After months of avoiding the possible devastating impacts of the Covid pandemic on the NFL, the league and the NFL Players Association are finally at the bargaining table trying to sort things out. Both sides need some clarity on the issues- teams need to know rules for cap planning and budgeting and players need to know the risks involved with playing this season and how it may impact them in the future. Here are some of the tidbits that have come out so far and some other issues that they still need to discuss
- NFL Proposed 35% Salary in Escrow
I talked about this in detail on the podcast this week, but it was a pretty vague request from the NFL. The NFL stated that they wanted to withhold salary in escrow to help with cash flows for the year but typically an escrow account would not help with that so I am assuming that they want the players to defer 35% of their salary to next year. I would guess payment would be around a date that coincides with the teams collecting season ticket revenues. Salary deferrals in contracts are not uncommon but on a full leaguewide basis they certainly would be. Assuming that this is just Paragraph 5 salary that we are talking about the NFL would basically call for the deferral of between an average of $40 to $45 million per team.
Not surprisingly the players very quickly came out against this proposal. A 35% deferral would really hit the big earners incredibly hard- about 12% of the players would account for 50% of all deferred money- and it would come across as the NFL owners using the salaries from the top players to cover a good chunk of their player obligations on the low end of the roster. Others have correctly pointed out that it is not the players obligation to manage the cash flows of an organization.
However, I would not, if I were the union, call something like this completely dead. Any downturn in revenue impacts the salary cap in the future and is going to limit spending. A large number of mid tier veterans would be the ones who face the brunt of that impact as they are the roster spots most at risk. If in return for a 35% deferral the NFL capped losses at no more than $45M with an agreement to wipe out 25% of the impact (technically 2020 revenue impact should not have any bearing on 2021 to 2023 spending but it will because of the way the CBA is written) and take the rest of the hit over the next three years at $10-$11 million per year I think the players would end up way ahead. Not sure the NFL would go for this suggestion but I do think the players would benefit and at the least can use this as a negotiating tool.
- NFLPA Proposed Flat Cap in 2021
This is a reasonable ask, but for a first offer it was not a good one by the NFLPA. The goal with this obviously is to keep the cap as is next year to not impact spending and force the brunt of the impact on this years players. The problem is a flat cap isn’t really flat. NFL minimums will rise pretty significantly- rookies will make $50K a year more, 1st year players $105K a year more, 2nd year players $100K more, and 3rd year players $95K more. So in reality a flat cap is actually going to be a reduction somewhere between $5 and $6 million per team. They really needed to include a “cost of living” increase here to keep things somewhat in check.
The NFL would probably be pretty agreeable to this one. If the NFL season would proceed as normal in 2021 the cap likely would have been around $210 million so they would be getting a $12 million kickback from the NFLPA if they do a flat cap. This is also better than the alternative which is how the CBA would currently handle this leading to a cap in the $150M or lower range. That would be a disaster for the league and players.
- NFLPA Proposed to Defer 2020 Losses as Adjustments from 2022-2030
I wrote about something similar at the beginning of June so I think this is a reasonable idea, especially if 2021 is not counting toward it, effectively giving the owners back a few million. The one reason I think the NFL would be against this is that the timeframe to recover losses is too long. If owners are looking at $90M in losses for example and it would take them 10 years to recover it on the cap they may see this as a bit of an interest free loan to the players. The next CBA spending bucket runs from 2021-2023 so my guess is they would counter with the impact covering those three seasons.
Assuming that the NFL goes to a 17 game year and begins new TV negotiations that kind of short period adjustment would likely lead to three years in a row of a flat cap that would mimic what happened at the front end of the last CBA where the cap went from over $123 million in 2009 to $120.4 million in 2011 to $120.6 million in 2012 to $123 million in 2013 and teams were able to navigate those limits easily enough.
I do think it is important to point out one key difference though that is being lost when people bring up 2011. In 2011 owners earned more than they were earning in the past. The drop in cap was attributed to a change in cap calculations that dramatically shifted revenues to owners. This was a pure accounting issue and a football consideration for teams. This cap loss is directly related to loss of revenue which takes it beyond football only. So they are going to look for the most reasonable way to recover that money quickly. They will take the football side obviously into account but those revenue losses make me think they want this done by 2023.
- NFLPA Proposed All Guaranteed Money Paid No Matter What
I do not see the NFL going for this at all. Guaranteed money covers contract termination not teams not playing games. The league and union have to have a discussion on tolling before they can get into these things. If contracts are going to toll (basically it would be as if 2020 never happened so every 2020 contract year becomes 2021) in the event of no season then the guarantees would toll with it. Are those players going to play for free in 2021 because the contract guarantee was already paid? If contracts will not toll then this is a different story completely.
The way the standard NFL contract is written salary for the year is fully earned if a game is played. So I think if 1 game is played that all guaranteed and other salary for players should be paid. They should clarify that before the season rather than waiting for court stuff to play out, but it seems that is the way the contracts are written.
If no games are played then this is a totally different scenario. The NFLPA did propose a stipend if games are cancelled and that is a much more reasonable way to give players cash to use this year if games are cancelled then just randomly picking winners and losers based on whether or not they had their salary guaranteed for this season.
- Other Items to Discuss: Player Opt Outs
We have only seen some very brief mention of this. With the pandemic you are asking players to take on unexpected risks that were not part of their original deals. Having asthma for instance wasn’t going to make you more or less likely to suffer a torn ACL however it may put you at a much higher risk for Covid complications. You are also taking risk home with you to your family. I don’t think the NFL can ask players to play in those conditions.
Right now if a player opted out they would fall under the categories of not reporting to camp or leaving the team. Basically, it would be a hold out scenario and they would be open to fines and forfeiture. That certainly should not happen if a player falls into a high risk category. It also probably should not impact those who have legit family concerns though Im not sure how you quantify that.
The rules that govern the NFI list here would be most appropriate. There is no guarantee that a team pays the player during their stint on NFI but the contract continues to run, with the exception of the final contract year, and the player is not fined. Certainly for the high risk player this is fair. For those that don’t have immediate personal risk there may be more involved such as paying back bonuses for the year.
While NFI can be a season ender depending on when its used I think for these scenarios you would put in rules where it is not a season ending designation if a player reports then doesn’t feel safe and bails. To prevent competitive advantages that may occur I think you have the first 10 weeks of the year being open for any player reactivating themselves as conditions change but after that 10th week the season is over for the player.
Other Items to Discuss: Player Tests Positive for Covid
Normally I would think that this is pretty easy. A player tests positive, he goes on a paid exempt list for 2 weeks while quarantined, and comes off the list when healthy. However whenever I think its easy I remind myself of when Lawrence Tynes of the Buccaneers contracted MRSA at the Buccaneers facility and they classified his status as a non-football illness. Though I believe the team did pay Tynes his salary his status on NFI could have limited his salary.
The NFL can not get into a situation where they are placing players on NFI for contracting the virus and then not paying them. Might there be an exception if players don’t follow the guidelines and catch the virus by going out to eat, having a party, etc…? I guess but they need to clearly define the protocols for how players and their salaries will be handled if they get sick.
Jason is the founder of OTC and has been studying NFL contracts and the salary cap for over 15 years. Jason has co-authored two books about the NFL, Crunching Numbers and the Drafting Stage, which are widely circulated in the industry and hosts the OTC Podcast. Jason’s work has been featured in various publications including the Sporting News, Sports Illustrated, NFL Network and more. OTC is widely considered the leading authority on contract matters in the NFL.