Getting to the 2011-2020 National Football League collective bargaining agreement.

Quinn, Kevin G.

Introduction

The National Football League (NFL) is by leaps and bounds the largest sports league in North America. Its annual revenues were estimated to be $8 billion for the 2010-11 season, with nearly $1 billion of that in operating profits, and its franchises are estimated to be worth a total of over $30 billion (Badenhausen et al., 2011). Various reports peg 2011-12 NFL season revenues to be in excess of $10 billion. By comparison, Major League Baseball's 2010 revenues, operating income, and average franchise value were about $6 billion, $500 million, and $500 million, respectively (Forbes, 2011). Eight of the most viewed U.S. television telecasts during the 2011 calendar year were NFL contests, led by the Packers-Steelers Super Bowl, which drew 111 million viewers. (1) The 2012 Super Bowl between the Giants and the Patriots was the most watched program in television history, drawing 300,000 more than the prior season's edition (Guthrie, 2012).

The economic manifestation of such popularity is the NFL's set of network television contracts, which paid the league a total of $3.7 billion during the 2011-12 season and $4.1 billion in 2012-13 (Vrooman, 2012). This money is split evenly across the 32 teams in the league, as are revenues from licensing, a substantial share of league-wide ticket sales, and other monies generated by teams with the highest local-generated revenues. All told, about two-thirds of total league revenues are shared evenly by the teams. The Green Bay Packers, the NFL's only publicly-held entity and therefore the only team required to report its financials, generated a total of $259 million in revenues from football-related operations in 2010-11 (Bercovici, 2011). The team is believed to be in the top of the middle third of NFL franchises in this category.

Labor Relations in the NFL Before the AFL Merger

The NFL was founded in 1920 as an alliance among the most successful professional football clubs in Ohio, Pennsylvania, Illinois, and other states in the American Midwest. Unlike MLB, which had in hand a specific exemption from antitrust law in the form of the Federal Baseball U.S. Supreme Court decision in 1922, the NFL has enjoyed no such exemption. (2) However, the league pursued its labor relations during its first three decades as though it did, a seemingly reasonable assumption, for several decades, and even included a MLB-style reserve player reserve system in its first constitution--which was ratified the year before Federal Baseball (Algeo, 2006). The annual player entry draft, an effective monopsonization device, was instituted unilaterally in 1936 by the owners in response to a bidding war over University of Minnesota star Stan Kostka, and not as the result of collective bargaining with players. In 1948, during a period of player bidding wars with the All-American Football Association, the league eliminated the reserve system in favor of an option clause to be included in every player contract. This allowed the team of renewing a player's contract for an additional year (Lyons, 2010). However, in practice, there was little material difference between the two systems as owners interpreted the one-year renewal to include an additional option year, in effect creating a perpetual reserve right for teams.

George Radovich was an All-Pro guard who played for the Detroit Lions for four years before World War II, and for an additional year in 1945. His request to be traded to the Los Angeles Rams for the 1946 season so as to be closer to his ailing father was denied, so he signed with the All-American Football Conference's (AAFC) Los Angeles Dons, and played with them for two years. The following season, he was denied an opportunity to coach with the Los Angeles Clippers, a minor professional football league team with connections to the NFL, because he had been blacklisted for jumping to the AAFC. He sued the NFL under antitrust law, and in 1957 the U.S. Supreme Court ruled in his favor, holding that Federal Baseball did not apply to the NFL. (3) This meant that the league could no longer behave as if it were exempt from antitrust laws.

Despite the Radovich decision and the NFL's subsequent failure to win a general antitrust exemption in Congress, teams refrained from signing each other's free agents. (4) This behavior de facto eliminated buyers for a veteran player's services beyond his incumbent team, even if his contract had expired. In 1962, the Baltimore Colts violated the unwritten rule against such action by signing R. C. Owens after he had played out his option year with the San Francisco 49ers. This prompted the "Rozelle Rule" to be added to the league constitution in 1963. The rule specified that compensation was owed to the jilted team when a "free agent" player signed with another club. In the event that the two teams involved could not come to an agreement regarding that compensation, the NFL Commissioner would unilaterally make that determination.

From 1963 through 1974, a total of 176 players played out their options, and 34 signed with new teams. Compensation was agreed upon by the two teams involved in 27 cases, was determined by the Commissioner in four cases, and was waived by incumbent teams in three cases (John Mackey et al. v. National Football League et al., 1976; Marvin Powell et al. v. National Football League et al., 1990). The monopsonistic power that the reserve/option/Rozelle system afforded is evidenced by sharp player salary increases during those times when the NFL faced rival leagues of consequence that did not honor the NFL's no-poaching policies (e.g., AAFC, 1946-1949; American Football League, 1960-1969; World Football League, 1974-1975; and United States Football League, 1983-1987) (Staduhar, 1996; Quirk & Fort, 1997).

