Author’s note: With the news breaking that the agents for players have tried to halt the vote for a new NBPA director, it seems like it’s a good time to reflect on what happened in 2011. Three years ago, the agents essentially took a seat at the negotiating table to further complicate an already complicated situation. Clearly, the agents were able to assert their influence and look to continue too do that. This seems like a good time to look back on the 2011 lockout and think forward to what could be awaiting us in 2017. Below is a copy of my final paper for my Business Law class last semester, and since my instructor thought it was decent, I thought that I would share.
The 2011 NBA lockout was an interesting study in employer-union interactions. Within the events of the lockout, they offered a crash course in many of the labor topics covered in our textbook this semester. These subjects include unions, collective bargaining agreements (CBA), trade associations and many more.
When the previous CBA expired on July 1st, 2011, the league’s owners had officially locked out their players after months of negotiating. The common perception in these situations is that this is a strike, but this was very different. While the players union technically has the ability to strike by agreeing as a majority to refuse to work due to grievances; a lockout is a temporary work stoppage initiated by a company’s management. During a lockout, contact between an employer and its employees is usually forbidden and is used as a method to wear down the unionized force into agreeing to their demands since they are not paying employees at that time.
The divisive issues among the owners and the players included how to divide the basketball related income (BRI) and where the salary cap and luxury tax should be set. Owners complained that the size of players’ contracts had gotten out of hand, although they were the ones determining how much they made, and that was pushing them over the salary cap and into paying the luxury tax penalty. Essentially, the owners wanted the next CBA to save them from themselves. As for the players, they had become accustomed to a certain standard of living and did not want to concede future earning power while setting a precedent for future negotiations that the union would make significant concessions unnecessarily.
Under the previous CBA, the luxury tax penalty was one dollar per dollar over the tax line. With the owners’ new proposal, the new penalty would have quadrupled to two dollars per dollar over, and up to four for repeat offenders, in the name of discouraging reckless spending and promoting a more competitive league. Miami Heat player representative Dwyane Wade felt that this was unnecessary because smaller market teams like San Antonio had been able to sustain success by being able to manage their team intelligently. On the other hand, the major market New York Knicks struggled for years after mismanaging their salary cap and bungling draft picks, indicating that competitive balance was not determined by having a hard or soft salary cap, but having a well-run organization.
Owners also wanted to lower the maximum length of a player’s contract from seven to five, which was another point of contention. The union felt that this was an issue of team’s recklessly doling out contracts to the wrong players and that the players should not have their livelihood limited because of that. This was a complex issue because, yes, long-term contracts pose significant risks because injuries can end careers in the blink of an eye, but these contracts offered significant financial security for players and their families.
However, the big issue was the division of the BRI. The owners proposed reducing the players’ share of revenue generated from 57 percent to just 47, to which the players initially countered with an offer of 53 percent. Basketball revenue entails everything from TV to tickets and other form of sales—earnings that are made possible by the players. However, the league was crying foul, claiming that they were losing $300 million annually because 22 of its 30 teams were losing money. Yet, their offer to remedy this problem would reduce players’ salaries by a whopping 40 percent, or $800 million altogether.
This led to union president Billy Hunter filing a complaint with the National Labor Relations Board (NLRB) that the league was acting in bad faith by not providing them with critical numbers (such as their alleged annual losses above) and repeatedly threatening them with a lockout. The NLRB is a federal agency that oversees everything from union elections to investigating unfair labor practices. Naturally, the owners rebuffed the union’s claim, saying that they were acting fairly within federal labor laws.
As both sides appeared entrenched in their respective stances, it appeared that a quick resolution was not on the horizon. As the calendar turned to October, the league had canceled training camps and the entire preseason, costing the players millions of dollars. In attempt to resolve the conflict, George Cohen was brought in as a federal mediator representing the Federal Mediator and Conciliation Service. Cohen nearly brought the sides to agree to a 50-50 revenue split, but after the league told Hunter to “Take it or leave it,” Cohen decided that mediation was no longer purposeful.
The league’s attempt to strong arm the union into submission did not sit well, and they considered their very own nuclear option: decertification.
When a union chooses decertification, it usually means that they are trying to regain some bargaining power as a trade association by being able to file an antitrust lawsuit, and dissolve the union into a trade association. Acting as a trade association would enable the players to continue to exchange information as individual employees and represent its members’ interests in front of government bodies, like in a lawsuit. In order to decertify, the player’s union needed a 30 percent vote, but the NLRB does not consider decertification with an ongoing unfair practices complaint filed.
This also affects the laws that would govern the proceedings. Should they choose decertification, they would no longer be operating under labor law, but antitrust law. The difference is that labor law would allow them to bargain collectively (hence “collective bargaining”) and antitrust law would enable them to pursue litigation, but also continue to negotiate in the interim. As a whole, antitrust laws are in place to prevent trusts, or large corporations, from forming monopolies and restricting competition. Labor law simply mediates the relationship between employers, employees and their unions. Decertification was a powerful tool to have because the players could potentially force the NBA from locking them out and allowing them to play and collect a paycheck once again.
When the two sides met again at the bargaining table on November 9th, negotiations were at their most tense with the owners in their hardline stance and the union threatening decertification. The sides met for two days before the owners gave their final offer and said they were done negotiating. As a result, the players dissolved the union and quickly filed an antitrust suit, claiming that the lockout was an illegal boycott. Then on November 15th, one lawsuit was filed by a group of players in California and another group filed one in Minnesota.
Just six days later, the lawsuit in California was merged with the one filed in Minnesota to expedite the process and since the courts would have likely done the same because of their similarities anyway. The power play worked in the favor of the players, and the owners agreed to meet with the players 48 hours later to resume negotiations. When talks did continue, the sides finally reached an agreement on the revenue split and salary cap after 15 hours, putting an end to nearly five months of ugly negotiations. Of course, nothing could be official until the NBPA reformed and the players would vote in favor of doing so on December 1st. From there they would go on to iron out the secondary issues and begin their season on Christmas Day of that year.
The interesting thing is that the definition of labor law states is that it governs the employee, employer and unions, but in this case the agents of the players had a prominent role in these negotiations. As with anything in life, the more moving parts there are, the slower progress is made. Agents, like players, were also concerned with any loss of income because that affected their income as well. It was the agents who met privately in the fall of 2011 to push the union to decertify months before they would eventually do so in the name of reclaiming the union’s power. Yet, their motives were questionable since their livelihood is contingent on the players being able to retain theirs.
After all was said and done, the players were set to receive 51.2 percent of BRI over the six years of the new CBA and a new amnesty clause was added to relieve teams of one cumbersome contract signed under the old pact. The amnesty clause was a never before seen element in the NBA because teams could simply waive a player without his salary counting against the salary, but did require a decent amount of pride to be swallowed by the amnestying team. Yet, the maximum salary a player could earn would go unchanged. In the end, both sides had to compromise—something neither appeared interested in doing early on.
The 2011 NBA lockout provided us an interesting case study in labor and antitrust law, but also the power of unions. Instead of immediately giving in to the owners’ demands, the union was able to retain some power for the inevitable 2017 lockout by using their right to decertify for the first time in history. While owners may have seen the union flex their muscle and the players may feel as if they have more power than ever, but the league has a new commissioner who will want to leave his mark on the league; so the league will likely be in a similar situation three years from now. We also saw to an unfortunate extent how these negotiations can cost both the employer and employee earnings if they are unwilling to negotiate in good faith from the onset, and just what it can take to resolve the ugliest of spats. Finally, we saw the benefits that both antitrust and labor laws can bring to a labor force and company seeking a fair collective bargaining agreement.