SBD/March 21, 2011/Leagues and Governing Bodies

NFL Lockout Watch, Day 10: Pegged Salary Cap System Was Key Part Of Talks

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Fujita says union suggested pegged cap to try to address owners' concerns

The concept of a pegged salary cap system was not only at the forefront of negotiations between the NFL and players when their CBA talks broke down earlier this month, it had been a key part of talks since Feb. 1, with the concept proposed even earlier than that, sources said. Recent reports have noted that CBA talks broke down in part after a league proposal on a system that would have delinked the salary cap from overall revenue. Such a system was first proposed last year. "That was our proposal and it was a way to legitimately try to address some of their economic concerns," said Browns LB and NFLPA Exec Committee member Scott Fujita, speaking this past weekend in Marco Island, Fla., where the NFLPA held its annual meeting. Leading up to the NFLPA’s March 11 decertification and the NFL’s subsequent lockout, reports on the talks between the two sides included the narrowing of the gap between the league and players, presumably relating to the 18% credit the league had been asking for. However, the narrowing was the difference between the two sides’ pegged salary caps. The proposal that the players rejected on the last day of CBA talks, which the new NFLPA trade association has since denounced as robbing them of excess revenue growth, was the latest iteration of cap-related proposals. Fujita said that after the players first issued a cap-related proposal last year, the idea was then set aside, but it was brought up again when the players and owners met during Super Bowl week.

TIPPING THEIR CAP: It was at a Feb. 1 meeting when the NFL for the first time agreed to cut the cord between the cap and the amount of revenues, sources said, a fundamental tenet of relations between owners and players since '93. “We first started talking about the pegged cap the better part of a year ago,” one source said. “The union said it preferred it to an expense credit approach and that it was better because it was simpler, with less heavy-duty auditing and fewer disputes. They wanted to get away from arguing over … expense allocations and percentages of revenue. That was the whole point of the meeting at the Super Bowl, where (owners) 'reluctantly' … agree[d] to move off an expense credit approach and bargain within their pegged cap concept.” The players’ plan would have pegged the cap at a certain number based on a revenue projection, allowed the owners to keep 100% of the first 1.5% of revenues that came in above that number, and then allowed for players and owners to share the revenues above that number. The players and owners talked about different ways to split the amount above the 1.5% players were willing to give to owners, including a 50-50 split and a 60-40 split, but they never came to an agreement on that issue, said Pete Kendall, permanent player rep for the NFLPA. After the concept of a pegged cap was discussed in the weeks that followed Feb. 1, the players say they were stunned when the owners came in with a new pegged cap proposal on March 11, different apparently from what had been discussed since Feb. 1. While this new proposal had a cap closer to the union’s proposal, it cut off any sharing with them of excess revenue until at least '15.

TRUE INTENTIONS: Kendall on Friday said NFL owners on the last day of their mediation talks with players took off the table the players’ ability to share in the growth of future revenue by making the NFL salary cap a fixed cost. The NFL and NFLPA had been talking about a pegged cap, but it would include a “true-up,” a mechanism that would have allowed players to share in the future growth of the league. The “true-up” would have allowed the NFL to increase the salary cap to reflect actual revenues, if they came in above projected revenues in the following year. Kendall said the owners took the “true-up” off the table on the final day of talks. “That was a game-changer,” Kendall said. Kendall said the owners also, on the last day of the talks, changed the deal term from seven years to 10 years. “A 10-year fair deal might be something worth considering," Kendall said. “A 10-year deal where players don’t participate in any of the upside is … not a deal that I think is ... something that the players should have taken.”  NFL Senior VP/PR Greg Aiello said via e-mail in response to Kendall’s comments, “The facts are that our proposal was for a fixed sum for both sides for four years. ... The ‘true up’ concept was designed to occur after the league received credit for a range of expenses. But we were not asking for those credits from 2011-14 in the proposal. Also, we made it clear that there would be a ‘true up’ beginning in 2015 to reflect revenue growth generated from new stadiums, new television contracts, a possible shift to an 18-game season, and other potential opportunities. What the union is saying now is that the cap didn’t go up by enough” (Kaplan & Mullen, SportsBusiness Journal).

