Your Cheat Sheet to the NBA Collective Bargaining Agreement

| + More Articles
  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn

Now that the NBA players and owners in the NBA labor dispute have reached a tentative agreement, the players’ lawsuit will be settled; the agreement will expand to a new collective bargaining agreement (CBA) and teams will hit the courts on Dec. 9 for training camp.

While the more contentious details were on display in the media, there’s some unresolved issues that will shape the new 2011 CBA from its previous one.

Here’s a summary of the CBA differences.

Agreement Length

2005: Seven years with a 2011 league opt-out that had been used.

2011: Ten years and now an opt out by either side in 2017.

Revenue split

2005: Players received 57 percent of Basketball Related Income (BRI).

2011: Players will receive 51.15 percent of BRI in 2011-12 and then in later seasons, they’ll receive 49 to 51 percent of BRI (including an option of 50 percent, or plus or minus 60.5 percent of the amount that BRI either exceeds or doesn’t meet projections).

Now, one percent of BRI, coming from players’ portion, will fund a pool for life after NBA benefits.

Escrow

2005: Eight percent (in 2010-11) had been withheld to enable players to receive no more than an agreed upon revenue split; however, if escrow withholding was insufficient, salaries would be subsequently reduced in following season to compensate.

2011: Now 10 percent will be withheld each season and if there’s insufficient escrow withholding, its shortfall will be removed from the players’ life after NBA benefit pool; now salaries will not be adjusted in the next season.

Amnesty

2005: A player could be waived before the 2005-06 season start with the waived player’s salary not going toward the luxury tax.

2011: A player may now be waived prior  to a season’s start, with one player amnestied during the agreement and signed contracts now are not eligible. A waived player’s salary doesn’t  count toward either the salary cap or luxury tax.

Now teams that cap room may submit competing offers to acquire an amnestied player at a lower rate prior to the player hitting free agency and signing with any team.

Revenue sharing

2005: Some undistributed luxury tax funds had been given to teams in “competitively disadvantaged markets.”

2011:  The new plan approximately triples revenue-shared money; however, details need to be finalized.

Teams’ minimum salaries

2005: Teams had to spend a minimum 75 percent of the salary cap.

2011 : Now, teams must now spend in 2011-12 and 2012-13 at least 85 percent of the salary cap, rising to at least 90 percent in the agreement’s later years.

Luxury tax

2005: Teams had paid $1 for every $1 of salary that came in above the luxury-tax threshold.

• 2011: Now teams will pay $1 for every $1 their salary comes in higher than the luxury-tax threshold in 2011-12 and 2012-13; however, beginning in 2012-13, teams will pay an incremental tax that rises with each $5 million higher than the tax threshold ($1.50, $1.75, $2.50, $3.25, etc.).

For the repeat offending teams (those that pay taxes for four of the five past seasons), they will have a higher tax: $1 higher for the above increments ($2.50, $2.75, $3.50, $4.25, etc.).

Luxury-tax Fund Distribution

2005: Teams not paying tax each received 1/30th of the total tax fund while the teams paying taxes, gave up their tax distribution; it went to “league purposes” including the revenue-sharing program.

• 2011: An amount no greater than 50 percent of the tax funds can go solely to teams not paying taxes.

More limits for teams paying taxes 

2005: There were no additional limits for the taxpaying teams.

2011: Now taxpaying teams will have a lower midlevel exception, may obtain less salary from a trade, and may not use the biannual exception. Beginning in 2013-14, teams higher than $4 million from the tax level may not receive a player from a “sign-and-trade transaction.”

Stretch provision

2005: From mutual agreement, teams could alter the waived players’ payment schedule with the remaining guaranteed salary applied to a team’s salary cap across the players’ contract of remaining years.

• 2011: Now, a player’s remaining salary and cap hit could go across twice as many of the seasons remaining on his contract, plus one (for a salary and cap hit on a player waived with two remaining seasons, it may now be stretched across five seasons).

This comes from the team’s discretion and only applies to 2011 CBA-signed contracts.

