CBA Negotiations 101

January 29, 2020

by Steve Thomas

We’re into the thick of the Super Bowl week now, which is the NFL’s preeminent event of the year, but since it’s yet another season in which the Redskins are nowhere near an event of this magnitude, I wanted to take this opportunity to give everyone an introductory primer on the issues that will come up in the NFL – NFLPA’s negotiations for the next Collective Bargaining Agreement.

The existing CBA runs through the end of the 2020 league year, which is March, 2021, so there is no threat of a strike or work stoppage for the 2020 season.  If a strike (meaning, the players refuse to play) or a lockout (meaning, the owners refuse to allow the players to come to work) happens, it will be for the 2021 season.

As a matter of background, any collective bargaining agreement between employer and union is governed by a complicated set of federal laws which are enforced first and foremost by the National Labor Relations Board.  There is a large and complicated body of Supreme Court case law governing the employer – union relationship that I’m not going to get into here, because (1) I’m not an expert in this field, (2) it would be very, very boring, and (3) would take a ton of time to research and write about.  Also, the existing CBA is over 300 pages long.  Suffice to that these are very complex issues that take energy, expertise, and significant time in order to get done.

So, having said that, what are the major issues that need to be solved?  Let’s dive in.

Revenue

Generally speaking, the NFL’s gross revenue includes such things as income from game tickets sold, some of the gameday parking and stadium income, some income from third-party stadiums leases or use agreements where the team receives income from such lease or use agreement, income from television broadcast contracts, NFL Films, leaguewide and some team-specific sponsorship deals, merchandising sales, and website ad revenue.  The NFL and the NFLPA will eventually reach consensus as to how much of that gross revenue will be spent on player salary and how much will be kept as income for the owners.  There are two factors in this determination:

• What’s defined as “Non-AR” under the CBA, which identifies the income streams that will be exempt from the definition of “Revenue”. These two definitions – “Revenue” and “Non-AR” – define the pot of money that will be split between owner income and the money that must be spent on player salaries, and the pot money that the owners can keep without splitting it with the players.
• The percentage of the split of “Revenue” (which, again, is limited by the “Non-AR” revenue that the owners keep) between ownership and player salary. Under the current CBA, that split is 53% to ownership and 47% to player salaries.

The salary cap is calculated each year by multiplying annual “Revenue” (again, minus the “Non-AR”) by the agreed-upon percentage reserved for player salaries; currently, 47%.  Then, that master number is divided by 32 to achieve each team’s base salary cap figure.

This is always the single biggest hurdle to overcome.  The difficult part is that this calculation has two variables – the percentage split and the definition of what’s split.  The parties could actually agree on a percentage split that looks more favorable to ownership, for example 54% to the owners and 46% to the players, that ends up being less overall money to the ownership because fewer items have been carved out via the “Non-AR” definition, or vice versa.

Currently, some of the major “Non-AR” income streams are, among other things, most forms of income that goes towards stadium construction, income from the sale of personal seat licenses that were excluded from the prior CBA, non-football events at stadiums such as concerts, and, amazingly, wholesale merchandising by “Dallas Cowboys Merchandising”, which seems suspiciously like a bone thrown to Jerry Jones to make him happy.

Put in simple terms, ownership wants more income streams included in the “Non-AR” bucket, and the NFLPA wants the opposite.  Of these items, the exclusion for stadium construction funds is probably the toughest to solve.

This is an extremely complicated set of provisions and is by far the most important part of the negotiations for the next CBA.  The percentage split will be the number thrown around in the media because it’s the easiest to understand, but it only tells part of the story.

Increase in Regular Season Length

The NFL owners want to increase the length of the season because more regular season games means more income.  Ownership has at various times proposed both an 18 game season and a 17 game season.  The NFLPA has publicly balked at both, ostensibly out of concern for player health.

The NFLPA’s stance is a bunch of garbage.  Don’t buy it.  The NFLPA is, in this writer’s opinion, almost certainly taking this position in public in order to maintain bargaining leverage.  The NFL will need to give on some major items in order to extract the NFLPA’s agreement on this issue, but make no mistake, this is going to happen.   There’s too much money at stake for the parties not to agree.  Ownership may have to give a greater share of revenue to the NFLPA and will probably have to modify the vesting rules for retirement benefits to account for the longer season, but at the end of the day both sides want to make more money and this is the easiest way to do so.  The NFLPA is smart enough to understand that it can extract major concessions from the owners in exchange for the union’s agreement on this issue.

Drugs of Abuse Policy

The NFLPA wants the NFL to relax its marijuana policy.  In my opinion, the NFL’s stance on marijuana use – and for that matter, drugs of abuse in general – has more to do with the effect of drug use by NFL players and employees on the public’s perception of the NFL than it does about the effect of drug use on the on-field product.  In other words, the NFL cares a great deal about the veritable “NFL Shield” and is leery about agreeing to anything that will negatively affect it.  I’ve made my personal feelings on drug use abundantly clear on the show many times, so I’m not going to rehash that here.  Suffice to say, the NFL will be reluctant to relax its drug policy too much, and certainly won’t be willing to do this at all without an exchange of value from the NFLPA in some other area (such as, for example, more favorable revenue split and/or season length).

