The NBA and the National Basketball Players Association are finalizing a plan to withhold 25% of each player’s paycheck beginning May 15, sources told ESPN.
A formal ratification of the plan was underway Friday, but details are in place to deliver a gradual reduction in player salaries should the force majeure provision in the collective bargaining agreement be enacted with the cancellation of regular-season games.
Players would receive their full paychecks on May 1.
The plan would serve as something of an escrow account that would return money to the players should all the remaining regular-season games be played in a resumption of the season. Otherwise, teams would keep a percentage of the money based on the cancellation of games.
The NBA and NBPA will spread out the salary deductions into the first four pay periods — through November and December — of the 2020-2021 season, sources said.
The NBA has no immediate plans to announce the cancellation of any regular-season games, and the union has informed players that it could be June 15 before the players know whether games are canceled and how many, sources said.
The withholding of salary would prevent a scenario where players could go several pay periods with no checks — if the NBA canceled a majority or all of the remaining regular-season games.
The NBA doesn’t want a scenario in which it has to pursue players for payment on canceled games, which is part of why the NBA and NBPA spent the past several weeks negotiating so the players would have the ability to budget the loss of income on this season’s salary over an extended period.
The CBA maintains that players lose approximately 1% of salary per canceled game, based on the force majeure provision that covers several catastrophic circumstances, including epidemics and pandemics.
Once there is a cancellation of games, the force majeure is automatically triggered under the language of the CBA.
The force majeure is one more mechanism for the NBA to make the financial formula work on delivering the players the agreed-upon 51% share of the revenues with owners. Already, 10% of players’ salaries is held in escrow by the league. The significant decline in Basketball Related Income would result in the projected $380 million of escrow returning to the 30 NBA teams after the season. The amount of projected revenue loss without the application of the force majeure would exceed the current amount of escrow available to teams. As a result, the NBA would need other means to offset the loss.
In the case of salaries decreasing as a result of games missed to a point that there is a shortage in the escrow system, the 10% currently withheld would likely be returned to the players.
The use of the force majeure further protects against a dramatic drop in the salary cap and luxury tax for next season.