Posted by: Mike Cornelius | August 30, 2012

Time Running Out For NHL Players And Donald Fehr

A NOTE TO READERS: On Sports And Life is attending the PGA Tour’s Deutsche Bank Championship this weekend.  Because of travel considerations, Sunday’s scheduled post may be delayed.

When the L.A. Kings, led by goalie Jonathan Quick, finished their improbable run through the playoffs from eighth seed to Stanley Cup champions in early June, the one thing that hockey fans did not want to contemplate was the idea that L.A’s resounding 6-1 victory over the New Jersey Devils in Game Six of the Finals might be the last NHL game played for quite some time. But now, with less than three weeks remaining before the September 15 expiration of the current collective bargaining agreement such contemplation is unavoidable. Commissioner Gary Bettman has made it plain that the owners will institute a lockout if there is no new CBA ready to take the place of the expiring one; and the owners and the players’ union remain far, far apart on a host of issues.

As is always the case in negotiations between billionaire owners and millionaire players, irrespective of the sport, the driving issue is money. The current CBA allocates 57% of revenue to players’ salaries. The league’s initial proposal was to reduce that to 43%, which NHL Players Association head Donald Fehr promptly characterized as a 24% pay cut. Fehr and the union countered with an offer to take modest reductions in the players’ share of the revenue pie for three years before returning to the current level in year four. That in turn was rejected out of hand by Bettman and the owners, who offered a revised proposal on Tuesday, modestly bumping up their initial offer from 43% to 46% for the entirety of a proposed six-year contract. Because both sides project total revenue to increase each year, the actual amount of money available for salaries would increase each year as well. However under the owners latest offer, last season’s salary pool of $70.2 million would immediately be reduced to $58 million, and wouldn’t climb back to the current level until the final year of the new contract.

The players may respond with a formal counter-offer at a negotiating session in New York on Friday. Or they may not, since Fehr had originally indicated the formal response would come on Thursday, before a potential meeting was called off. The cancellation or postponement of scheduled negotiating sessions has been the most consistent occurrence during the fitful talks.

While the size of the salary pool is the main bone of contention, it is by no means the only issue on which the two sides differ greatly. The union has proposed a major expansion of revenue sharing among the teams. While Bettman was cool to the idea and owners of financially successful teams loath it, the NHL’s current scheme for sharing revenue is the least generous of the four major North American sports, with most estimates suggesting that no more than 6% of revenue is shared. In a league where the financial health of teams varies wildly (Toronto’s estimated profit last season topped $80 million, while Columbus is estimated to have lost nearly $14 million), there are a number of owners of struggling franchises who would be eager to ratify a new CBA that included more revenue sharing.

Differences also remain on myriad other issues, including the length of player contracts, arbitration procedures, the definition of hockey related revenue from things like concessions and parking, to the amount of players’ salaries that is escrowed pending the determination of each season’s gross revenues. Still, while both sides insist that each of these ancillary issues is significant, the history of collective bargaining in sports suggests that common ground on all of them would be found fairly quickly if the core issue of how the revenue pie is divided between the two sides is resolved.

Yet that may well not happen, and the probability of a lockout of some duration grows with each passing day. One reason for that may lie in the identity of the players association executive director. Donald Fehr’s reputation as an attorney and leader of players unions borders on the legendary. But there has been a seismic shift in the relationship between owners and players, thanks largely to what Gary Bettman and the NHL owners were willing to endure the last time they found themselves in a negotiating stalemate. What’s unclear is whether Fehr understands that, or is still living in the past.

As a young attorney Fehr was an assistant on the arbitration case in which the Dodgers’ Andy Messersmith and the Expos’ Dave McNally challenged the reserve clause, contending that since they had gone a full season without signed contracts they were free to sign with any team. In December 1975 arbitrator Peter Seitz ruled in the players favor. When the Great Game’s owners exhausted their appeals of the Seitz decision in 1976, the era of free agency was born. In 1977 Marvin Miller made Fehr the general counsel of the MLB Players Association, and in 1985 he succeeded Miller as the union’s executive director.

