Most aspects of professional sports, including player salaries, are riddled with the same elements of uncertainty plaguing the world right now.
Professional baseball and basketball players could lose large portions of their salaries if games from this current season are eventually canceled, according to the terms of their collective bargaining agreements. Football players could also be impacted if the fall season doesn’t happen as currently scheduled, as could those who make up the rosters of MLS clubs.
“The big question is, will players be paid if they don’t actually play the games, contractually speaking?,” James Dworkin, a professor in the Krannert School of Management at Purdue University who studies professional sports unions and collective bargaining, said. “People are asking the same question, but it’s a different answer for the different sports.”And while every league is faced with the question of what to do – and what they can legally do – few have answers already outlined for them.
The NBA, where the annual salary averages $7.7 million, highest among professional sports, is the only league with explicit force majeure language in the current collective bargaining agreement, which runs through June 30, 2024.
“Any language in a collective bargaining agreement is agreed to by both parties, so both parties in the NBA CBA put in this language which deals with what happens if games are not played because of these catastrophic forces,” Dworkin said, explaining that the French term, found in Article 39 of the CBA, means ‘superior force.’ “They have things like chemical or biological warfare, sabotage, terrorism, and they have one word very clearly: epidemic.”
The NBA’s clause also includes a specific formula that dictates the amount of money lost for players per impacted game.
“For every game missed, you’d basically lose one game’s pay,” Dworkin said. “That’s the easiest way to think about it. But just because it’s in the contract doesn’t mean they have to enforce it, and so far, the players have continued to be paid.”
The average NBA team when the league shut down in March had played 65 out of their 82 games.Enforcement would not only cut off player pay, but the language also states that the NBA has the option to terminate the entire CBA if force majeure is enacted. The Players’ Association would receive a 60-day notice, and then a successor agreement would be negotiated in “good faith.”
“They haven’t done it yet, which means they don’t have to do it,” Dworkin said. “But if they do, they at least have very precise language for how salaries would be reduced during that part of the season that’s not played.”
Neither the MLB nor the NHL has force majeure language in their collective bargaining agreements, which go until December 2021 and September 2022, respectively. That said, both of their standard player contracts within their CBA’s provide a framework for such situations.
Appendix A of the MLB basic agreement includes a ‘uniform player contract’ that every player signs annually, which specifies salary terms. The contract states that the commissioner can suspend the operation of the contract – salary included – during any national emergency in which baseball is not played.
That has not yet become the case, and a temporary agreement outside of the current CBA was agreed to late last month in which the league will continue to pay a portion of the players’ salaries for the 2020 season on a tiered system.The amount allocated for stoppage of play salaries totals $170 million, to be distributed among all players on a major league or split contracts at a minimum of $275 per day and a maximum rate of $5,000 daily through late May. The average salary for an MLB player is just over $4 million – with some individual player contracts costing upwards of $20 million annually.
“It’s not very much compared to what players would be making if they were fully paid,” Dworkin clarified. “Everybody is waiting to see if the season will pick up. My guess is the players probably won’t get paid for any games they don’t play, so there will likely be some subsequent negotiations if they play, say, an 81 game season instead of 162. But it’s really anybody’s guess what happens after May 24.”
The NHL, where teams played an average of 70 of 82 regular-season games before 2020 play was suspended, has similar language in its standard contract. Paragraph 17a says players will only be entitled to pay until the date of suspension of operations, but the league has paid players in full for the remainder of the season despite the option to avoid doing so. The average NHL salary is $2.4 million annually.
The NFL, which still has several months until its season is slated to start, has no force majeure language in the new CBA, which expires in 2030, nor in the standard player contract. There is somewhat applicable language, however, in Article 19.2 of the NFL constitution.
The clause reads, “there shall be no postponement of regular-season games unless said game cannot be played because of an Act of God or because of a state, federal or local prohibition.”
While the constitution addresses the requirements for postponements of the season, there is no language to guide the average $2.7 million yearly salary payments football players are expecting if that were to become the case.“They have no language about anything related [to player pay] in the collective bargaining agreement or the standard player contract,” Dworkin said. “There’s no language about getting paid if games aren’t [played] but the sport, like a lot of these leagues, is financed through television and fan revenue and tickets, so if there are no games, it’s going to be pretty hard to pay the players.”
NFL players are generally paid once per week in season, with offseason bonus checks distributed per contract stipulations.
Major League Soccer similarly has no contractual guidance for the situation, and with the smallest annual salary at $412,000 and a CBA that runs through 2024, the income is increasingly paramount for its players. With only two matches of the 34-game season complete, the league has continued to pay its players despite the cessation.
“We don’t know how long that’s going to go on,” Dworkin said. “We’ll find out what happens next, but things are going to be a lot different on all fronts when things start again, for everyone.”
For those still being paid – even a portion of their salaries – uncertainty about how long that will continue or what will happen in the event of outright cancellations have kept financial question marks afloat. Other additional money-making avenues are also at risk, including postseason and performance bonuses, sponsorships, public appearance opportunities, and more.
“The same uncertain parameters exist for everyone,” said Jeff Runyan, founder of Runyan Capital Advisors, which has an ‘Invested Athlete’ division that works with a number of MLB and NFL players. “What’s especially hypersensitive for a pro athlete is you have fixed expenses that may be really significant. And so pay impact is pretty significant in the immediate term.”
Despite the large salaries most professional athletes make annually, research has shown that 78% of NFL players still file for bankruptcy or experience financial distress as soon as two years into retirement. MLB players file for bankruptcy at four times the national average.
Money management among athletes has become a focal point among players associations and firms like Runyan’s as a result. Not all athletes have sufficient financial plans in place, and even those who do are feeling the economic impact of COVID-19 with the rest of the country.
“When the entire market falls in value 25 or 33% like it did in the beginning of March, you’re dealing with a sort of two-fold [problem],” Runyan said. “One, your pay is getting cut potentially, and you don’t know when your season is going to start. And then coupled with that, the earnings that you’ve had in the past have shrunk in value from the market turmoil.”
Professional athletes could, however, be more prepared for the current situation in some ways, Runyan said.
“Pro players are especially accustomed to uncertainties that exist,” he said. “They can get traded, they can get cut, or not have a contract renewed, so they need to be prepared [financially] always. But what’s happening right now – if someone’s getting a signing bonus, even if it’s a meaningful bonus, it’s going to be significantly reduced in the way that they come to receive it in the years ahead – they probably didn’t prepare for that.”
The biggest unknown now isn’t what seasons will look like or how much money an athlete will make over the course of an altered season, but when they’ll be able to start earning again at all.
“It’s a matter of when they start playing again, so you have a resumption of income, even if fans aren’t allowed into the stadium yet,” Runyan said, pointing out that the majority of pro sports households are single-earner families. “There’s not necessarily another income to fall back on more often than not. In the long term, maybe they’ll be just fine because they’ll be able to resume play, but in the short term, you can feel the sharpness in that curtailed income rapidly.”