Wednesday, August 4, 2010

The Darelle Revis Holdout, NFL Guaranteed Contracts & The Labour War

This piece is written by Joshua Chambers. Apart from being a terrific lawyer at Gowlings, Josh is also a big NFL fan and has a high football IQ. However, despite his football knowledge, he didn't fair too well in last year's football pool. Maybe next year Josh.

With the NFL not guaranteeing contracts and the impending labour war at the end of this NFL season, a lot of players feel they have to get what they when they can. And that’s why New York Jets Cornerback Darrelle Revis is holding out.

In holding out, Revis is getting hit with a daily fine of about $16K, while waiving future guarantees under his current contract. Based upon his contract, if Revis fails to show up to training camp by August 10, the $20 million he’s scheduled to earn in 2011 and 2012 goes from guaranteed (on the assumption that the Jets elect to buy back the final two years of the contract) to non-guaranteed salary. The fact the he’s willing to take that risk shows how frustrated he is with his current deal, and perhaps more importantly, how he feels the NFL’s position of not guaranteeing contracts gives him no choice but to holdout. On top of that, if there is a work stoppage next season, Revis won't be making anything.

Indeed, the Revis holdout is a case study on the NFL labour arrangement with the players.

The Jets enter this season with high expectations, after having gone all the way to the AFC Championship game last season, losing to the Indianapolis Colts. That was quite a feat for a team with a rookie QB (Mark Sanchez) and a rookie head coach (Rex Ryan). However, as anyone who watched the AFC title game knows, Peyton Manning absolutely shredded the Jets defensive backfield in the second half of the game. Manning avoided CB Darrelle Revis who was blanketing WR Reggie Wayne on "Revis Island", but he lit into Jets corner backs Lito Sheppard and Dwight Lowery. Colts wide receivers Austin Collie and Pierre Garcon looked like Pro Bowlers in the second half.

How did the Jets address this glaring problem in the offseason? They traded a third round pick for CB Antonio Cromartie (San Diego Chargers) and used their first round pick on CB Kyle Wilson (Boise St.).

Now on paper the Jets have arguably the best secondary in the league. But all is not well in Jets land and the reason is Darrelle Revis' contract situation. Revis has decided to hold out from the Jets camp and is looking for a new deal from the team. Revis is arguably the best shut-down corner in the entire NFL. He is particularly important to the Jets because their blitz packages rely on having single coverage on their opponent's top receivers. The Jets need a legitimate shut-down corner to be as effective with their defensive schemes.

Revis is still playing under his 2007 rookie contract, when he was drafted 14th overall. He received a signing bonus of $4.7 million at the time. The problem is that his base salary for 2007 is only $550,000.00 (a nice sum of money for an average worker but a pittance for an elite NFL corner). Revis is refusing to play for that amount.

Why? It is the risk of injury combined with the fact that player contracts in the NFL are not guaranteed.

The final two years of Revis' current contract call for salaries of $5 million in 2011 and $15 million in 2012. While that may also seem like a lot of money, it is also partly a fiction. As mentioned, that money is not guaranteed until after this season when the Jets have an option to keep Revis for the 2011 and 2012 seasons on the condition that the salary is guranteed money.

In the NFL, usually only signing bonuses are guaranteed (not base salary). All other bonuses (workout bonuses, roster bonuses, etc.) are only payable if the player is under contract when the bonus becomes due. If the team cuts the player before the bonus or base salary becomes due, the money is never paid. So from Revis' perspective, if he plays the 2010 season for his base salary of $550,000.00 and suffers a catastrophic injury, he will never see the $5 million in 2011 and $15 million in 2012 (this assumes Jets don't buy back last 2 years of the contract). From his perspective, this is simply too big a risk to take.