Free agents, Restricted free agency

• 2005: A 150 to 300 percent cap hold continued to count against a team’s free agent cap with either Bird rights or a first-round pick. A team had seven days to match the restricted free agent’s offer sheet with the qualifying free agent offers based on a player’s draft numbers.

• 2011: Cap holds will be reduced for most players with either Bird rights or for first-round picks; they will now range between 150 and 250 percent. Teams will have three days to now match a restricted free agent’s offer sheet.

Players may not qualify for an improved qualifying offer after meeting certain criteria. A high-drafted player could receive a lower qualifying offer if he fails to meet the same criteria.

New contracts

2005: The breakdown was six years and 10.5 percent raises for Bird free agents and for other players, five years with an eight percent raise. Maximum salaries had been approximately 25, 30 or 35 percent of the salary cap, based on a player’s number of years.

2011: Now Bird free agents will get five years and 7.5 percent raises with four years and 4.5 percent raises for the other players that includes all sign-and-trade transactions. Maximum salaries remained the same from 2005 with the exception of rookies coming from their rookie scale contracts can now qualify for the 30 percent maximum should they meet criteria.

Both minimum and rookie scale salaries have been close to  their 2010-11 levels until the revenue increases is reduced proportionate to to a 12 percent reduction in the overall system.

Contract extensions and exceptions

2005: Players with rookie scale contracts could have five additional season extensions with veterans seeing five total season extensions, including the remaining seasons on current contracts.

• 2011: Players with rookie scale contracts may now extend for four additional seasons; however, a team may designate a player eligible for five seasons at the maximum salary. A team is allowed only one designated player on its roster at any one time.

The remaining veterans may extend for a total of four seasons, includes the remaining seasons on current contracts. This is in an extend-and-trade contract, which has three total season limits and remaining seasons on current contracts.

Midlevel exception

2005: Five years beginning with the average salary (in 2010-11 $5.765 million) and an eight percent raise.

2011 : For the non-taxpaying teams, it has a four year exception starting at $5 million (a base salary will increase by 3 percent annually starting in 2013-14) and 4.5 percent raises. Now taxpaying teams will be limited to three years with a $3 million base salary (growing annually by 3 percent starting in 2013-14) and 4.5 percent raises.

Teams that have cap room who will lose their midlevel exception may get a new midlevel for two years that begins at $2.5 million (with 3 percent annual growth).

Disabled player exception

2005: It was five years, beginning at the lower half  of either the replaced player’s salary or the average salary and eight percent raises.

2011: Now it’s one year, beginning with the lower of the half the either replaces the player’s salary or the non-taxpayer midlevel exception.

Trade rules

• 2005: Teams that were over the cap couldn’t acquire greater than 125 percent and $100,000 traded away salaries. A team could receive up to $3 million cash from any trade.

• 2011: Taxpaying teams cannot acquire more than 125 percent and $100,000 of traded away the salaries (same as above). Now, non-taxpaying teams (based on their post-trade salary level) may acquire up to either the lower of 150 percent plus $100,000, or 100 percent plus $5 million of traded away salaries.

A team cannot pay or receives cash in trade greater than $3 million annually.

Base year compensation

2005: This applied for six months (but no later than June 30) after a player had either been re-signed with Bird rights or received an rookie scale contract extension, and received a greater than 20 percent raise. Base year compensation had limited a player’s outgoing salary for trade purposes.

• 2011: The criteria for determining if a player is subject to base year compensation remains the same but players subject to base year compensation may not be traded prior to Jan. 15 with the exception of a sign-and-trade.

Should the trade be allowed, base year compensation will applied to a player’s outgoing salary from sign-and-trade transactions.

Re-signing a traded player

2005: If a player had been traded and then waived by his new team, he could not re-sign to his original team for 30 days in the season or 20 days in the offseason following the trade.

2011: Now if a player has been traded and then waived by his new team, he can neither re-sign with his original team for one year after the trade or nor until July 1 following the player’s the last season of the contract–whichever comes first.

More Articles About:
Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business