By Peter Gleason
The NBA and National Basketball Players Association are considering withholding up to 25% of players’ remaining salaries in a league escrow should regular-season games eventually be canceled.
ESPN is reporting that the NBA continues to hope that there will be a resumption of some part of the regular season and playoffs in the wake of the coronavirus pandemic, but the uncertainty surrounding the league’s ability to fulfill its full 82-game regular season will ultimately be a financial cost shared among owners and players.
The collective bargaining agreement maintains that players lose approximately 1% of salary per canceled game, based on a force majeure provision, which covers several catastrophic circumstances, including epidemics and pandemics.
Once there is a cancellation of games, the force majeure is automatically triggered under the language of the CBA.
Commissioner Adam Silver, NBPA executive director Michele Roberts and a group of league and union lawyers have been discussing a number of ways to prepare financially for how the likely canceling of scheduled games will impact some percentage of lost salary for players, sources said.
If there is no forthcoming NBA and NBPA agreement on beginning to withhold a percentage of players’ salaries with the April 15 paychecks, players would continue to be paid in full on a normal timetable. Under the guidelines in the CBA, players would be required to pay back the salary later, based on a formula of canceled games for a player’s individual team and salary.
The NBA has no plans to announce the cancellation of games in the immediate future, sources said. The league’s plan is to continue working on a number of contingencies for return from a hiatus that started March 11, based on how many days the league has to work with to salvage a season, sources said.
The NBA has committed to paying full salaries on April 1, but the league and union are discussing options for an orderly redistribution of money based on the number of regular-season games that could be lost in the 2019-20 season.
The force majeure becomes one more mechanism for the NBA to make the financial formula work on delivering the players to the agreed-upon 51% share of the revenues with owners.
Already, 10% of players’ salaries is held in escrow by the league. The significant decline in Basketball Related Income (BRI) would result in the projected $380 million of escrow returning to the 30 NBA teams after the season. The amount of projected revenue loss without the application of the force majeure would exceed the current amount of escrow available to teams. As a result, the NBA would need other means to offset the loss. In the case of salaries decreasing (as a result of games missed) to a point that there is a shortage in the escrow system, the 10% currently withheld would likely be returned to the players.