Also keep in mind that Revis is very good friends with running back Leon Washington, formerly of the Jets who was traded to the Seahawks at the NFL draft for a third round pick (which the Jets used to draft Washington's replacement in the form of RB Joe McKnight of USC). In 2008, Leon Washington was a major piece of the Jets offence. He sought a new deal prior to the start of the 2009 season where he was scheduled to make $1.1 million. He wanted a deal in the neighbourhood of what running back Maurice Jones-Drew of the Jacksonville Jaguars had signed ($31 million over five years). The Jets refused to sign him at that price but assured him they wanted to sign him to a new contract.

So Leon Washington played under that contract for $1.1 million, all the while negotiating with the Jets for a new deal, and what happened? He suffered a gruesome season ending broken leg (compound fracture) in a week 7 win over Oakland and never played another game for the Jets. Don't think that the way the Jets treated Leon Washington does not weigh heavily on the mind of Darelle Revis.

In addition, there is the very real prospect that there may be a work stoppage in the form of a lockout by the NFL owners in 2011. This season is the last season of the current collective bargaining agreement (because the owners decided to opt out of the current agreement) and the owners may decide to lock out the players to get a new collective agreement that is more favourable to their interests (i.e. that makes the owners more money and pays the players a smaller percentage of league revenues). As a result, if there is no football in 2011, Revis will never see the $5 million in salary he is due for the 2011 season.

Let us know what you think. Are the Jets right to demand that Revis play out his existing contract? Is Revis right to hold out demanding a new contract from the Jets with more guaranteed money?


Anonymous said...

this is a great article and analysis. thanks.

Anonymous said...

I'd like to understand - what are the options on both sides. What are Darrel's options next year if he doesn't play this year? Is he still under contract? Can he go anywhere? Is he a free agent?

And what can the Jets do, if they want, to counteract Darrel's moves? Do the have to keep him on the roster to keep him under contract? etc.

The chess game is interesting but I can't really find a discussion of all the NFL rules that are in play.

Anonymous said...

This is Josh (author of the article). Sorry I did not get to your question earlier.

If Revis had decided to sit out the entire season, it would not have counted as a year toward free agency. Ultimately, it would have been a wasted season for both him and the Jets. He would still be under contract for the 3 years left on his deal.

As for the Jets, they could have kept him under contract to fulfill the terms of his contract. The Jets arguably had more leverage in these negotiations because they had him for three more years.

As Revis has now signed a new deal, there are somewhat moot issues.

If you look at the new deal Revis signed, the Jets added about $20 million to the entire deal and made $32 million guaranteed in exchange for adding an extra year to the total number of years he is still under contract (i.e. he went from 3 to 4 years under contract).

Anonymous said...

Im just curious as to the Jets legal options in terms of suing for breach of contract and what type of damages they could receive. This has never happened and I assume that because these things would end up going to arbitration, but what could the Jets have theoretically done (assuming they never finished a new deal)?

Anonymous said...

This is Josh again.

To answer your question about legal remedies for the Jets, they would have been limited for breach of contract remedies.

The collective agreement (labour contract) between the NFLPA and the NFL sets out what the allowable fines are for players that miss mandatory training camp. In Revis' case, he has been fined $578,000.00 for his 36 day holdout (or about $16,000 per day). That means that the Jets and the league would be pretty much limited to that amount as a breach of contract remedy because the league and union agreed to that penalty as part of their collective agreement in the case of a player missing a mandatory team practice without permission of the team.

The only other way the Jets could have gone after Revis would have been to try and recover a portion of his signing bonus under his original deal. The Jets would have argued that the previously paid signing bonus was part of Revis' compensation for the 2010-2011 season, and because he was refusing to play under his existing contract, the team should be entitled to recover part (or all) of his signing bonus. This was the same argument that the Falcons used with Michael Vick when he was sent to federal prison upon his animal cruelty conviction and by the Dolphins against Ricky Williams when he retired.

As for normal contract damages of loss of profit, that would have been very difficult for the Jets to prove based on one player's absence from the team, and further, the Jets would not have wanted to open their accounting books to Revis' lawyers in a lawsuit for loss of profit. The reason being that to prove a loss of profit, they would first have to prove what their profit is under normal circumstances, something the team and the NFL would be loathe to do.