The Fight Over Free Agency

In 1956, the year before the Radovich decision, NFL players formed a union, meeting for the first time as the NFLPA in New York in a hotel across the street from NFL headquarters. Representatives from 11 of the 12 NFL teams (except the Chicago Bears) joined the union, demanding a $5,000 minimum salary, a per diem for players, salary protection against injuries, and a provision that clubs pay for players' equipment. Bert Bell, then NFL Commissioner, agreed under Congressional pressure to recognize the union, and pledged to create a pension system, which came into being in 1959. However, NFL owners did not formally vote to recognize the NFLPA as the players union until 1968, after passage of a specific Congressional antitrust exemption that allowed the AFL-NFL merger.

A brief work stoppage over the summer of 1968 ensued, resulting in the first collective bargaining agreement (CBA) between the NFL and its players. The 1968 CBA called for a $1.5 million contribution to the pension fund and a minimum salary of $9,000 per year for rookies and $10,000 per year for veterans. Players would continue to receive $50 per exhibition game as they had been. This was considerably less than the NFLPA had demanded, but the AFLPA had already agreed to these terms, knocking out most of the NFLPA's bargaining power (Bell, 2011; NFLPA, 2011).

The NFLPA absorbed the AFLPA in 1970, and the National Labor Relations Board certified the NFLPA as the bargaining representative for players. Negotiations over a new CBA in 1970 did not go smoothly, and the players went on strike in July. The owners threatened to cancel the season, and two days later, the strike concluded with a new CBA. The deal ran through 1974, increased minimum salaries, and improved some medical and pension benefits (Bell, 2011; NFLPA, 2011).

In 1971, the union filed an antitrust lawsuit over the Rozelle Rule and option clause. The players sought creation of real free agent markets for veteran players via elimination of the option clause and the Rozelle Rule. The case winded its way through the U.S. judicial system, but had not been decided by the time the 1970 CBA expired in 1974. The players went on strike again that July, perhaps emboldened by the emergence that year of the rival World Football League (WFL). They called for an end to the player entry draft, the option clause, the Rozelle Rule, and a number of other policies that inhibited player free agency. The players eventually ended the strike in midAugust without having won on any of these issues (NFLPA, 2011). The union was weakened by this failure, and by 1975, fewer than half of all players were paying union dues (Bell, 2011). The WFL itself dissolved in the middle of its second season, further damaging the NFLPA's leverage with owners (Staudohar, 1996).

The 1971 antitrust suit, by now known as Mackey, was finally decided in 1977 in favor of the players. (5) Noting a number of specific cases in which the Rozelle Rule substantially limited player movement, the Eighth Circuit Court of Appeals ruled that the owners' contentions that such restraints were needed to recoup player development costs and to maintain competitive balance--Rottenberg's Invariance Principle notwithstanding--were not sufficient to legally justify the Rozelle system (Rottenberg, 1956). It further held that while some restrictions on player movement might be permissible, the Rozelle Rule, which was not a product of the collective bargaining process, was so severe as to constitute a violation of the Sherman Antitrust Act (John Mackey et al. v. National Football League et al., 1976).

Parties injured due to violations of the Sherman Act may be liable for treble damages, three times the actual economic damages caused, which could have been a substantial sum in the Mackey case. However, the NFLPA, without robust union dues payments, lacked the resources to credibly threaten further legal action, and was unable to parlay its legal victory into either a large monetary settlement or a real free agency system for the players. The 1977 CBA, which was struck following Mackey, improved some player benefits and technically ended the Rozelle system, but teams losing players after signing elsewhere still were to receive compensation in the form of a first-round draft pick. Furthermore, incumbent teams retained a right of first refusal to match a contract offered by any prospective new team (NFLPA, 2011). In effect, the NFLPA gave away most of what it had won in Mackeyand got very little in return, and essentially nothing with respect to free agency. Between 1977 and 1988, an average of 125 players per year filed for free agency, but only two managed to play for a different team the following season (Leeds & von Allmen, 2011).

NFL football became increasingly popular and more lucrative during the five-year period covered by the 1977 CBA, at least for the owners. Game attendance increased by 23% from 1977-1982, and the league's broadcast television revenues went from $55 million in 1977 to $163 million in 1981 (Fort, 2012; Rosner & Shropshire, 2010; Vrooman, 2012). A new set of network agreements signed prior to the 1982 season were going to pay the league $200 million in 1982, increasing to $450 million for the 1985 season. These deals meant that broadcast revenues per team of less than $2 million in 1977 were going to become more than $16 million in 1985--an eightfold increase. Meanwhile, the average nominal player salary of about $258,000 in 1977 had only grown to $353,000 in 1981, an increase of 37% during a period in which the Consumer Price Index increased by 54% (Fort, 2006, 2012; BLS, 2012).

