NBA and NBPA Agree to Shorten July Moratorium by Five Days

The NBA and National Basketball Players Association have agreed to shorten the league’s moratorium period by five days for next season, according to a memo sent from the league office to its member teams on Thursday evening.

It will now last six days, from July 1 to July 6, with free agency beginning on July 7.

Both the NBA and the union had to agree to the change, since the moratorium rules fall under the Collective Bargaining Agreement, an agreement which, as the name states, was collectively bargained. The agreement had called for the moratorium period to run from July 1-11 in 2016.

While teams can still sign their first-round draft picks and players to minimum salary contracts of up to two years in length, and make a few other specific moves that are not impacted by the salary cap, most transactions are prohibited during the moratorium period, including trades and most free-agent signings.

The change was surely inspired by DeAndre Jordan’s notorious free-agent flip-flop last summer that saw the center commit to sign with the Dallas Mavericks on July 3, only to renege on the verbal deal five days later and instead choose to re-sign with the Los Angeles Clippers. Clippers ownership, management and players converged on Jordan at his family’s home in Houston and helped change his mind, then stayed with him for the final hours until the signing could be made official at 12:01 am on July 9, effectively blocking the Mavericks organization from re-gaining access to him.

Technically, even verbal agreements aren’t allowed during moratorium. In theory, then, Jordan didn’t renege on the Mavericks. In practice, however, such verbal agreements are commonplace as early as July 1.

The rule change for next season allows players and teams to execute agreed-to deals faster, and is designed to help reduce second-guessing scenarios such as that with Jordan.

It does, however, come at a minor potential risk. 

The NBA’s fiscal year officially ends each season on June 30, and the league’s accountants use the subsequent moratorium period – a predetermined period of time which varies slightly from season to season – to complete an audit of the league’s financials. Among the figures audited are the league’s total revenues as well as player salaries and benefits.

With those figures in hand, the league then huddles with the players association to project revenues and benefits for the coming season, and uses them to calculate the new salary cap and luxury tax figures.

If the audit is not completed by the end of the moratorium period, the league and union instead utilize estimated results to project revenues and benefits for the coming season, and ultimately arrive at the cap and tax figures.

If estimated results are also not available, the revenue and benefits projections that were utilized for the prior season are utilized again, adjusting only for the current season’s national television revenues (which are known in advance), to arrive at interim cap and tax figures. These amounts will then be adjusted when the estimated results become available.

In either case, the figures would not be adjusted when the audit is completed. The league would therefore be forced to utilize projected figures which might not accurately reflect its finalized financial results from the season prior.

While this has never before happened, the moratorium has never before lasted just six days. It has thus far lasted between eight and 10 days under the current Collective Bargaining Agreement, and as few as seven under the last. Prior to that, it was regularly more than two weeks in length.

The parties, past precedent in hand, clearly feel that the audit can be completed within the truncated timeframe, and will surely utilize the coming moratorium period as a test case for the future. The 2017 moratorium period is currently scheduled to last 11 days.

The 2016-17 salary cap is currently projected to reach $91 million or more, a whooping year-over-year increase of approximately 30 percent on the strength of a massive new national television rights deal, giving the majority of teams in the league at least one max-salary slot. The list of free agents, however, is relatively short.

The abundance of cap room across the NBA and the relatively small list of free agents on which to spend it could lead to a convoluted and hectic summer, the implications of which could potentially carry over until the following summer, when a much deeper and more attractive list of players will hit the open market.

In between the two free agency periods, however, lies the prospect of a potential lockout.

Both parties are able to opt out of the current Collective Bargaining Agreement by December 15, which would take affect prior to the 2017-18 season. It remains likely that both sides will choose to do so, which, in turn, may lead to a lockout while the parties negotiate a mutually-acceptable agreement.

Reaching an early consensus on the shortened moratorium period suggests that the sides are at least trying to work together. Whether it has any relevance to potential Collective Bargaining Agreement negotiations, however, is yet to be determined. Such negotiations are a substantially different battle, wherein, unlike with the moratorium shortening, the final outcome is in many ways not mutually beneficial but rather a zero-sum game in which both sides have something to prove.

The 2011 agreement was overseen by then NBA commissioner David Stern and former union director Billy Hunter. This time around, the lead players on both sides will be different.

While current Commissioner Adam Silver was an active participant in the 2011 negotiations, the next round will be the first under his tenure.

On the union side, Michele Roberts replaced Billy Hunter as the union’s executive director in 2014. She is new at the collective bargaining table, and will lead a side that feels it was overly generous in reducing its split of league-wide revenues down from 57 percent to between 50 and 51 percent.

The concession will wind up equating to a re-distribution of $1.9 billion from players to owners over the six years of the current agreement. It was made amid cries of an unsustainable business model from many of the league’s owners. The players will be gunning to get some of it back, in what has now become the most prosperous era in NBA history.

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