for everyone else – see Part III(A)(4) above) for

MLB is so important – it is their first opportunity to leverage a salary higher than the league minimum.

This is not deemed to be too unfair in most cases like it would be in the NBA given it generally takes a

number of years for a draftee to develop into a player that can contribute in a significant way to the team.

This is in contrast to NBA rookies who can sometimes make an immediate impact on the success of a

team.

3. NFL

Similar to the NBA, NFL players also have a minimum salary that increases based on years of service.

For 2016 the minimum salary for a first year player is $450,000 and increases up to $985,000 for players

with 10 or more years of experience.95

The NFL also prescribes the length of rookie contracts for players selected in the draft. Players selected in

the first round of the draft are signed to a 4 year contract with a team option on the 5th year. Players

selected in the 2nd

-7th

(and final) round of the draft are signed to a 4 year contract, with undrafted free

agents signed to a 3 year contract.96

However, it is important to remember that in practice teams do not

guarantee contracts. Unlike in the NBA, the NFL collective bargaining agreement does not prescribe the

compensation rookies are to receive on their first professional contract. However, increases are limited to

+25% of the player’s first year salary.97

4. NHL

The minimum salary in the NHL is $575,000 in the 2015-16 season, rising to $750,000 in 2021-22.98

Unlike in the NBA and NFL, hockey players’ minimum salary is not affected by the number of years they

have played in the league.

For rookies, different salary limits and prescribed contract lengths apply depending on the age at which

they enter the league. Players are subject to restricted rookie contracts for 3 years if they enter the league

92 Ibid Exhibit B. 93 Ibid art VIII s 1(c). 94 MLB Basic Agreement, above n 29, art VI(A)(1). 95 NFL Collective Bargaining Agreement, above n 32, art 26 s 1. 96 Ibid art 7 s 3. 97 Ibid art 7 s 3(e). 98 NHL Collective Bargaining Agreement, above n 33, art 11.12.

22

aged 18-21; are subject for 2 years if they enter at age 22-23; and for 1 year if they are drafted at age 24.99

Players who enter the league aged 25 or older are not subject to prescribed rookie contract lengths or

compensation. The maximum contract for a player entering the league aged under 25 is $925,000 plus a

maximum 10% signing bonus.100

5. Analysis of Minimum and Rookie Salaries

The minimum salary for inexperienced NBA players is close to the minimums in the other sports,

however the minimum salary increases in line with the increases to a players’ years of service in the NBA

to the point where they can earn almost $1.5 million. Minimum salaries do not increase with experience

in either MLB or the NHL. The NBA tries to ensure that veterans are not discriminated against by this

measure and passed over for younger, cheaper players by reimbursing the team the difference between a

three-or-more year veteran’s minimum salary, and the minimum salary for a two-year veteran.101

PART V: CONCLUSION

Despite coming out of the 2011 negotiations bruised and battered, NBA players are not in a bad position

relative to their contemporaries in professional baseball, football and hockey. They enjoy higher on

average salaries, decent freedom of movement, competitive minimum salaries, a serviceable pension and

similar share of revenues. On the downside, elite players are unable to earn to their full potential due to

the maximum salary – a restriction that is only in place in the NBA and NHL and enables the top baseball

and football players to be the most highly paid athletes across the four sports. The NBA’s luxury tax is

also more onerous than MLB’s competitive balance tax, further putting downward pressure on salaries.

Basketball players also face a higher age of eligibility to enter the NBA draft than is faced by hockey and

baseball players to enter their draft, but this is still less restrictive than the system in the NFL. Their

pension program also appears to be inferior to that of MLB and NHL players, especially in respect of the

minimum service until a player is fully vested.

But none of this changes the fact that under the current agreement, owners have been able to profit

immensely. Six years later and with both sides under new leadership, the NBPA will almost certainly be

pushing to recoup the share in revenue the players lost in 2011. Whether they also seek to abolish

maximum salaries will be interesting, but the bigger issue will be getting the NBPA to agree to such a

move internally, not so much the owners. It’s very likely that minimum and rookie salaries will adjusted

to reflect the huge increase in the salary cap brought on by the new media rights deal which takes effect in

the 2016-17 season.

The NBPA and NBA are diametrically opposed on the issue of age of eligibility. The other sports provide

fuel for the racial fire which the NBPA can invoke to support their case of lowering the minimum age to

18. The current negotiations will surely test the conviction of the players on this issue, and it would not be

surprising to see the players give in since it is the one issue that doesn’t directly affect any current players.

The comparisons to the other major sports reveals that the NBA players have it pretty good, but there are

still a number of areas in which they seek a change. The NBPA might not be able to find many

compelling arguments by comparing the NBA to the other major sports, but there are plenty of reasons

99 Ibid art 9.1(b). 100 Ibid art 9.3(a)–(b). 101 NBA Collecteive Bargaining Agreement, above n 23, art IV s 6(k).

23

within the workings of the NBA itself to justify changes – especially on the paramount issue of revenue

sharing between the owners and the players.

24

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