The 1982 bargaining sessions began with the players proposing a league payroll totaling 55% of the league's revenues, and that player salaries should be determined by a set of provisions based on years of service and performance instead of through individual player-team negotiations. The owners dismissed the offer, and the players voted to strike beginning on September 21, after the first two regular season games. The timing of the action was calculated to do more damage to owners' pockets than had the previous summer work stoppages. The walkout dragged on for 57 days, threatening to cancel the remaining portion of the 1982 season. It was finally settled by owners agreeing to pay $60 million to replace a substantial portion of the wages that had been lost by striking players, along with higher minimum salaries and an improved medical benefit package. The deal included no real changes to the ability of veteran players to change teams. All players returned to work on November 16, although some teams had already resumed practicing before the settlement, and on December 5, a new CBA running through the 1986 season was formally signed (Bell, 2011; NFLPA 2011).

The 1987 regular season began without a CBA in place, and again the players voted to strike after two regular season games had been played, primarily over free agency. This time, the owners had prepared for the work stoppage by arranging for potential replacement players, and three weeks' worth of replacement player games were played. Playing these games meant that the owners were able to maintain their television revenues, and the strike failed. Eighty-nine veteran players crossed the picket lines, including a number of stars, and on October 15, 1987, the players officially returned to work without a new CBA (NFLPA, 2011).

Unlike 10 years earlier, however, the union now had access to substantial resources that could be put to use pursuing antitrust claims in court. By 1987, the majority of players had agreed to provide the union with the rights to their likenesses for marketing purposes. These revenues generated $2 million in 1988 and eventually grew to $11 million in 1990. The day after the 1987 strike ended, licensing revenues now in hand, the NFLPA sued the league again. Their main claim was that the restrictions on free agency agreed upon for the now-expired CBA continued to be league policy, and that the owners' continuing unilateral imposition of these rules constituted a violation of U.S. antitrust law. The case became known as Powell, after then-NFLPA President Marvin Powell. (6) Judge David Doty of the U.S. District Court in Minnesota ruled in favor of the players in early 1988, opening the prospect for significant compensatory and punitive payments from the league to players. During the league's appeal of Doty's ruling, it set up a lukewarm system for free agency that was meant to actually do as little as possible. The system, known as "Plan B," was a reservation of each team's right of first refusal for 37 of its 47 roster players in the event of an offer by another team.

In November of 1989, the Eighth Circuit Court of Appeals, which had heard the Mackey case, reversed Doty's decision, finding that antitrust laws did not in fact apply in the specific labor-related circumstances of the case. Essentially, the court said that the players had no claim against the league on antitrust grounds because they continued to be represented by a union in collective bargaining (Marvin Powell et al. v. National Football League et al., 1990), even in the absence of a CBA. Two days later, the NFLPA voted to decertify itself as players' representatives in labor negotiations, thereby clearing the way for individual players to make legal claims against the league on antitrust grounds (Bell, 2011; NFLPA, 2011).

In early 1990, a suit challenging the Plan B system was filed by the NFLPA on behalf of several players whose contracts had expired after the 1989 season. The lead plaintiff was Freeman McNeil, a running back who played for the New York Jets from 1981 to 1992. The league attempted to choke off the suit by offering players payments for licensing rights, thus drying up the union's main source of funding. Seven hundred players accepted the league's offer. Judge Doty ruled in 1991 that the decertification meant that McNeil could proceed, leading to a 50-day jury trial that began in June, 1992 (7) The jury eventually found the Plan B system to be more restrictive than necessary to achieve competitive balance, and therefore in violation of antitrust law. However, they only awarded damages totaling $543,000 to four of the eight plaintiffs, not including McNeil, interestingly. Shortly thereafter, Eagles star Reggie White and four other players filed a class action suit seeking compensation for economic damages due to a number of league rules, including the mandatory right of first refusal system and the player entry draft. (8) Other similar suits followed. The White case was settled on January 6, 1993, with a consent decree that called in part for a cash settlement of $195 million for various antitrust claims in at least 20 separate suits, the recertification of the NFLPA as the players' collective bargaining agent, and continuing oversight over the provisions of the agreement by a Special Master appointed by the court. Judge Doty gave the White settlement final approval in August of 1993. (NFLPA, 2011; White v. NFL, 2009).

