Tuesday, 27 March 2012

The NFL's Next Legal Challenge Comes From Within

The NFL continues to push the boundaries of antitrust and labor law. The latest incident has to do with an ongoing debate between two teams--the Dallas Cowboys and the Washington Redskins--and the league itself. Charges of collusion abound. Here is a summary of the events that triggered this conflict.

1. March 8, 2006: With CBA expiring, Commissioner Paul Tagliabue asks the owners to extend the agreement through the 2012 season. Every owner except Mike Brown of Cincinnati and Ralph Wilson of Buffalo votes to do so. However, a stipulation is put in the CBA extension is that owners can opt out in ’08 and cut the CBA’s length by two years. A provision is put in the CBA that means if the owners opt out, the last year of the agreement (2010) will not include a salary cap.
2. An uncapped year was intended to act as a “poison pill” for both the NFL and NFLPA. The NFLPA was in favor of an uncapped year because they anticipated teams would spend over this artificial ceiling if there are no restrictions. The NFL was in favor of this provision because there were clear limits on free agency that the NFLPA opposed.
3. May 20, 2008: The NFL owners vote unanimously to opt out of their collective bargaining agreement. Without action, CBA will expire March 3, 2011.
4. March 5, 2010: The 2010 league year begins with no salary cap, again, a provision originally meant to motivate sides to extend CBA.
5. 2010 NFL Season: played, but no salary cap.
6. During this season, two teams go over what would have been the artificial salary cap—the Washington Redskins & the Dallas Cowboys. This is done partly by front-loading salaries from long contracts into 2010 season.
7. Important note: All contracts were approved by NFL Management Committee.
8. Winter/Spring 2011: NFL Lockout
9. July, 2011: Owners ratify new CBA.
10. NFL, via the NFL Management Council, comes down on Redskins & Cowboys by punishing them for going over cap in 2010. Both teams were penalized for overloading contracts in the 2010 uncapped season despite league warnings to restrict doing so. Washington has been given a $36 million reduction over two years, while Dallas loses $10 million. Each must take at least half the reduction this year.
11. Why is the league upset over this overspending? Teams had been warned by the league not to structure contracts in such a way, because it could negatively affect competitive balance in 2011 and beyond, when a new collective bargaining agreement was expected to kick in. By dumping large financial guarantees into the uncapped year, Washington and Dallas not only were able to retain or sign potential impact players, the league contends, but also have greater salary-cap flexibility under the new CBA.
12. Finding by NFL that this action "created an unacceptable risk to future competitive balance".
13. No dispute from the NFLPA since they agreed to allow the NFL to take this cap space from the Cowboys and from the Redskins and redistribute the money to other teams. Why? NFL offered to help pump up the 2012 team-by-team salary cap in exchange for the union’s agreement. Also NFLPA Exec Dir DeMaurice Smith up for reelection.
14. Redskins and Cowboys contest this decision for two main reasons: one, the Management Council approved the contracts; and two, how could they be at fault when there was nothing in writing that prohibited them from structuring contracts as they did? Also, the NLFPA could file charges that the owners colluded to try to suppress wages.
15. The NFL Management Council is Co-Chaired by New York Giants owner John Mara, whose team happens to compete in the NFL East against the Redskins and Cowboys.
16. Statements made by each party include:

a. The Redskins statement:
“The Washington Redskins have received no written documentation from the NFL concerning adjustments to the team salary cap in 2012 as reported in various media outlets. Every contract entered into by the club during the applicable periods complied with the 2010 and 2011 collective bargaining agreements and, in fact, were approved by the NFL commissioner's office. We look forward to free agency, the draft and the coming football season.”

The Cowboys statement:
“The Dallas Cowboys were in compliance with all league salary cap rules during the uncapped year. We look forward to the start of the free agency period, where our commitment to improving our team remains unchanged.”

The NFL statement:
"The Management Council Executive Committee determined that the contract practices of a small number of clubs during the 2010 league year created an unacceptable risk to future competitive balance, particularly in light of the relatively modest salary cap growth projected for the new agreement's early years. To remedy these effects and preserve competitive balance throughout the league, the parties to the CBA agreed to adjustments to team salary for the 2012 and 2013 seasons. These agreed-upon adjustments were structured in a manner that will not affect the salary cap or player spending on a league-wide basis."

17. As indicated in CBA, teams suing NFL go to arbitration, which in this case is Special Master Prof. Stephen Burbank at Wharton.

No comments:

Post a Comment