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Contracts Part II: To Guarantee or Not to Guarantee?

By Wes Trueblood III

WASHINGTON, DC - MARCH 11: NFL Players Association executive director DeMaurice Smith addresses reporters after the league and the NFL Players Association failed to reach an agreement in labor talks at the Federal Mediation and Conciliation Service building March 11, 2011 in Washington, DC. The NFLPA has filed for decertification and will no longer be the exclusive collective bargaining representative for the players. Players will now be able to file antitrust lawsuits against the NFL. (Photo by Jonathan Ernst/Getty Images)
WASHINGTON, DC - MARCH 11: NFL Players Association executive director DeMaurice Smith addresses reporters after the league and the NFL Players Association failed to reach an agreement in labor talks at the Federal Mediation and Conciliation Service building March 11, 2011 in Washington, DC. The NFLPA has filed for decertification and will no longer be the exclusive collective bargaining representative for the players. Players will now be able to file antitrust lawsuits against the NFL. (Photo by Jonathan Ernst/Getty Images) /
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So why doesn’t the NFL have guaranteed contracts?  Well, let me see if I can explain the two sides in the debate, and then you decide.

NFL Teams:

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You have to understand that the NFL is a business first and foremost.  The NFL teams contract with players to play for their team the way you would contract with a roofer to fix your roof.  They are not employees (that’s why they get the collective bargaining agreement), they are contracted labor whose contracts must fit within the agreed upon parameters that exist between the NFLPA and the NFL and that currently doesn’t include guaranteed contracts.

When you hire a roofer to fix your roof, you expect that he will do the job.  If he gets injured, you expect that he will get a sub-contractor to do the job.  Either way, you expect him to honor his contract and perform his duty.  It’s no different with the NFL teams.  The expectation is the player they are paying will perform the obligated service.  In the event of an injury, the team is often insured to help with the Cash Budget part of the equation, but there is little that they can do about the talent part or the cap part.

Hiring (trading for) a high priced replacement will cause serious cap issues when the player heals and returns.  So the only out that teams have, currently, is the fact that the contracts are not fully guaranteed.  As such, they can get out of the contract with minimal cap damage if a player is injured, and then they can replace his talent without creating a salary cap Armageddon when/if the player returns from their serious injury.

Cash is rarely the issue with the guaranteed contracts, as stated above, that’s usually handled by an outside insurance company ON BOTH SIDES.  The bigger issue is the salary cap ramifications for the team and the feelings of the player when the team moves on.  With guaranteed contracts, your team could be on the hook for a player who had to be cut for salary cap reasons while injured who then signed with another team for another contract and then gets to double dip on your team’s cap while playing for a smaller amount for another team.  Your team suffers, but the player gets more.  Non-guaranteed contracts protect against this scenario.

NFL Players:

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NFL Players only have so many years to make the maximum amount of money that they can.  They are independent contractors (hence the legality of Free Agency, if they were employees Free Agency as it exists would be illegal) and offer a finite resource, their bodies, in exchange for the money that they make.  Yes, the make too much money, but it’s what the market says they are worth, and until people stop watching the game, it’s what they will make, this and more.

Players believe that guaranteed contracts are fair because if they are injured while serving the interests of the team, they should be compensated for that (and they are until they clear their physical).  They use the “but for…” legal argument to defend their position.  “But for my playing for your team, I would not have been injured…”  The issue is that while this argument works for employees for whom the employer is responsible, it is not a valid argument for independent contractors unless their collective bargaining agreement between the union to which they belong and the NFL agree that it is.  This is the heart of the disagreement.  The NFLPA says that it is, and the NFL says that it’s not.

It’s hard to fault the players.  Most don’t live within their means in a way that is sustainable over their entire lives.  They live within the means of the moment as do we all.  So when the income is gone, it causes a massive lifestyle change that many of them do not make it through well, and some don’t make it through at all.  Any of us would want to guard, as much as is humanly possible, against such a massive upheaval in our lives.  They’re no different.

They don’t want an injury to interrupt their lives in the same way that we don’t.  So they take out insurance policies against injury and try to hedge against it in their contracts, but this truly is about lost future wages rather than the loss of the immediate contract.  Rarely will a company insure for a rate higher than your present contract or longer than the position average of your position.  So an injury can derail not only your present earnings, but your future ones as well.

Players see this “double dip” as a hedge against lost future wages as opposed to teams seeing it as a double dipping on the current one.  They know that they’ve lost value on their next contract, so the double dip helps to make up that loss.  They see it as indemnification not as double pay.

The Non Guaranteed Conclusion:

This will have to be hammered out in the CBA process, and I think a lockout is not only likely, but it’s almost unavoidable.  If the players want guaranteed contracts, then the owners are going to want to go back to shielding part of the non-player generated revenue from the NFLPA.  This will shrink the cap and hurt player salaries overall.  The NFLPA has to know that this is coming.  I think this time we may be looking at a very serious and drawn out battle. That could be half a season, a full season, or maybe it even involves replacement players.

Does anyone have the number for Shane Falco?

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