NBA players could refund millions to owners, sources say

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KEY POINTS
  • As part of any deal to settle compensation issues, NBA players who received upfront money on contracts signed will need to repay league owners.
  • The NBA became the first league to suspend games on March 11 due to the coronavirus pandemic
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National Basketball Association owners could get some financial relief in the form of of returned pay in any compensation deal with players, according to multiple people with knowledge of the situation.

In an hour-long call on Tuesday afternoon, executives at the National Basketball Players Association (NBPA), the players’ union, cleared up misinformation and told agents that any compensation deal constructed by the NBPA and league owners will include refunds on all NBA contracts.

The repayments will hit hardest for players who receive their paychecks on a six-month cycle, who receive more money per pay cycle but don’t get checks during the off-season. (Agents usually prefer 12-month payment plans to protect players from over-spending, and to keep them from struggling once the season ends and paychecks stop rolling in.) It will also hit hard for some players who received advance payments on their contracts. Teams often use advances to lure free agent players to sign deals sooner, at times offering full or partial payment of contracts upfront.

According to the people, who asked to remain anonymous because the call was confidential, NBPA executive director Michelle Roberts offered no road map as to how owners will want to recover funds, but warned agents returns would be solicited should the league cancel the remainder of its games due to the coronavirus pandemic.

According to the people, players under contracts that run past the current season could be partly spared, as owners could decide to recoup funds over the life of deals. But upcoming free agents who haven’t completed the last year of contracts could be forced to write checks to NBA owners if they got advances.

Last month, New York Times reporter Marc Stein reported players who received advances include Brooklyn Nets star Kevin Durant (scheduled to earn roughly $37 million this season) and Detroit Pistons forward Blake Griffin ($34 million). He also said nine of super agent Rich Paul’s clients at Klutch Sports Group are on six-month pay cycles.

According to the collective bargaining agreement between the players and the league, the NBA is already allowed to retain roughly 1% of players’ paychecks for each canceled game via force majeure — that it, an unforeseeable event like a natural disaster or pandemic. ESPN reported the NBA and players discussed a plan to withhold remaining salaries and place funds in a league escrow if games are canceled.

One NBA agent who spoke to CNBC about the issue on condition of remaining anonymous believes the league may try to halt 50% of players’ remaining pay until the completion of the league’s 2019-20 accounting, which is expected in early July. Agents will also feel the trickle-down effect of players losing pay, as they will not receive commissions tied to contracts.

Oklahoma City Thunder star Chris Paul, who is president of the NBPA, told CNBC on Tuesday players “communicate as best we can” to stay afloat to league discussions involving compensation.

“We’re aware,” Paul said. “As long as we have the conversations about it and try to make sure that guys are prepared as possible, I think we’ll be fine.”

The NBA become the first league to suspend its season last month due to the coronavirus pandemic. The move triggered other pro sports leagues to follow.

NBA commissioner Adam Silver said decisions about any return is still weeks away, but with this possible repayment clause included as part to any revised compensation deal, the regular-season portion of the NBA could be over.

The NBA and NBPA did not return calls seeking comment.

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