Lack of new deal would affect '06 free agency

What's the holdup with the CBA negotiations and what happens if a new deal isn't completed soon? John Clayton addresses those questions and more.

Originally Published: February 16, 2006
By John Clayton | ESPN.com

Negotiations for a collective bargaining agreement extension continue to drag. Conference calls are going on daily with hopes of getting something done. The collective bargaining agreement runs out after the 2007 season, but March 3 of this year is perhaps the most important date in the process.

Even though two years remain in the agreement, the NFL Players Association and owners built incentives into the current CBA to encourage negotiations. The incentives include the uncapped year in 2007 and the equally painful transition year in 2006. If no deal is done by March 3, the NFL, as we've known it since the cap started in 1993, won't be the same. If a new deal isn't worked out, NFLPA executive director Gene Upshaw said the union will proceed to the uncapped year in 2007 and not look back. That could put pro football in the rare position to be the first sport to lose a salary cap.

Most experts think a last-minute deal will be completed, but what if it isn't? Here are a few answers to the questions.

What is the problem in the negotiations?
The biggest problem is the lack of cohesion among the owners. The players have to settle on a negotiated percentage of total gross revenues, and Upshaw said that percentage must be in the 60s. They currently get 64 percent of designated gross revenues, but the sport has grown so much that the formula must change. Starting with an extension, the percentage will be based on total revenues. The NFL has grown into a $6 billion business and is expected to be a $10 billion business by 2010. Upshaw and commissioner Paul Tagliabue should be able to work out the number but not if there isn't improved revenue sharing among the owners, and that's what has been holding up a settlement.

Teams with new stadiums at the top of the revenue list don't want to share their profits with the lower revenue teams. Heading the list of high-revenue teams are the Dallas Cowboys, Washington Redskins, New England Patriots, Houston Texans and Philadelphia Eagles. Because eight votes can block any deal such as a CBA, they prevent a deal from getting done and it could cost the league the salary cap. Their position is strong.

The revenue differences in a league that made its success by sharing has grown apart. A top team such as the Redskins can make between $200 million and $240 million in gross revenues and that number should grow to $300 million. The lower-revenue teams are in the low $100-million range. What the high revenuers are hoping is that the union would do a deal without revenue sharing. Upshaw says that won't happen because he can't have a top revenue team pay 35-40 percent of its revenues on payroll while a low revenue team pays 70 percent. Conference calls over the past couple of days are moving the process but the negotiations are complicated. At some point, the owners have to settle their differences and take the best deal or they will lose the salary cap.

With no extension, what problems would exist for the '06 season?
Because 2006 could be a transition year to no cap in 2007, rules change slightly and they take a lot of money out of the free agency pool. Teams will lose between $2.5 million and $5 million of cap room because of the transition. Because there is no cap in 2007, players who are released from multi-year contracts will have the cap hits on the 2006 cap. With no salary cap in 2007, there will be no June 1 adjustment date to release players with high cap numbers and delay the cap hits. With no cap in 2007, all incentives will count immediately.

Normally, incentives have to be earned during the season and are posted on the next year's cap. Teams have to leave room for the extra charges and that will take anywhere between $100 million and $150 million of cap room out of the free agent pool. With less room, fewer free agents will get big dollars, and fewer free agents will be signed. Another problem is the 30-percent rule for base salaries. Any contract that extends into an uncapped year limits the increase of a player's base salary to 30 percent a year. That kills the teams over the cap because they can't negotiate simple replacement deals in which they replace base salary with signing bonuses. The base salaries can increase only 30 percent a year so teams would have to negotiate two or three years of reductions. It will be harder for teams to free up money under the cap because of that.

Signing draft choices will be more difficult because teams can prorate signing bonuses for only four seasons. Already, agents figure the most a top draft choice can make under that scenario is $15 million, a major reduction from recent years. That leads to long holdouts by draft choices.

What does the NFL lose if it doesn't negotiate a CBA extension?
Labor peace. In 2008, the NFL will either be on strike or the owners will lock out the players. That's not going to play well with networks investing a total of $100 million a year in rights fees. The union will decertify and then antitrust rules will apply. The NFL draft will go away in 2008 as part of a clause inserted in the current CBA if it expires. Naturally, the NFL will try to implement a system, but the NFLPA will sue and both sides will be spending all of their time in court. To get players out of college, it could be open negotiations. Minimum salaries for all players will be eliminated in 2007, so every contract, including those for rookies coming out of college, has to be negotiated individually and those players get what they can get. Players probably can sue if their contracts are traded. Every single move of the league will be under legal scrutiny.

What do the players lose if there is no extension?
They will lose some protection. Even though it's more of a procedural thing that has to do with antitrust laws, the union will go out of business if there is no CBA. That will cause uncertainty for the players. Teams can change and cut down the benefits package that players receive, which is considered the best in sports. With no structure, teams can pay young players below the current minimums of $235,000, $310,000 and $385,000 a year.

Will the NFL resemble baseball if there is an uncapped 2007?
Not really. There will be some restrictions of teams being able to go out and sign whomever they want. There will be what is called a "Final Eight" restriction for teams that make the playoffs in 2006. The final four playoff teams will be allowed to re-sign any of their own unrestricted free agents. However, they will be permitted to sign unrestricted free agents from other teams as replacements only if they lose one of their own free agents. A team that loses in the divisional playoff round will have the limitation of adding one unrestricted free agent with a salary of $1.5 million or more. So the final eight playoff teams won't be able to go out like the Yankees and Red Sox and grab all the players that are available in an uncapped year. There is no limitation on Fight Eight teams signing franchise or transition players from other teams but those players are hard to acquire and would cost top draft choices to sign. Teams in 2007 also will have one extra transition designation along with their one franchise tag, giving them a franchise tag and two transition tags to keep their top players.

Will free agency be different in 2007?
Yes, players hit restricted free agency after three years and unrestricted free agency after four years under the current rules. If no CBA agreement is reached this year, players won't begin unrestricted free agency until after their sixth year. Players whose contracts end after third, fourth and fifth seasons will be considered restricted free agents and subject to qualifying offers.

John Clayton is a senior writer for ESPN.com.

John Clayton

NFL senior writer

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