NBA, NBPA Reach Agreement in Principle on New Collective Bargaining Agreement

June 21, 2005

SAN ANTONIO -- The NBA and the National Basketball Players Association announced today that they have reached an agreement in principle on the key items of a new 6-year collective bargaining agreement.

NBA Commissioner David Stern, Players Association Executive Director Billy Hunter and President Michael Curry announced the agreement prior to Game 6 of The Finals in San Antonio.

“This new agreement creates a strong partnership with our players, which is critical to our prospects for continued growth on a global basis,” said Stern. “Once the deal is finalized, the NBA and its players will be able to focus on the enormous opportunities we have together.”

“Although a definitive written agreement must still be completed,” Hunter added, “we believe we have reached the framework for a deal that preserves and enhances gains that the players have made under the expiring agreement. The new CBA deals fairly with the issues that are important to the league, and gives our sport the continuity that will be so important to its growth and to its fans.”

The agreement includes an increase in the salary cap, a lessening of the impact of the luxury tax, a decrease in the escrow withholding over the term of the deal (to 8 percent), and a guarantee by the league that the players will receive no less than 57 percent of basketball related income (a percentage that will increase as revenue increases). The maximum length of player contracts will be reduced to 6 years, from their current 7, and maximum annual increases in salaries will be reduced from 12½ to 10½ percent for teams resigning their own players and from 10 percent to 8 percent for teams signing free agents.

On non-economic matters, the minimum entry age will be increased from 18 to 19 years and teams will have the ability to assign players with less than 2 years’ experience to the NBA Development League. The number of random drug tests as well as the penalties for violations will be increased. The league will guarantee that, on average, all teams will have 14-player rosters, and players suspended for more than 12 games for on-court misconduct will be able to challenge the suspension before a neutral arbitrator.

While the agreement is being reduced to a definitive writing, the moratorium on free agent signings presently scheduled to expire on July 14 will be extended to July 22. During this period, summer leagues may be conducted, rookies may be signed, and free agents will be permitted to negotiate, but may not sign, new contracts.

The agreement is subject to the approval of the NBA Board of Governors and the membership of the Players Association.

The following are the key points agreed to by the NBA and the Players Association in their new 6-year collective bargaining agreement:

• Players will be guaranteed to receive 57 percent of league revenues (BRI), the same percentage paid to players the last two seasons. (This is the first time the league has ever agreed to guarantee the players an agreed-upon percentage of revenues.)
• The Salary Cap will increase from 48 percent of BRI to 51 percent of BRI. All Cap exceptions will remain unchanged, including the Mid-Level Exception ($4.9 million per team this past season).
• The amount of money that can be withheld from player salaries under the “escrow” system will be reduced from 10 percent of salaries in year 1 of the new deal to 9 percent in years 2 through 5 and 8 percent in year 6. The 57 percent escrow level will increase with revenue growth.
• The effect of the existing luxury tax on teams will be reduced and there will be no additional taxes. The tax level will be set at 61percent of league revenues (the same level as in the 2001-02 – 2003-04 seasons). Tax treatment for injured players and minimum salary players will be liberalized.
• The maximum length of a player contract will be reduced by 1 year, from 7 years for a team’s own players and 6 years for other players to 6 years and 5 years.
• The league will guarantee that, on average, all teams will have 14-player rosters.
• The maximum annual increases in multi-year player contracts will be reduced from 12.5 percent for a team’s own players and 10 percent for other players to 10.5 percent and 8 percent.
• Players will be subject to 4 random drug tests per season and penalties for use of performance-enhancing drugs will be increased.
• The age limit for entering the draft will increase from 18 to 19 (plus one year removed from high school).
• Players will have the right to an arbitrator’s review of Commissioner suspensions for on-court misconduct of more than 12 games (currently, no arbitrator review is permitted regardless of the length of the suspension).
• Players in their first two seasons in the league may be placed on teams in the NBA Development League for skills development.
• There will be an increase in the minimum salary and benefits. Pension benefits will be increased subject to IRS approval.

Source: Associated Press,