The 1993 Collective Bargaining Agreement

The economic elements of the 1993 White settlement provided the framework for the landmark 1993 CBA, the first one since the expiration of the prior CBA in 1987. The four-year deal gave players limited free agency in exchange for a league-wide salary cap that provided cost containment for owners. The annual player entry draft was reduced from 12 to seven rounds, and drafting teams would retain the exclusive rights to their players for their first three years in the league. Players with three years of service whose contracts expired would be also be free to negotiate with other teams, but the incumbent team retained the right of first refusal. A player no longer under contract would be an unrestricted free agent after four seasons of NFL service. In addition, teams could designate one player otherwise qualified for free agency as their "franchise player," and two others as their "transition" players. (9) Teams could retain franchise players by offering them a contract that paid the average of the top most highly paid players in the league at the same position. Teams maintained the right of first refusal for transition players as long as the contract offered was for the minimum of the average of the top 10 players at the position (Shapiro, 1993).

The CBA had an immediate impact on player pay. The average salary jumped from $484,000 in 1992 to $666,000 in 1993, a 38% increase. League-wide player costs went from $1.08 billion (57.2% of total league revenue) to $1.20 billion (68.5% of total revenue) (Vrooman, 2012).

The salary cap, which did not take effect until the 1994 season, was set at 64% of the league's "designated gross revenues" (DGR), which was the part of total league revenues that was shared equally by teams. (10) This cap fell to 63% in 1995 and 1996, and to 62% in 1997. The result was that the player cost share of total league revenue fell from 68.5% in 1993 to 59.3% in 1994 and 61.4% in 1995. (11) The player share of total revenue then remained under 60 % from 1996-99. The average player salary fell by nearly 6% to $628,000 in 1994 as a result of the cap (Vrooman, 2012).

The 1993 CBA was extended by mutual agreement between the owners and the players in 1998 (through the 2002 season), and again in 2001 (through the 2006 season). While the two extensions included some relatively minor changes such as increases in minimum player play and clarifications of disciplinary procedures, the 1993 economic framework remained intact. The salary cap was set by these accords to be 63% of DGR during 1998-2001, and between 63.0% and 65.5% for 2002-06. Both owners and players prospered under the three agreements. From 1993-2005, total NFL revenue grew from $1.7 billion to $6.1 billion annually, and operating income across all teams went from an estimated loss of $12 million in 1993 to nearly $1 billion in 2005. Team salary caps increased following the CBA from $34.6 million in 1994 to $85.5 million in 2005 (Figure 1), while the average player salary increased from $628,000 to $1.4 million (Fort, 2012; Vrooman, 2012).

[FIGURE 1 OMITTED]

The 2006 Collective Bargaining Agreement

While labor strife led to significant work stoppages in MLB (1994-95), the National Basketball Association (1998-99), and National Hockey League (1992, 1994-95, and 2004-05), the NFL enjoyed a long period of relative labor peace following the 1993 CBA. However, by 2006, it was becoming apparent that the NFL's economic framework was beginning to fray a bit. The primary culprit was the increase in the portion of total revenues not counted as part of DGR, and therefore not included in calculating the salary cap. DGR included home and visitor shares of gate receipts and national and licensing revenues, but not venue revenues such as parking, concessions, sponsorships, and luxury seating income. Furthermore, personal seat license revenues used for stadium construction were also not included in DGR. During the spate of venue construction during the 1990s and 2000s, owners specifically emphasized maximizing revenues that were not counted toward DGR or shared with other teams. Consequently, the percentage of total revenues going toward player pay fell from 70.8% in 2000 to 62.3% in 2005.

The 2006 CBA changed the basis on which the cap was determined from DGR to all football-related revenues in the league, less $1 billion to the owners for their risks in operating the business. The players' share of revenues in 2006, net of the $1 billion, would be 59.6%, instead of 62% of DGR as specified in 2005 by the prior CBA (Brandt, 2011a). (12,13) The new methodology meant that player pay increased from 55.1% of all league revenues in 2005 to 58.4% in 2006. (14) Moreover, league revenues in 2006 were substantially greater in 2006 than 2005 courtesy of a new, even more lucrative set of television contracts. As a result, the team payroll cap in 2006 of $102 million was 19% higher than in 2005 (Figure 1). By 2008, the per team cap value came to $116 million, an amount equal to 56% of revenue for the lowest revenue team in the league (Detroit Lions), but only 35% of the highest (Washington Redskins) (Forbes, 2009; Fort, 2012). The 2006 CBA did include a new local revenue sharing program that transferred about $500 million annually from the 15 highest-earning clubs to the bottom 8-12 clubs, which helped somewhat in easing inter-team disparities due to stadium situations.

