With Canceled Games Looming, NBA To Begin Withholding More Player Pay

The NBA and the National Basketball Players Association announced Friday that they’ve reached an agreement to withhold 25 percent of players’ paychecks beginning May 15 as the league weighs when—or if—it can resume the 2019-20 season.

The collective bargaining agreement contains a “force majeure” clause that dictates players lose roughly 1.08 percent of their salary for every regular-season or playoff game canceled due to things such as wars, natural disasters or pandemics. Since the NBA has yet to officially cancel any games—Commissioner Adam Silver remains in wait-and-see mode for now—players have continued to be paid in full to this point.

But had the NBA and NBPA not reached an agreement on withholding player salary moving forward, teams might have been forced to withhold entire paychecks and/or recoup additional money from players if games do start to get permanently canceled.

Under the current CBA, players are guaranteed between 49 and 51 percent of the basketball-related income that the league generates every year. The NBA withholds 10 percent of their salaries in escrow—roughly $380 million this season, according to ESPN’s Adrian Wojnarowski—to ensure players do not surpass their guaranteed portion of BRI in case revenues fall unexpectedly.

Each season’s salary cap is based upon projected BRI for that season, but the COVID-19 pandemic could result in a drastic, unexpected decline in revenue. Canceling the remainder of the regular season alone could cost the league more than $500 million, according to John Hollinger and Danny Leroux of The Athletic. Scrapping the playoffs as well could send losses soaring north of $1 billion, per Ben Golliver of the Washington Post.

Since players’ salaries for the 2019-20 season are largely set in stone (save for incentives in their contracts), they may be in line to vastly exceed their guaranteed 51 percent share of BRI if the league is eventually forced to cancel most or all of the 2019-20 season. Withholding a higher percentage of their remaining paychecks is a way to prepare for the eventual cancellation of games.

According to ESPN’s Bobby Marks, the 25 percent reduction in salary beginning on May 15 “is equal to $475 million,” which would cover 12.5 canceled games. If the league cancels the rest of the regular season and the playoffs, “the losses for all players could increase to $866 million,” per Marks, which would be up to an additional 15 percent of their remaining salary.

Had the NBPA not agreed to a higher percentage of withheld pay, teams would have continued to pay players in full, but the official cancellation of games down the line would have resulted in the automatic reduction in salary. At that point, teams would have been forced to withhold entire paychecks, perhaps even trickling into 2020-21 if the players’ remaining 2019-20 salary didn’t cover the losses.

Since some players will change teams via trades or free agency this offseason, they either would have had to “promptly” repay their previous team, per the wording in the CBA, or their new team would have withheld their paychecks to cover the difference and sent them to their old team. That’s a logistical headache that all parties—both players and teams—seemingly wanted to avoid.

Under this agreement, players who are under contract through the 2020-21 season will have their total deduction spread out over 16 paychecks, according to Marks—their remaining 12 this season (through Nov. 1) and their first four next season. Those who are set to become free agents this offseason or have 2020-21 player options will have the deductions spread out over their remaining 12 paychecks this season.

If the NBA is somehow able to complete a full 82-game regular season and hold a full postseason, teams would return at least some portion of the players’ additional withheld salary. For now, this is serving as a larger version of the 10 percent annual escrow to protect against catastrophic financial losses stemming from the cancellation of numerous games.

Both sides’ willingness to reach an agreement on this front bodes well moving forward, as it could become an issue in 2020-21, too. The COVID-19 pandemic will make it far more difficult to confidently project revenue for the 2020-21 season—Will there be a full 82-game season? Will fans be able to attend those games?—so the NBA may want to withhold a higher percentage of players’ salaries next year as well given that uncertainty.