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NBA union files grievance over tax, escrow funds
Published July 8, 2002
The National Basketball Players Association has filed a grievance against the NBA over what union chief Billy Hunter says is a plan by the league to "double tax" free-spending teams in violation of the collective-bargaining agreement.
"It kills the free-agent market," Hunter said. "There is no question about it being serious. It has really retarded the system ... when you come up and apply the system illegally, as the NBA is doing."
Mike Bass, NBA spokesman, said the claim "is absolutely without merit." He wouldn't comment further.
This is the first year teams could have access to luxury tax money collected from owners and an escrow on players salaries under the collective-bargaining agreement that was signed in January 1999. Under the deal, players could lose up to 10 percent of their salaries if player salaries make up more than 55 percent of revenue. Owners could be taxed one dollar for every dollar their payrolls exceed about 61 percent of revenue.
Revenue is still being calculated for last season and it is not yet clear whether players will lose the entire 10 percent or whether owners will be taxed.
Hunter said the union agreed to the tax and escrow but did not agree to having the league withhold money from the players escrow and the luxury tax funds from teams with high payrolls.
The league's position is that it has the discretion to decide how to distribute the escrow and luxury tax money, Hunter said.
Hunter said the NBA has told teams that it will withhold payments to them from the new escrow and luxury tax funds if the teams' payrolls are over certain limits.
Jeffrey Kessler, outside attorney for the NBPA in this matter, said the NBA has told the players union there is such a policy, but the union does not know the exact terms "because we have not seen the policy." An arbitrator is expected to be appointed this week and the union will get the policy through the discovery process, Kessler said.
The union knows about the policy because NBA team general managers have told agents they can't sign certain players because they fear they will lose money from the escrow and luxury tax funds.