However, the real cash squeeze on some teams was substantial because large signing bonuses are permitted to be pro-rated over the life of a multi-year deal for salary cap purposes, even though they are lump sum payouts. Moreover, the new deal had changed the number of years over which bonuses could be pro-rated for salary cap purposes from four years in 2005 to five in 2006, to six in 2007, and then back to five in 2008 (ESPN, 2006). In an ever-increasing payroll environment, the pro-ration meant that the real cash outlays for players were about 14% above the cap value in 2009. Consequently, actual 2009 pay as a percentage of team revenues varied from 34.4% (Dallas Cowboys) to 71.9% (Oakland Raiders) (Vrooman, 2012). This meant that richer teams had even more flexibility in attracting better players than their less well-off brethren. The Buffalo Bills and Cincinnati Bengals voted against the CBA, but the owners still approved the deal, 30-2 (ESPN, 2006b).

The 2006 CBA included a provision that allowed either party to opt out by November 8, 2008 (Clayton, 2008). The owners voted unanimously to exercise that option in May of 2008. Despite claims by the league to the contrary, Vrooman (2012) convincingly demonstrates that total player costs did not grow more quickly than total league revenues in the wake of the 2006 deal. Forbes (2009) estimated that only one team (Oakland Raiders) lost money in 2008, and that the league's operating income totaled over $1 billion. While profits were not a great deal higher in 2008 than in 2005, they were not less, either (Fort, 2012). Instead, the real drivers of the vote to opt out were (a) the widening gap between the have and have-not teams following the 2006 CBA and, more importantly, (b) the owners in general figured that they could force the players into a more favorable arrangement than was embodied in the 2006 deal.

The opt-out clause specified that the agreement now was to expire in March of 2011, and that the 2010 season was to be played without a salary cap. However, the 2006 CBA included a number of provisions that kept a lid on player salaries in the event of a final uncapped season, so average team pay fell in 2010, from $140 million in 2009 to an estimated $122 million. (15,16)

Issues in the 2011 NFL Lockout

There were a number of differences splitting owners and players when serious negotiations began following the 2010 season, but the central issue was how to share revenues between owners and players. In general, the players were happy with the status quo. The owners, on the other hand, were not. They called for 18% to be taken off the top of league revenues, amounting to roughly double the 2006 CBA amount of $1 billion per year, before the 59.6% was put toward player salaries. In addition, the owners wanted to increase the regular season from 16 to 18 games per team. This would boost revenues from ticket sales, broadcast rights, venue signage, etc., which owners believed would be attractive to the union, too (Brandt, 2010a). In addition, the owners, still smarting over a recent Special Master ruling that negated broad bonus clawback provisions common in player contracts, sought to more easily recover signing, option, and other monies from players who engaged in misconduct or retired immediately after being paid (Brandt, 2010b).

The NFLPA responded by offering the owners an additional $138 million, not $1 billion, on top of the $1 billion already excluded from the players' percentage of league revenues. In exchange for an 18-game schedule, the union requested roster expansions to reduce negative impacts of a longer season on player health and safety. Total team rosters under their proposal would increase by one or two players from 53 to 54 or 55, and game-day active rosters from 45 to between 48 and 50. In addition, they asked that practice squads be expanded from a maximum of eight to a maximum of 10 players. The NFLPA also called for reduced offseason activity loads for players along with a shorter injured reserve period--under the 2006 CBA, any player put on injured reserve was done for the season. The union sought a partial-season option that would be less draconian (Brandt, 2010a).

There were couple of areas of general agreement between the parties. The league, along with some helmet manufacturers, had been called on the carpet by Congressional hearings on player concussion issues in late 2009 and early 2010. The league was accused of underplaying the serious long-term effects of sustained head trauma, despite having commissioned a study on former players' dementia problems that was published in September of 2009 (New York Times, 2010). The NFLPA welcomed some of the neurological testing and the concussion protocols instituted by the league in response to the report and hearings, but players were divided along offensive/defensive lines about stricter rules, increased number of disciplinary hearings, and higher fines for hits to the head. Both owners and the union saw potential public relations benefits from progress on this issue. Another point of agreement was on rookie pay. The existing system rankled veteran players who often earned much less than highly drafted but unproven rookies, and owners welcomed the prospect of not having to pay unknown commodities tens of millions before they played a single down. The union and the league each were in favor of diverting some rookie pay to veterans. (Brandt, 2010c).

Both the league and the union also generally agreed on the matter of improving benefits for retired players. The league's motivation was to help blunt the public and legal response to the concussion/dementia issue. DeMaurice Smith, who had replaced the late Gene Upshaw as NFLPA Executive Director in 2009, was eager to show that he was more concerned about retirees than Upshaw had been perceived to be (Brandt, 2010c).

