Explaining the New NBA CBA

In December of 2016, the NBA ratified a seven-year agreement for a new Collective Bargaining Agreement. The NBA has had an influx of money in recent years, largely due to a nine-year, $24 billion dollar extension of a television rights deal with ESPN and TNT.. Due to the structuring of the CBA, approximately half of this increased revenue is required to be redistributed to players, leading to a spike in the NBA Salary Cap. The new CBA poses a plethora of interesting questions, but the most intriguing with regards to the law and the future of the league has to do with the new “Designated Veteran Player” provision.

Section 7 of the new CBA outlines the provision, and the relevant text is shown below. (The new CBA can be read in it’s entirety here).

ii) for any player who has completed at least seven (7) but fewer than ten (10) Years of Service, the greater of (x) thirty percent (30%) of the Salary Cap in effect at the time the Contract is executed, or (y) one hundred five percent (105%) of the Salary for the final Season of the player’s prior Contract; provided, however, that a player who has eight (8) or nine (9) Years of Service at the time the Contract is executed and rendered such Years of Service for the Team with which he first executed a Player Contract (or, if he was under a Player Contract for more than one Team during such period, changed Teams only by trade during the first four (4) Salary Cap Years in which he was under a Player Contract) shall be eligible to enter into a Designated Veteran Player Contract pursuant to which he receives from his Prior Team up to thirty-five percent (35%) of the Salary Cap in effect at the time the Contract is executed (the “Designated Veteran Player 35% Max Salary”) if the player has met at least one of the following criteria at the time his Contract is executed: (i) the player was named to the All-NBA first, second, or third team, or was named Defensive Player of the Year, in the immediately preceding Season or in two (2) Seasons during Article II 37 the immediately preceding three (3) Seasons; or (ii) the player was named NBA MVP during one of the immediately preceding three (3) Seasons (the “Designated Veteran Player 35% Max Criteria”);

Essentially, what the provision entails is that players entering their 8th or 9th seasons with their original franchise (or were traded to their current team during their first four years), and are impending free agents, are eligible for the Designated Veteran Player Contract if they:

1) Made one of the three all-NBA teams in a season preceding the extension or in two of the previous three seasons.
2) Earned league defensive player of the year (DPOY) honors in the season preceding the extension or in two of the previous three seasons.
3) Earned league most valuable player (MVP) honors in any of the three seasons preceding the extension.

Let’s take an example of a current player, to understand how this new provision will change the landscape of the NBA, with regards to retaining superstar talent. Paul George is currently in his 7th season in the NBA, and plays for the Indiana Pacers. Since he will be entering his 8th year in the 2017-2018 season, George will potentially be eligible for this Designated Player Provision. However, unfortunately for George, he has not won an MVP and has only made one All-NBA team in three previous years, so he will only be eligible for this provision if he is awarded All-NBA honors after this season or after the 2017-2018 season.

Given that George is entering the last year of his contract, the Pacers hope that he is awarded this honor after this season, so that they can offer him the Designated Player Provision. This would mean that George could secure a five-year extension, worth a maximum of 35 percent of the salary cap. The 2018-2019 salary cap is projected to be $108 million, so George’s first year salary if he re-signed with the Pacers could be $37.8 million, and this rate would increase by 8 percent every year, giving George a contract total of $219,240,000 over five years ($43,848,000 annually). Contrast this contract with the maximum that another team could offer George as a free-agent, which would be $139,320,000 over four years ($34,830,000 annually). [http://nba.nbcsports.com/2017/01/06/report-pacers-optimistic-theyll-keep-paul-george-as-veteran-designated-player/]

If George is awarded All-NBA Honors, he would instantly become eligible for this Designated Player Provision, which would be a difference of $80 million in guaranteed money. Thus, George’s future financial stability, and the Pacers ability to retain their franchise player hinges on the inherently subjective process of All-NBA voting. For those unfamiliar with the process, at the conclusion of every season, a panel of sportswriters and broadcasters throughout the United States vote on three different All-NBA teams, with each team consisting of two forwards, one center and two guards. Here are the three All-NBA teams from last year, where George was awarded third team All-NBA honors.

It seems that a reliance on a subjective process like All-NBA voting may be legally unsound, as it allows for sportswriters, who may have biases towards certain players or teams, to alter the landscape of the league while also controlling the financial future of players. The decision of sportswriters this summer and the next may be the difference in $80 million for George.

What if George perturbed a group of sportswriters, who held votes in this process, and they subsequently decided not to vote for George, or a superstar player similarly situated, for All-NBA honors? These type of practices are not far-fetched, and the NBA would be likely better suited to adopt a more objective standard to determine the eligibility of this provision, rather than a subjective standard that may be easily manipulated. The NBA should reconsider the wording of Section 7, and instead move towards a reliance on either pure statistics (perhaps Player Efficiency Rating), or strip the All-NBA requirement altogether, and simply rely on years of service.

The NBA crafted this provision in order to give teams a greater ability to retain their own talent, however in doing so, have given too much power to sportswriters in determining the landscape of the NBA.

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