Monday, March 14, 2011

NFL Owners Initiate Lockout; Players set to Sue the League

What was speculation by the NFL and NFLPA about each others positions and what would end up happening between the sides that would lead to a lockout of the players, both wound up fulfilling each others self-fulfilling prophecies.  The NFL claimed for weeks leading up to this lockout that the NFLPA would deny reasonable terms to a new deal and pursue action in federal court.  The NFLPA claimed for weeks that the NFL had no intention on bargaining in reasonable terms and were committed to locking the players out.

Each ended up being the exact position of both sides as the current CBA expired on March 11th, 11:59PM with both sides walking away from the negotiating table.

The NFL and the NFLPA broke off negotiations to work out a new deal between the two operating sides of the business that is the National Football League on Friday.  The original deadline date was set for March 4th by the original drafting of the CBA that was to expire.  Not even 17 days of negotiating with a special third party federal mediator could bring the two sides to an amicable resolution.

DeMaurice Smith(left) is the Executive Director of the NFL Player's Association and Roger Goodell is the NFL Commissioner that represents the National Football League and its owners

What prompted the last minute, intense negotiations in the final week before the CBA expired was when Minnesota judge David Doty, who has been presiding over NFL labor cases for over twenty years as the ultimate arbiter of grievances between the NFLPA and NFL Management Council and has often ruled in favor of the players, blocked the NFL from being able to use an estimated $4 Billion dollars in money it had acquired in current and future television contracts.  The ruling came just a couple weeks before the CBA deadline and lost the NFL a mountain of leverage it could have used with those TV dollars if it ends up going into a season with the lost revenue of no football being played in 2011.

With the loss of that leverage, the NFL came down to a more level playing field with the NFLPA.  Because talks got much closer with the help of an independent, third party federal mediator to help induce compromise between the two sides, the CBA that was set to end on March 4th was once extended 24 hours then twice extended to March 11th.  That date has now come and passed with no new deal in place and no extension of the current deal to continue talks.

Minnesota U.S. District Judge, David Doty, has presided over NFL labor issues as the arbiter of grievances between the NFLPA and NFL Management Council since the late 1980's

The most glaring of the issues remains to be the way that the NFLPA and the NFL owners split up an astronomical $9 Billion pie between them.

Owners have been getting the first billion off of the top of the revenue pile under current terms, but opted out of that most recent CBA in May of 2008 because they wanted to get a new deal in place to increase their personal revenues.  The league has stated that many teams are operating under their profit potentials or even at a loss because players are being overpaid.  This is the basis of their argument for wanting to increase the amount of money they earn  from $1 Billion to $2 Billion.

The players have conceded that there can be an argument made for teams that need revenue boosts to keep those teams running and not relocated to larger markets.  Teams like the Jacksonville Jaguars are at risk of being sold and relocated to Los Angeles.  But just because a few teams are not maximizing profitability, the players don't feel it should be them that has to sacrifice their wages to make up that difference.  All they have asked the NFL to do is to share each individual team's revenue reports for each year over the last ten years and allow them to see how teams that operate on hard budgets need the financial boost and a compromising number to split between the players and owners can be made based on that information.

This chart shows the discrepancy between the league's leading and lowest revenue generating teams.

The owners were even willing to back off of their billion dollar per year revenue sharing demand and come all the way down to $137.5 Million, but in the end, it was their unwillingness to provide any detailed evidence that the owners are in need of more revenues to operate that turned off the NFLPA.  Without it, the NFLPA wasn't willing to give up any amount of money to the owners on a new deal.

The NFL thinks it is intrusive to the owners to have their revenues put under a public microscope by the players.  They offered only an aggregate revenue report of the 32 teams combined to justify their need for an increase in revenue share.  When the players found the NFL's attempt to provide financial information less than adequate to make a decision on how they would move forward on a compromise to determine revenue sharing, they broke off talks and the league consequently released a statement on Saturday stating that they were enforcing a lockout of the players.

The players, exercising their best chance to get a favorable resolution to the CBA stand-off, decertified themselves as a union, making them, legally,  now only a trade association of individuals in a common industry.  This move enabled them to remove themselves from competing with the NFL under the rules of labor law and allowed them to take their chances in the antitrust law arena by individually collaborating on a class-action, antitrust law suit against the NFL.  The players also had already filed with the courts for an injunction to block the owners from enforcing their imposed lockout before the lockout was even announced.  That injunction hearing will be held on April 6th.