The negotiations were complicated by personality issues that had not been part of league labor relations for three decades. Upshaw and Tagliabue had a very solid and amiable relationship that had matured over many years. Upshaw had been a member of the NFLPA's bargaining committee while a player with the Raiders in the 1970s, staying with the union following his retirement in 1981. He became Executive Director in 1983 and remained in that position until his death in 2008. Upshaw's opposite number through the 1980s strikes, the Freeman McNeil case, and the negotiations over the 1993 CBA, was Paul Tagliabue. Tagliabue had become Commissioner following Pete Rozelle's retirement in 1989, but he was intimately involved with union relations as his law firm had done the bulk of the league's business for many years before he became Commissioner. Tagliabue retired shortly after concluding the 2006 CBA, and Roger Goodell became Commissioner. The vote by the owners to opt out of the 2006 CBA occurred with relatively new leadership on both sides of the bargaining table, and many were of the opinion that Smith, in particular, needed to appear to be a tough negotiator to appease his constituency (Brandt, 2010c).

Reaching a New Agreement

Relations between the two sides were sour as they met on and off for several fruitless months of talks toward a new deal in 2010 and 2011. The union accused the owners of not being forthright in their protests of financial stress, and demanded that they open their books. They pursued a claim of owner collusion in depressing player salaries during the uncapped 2010 season, and sought to keep the league from accessing revenues from their television contracts during a prospective 2011 work stoppage. Those contracts had provisions that would continue payments--$4 billion for the entire season--against future years in the event that regular season games were not played. The union regarded those provisions as strike insurance purchased during the prior CBA, which would be a violation of the deal's terms. Special Master Stephen Burbank, a University of Pennsylvania law professor, ruled in early February against the union's request that any of these revenues should go into escrow rather than into owners' pockets. Judge Doty shortly thereafter reversed Burbank's finding, ruling that the TV deals were in fact strike insurance (ESPN, 2011a). The union then filed a suit seeking $707 million in damages against the league for that violation (ESPN, 2011c).

With the clock ticking toward expiration of the CBA in early March, the two sides met for 16 more days with a federal mediator. There was some movement on the matter of the owners' deduction from league revenues before the salary cap calculation, but not enough. The owners dropped their demand from an additional $1 billion to $650 million, then to $325 million, but this still meant the sides were apart by $187 million per year on the issue. After a couple of temporary CBA extensions for more bargaining, on March 11, the NFLPA decertified itself as the collective bargaining representative of the players, clearing the way for another round of antitrust suits against the league. The next day, the owners locked out the players. Several prominent players, including the Patriots' Tom Brady and the Colts' Peyton Manning, filed a class action suit in federal court in Minneapolis (Farmer, 2011; ESPN, 2011b).

The players quickly sought a legal injunction against the lockout on antitrust grounds in federal court, which was granted in an 89-page ruling on April 26, 2011, by Judge Susan Richard Nelson, in whose courtroom the Brady case was being heard. Three days later, the Eighth Circuit Court of Appeals temporarily stayed Judge Nelson's order. This allowed the league to resume its lockout. Finally, on July 8, the appellate court ruled in the owners' favor, on the grounds that judges are not empowered to issue lockout injunctions in labor disputes such as the one in question, permitting the owners to extend the lockout indefinitely (Maske, 2011; McCann, 2011).

The two sides held some talks throughout the legal wrangling over the injunction. In mid-May, they met with Magistrate Judge Arthur Boylan, who had been appointed by Judge Nelson to serve as mediator, but the talks quickly failed. In early June, a small group of players and owners met in a secret series of talks. More discussions ensued in mid-July in the wake of the appellate court's decision, concluding in an agreement about rookie pay. Three days later, on July 14, 2011, a deal for a new CBA was reached.

The owners voted 31-0 to approve the deal (the Oakland Raiders abstained) pending approval by the NFLPA membership. On August 4, the players voted overwhelmingly in favor of the new CBA, although some details about player discipline and drug testing remained to be finalized, and officially reconstituted itself as a union shortly thereafter (Battista, 2011; USA Today, 2011).

Provisions of the 2011-2020 NFL CBA

The 2011 CBA was set to run through the 2020 season and the 2021 player entry draft, with no opt-outs, reflecting both sides' desire to not to have to revisit their agreement for as long as possible. The agreement settled all pending litigation, including the Brady and television revenue lawsuits. It also rid the league of judicial oversight of their labor relations via the Special Master, substituting instead neutral arbitrators jointly chosen by the league and the union. Table 1 summarizes the main elements of the deal. (17)

The salary cap for the 2011 season was set to be $120.4 million per team (compared to the cap of $128 million in 2009), and a total of $142.4 million per team, including all benefits, with at least those amounts for the 2012 and 2013 seasons. Beginning with the 2012 season, the players will share percentages of all revenue categories. Specifically, the league-wide cap will be calculated to be 55% of national media revenue, plus 45% of league licensing revenue, plus 40% of local team revenue. The cap must average at least 47% of total league revenue over the life of the CBA. Owners no longer take $1 billion off the top, but teams now receive credit for actual stadium investments, up to 1.5% of revenue each year. Each team is now required to spend in cash at least 89% of their cap in each of the 2013-2016 and the 2017-2020 periods, with league-wide actual spending at least 99% in 2012 and 95% for each of the 2013-2016 and 2017-2020 periods. Teams can also now "borrow" (i.e., transfer) up to 1.5% in cap room for a current year from a future year (Brandt, 2011b). Minimum salaries were increased for the 2011 season by $55,000 for each category, with increases of $15,000 per year from 2012-15 (Florio, 2011).

