Tuesday, May 20, 2008

NFL Labor Peace - 2nd Down

NFL owners voted to opt out of the last two years of current collective bargaining agreement (CBA) with the National Football League Players Association (NFLPA) resulting in the current CBA to end in 2011. This means for the 2008 and 2009 NFL seasons the current agreement is in effect, and NFL clubs will face the same payroll cap rules as they have in the last few years. The 2010 season is different – this season would be uncapped. So should we expect NFL player salaries to skyrocket in 2010? Not exactly.

The CBA has some additional restrictions on player’s labor options. First, free agency will be extended from four years to six years. Thus players who have four years experience and their contract expires before the 2010 season, will have to wait. This will take a number of young players out of the free agent market – unless their club cuts or waives them or the player is able to terminate their existing contract.

Second, instead of just one “franchise” or “transition” player tag, clubs now have one franchise AND two transition tags. OK, what does this mean? As of right now, NFL clubs can designate one player per year as a franchise player (salary is in the top 5 average by position) or transition player (salary is in the top 10 average by position). Once a player is tagged as a franchise or transition player, this restricts that player’s ability to negotiate with other clubs. In 2010 this restriction could increase by 200%.

Third, the teams that finish in the top 8 in 2009 are severely restricted in the free agent market. Essentially if a team in the top 8 signs a player to $X million contract, they would have to cut player(s) up to $X million in current contracts before they can sign the free agent.

For a great write up on the impact this will have on NFL players with excellent examples – check out the Mile High Report.

Fourth, Mark Levin, NFL Director of Salary Cap & Agent Administration stated at the Sports Lawyers Association that, “[d]uring the last capped year, signing bonuses can be prorated over only five years instead of six,” he said. “This could have a significant affect on negotiations for unrestricted free agents and first-round draft choices.” I expect signing bonuses for free agents and first-round draft choices will be significantly lower than in previous years.

So, NFL players will be worse off – longer waiting times to free agency, more labor market restrictions and those that are unrestricted free agents will have lower signing bonuses in 2009 and in reality fewer choices of clubs to negotiate with in 2010.

Why are NFL owners not happy? I think the big issue in the next round of collective bargaining with the NFLPA will be a rookie (especially for first round draft picks) salary cap. I would guess the owners will want something like the NBA collective bargaining agreement rookie salary scale, in which each draft pick in the first round is set over the life of the first contract. With Jake Long signing for $57.5 million over 5 years and about $30 million guaranteed, a rookie salary cap will likely be at the top of the owners negotiating list. I would guess that current players would not be all that concerned with restricting new draft choices salaries since given the payroll cap, this will mean that current players salaries will increase.


Shake'n'bake said...

Transition tags are nearly worthless until the NFL does something about contract "poison pills" (example-whole contract guaranteed if the player plays more than 6 games in [insert current teams state here]). There's no draft compensation for transition players and the poison pills negate the effect of the salary match option the tag allows. So if a team uses a transition tag isn't risking that a team will insert a poison pill and make the tag worthless.

If you think Jake Long's deal is ridiculous, Matt Ryan got even more guaranteed money and barely less per year.

Looking forward to reading your future posts and hopefully taking some classes from you since I'll be at Iowa in the fall.

Stacey said...

Thanks for the comment. I saw the Ryan deal after I posted. I read how current players are disheartened about these rookie contracts. Here's the story from ESPN. http://sports.espn.go.com/nfl/news/story?id=3406508

Great to hear you are going to Iowa in the Fall. Feel free to stop by my office. I don't know where it is yet, but I should be in the Pappajohn Business Building.

Shake'n'bake said...

is not isn't risking in the last sentence of my first paragraph.


Dr. Steven J. Balassi said...

Thanks for the link!

Dr. Steven J. Balassi said...

The rookie salaries are way out of hand. What happens is they are used for leverage for everyone else in the league. This pushes up salaries much faster than the league can absorb.