With this brought forth the next action for the players, which was to have ten players, including NFL superstars Tom Brady and Peyton Manning to file the class-action antitrust suit against the NFL in a Minnesota courtroom.

The NFL is dismissing this move by the players to decertify themselves as a "sham" and that the player's court action is "built on the indisputably false premise that the NFLPA has stopped being a union and will merely delay the process of reaching an agreement."  The NFLPA antitrust suit's declarations denunciate the league's policies on the salary cap, draft and free-agency restrictions like franchise-player tags that force a player to stay on a team for a guaranteed salary that is, many times, less than what they could earn if they were allowed to test the free agent market.

Indianapolis Colts quarterback, Peyton Manning, is one of several star players that will file class-action antitrust action against the NFL

In decertifying as a union, the NFLPA is running from it's playbook from 1989 when the union decertified and filed antitrust action against the NFL, just like they are presently.  The NFLPA learned this move when back in 1989 their favorable court judgment was overruled by the 8th Circut Court of Appeals citing that the players could not file antitrust action as a union which prompted the first decertification of the NFLPA.  Those lawsuits, led most notably by the class-action law suit brought on by Hall of Fame player and NFL legend, Reggie White in 1993, brought both sides back to the bargaining table and ushered in the era of the NFLPA gaining free agency, which was the huge point of contention in that era's CBA dealings.  The NFLPA then re-formed in 1993 and has been a union ever since, until Friday.  Once a deal is done, they can re-form once again.

What the lockout ultimately means to the business of the NFL during the time it is in place is there can be no communication between the teams and current NFL players. Even after players are selected in this year's NFL draft this April they will only be selected and not negotiated with until a new CBA deal is in place.  The NFL is a year round business and much of what teams do to make themselves better for the upcoming season is to sign free agent players that can fill pressing areas of need.  With no free agency happening until a new deal is done, look for teams to try and fill positions purely through the draft.  By the time the lockout comes to a close, which could go all the way into the season before business is resumed, it may be too late to go out and sign players at need positions for the 2011 NFL season.

This is also the time of year when many sponsors and advertisers start or renew contract deals with the NFL.  With the future of the 2011 season unknown, many sponsors and advertisers will hold out on contract renewals, costing the NFL millions in revenue.

According to the NFL, it had compromised it's position on many other key, core issues in the deal.  The NFL stated that it offered the NFLPA a resumption of the 16 game regular season for at least two years with an opportunity to revisit negotiations of an 18 game schedule in 2013, instituting a rookie wage scale and using the money saved to be paid to veterans and retired players, creating new guidelines to player health and safety rules, establishing a fund for retired players to which the owners would contribute $82 Million of their own money over the next two years and more financial transparency by providing information on audited profitability of the aggregate of the 32 NFL franchises.

With all of that on the table, many of those things being big wins in the core issues debate for the player's union, the NFLPA couldn't get past the fact that the NFL was asking them to sacrifice a large portion of their personal revenue to benefit already rich owners and were not willing to provide any real proof that they needed a penny more than the $1 Billion they already are taking from the NFL revenue sharing pie.  The NFLPA finds it frankly insulting that the NFL would demand hundreds of millions of their dollars and not give them a good, detailed reason why.  It is hard to understand the justification behind giving 32 individual and ownership groups any extra amount of money when the very small lot of them are already sharing a more than healthy 1/9th of a $9 Billion pot.

Looking forward, we won't know the status of anything until a judge hears and reviews the litigation from both sides and makes a ruling that will ultimately give one side or the other the upper-hand in coming to terms on a new CBA.  But first, the ruling on the union's injunction request that will be first heard on April 6th is expected to be made within a months time but expect that the antitrust trial and judgments may very well drag into the summer months.

Article first published as NFL Owners Initiate Lockout; Players set to Sue the League on Technorati.

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  1. Great article Forrest, very informative. Great detail and explanation of the sticking points. Also, thanks for checking my blog out, I just became a follower of yours!

  2. Thanks Dave D.! I'm following you too!

  3. Threw you on my Blog Role too. Good luck, stay in touch man!