There is now a maximum total compensation per draft class for the life of the CBA, with the savings relative to the prior system to be paid into a veteran performance pool and into current and retired player benefits funds. All drafted and undrafted players are signed to four-year and three-year contracts, respectively, that now include strong anti-holdout terms. Teams and first-round draftees can agree on terms that would permit the teams the option of extending those players to a fifth year. The draft remains at seven rounds, plus compensatory picks for teams that lose free agents (Brandt, 2011b). The free agency system under the 2011-2020 CBA remains essentially unchanged from the 1993-2006 agreements. Players with four years of experience without a contract are unrestricted free agents, while those with three years are restricted free agents whose teams retain the right of first refusal. The franchise and transition player tagging system was also left unchanged.

The regular season remains at 16 games with four preseason contests, but those numbers could be changed at any time after 2013 under the CBA if the NFLPA approves of doing so. Even so, the number of organized team activities in the off-season (OTAs) was reduced from 14 to 10, with five weeks less of off-season workouts. New limits were imposed on full-contact and total practice time, with players getting more off days. Players would be paid up to $1 million of their contract salaries for the year following an injury and up to $500,000 in the subsequent year (Brandt, 2011b). The active roster may be increased by teams by one additional player.

All players would have an opportunity to remain on the league's player medical plan for life, and retirees would be provided with other improvements to their post-career medical options. The retiree disability plan and career transition assistance program was improved, and the" 88 Plan," a program to assist former players diagnosed with dementia, was enhanced to now pay up to $88,000 annually for medical and custodial care. In addition, $50 million per year during the life of the CBA will be put into a fund for medical research, healthcare programs, and NFL Charities and NFLPA-related charities. A new "Legacy Fund" was created, into which owners and players will contribute a total of $620 million toward pre-1993 retirees. This plan will increase pension benefits for those players and their beneficiaries for the remainder of their lifetimes (Brandt, 2011b; EPSN, 2011d; NFL & NFLPA, 2012).

Final Remarks: Who Won the 2011 Lockout?

It is difficult to choose a loser of the 2011 NFL lockout--both sides got most of what they most wanted. The owners got 10 years of labor peace, salary certainty, smaller rookie salaries, and most importantly, a slightly smaller percentage of their overall revenues going to players than before. The league also shed the longtime yoke of oversight courtesy of Judge Doty's court and the Special Master. Players got lighter workloads, higher player and team minimum salaries, a piece of local revenues, and significant improvements in current player and retiree medical and other benefits. While NFL players did not improve their free agency status, they did manage to redirect a substantial portion of rookie pay toward more deserving veterans. They did not have to agree to an 18-game season to win these benefits, instead reserving the right to bargain over it sometime in the future. At least through 2020, the NFL and the NFLPA will remain close partners in an extremely lucrative business.

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Endnotes

(1) The other two programs in the top 10 were the Super Bowl pregame show (70 million viewers, #2), and the Academy Awards (38 million, #9; Neilson, 2011).

(2) Federal Baseball Club v. National League, 259 U.S. 200 (1922).

(3) Radovich v. National Football League (NFL), 352 U.S. 445 (1957).

(4) Congress did grant professional sports leagues an antitrust exemption limited to bundling network television contracts with the Sports Broadcasting Act of 1961 (15 USC, Chapter 1291).

(5) Mackey v. NFL, 543 F.2d 606 (8th Cir. 1976), cert. denied, 434 U.S. 801).

(6) These were actually two separate cases, Powell I and Powell II. Powell v. National Football League, 678 F.Supp. 777, 788 (D.Minn.1988) was the district court case, while Powell II, Powell v. National Football League, 930. F.2d 1293, 1304 (8th Cir. 1989) was the appellate court case.

(7) McNeil et al. v. NFL, 790 F. Supp 871 (8th Cir. 1992)

(8) White v. NFL, 836 F. Supp. 1458, 1482 (D. Minn. 1993)

(9) The number of transition players was reduced to one in a subsequent CBA.

(10) League-wide rookie pay was capped at 3.5% of DGR.

(11) Including player salaries and benefits. Player benefits were set in 1993 to be 10% of player costs (Vrooman, 2012).

