Posted: Tuesday April 26, 2011 6:18PM ; Updated: Wednesday April 27, 2011 10:22AM
Michael McCann
Michael McCann>SPORTS LAW

Recent NFL ruling could drastically alter NBA's labor strategy

Story Highlights

Judge Susan Nelson lifted the NFL's lockout on Monday, a pro-players ruling

NBA players may be less able to show irreparable harm caused by a lockout

A preliminary injunction might harm NBA owners more than NFL owners

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NBA commissioner David Stern said previously that 22 of the league's 30 teams will have lost money this season.
NBA commissioner David Stern said previously that 22 of the league's 30 teams will have lost money this season.

U.S. District Judge Susan Nelson's decision Monday to enjoin the NFL's lockout is a major setback for the league, which had had hoped to use the lockout to force players into agreeing on a new collective bargaining agreement that would substantially reduce players' earning capacity. While the U.S. Court of Appeals for the Eighth Circuit, which will review Judge Nelson's order, may provide renewed life to the lockout, NFL players are now poised to avoid the most onerous concessions.

More coverage of NFL's labor situation

But Nelson's ruling will affect much more than just NFL; it could also substantially alter the NBA's strategy for negotiating a new collective bargaining agreement with its players when the current CBA expires June 30. While the NBA and its fans are enjoying the playoffs -- with TV ratings off to a record start -- the league cannot gloss over the impact of the recent order. Here are the major questions as the NBA's deadline nears:

1. What happens after June 30?

Provided the NBA and players' union continue to bargain in good faith after June 30, the terms of their expired agreement would remain in effect. In that scenario, existing salary-cap rules and free-agency restrictions would stay in force, and teams could sign players, hold rookie camps and conduct other typical activities for NBA teams and their players. If the NBA and NBPA are relatively close to a new collective bargaining agreement by June 30, this scenario of continued relations is likely.

The NBA, however, wants substantial concessions from the players. If substantial progress has not been made on a new agreement by June 30, the league is poised to halt operations -- that is, to impose a lockout. The NBA would be motivated to start the lockout on July 1 because, while the timing of payments on players' contracts varies widely, some players are paid in the offseason. If locked out, those players would not be paid, thereby saving teams money. Reducing staff and limiting business operations would also help teams cut costs.

2. What are the NBA's demands?

Foremost, the NBA demands a reduction in the percent of Basketball Related Income (BRI) that is paid to players in salaries and other compensation under the collective bargaining agreement. Currently, 57 percent of BRI is paid to players; the NBA reportedly wants players to receive 45 percent. The NBA also seeks a hard salary cap, which would prevent high-spending teams from substantially exceeding the cap through payment of a luxury tax, and fewer guaranteed contracts, which would enable teams to cut disappointing players without an obligation to pay them the remainder of their salaries. These changes would reportedly result in a reduction of NBA salaries by about 30 percent.

At first glance, the NBA's demands seem out of whack with fan popularity in the league. This season alone, it has enjoyed excellent TV ratings and strong ticket sales, along with other signs of financial success.

The league, however, maintains that current sources of revenue are largely tapped out, and that there may not be additional sources of substantial review in the pipeline. Put another way, while the pie of NBA revenue may be considerable, it may not grow much in the coming years or not fast enough to pay salaries of players without owners losing money. The NBA, in fact, says that 22 of the 30 teams will have lost money this season. Assuming such a claim is true and would more or less be true again in 2011-12, most teams would make more by not playing at all next season.

3. How can NBA players respond to the NBA's demands and a lockout?

The NBPA does not believe the NBA is losing as much money as it says it is. The union also attributes teams' economic woes primarily to a lack of sharing among big-market and small-market teams -- if teams shared local television revenue, which varies considerably by team, fewer would be in financial trouble, the union claims.

If the NBA imposes a lockout, the players would likely follow the same script as the NFL's union: decertify and then, with several notable players as lead plaintiffs, commence antitrust litigation against the league. The NBA would, in turn, follow the same script as the NFL: file an unfair labor practices charge with the National Labor Relations Board (NLRB) with the hope of preventing the union from decertifying.

According to a report by CBSSports, union chief Billy Hunter has already obtained the requisite number of signatures of NBA players for decertification. Decertification would entail the NBPA notifying the Department of Labor that it has terminated its status as a union and thus no longer represents NBA players. At that time, various restrictions on NBA competition -- the salary cap, the draft, the age limit, etc. -- would become subject to federal antitrust law, which prohibits agreements among competitors (i.e. NBA teams) from limiting competition.

And such competition goes beyond the 82 games of each season. Just look at the draft process: Teams decide that a prospect can be "drafted" by one team and that every other team will not pursue that player. The prospect may not want to play for or live in the city of the team that selects him, and that player can only negotiate with that one team, so he can't get multiple teams bidding for his services. If he doesn't sign with that team, he cannot enter the NBA for at least one year, after which he may be subject to the draft again.

Such anticompetitive agreements are exempt from antitrust law because of the "non-statutory labor exemption." The exemption dictates that when owners and players collectively bargain a rule -- as opposed to the rule being unilaterally imposed by owners -- it is exempt from antitrust scrutiny. Once decertification occurs, however, the labor exemption is taken off the table and the antitrust war begins.
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