UNDER REVIEW: In N.Y., Judy Battista reports National Labor Relations Board acting General Counsel Lafe Solomon is "investigating the owners' allegation that players failed to bargain in good faith and that the union's decision to dissolve itself was nothing more than a negotiating strategy." His decision on whether the owners' charge has merit "could undermine or support the union's decertification and swing more leverage to one side, perhaps forcing the losing side back to the bargaining table." It "may not come for weeks, perhaps months, even as the players' antitrust lawsuit against owners begins its journey through federal courts on April 6" (N.Y. TIMES, 3/21). Although the NFLPA cannot bargain, its lawyers can engage in settlement discussions. But the NFL and the NFLPA are not expected to engage in those discussions without an agreement preserving both sides' legal rights. The NFLPA wants the right to pursue its antitrust litigation against the league, which it can only do if it is not a union. The league, meanwhile, wants to pursue its claim filed before the NLRB (Mullen). In L.A., Sam Farmer noted there is "nothing stopping the sides from sitting down as plaintiff (players) and defendant (NFL) and trying to negotiate a settlement before the case gets to court" (L.A. TIMES, 3/20).   

OPEN & SHUT CASE: In Green Bay, Rob Demovsky reported the NFL Management Council Exec Committee at the owners meetings in New Orleans yesterday was expected to discuss "whether to provide more audited financial information that the NFL players" have requested (GREEN BAY PRESS GAZETTE, 3/20). NFL Commissioner Roger Goodell in an online chat with fans Friday said, "We offered more financial information than we've ever given before. In fact, we offered information that we do not even share with the 32 clubs that the union requested. They turned it down without looking at the information" (NFL.com, 3/18). Former Chiefs President Carl Peterson said, "A number of owners have intertwined some of their football business with some of their other businesses. They're not interested in getting into that. They feel they've opened their books for years to their partners (other teams and the NFLPA). They've showed them all of their revenue and many of their costs. They don't know why they should have to open them more than that" (PHILADELPHIA DAILY NEWS, 3/21). 

Foxworth said that players are ready
to begin settlement talks at any time
READY TO GET BACK TO THE TABLE? Ravens CB and NFLPA Exec Committee member Domonique Foxworth Saturday said that players are "ready to begin settlement negotiations with NFL owners as soon as possible." Foxworth: "We've expressed that we're ready to begin talks as soon as they're ready." Foxworth said that he "doesn't think the players will re-form as a union any time soon, even though he knows the league will request that in any court settlement." Foxworth: "We're fine with decertifying, we're fine with never being a union again. That's our complete intention. Whenever we come to a settlement, they'll ask that we certify. (But) I don't know that that's what we want to do. It's in our best interests to be an association" (Baltimore SUN, 3/19). Packers President & CEO Mark Murphy said that owners "would rather negotiate than go to court." Murphy: "Absolutely, we think that's the best way to get this resolved." Giants President & CEO John Mara, when asked if there is any chance of negotiations before an April 6 court date, said, "You'd have to ask the players that" (GREEN BAY PRESS GAZETTE, 3/20). But he added, "We're still optimistic that there's going to be a 2011 season. We're preparing as if there will be one" (BUFFALO NEWS, 3/21).

MATTER OF TRUST:  In Boston, Ron Borges noted once it was "revealed in the court of Judge David Doty last month that the owners cut a deal with DirecTV to receive more money if games were not played next year, trust went out the window." The "aftershock of that revelation continued to reverberate throughout the negotiations until they totally broke down March 11." Chiefs LB and NFLPA Exec Committee member Mike Vrabel said, "That opened a lot of eyes. When you make a deal for more money if we don't play games than if we do, you don't have to be real smart to see that doesn't make a lot of sense." Steelers S and player rep Ryan Clark: "It's not only a sign of not being trustworthy but also illegal. It's about 'you went back on the agreement'" (BOSTON HERALD. 3/19).  

TAKING SIDES: ESPN.com's John Clayton wrote under the header, "Owners' Math Simply Doesn't Add Up." Before the NFLPA decertified, NFL team owners "increased their offer from $131 million in player costs in 2011 to $141 million, with hopes of getting a negotiating extension." But that number "doesn't work." Because benefits count for $27M of the $141M offer, the salary cap number "came to $114 million." That means the salary cap "would be a salary choke" (ESPN.com, 3/19). In Pittsburgh, Bob Cohn wrote under the header, "NFL Players On Right Side Of Cause." Cohn: "The owners have their arguments, and some are even valid. ... But the playing field looks tilted" (Pittsburgh TRIBUNE REVIEW, 3/19). But in Charlotte, Tom Sorensen wrote, "There are legitimate, adult issues to resolve. Why aren't owners and players entitled to resolve them without being accused of greed?" This is about owners and players "getting their share." No matter "how much you have, you’re entitled to your share" (CHARLOTTE OBSERVER, 3/19). 

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