(12) The CBA was set to run from 2006-2012, but specified no salary cap in the final year of the deal.

(13) The $1 billion rollback is for some marketing costs, and for costs associated with stadium construction and financing.

(14) Vrooman (2012) indicates that 57% and 57.5% of all revenue was used for the cap share the 2006-07 and 2008-11 periods, respectively.

(15) Heitner (2008) and Bell (2008) list a number of these provisions and explains their impacts.

(16) Lack of availability of 2010 NFL salary data is a notorious issue for sports economists as the lack of a cap meant that teams were not required to report values to the NFLPA, and therefore the numbers are not public. The accuracy of the 2010 figure and the extent to which it compares to the 2009 figure are fair game for criticism. The 2009 value was drawn from Vrooman (2012) while the 2009 value specified here was calculated from Rosenthal (2010).

(17) A full text of the 2011-2020 CBA can be found at https://images.nflplayers.com/ mediaResources/files/2011CBA.pdf

Kevin G. Quinn

St. Norbert College

Kevin G. Quinn is a professor in the economics program and associate academic dean at St. Norbert College. His research interests include the labor and stadium economics of the NFL.

Table 1: Major Elements of 2011 -2020 NFL Collective
Bargaining Agreement

2011CBA
Component Details

Length of Deal 10 years, 2011-2020, including the 2021 draft

Salary Cap 2011: $128 million per team
Determination
 2012-2020: 55% of national media revenue, plus 45%
 of league licensing revenue, plus 40% of local team
 revenue. Must average at least 47% of total league
 revenue in each of two four-year periods
 (2013-16 and 2017-2020).

 Teams can claim stadium credits up to 1.5%/year
 against their cap.

 Teams can borrow in a current year up to 1.5% from
 a future year's cap.

 Minimum spends: Each team must spend in cash at
 least 89% of cap in each of two four-year periods
 (2013-16 and 2017-20). League-wide cash spending
 must be at least 99% of cap in 2012, and 95% in
 each of two four-year periods
 (2013-16 and 2017-20).

Minimum 2011 Minimums:
Salaries
 Rookie: $375K
 2 Years of Service: $450K
 3 Years of Service: $600K
 4-6 Years of Service: $685K
 7-9 Years of Service: $810K
 10+ Years of Service: $910K

 All minimums increase by $15K/yr in 2012, 2013,
 and 2014.

Rookie Draft Remains at seven rounds, plus compensatory picks.

 Contracts: Drafted players must sign four-year
 contracts with a possible fifth-year option.
 Anti-holdout provisions.

 Rookie compensation pool reduced from prior CBAs,
 with savings put toward veteran pay and current
 and retired player funds.

Free Agency Unchanged from 2006 CBA. Drafted players are
 reserved by teams for first three seasons. Players
 no longer under contract with three seasons of
 service are restricted free agents, with incumbent
 team retaining right of first refusal. Players no
 longer under contract with four or more seasons of
 service are unrestricted free agents.

Franchise and Unchanged from 2006 CBA. Each team may designate
Transition Tags one Franchise player per year and pay him the
 average of the top five players at that position.
 Each team may designate one Transition player per
 year; team maintains right of first refusal as long
 as offer is at least the average of the top 10
 players at that position.

Season Length Remains at four preseason and 16 regular season
 games. Any changes must be approved by NFLPA.

Practice Limits OTAs reduced from 14 to 10.

 Five weeks less of off-season work for veterans.
 Only one three-day off-season minicamp for
 veterans. No contact permitted.

 Only 14 practices with pads during regular season
 allowed, 11 of which must be held during the first
 11 weeks of the season, and three of which must be
 during the last 3 weeks of the season.

 Up to two padded practices in one week during
 the regular season.

 Padded practices limited to three hours each.
 No padded two-a-days.

 Bye weeks normally must include a minimum of four
 consecutive days off.

Pay Following Injured players to be paid up to $1 million of
Injuries their contracted salaries in the year following
 an injury, and $500K in the subsequent year.

Retiree Benefits Players allowed to remain on league medical plan
 for life. CBA improves post-career medical options.

 Improvements in retiree career transition and
 disability plans, particularly with retirees with
 dementia.

 Legacy Fund paid by players and owners to
 contribute a total of $620 million to improve
 benefits for pre-1993 retirees.

 $50 million per year toward medical research and
 other charities during life of CBA

Roster Size Active roster increased from 45 to 46 players per
 team. Teams may carry as few as 43 active players
 during regular season. Active plus inactive roster
 maximum of 53 total players.

Other Settlement of all litigation pending as of
 July 2011.

 Agreement to end oversight by court via Special
 Master. Disputes to be decided by agreed-upon
 arbitrator.

 No opt-outs, lockouts, or strikes allowed.