Salary Caps, Pay Cuts, and COVID-19

The NHL employs a revenue-sharing agreement that funnels money from successful teams to “less fortunate” ones specifically to cover player payroll. It sets the split between owners and players at fifty-fifty.

At least one study has demonstrated that this agreement improves the overall competitiveness of the league and leads to greater investment in players. However, it also gives the richest team owners an incentive to find ways of reducing payrolls and capping salaries.

The revenue-sharing agreement is already slanted in favor of team owners. The NHL holds a certain percentage of players’ salaries in escrow. If those salaries prove to be in excess of owners’ revenues, that escrow is returned to the owners in order to “equalize” payments.

In 2020, the amount held in escrow was not enough to cover the league’s shortfall. The players had received more money than the amount held in escrow. The NHL responded by claiming that players had been overpaid.

The NHLPA blinked, agreeing to increased deferral and escrow demands. In effect, the request for players to defer more of their salaries meant asking people who rarely receive the full amount of their stated contract to bear a greater financial burden, just so their bosses wouldn’t have to.

Of the three major North American sports leagues that have a salary cap, the NHL’s, at $81.5 million, is the lowest. Even the lowest-valued team, the Arizona Coyotes, has an estimated value over three times greater than the cap maximum.

The salaries for professional sports stars leave most people envious, and this may all seem far removed from the experience of ordinary workers. But labor relations in the NHL actually mirror what’s happening in more conventional workplaces all over the world.

Labor In the Rink and Beyond

Professional sports unionism is a complex field, combining high — often very high — salaries with exploitative conditions. However, stripped down to its basic elements, it functions like any other sector of the labor market.

Team owners exploit the labor of their workers in the same way as other employers, by grabbing the vast bulk of the value that players generate. They deploy a variety of anti-union tactics to ensure ballooning profit margins. Of course, there’s one clear difference between players and the majority of regular workers: negotiations over sports contracts unfold in the glare of media spotlight.

Sports unions occupy a visible position of influence that is rare in today’s world. Bosses often use media coverage to their advantage, mobilizing public opinion against players by declaring them overpaid and entitled, or rebranding a wildcat strike as a boycott.

Economist Lawrence M. Kahn has described the business of sports as a “labor laboratory.” His research noted parallels between the treatment of athletes and government or health care workers bargaining for labor contracts. Kahn also found race-based wage gaps among athletes that resemble those in other employment sectors.

Professional athletes obviously aren’t in the same position as nurses, for example. However, there are similarities in the way a rhetorical celebration of their labor papers over the reality of mistreatment and exploitation.

For all the stereotypes of greedy, overpaid athletes, sports labor stoppages usually take the form of lockouts rather than strikes, with owners taking the initiative by freezing out players. This approach is often successful, because professional athletes have relatively short careers and can’t afford the lost earning potential.

An Example For All

The NHLPA has been one of the most combative unions in professional sports. Their defiance led to the unprecedented cancellation of the entire 2004–5 season because of a lockout. The CBA amendments ratified in July had been preceded by rumors of another potential lockout. NHL players, having already suffered major losses in previous labor conflicts, didn’t want to make it a hat trick for the owners.

NHL players were under no obligation to agree to the recent salary deferral request. However, the league presented that request as part of the return-to-play negotiations, and probably expected that this approach would compel players to accept it.

But players would not budge. With revenues from the last NHL season down because of the pandemic, owners had to lump it if they wanted to get things moving again. They disingenuously presented the deal as one in which “both sides” had agreed to keep the July agreement in place, obscuring the fact that there was only one side looking for changes in the first place.

When baseball players capitulated to owner demands during the 2020 season, it simply emboldened MLB owners to insist on more concessions. In contrast, the NBA and the NBPA staved off the unilateral termination of their CBA for the 2020–21 season, although there is a mutual opt-out clause that will come into effect the following year. Both sides are waiting to see where the chips fall this season, but memories of last summer’s wildcat strike are sure to influence the behavior of owners.

The NFL got rolled on its pandemic-related CBA amendments after certifying a new, ten-year CBA in March that featured deferred compensation and inadequate rules to take account of COVID-19. It remains to be seen what the proposed amendments for next season will look like, but the NHLPA’s display of backbone will surely not go unnoticed.

The intense media spectacle that surrounds professional sports has all kinds of negative consequences, both for athletes and society as a whole, but it also comes with a silver lining.

Player struggles are worker struggles, and the collective achievements of unions like the NHLPA can set an example well beyond the sports arenas, at a time when employers everywhere are using the pandemic as an excuse for austerity. The NHLPA took a stand and reaped the benefits. We should all be doing the same.