COVID-19 Has Magnified Labor Issues in the NHL and NBA

Photo Source: The Canadian Press / Jason Franson

The NBA and NHL share the winter and spring schedule in venues across North America. However, the leagues are in two different situations during the 2020 COVID-19 suspension. The future of NBA salaries are in flux, with players not understanding what the future holds, while a select few NHL players are guaranteed to be paid no matter what. Both leagues will be primed to address the issues COVID-19 has exposed in the next CBA negotiations. 

The NBA has a force majeure clause, which allows the league to deliver a written notice of termination of the collective bargaining agreement if an epidemic makes it impossible for games to be played within 60 days of the force majeure event. Once the written notice of termination is delivered, the NBA has 60 days to engage in good faith negotiations with the Players Association to enter into a successor agreement. If no deal is agreed upon after 60 days, the NBA can fully terminate the current CBA. During the force majeure period, NBA players’ salaries are decreased 1/92.6th for every game not rescheduled and replayed. NBA Champion and current Los Angeles Laker Danny Green lobbied for his fellow players to save up on ESPN’s First Take as he noticed that a lot of his fellow players are not prepared for this situation.

The NBA is currently in discussions with the National Basketball Players Association (the union of NBA players) to withhold 25% of players’ salaries. Even with games not occurring, the players have to be paid on the regular timetable – semi-monthly payments occurring on the 1st and 15th of every month. However, the NBA allows amendments to the payment schedule on the Uniform Players Contract. NBA super-agent Rich Paul was able to secure 90-plus% of his clients’ salaries to be paid before April 1. Whether the NBA players are on the traditional payment schedule or an amended one, the NBA still holds the right to withhold salaries for games that haven’t been played yet. During the force majeure period, if a player has received a disproportionate amount of his salary, the player must promptly pay the difference back to the team, or if the player is traded or signs with a new team, the new team shall withhold the amount owed from the first available payments until the difference is met. The NBA can also withhold salaries under income splits. NBA players are paid between 49% to 51% of basketball-related income. When the revenue falls short of the projections, the percent difference is taken out of the players’ salaries and placed into escrow.

What is uncertain are the requirements for players during this time if salaries are not paid. If the force majeure clause is instituted, the contracts are voided until the passing of a new CBA taking on the old contracts. If the NBA does not use the force majeure clause and institutes withholding salaries on basketball-related income grounds, the contracts are still valid. With players still under valid contracts, they are required to engage in promotional activities (which may be one of the reasons why there is an NBA 2k esports tournament between current NBA players).

The NHL is in a totally different spot regarding the future of the CBA. Instead of a force majeure clause, the NHL has a management clause, which allows the League to determine when, where, how, and under which circumstances it wishes to operate and suspend. This clause gives the League the power to suspend its season. However, the League does not have the power to outright cancel salaries under a force majeure clause. Thus, the NHL will continue to pay salaries on the current schedule. Like the NBA, the NHL has the right to reclaim salaries and payments even after they are paid. If 82 regular season games are not played, players’ salaries are decreased in proportion to the number of games canceled. Additionally, the League can withhold a portion of salaries when hockey related revenue falls under projections, with the difference entering escrow.

However, the NHL has one difference that allows the top players to keep their money even if there are no games: signing bonuses. A signing bonus is a lump sum payment given on a specific date to a player when he signs a Standard Player Contract. They have been seen as lockout-proof contracts where top players can be paid even if there is no season. The same logic applies to games canceled by COVID-19; even if games are not played, these signing bonuses have to be paid. The difference is in the language of Article 16.1 of the NHL CBA. The proportioned decrease in payments only applies to Paragraph 1 Salary, not signing bonuses. The signing bonus loophole in the NHL CBA has been used by players such as Ryan O’Reilly, John Tavares, and Connor McDavid. However, the signing bonus is not foolproof, as players still have to pay escrow if hockey related revenues fall short of projections. But, as the majority of players are not guaranteed any salary at all, some of the League’s best have already been paid. The signing bonus loophole is seen as one of the issues at the forefront of the next NHL CBA negotiation, as teams are forced to pay bonuses even if games do not occur, and a small group of elite players are being paid in the absence of games. At the same time, the majority of the union would be unemployed.

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Conn Smythe winner and Stanley Cup champion Ryan O’Reilly signed a 7-year, $52 million contract with the Buffalo Sabres in 2016 before being traded to St. Louis in 2018. $45 million of the compensation is in the form of a signing bonus. Photo Source: MediaNews Group/Boston Herald / Christopher Evans.

The majority of the athletes in the NHL and the NBA are losing hope that they will receive continued payments. Games have been postponed for the immediate future, and cities are instituting ordinances to ban public gatherings. Every passing day that COVID-19 does not improve decreases the odds of the season continuing. However, for a select few NHLers, payments are not going anywhere, frustrating owners and other players. And for the NBA, instituting its force majeure termination notice would throw the future of the NBA in limbo. Through two different paths, COVID-19 has thrown the CBAs of both Leagues into question.

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