To Pay Or Not to Pay, That Is The NBA’s April 1st Question.

Image Credit :Bob Donnan / USA Today Sports

Shortly after the Covid-19 pandemic reached the United States, the NBA suspended play on March 11, 2019, in an effort to protect its players, officials, and fans after Rudy Gobert tested positive for the virus moments before a game. At the time, the NBA was one of the first professional leagues to suspend play; in hindsight, this was the responsible decision, particularly as Rudy Gobert, a well known NBA star, was one of the first Americans to test positive for the virus. Unsurprisingly, a decision to suspend play for a professional sports league involves consideration of several factors, including to television contracts, various CBA contractual provisions, and how to handle payroll for athletes and stadium staff.

Recently, one specific contract clause, the “force majeure” clause, in the new NBA CBA has become increasingly relevant as play has been suspended. Put simply, a force majeure clause is applicable when subsequently, due to “acts of God,” the contract cannot be carried out as previously agreed upon. As reported by Bryan Toporek of Forbes, if the NBA cannot “perform its obligations” due to a “force majeure event”—which includes epidemics—players would lose 1/92.6th of their salary for each missed game that cannot be rescheduled, according to Article XXXIX, Section 5 of the Collective Bargaining Agreement. The NBA, unlike other professional leagues such as the NHL, expressly included “epidemics” as a condition precedent, or a requirement, in order to invoke this clause. Additonally, a force majeure event also conveys to the NBA the right to terminate the current collective bargaining agreement 60 days after delivering a written notice of termination to the NBA Players Association.

Adding further tension to already unprecedented challenges to the NBA, Michael McCann of Sports Illustrated reported that the current CBA does not define “the necessary elements or circumstances for an ‘epidemic’ to exist.” Accordingly, it is unclear whether the coronavirus outbreak would constitute a force majeure event, therefore the NBA’s options at this juncture are somewhat uncertain. However, the World Health Organization recently officially upgraded the outbreak to a pandemic, which might allow the NBA to argue that COVID-19 qualifies as an epidemic, therefore allowing teams to withhold pay for missed games.

Image Credit: Zach Buckley / Bleacher Report

Although the NBA may have the right to withhold pay pursuant to the force majeure clause, there are other factors the league must consider. Specifically, the NBA and the NBA Players Association, led by its president Chris Paul, currently have a positive relationship following the execution of the recently agreed upon CBA, and the players are without fault for the current issues the NBA is facing. Additionally, ESPN’s Bobby Marks reported “the financial cost is a big reason there is the expectation, according to sources, that the current season will resume at a later date, even if that means the 2020-21 season starts later than expected.”

The NBA’s force majeure clause is particularly relevant because the NBA has only publicly committed to paying player salaries in full through April 1st. Additionally, some player contracts impose a payment schedule over the course of the calendar year beginning on November 15th, therefore there is significant money in jeopardy if the clause were to be in play. Daniel Marcus of Forbes provided some rough estimates as to what the actual impact of the force majeure clause may be. Assuming most players have their salaries paid over 12 installments during the course of the season, 90% of these salaries will be paid by April 1st, the date which the NBA has openly guaranteed salaries until. The remaining 10% would be roughly $318,798, 784. Therefore, the NBA could withhold around $3.3 million, which if you divide by the 30 total teams comes out to about $110,000 saved per team. Although this seems like a substantial amount of money, considering the economic crisis the pandemic caused, it is likely the bad press and negative impact upon labor relations would greatly outweigh the benefit for the NBA of saving $3.3 million.

Obviously, when a global crisis such as Covid-19 is at its height, sports, justifiably so, take a backseat. However, sports such as the NBA have a way of bringing people together and boosting morale, which just about all of us could use right now. To date, the NBA has seemingly been doing all of the right things. Specifically, Adam Silver and other executives have taken substantial pay cuts to ensure stadium workers and other staff receive their full weekly paychecks. Additionally, the NBA has been donating supplies, money, and use of their stadiums to help combat this virus and the overflow of patients which need care. Hopefully, the NBA does right by its players and continues to pay all of its them, as well ass executives, and stadium workers through this difficult time. In the end, this gesture of good will may motivate players to be their best when/if, as reported by ESPN’s Bobby Marks, the NBA decides to resume its season, in an unconventional format. We can hope that the NBA playoffs can distract us and provide us with some entertainment to bring back some normalcy and we will remember the image of players raising the trophy, rather than the suspension of play, when we look back on this unique season.

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