At a time when newly freed players were flexing their muscles, and owners spent as much time fighting each other as they did the hired help, Fehr led his charges to new heights. He successfully brought multiple collusion cases against the owners, which ultimately resulted in a $280 million settlement in November 1990. He also took the union out on strike in 1994 in what eventually became the longest work stoppage in the history of the Great Game. While the loss of the 1994 post-season tore at fans hearts and earned players and owners alike the enmity of many of those who must pay their way into the ballparks, the strike also eventually led to revenue sharing among the teams, enormous increases in the salaries paid to Fehr’s constituents (the players), and an unprecedented period of labor peace for at least one of the four major North American team sports.

With that history, Fehr may well be fearless about allowing his new union’s members to be locked out. But in 2004 NHL owners not only locked out the players, they proved that they were willing to forgo an entire season of their game to get what they wanted in a new collective bargaining agreement. While the loss of an entire season naturally alienated many fans, in the years since NHL revenues have grown significantly while the owners have at last had the salary cap they desired. The league’s willingness to refuse to blink has not been lost on team owners in other sports. If it happens, hockey will become the third sport to lockout its players in less than 18 months. The NFL did it last spring. Some training camp time was lost before the players union began to fracture and a settlement largely favoring the owners was reached. The NBA did it last fall. An entire season appeared on the brink before another players union started showing its cracks and another agreement favoring another league was signed.

Perhaps Donald Fehr thinks he can do what other sport’s union heads have not, which is hold together hundreds of millionaire players who enjoy their salaries and endorsement contracts, against an implacable wall of determined owners. Perhaps he can. But the sports world today is entirely different from what it was before the Seitz decision, and Donald Fehr could yet become a victim of his own legendary success.

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Responses

  1. Excited to read more of what you have to say about the NHL union standoff. Foudn your comment at the nyt site today and followed you back here. However I found the piece above confusing.

    In future writings on this topic (and I hope there will be more) maybe you could break down issue by issue in a clearer way. I think a key point you are making is hockey in 2012 is not baseball in 1994.

    But to back this up you say the baseball owners were arguing amongst themselves back then and by implication were less inclined to collaboration amongst themselves than hockey owners today. You also say baseball owners back then were found by a court to be in cullusion with eachother which reflects a very high degree (illegal) of collaboration? Which is it?

    What are Fehr’s chances of dividing the NHL owners into blocs on the basis of proposed changes to revenue sharing? Is this one way he can make the two situations more similar?

    If your’e saying that that the current era of broad based economic contraction is the difference then I’ll buy that. I hope Fehr does not fly too high in that other, simpler respect. But that seems to be a smaller point than the one you’re trying to make.

    • Thanks for your thoughtful comments. As to your first question, I actually meant both, although trying to characterize several years of history with just a couple of general statements did produce a confusing result. My view is that Fehr (and Marvin Miller before him) had initial success as head of the MLBPA because owners were divided; but that within a few years, and largely at the urging of MLB Commissioner Peter Ueberroth, that changed. However as often happens when people consciously attempt to change behaviors, the owners then went too far and wound up paying $280 million to the players as a result of the collusion claims. As for your second question, I think Fehr’s chances of dividing NHL owners are somewhere between slim and none, which is really my main point. In my view collective bargaining in all sports is fundamentally different in 2012 than it was in 1994, specifically because of what NHL owners did in 2004. To borrow the Vietnam War era phrase, by being willing “to destroy the village in order to save it,” that is by willingly sacrificing an entire season, the NHL owners set a new standard for management resolve and tilted the playing field in the owners’ favor. As we saw last year with both the NFL and NBA, work stoppages were the product of action by management (lockouts) rather than players (strikes). In both cases, the eventual settlements were clear victories for the owners on all of the main issues. I think that is likely to be the case with the NHL as well, given that Gary Bettman is still commissioner and most of the owners are the same as eight years ago. I simply don’t know if Fehr understands how much the battlefield has shifted against him. As for enhanced revenue sharing, there are surely NHL franchises which would love to see it, and it appears to be the principal card that Fehr is trying to play. But I just don’t see any signficant number of owners breaking off because of it. At best I see it being an “add-on” after the main issue of how to divide up the revenue pie has been settled, almost certainly in the owners’ favor; and that, I fear, may only come after a protracted lockout. Thanks again for your comments, and thanks for reading!


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