Originally Published: April 27, 2007 10:04 p.m.
If only the NFL could treat the IRS as dismissively as it does its own players.
In case you missed it, NFL Commissioner Roger Goodell, still enjoying an extended honeymoon as the newest commish of a major league team sport, slapped Adam "Pacman" Jones with a year's suspension for off-field conduct deemed detrimental to the league's image. The suspension came after Jones was accused - but not charged - of inciting a fight at a Las Vegas strip club last February that led to a triple shooting.
Jones is the poster boy for out of control NFLers. Since he was drafted by the Tennessee Titans in 2005, Jones has been arrested five times and the police have talked with him on five other occasions about his involvement in illegal activity. Although Jones has not been convicted of any crime since he joined the Titans, Goodell had had enough. Goodbye due process, hello suspension.
Goodell's get tough policy may play well to middle America, but his actions have yet to receive an arbitrator's or a court's blessing. Jones has vowed to appeal the suspension and will undoubtedly have his choice of lawyers eager to take his case.
The NFL dealt just as ruthlessly with Brian Urlacher. The Chicago Bears linebacker was fined $100,000 for wearing a cap promoting Glaceau's Vitaminwater during Super Bowl media day last January. Urlacher is a paid endorser for Vitaminwater and was seen wearing the cap for a full three minutes while the cameras were rolling. The NFL has a rule that only official league sponsors may be promoted during official league activities. Unfortunately for Urlacher, Gatorade, which competes with Vitaminwater, pays the league $45 million a year in sponsorship fees.
But the IRS plays by its own rules and the NFL is the party at a disadvantage.
In February, the IRS ruled that the NFL's Drug Program Agents (DPAs) are league employees, rather than independent contractors. The ruling could end up costing the league tens of millions of dollars in back taxes, benefits and pensions.
Since 1987, the NFL's drug testing program has relied on DPAs to collect urine samples. Many of the agents were retired law-enforcement personnel who relished the pay - $50 per hour - and flexible hours the job provided. The agents were also experienced in handling legal evidence, a fact the NFL emphasized in touting its drug-testing program as the "gold standard for professional sports."
As independent contractors, the DPAs were treated as self-employed individuals for federal tax purposes, meaning they paid the employee's and the employer's share of employment taxes. Last year, one of the DPAs requested a ruling from the IRS concerning their status and the IRS ruled that they were employees, not independent contractors. Not satisfied with the ruling, the NFL appealed, but to no avail.
In an effort to save money, the NFL has contracted with Comprehensive Drug Testing (CDT), a Long Beach, Calif., company, to take over specimen collections on May 1. In an e-mail sent to its 74 active DPAs on April 13, the NFL notified the agents that "The journey we have collectively traversed is coming to an end." New York attorney Robert Costello, who represents more than 70 active and retired DPAs, told the New York Daily News, "We think it (the termination) is in retaliation for the IRS ruling."
CDT, which pays its collectors less than the NFL did, also collects specimens for Major League Baseball and the National Hockey League and, like the NFL, treats its collectors as independent contractors. It's likely that the IRS ruling against the NFL applies to CDT as well. If one of CDT's collectors seeks an IRS ruling, the company could be on the hook for past and future employment taxes and benefits, which would increase the cost of drug testing to all CDT clients.
The NFL could have treated the DPAs as employees, paid the employment taxes, and then negotiated benefits and pensions. But a $6 billion-a-year colossus like the NFL is used to getting its own way (just ask Jones and Urlacher). Until, of course, it runs into someone with more clout than it has. Welcome to the real world.
(Jordan Kobritz is a former attorney, CPA, and Minor League Baseball team owner. He currently teaches Sport Management and the Business of Sports at Eastern New Mexico University and the University of Wyoming. The Prescott Valley resident can be reached at email@example.com)