NFL Owners Considers Cancelling Agreement

In March of 2006, the NFL reached an agreement with the NFL Players Association (NFLPA) by a vote of 30-2. It was essentially a take-it-or-leave-it offer from the NFLPA, after watching the owners wrangle amongst themselves over revenues. In the end, the deal was that the collective bargaining agreement - with a salary cap - would be extended and the league would distribute 60% of the qualified revenues. This radically shifted the economics of the league.

At the time, it was reported that the deal was eventually put together by 9 teams - led by the Patriots and Cowboys - and was designed to ensure 6 more years of labor harmony.

As a result of the deal, the salary cap increased and the owners guaranteed that there would continue to be a salary cap.

However, what was not reported at the time was that the agreement contained a provision allowing either party to the agreement to terminate the extension in November 2008 and the reports are that several owners have suggested the extension needs to be renegotiated.

There was wide debate within the ownership ranks about the amount of money the league was revenue sharing with the players association, but in the end decided that the cost certainty of a salary cap was a more important business issue. The agreement added approximately $900 Million to the deal for the players, but concerns about some owners becoming "cash strapped."

Should either the NFL or the NFLPA terminate the deal, 2009 would be the final year with a salary cap; 2010 would be an uncapped year and the collective bargaining agreement would expire in 2011. The union has specifically stated that should there come a point with an uncapped year, the union would never agree to another and that should the agreement be cancelled the players would not settle for less than the 60% of revenues they have currently.

The issue is now framed thus: Are the owners cash strapped enough to risk losing a salary cap? Simply because one side or the other opts out, does not necessarily mean there would be a work stoppage or even that there would not be a salary cap going forward. It would mean, however, that a clock would start ticking on getting the situation resolved before the 2010 season. It is also one thing to threaten that there would be a work stoppage and that the players would not agree to less than the 60% of qualified revenues. This is a high stakes game of chicken, and if the owners were to cancel the agreement, there would have to be a significant number of owners under revenue stress - it is the owners who have a significant interest in maintaining a salary cap, not the players association, and it is that bargaining chip with which the NFLPA is holding onto the revenue sharing.

According to Sports Illustrated, Upshaw does anticipate the owners to opt out of the agreement, at which point the union will have some choices to make as will the owners. The owners demonstrated that the salary cap was important enough to share 60% of revenues and while a couple of owners have come out suggesting the deal needs to be redone, "a couple" is not the majority - of specific note is Robert Kraft, whose son Jonathan was in the lead on pushing this deal through, has been noted as suggesting it was a bad deal. This appears to this author as posturing for another round of collective bargaining for a successor contract, and not necessarily aimed at provoking a contract dispute or at canceling the agreement. While Mr. Upshaw may be confident the owners will cancel it, it is this writers' belief that the owners fear not having a salary cap more than they fear the current revenue sharing with the players and will not move to cancel the deal.

SOURCES:

Gary Myers, "Gene Upshaw Threatens Strike" retrieved 2/1/08

ESPN News "NFL owners approve six-year CBA extension," retrieved 2/1/08

Sports Illustrated, "NFLPA to Accept HGH testing," retrieved 2/1/08