NBA May Reduce Players’ Salaries Due to COVID-19 Shutdown
On March 11, 2020, the National Basketball Association (NBA) suspended its season due to the coronavirus (COVID-19) pandemic. Now, the League is considering reducing or withholding players’ salaries after the April 1, 2020, payday.
The NBA originally hoped to resume its season at some point in June, possibly without fans in attendance. However, as COVID-19 cases escalate in cities across the country, it is unclear whether resumption of the season is viable. The NBA is preparing for the more likely scenario that the 2020 season will be canceled. As the financial impact of the shutdown to the NBA and its member teams increases with each day, NBA officials have begun to look for other ways to stabilize the League financially.
If the season is canceled, the NBA is entitled to reduce players’ salaries under Article XXXIX of the collective bargaining agreement (CBA) between the NBA and the NBA Players Association (NBPA).
Article XXXIX’s “Force Majeure” clause permits reducing players’ salaries by 1/92.6 per canceled game because of events that make it impossible for the League to perform it obligations under the CBA.
Such events include:
wars or war-like action (whether actual or threatened and whether conventional or other, including, but not limited to, chemical or biological wars or war-like action); sabotage, terrorism or threats of sabotage or terrorism; explosions; epidemics; weather or natural disasters, including, but not limited to, fires, floods, droughts, hurricanes, tornadoes, storms or earthquakes; and any governmental order or action (civil or military); provided, however, that none of the foregoing enumerated events or conditions is within the reasonable control of the NBA or an NBA Team.
The COVID-19 pandemic likely would meet the definition of a Force Majeure event under the CBA. Thus, cancellation of the 2020 season would automatically invoke Article XXXIX.
An official decision has yet to be made. However, if players continue to receive their full salaries and games are eventually canceled, the CBA provides that the players would have to pay back the money they received. In order to avoid this scenario,
the League and the NBPA are attempting to reach an agreement and are negotiating the possibility of holding 25 percent of players’ remaining salaries for this season in an escrow account.
Other leagues have already agreed to reduced compensation plans. For example, Major League Baseball agreed to a pro-rata distribution of performance bonuses if the 2020 season is delayed and to pay all players on a 2020 major league contract $5,000 a day ($150,000 a month) if the season is canceled.
The NBA informed teams and players that it would provide “additional guidance” regarding player salaries in the near future. The League and the NBAPA are expected to find a way to split revenue losses from missed games as evenly as possible among both sides.