Franchise Tags

Ownership loves the franchise tag, whereas it is universally disliked by the players, for obvious reasons.  This will be a bargaining point, but in my opinion, the NFL likely won’t give on it without major concessions from the players, simply because it provides too much value to the teams because it helps keep rosters together. The franchise tag is a great way for a team to keep the best players in the fold, so to speak, and ownership is very unlikely to eliminate it from the CBA.  Plus, unlike what the NFLPA would have you believe, players who are tagged in any capacity actually get paid very well for that year, so it’s not fundamentally “unfair” to the players, or as ESPN erroneously labeled it recently as “tyrannical”.  The NFLPA’s best way to approach this issue is for agents to start negotiating no-tag clauses into the contracts of elite players.  Plus, frankly, the franchise tag only affects a very small number of players, so it’s unlikely that the NFLPA is going to go to the mat over this in the CBA negotiations.  The only progress the NFLPA is likely to make in the CBA on in this regard are modifications to the ways tagged salaries are calculated and/or more restrictive limits on the number of years it can be applied.  But go ahead and bet the house that it isn’t going away completely absent an unrealistic extraordinary concession by the NFLPA.

Guaranteed Contracts

Don’t fall for this as a bargaining issue.  It almost certainly will not be a specific provision in the CBA.  Neither the NBA nor MLB are required by their collective bargaining agreements to fully guarantee contracts; in fact, a handful each year aren’t.  It’s just something that has evolved over time in player contracts.  What makes NFL contracts “non-guaranteed” in the eyes of the public is paragraph 11 of the form of NFL player contract that is attached as an exhibit to the current CBA.  Paragraph 11 gives teams the right to terminate the contract if, in the sole judgment of the team, the player’s skill and/or performance is unsatisfactory as compared to other players on the roster, negative player conduct, or if as long as a salary cap is in effect the player’s contributions on the field are anticipated to be less than others on the roster or others whom the team intends to sign; in other words, essentially any time it wants.  The way to make player contracts fully guaranteed is easy from a contractual perspective – simply either modify this paragraph of the form player contract or eliminate it entirely.

However, this is extremely unlikely, because it would change the entire fabric of how the NFL operates.  For one thing, NFL teams expand their rosters to 90 in the offseason, and they can’t be on the hook under the salary cap for all 90 contracts under the existing salary cap rules.  Second, the risk of injury in the NFL is so much greater than in the NBA or the MLB that teams have to have a way to replace players when their performance falls off due to injury, and having long 5 year contracts that are fully guaranteed doesn’t allow teams to do that.  If the NFL were for some reason inclined to do this, what you’d see is a series of mostly 1 or 2 year contracts, and that isn’t what the NFLPA wants either.

All of that is to say that this is extremely unlikely to happen in the new CBA.

Health Care

The players want better health care benefits for retired players.  The NFL wants to limit the cost of benefits to retired players, because, to put it cynically, retired players have little value to the NFL.  By the standards of the average person, the benefits of retired NFL players are extraordinary.  In fact, one probably couldn’t find either a job or a retirement with a better overall benefits package than “NFL player”.  The issue, though, is that NFL players obviously suffer serious injuries that affect them for the rest of their lives, including CTE, and as a result that the NFLPA wants the NFL to provide free lifetime health care for all players.  That’s probably not going to happen, because that would be a truly enormous cost and it also involves the complicated and significant issue of state worker’s compensation laws, but regardless, look for health care to be a major negotiating point.  I expect the NFLPA to be very public about their health care demands because most of the public can sympathize with the basic idea of NFL players sacrificing their bodies for the NFL.  The owners would be wise to give some ground on this issue, both from a public perception perspective and because it can limit the possibility of new lawsuits and problems in the coming years.

Player Discipline

In the last CBA negotiations 10 years ago, the NFL was adamant that the final say in player discipline would rest in the hands of the commissioner, to the point that the league essentially refused to even negotiate the point.  The NFLPA obviously has a big problem with the way Roger Goodell has administered this program, so it will be raised during these negotiations.  Goodell has definitely had his stumbles in disciplinary actions, but it seems unlikely that the NFL will ultimately give in and allow some sort of jointly administered neutral body to do discipline.  First, the NFL views this as the commissioner’s job – after all, this league belongs to the owners, not the players.  Both sides need each other, sure, but at the end of the day, it’s the NFL owners who are taking the financial risk for the business.  Second, player discipline affects a very small number of NFL players, so it’s never been something that the union has been willing to go to the mat over.  Some small changes may happen, but the smart betting money should go on the commissioner retaining ultimate authority.

Miscellaneous issues

The continuing effort to make changes to the game to improve the safety of the players is at the forefront for both sides.  The NFL owners are mostly concerned about the effect of serious mental health issues in prominent players on the economic future of the game and have therefore been willing to make many changes to the on-field product.  The NFLPA is obviously trying to improve the lives of its members.  For these reasons, expect some changes to come with this CBA, because it can be a win-win for everyone.  There are also a myriad of other more minor items that could also change, none of which being serious enough to hold up the execution of a new CBA.