Most players were to receive their first pay cheques on 15 November, although a handful had clauses entitling them to be paid over the summer. O'Neal was supposed to receive his entire salary in one payment on 1 October.
The ruling by Feerick, dean of Fordham Law School, bolstered the bargaining position of the owners and saved them from having to go to court to avoid paying more than $700m salaries.
"We are pleased with the arbitrator's ruling," said Jeffrey Mishkin, the National Basketball Association chief legal officer. "Unfortunately, it does not get us any closer to a deal with the union's leadership.
"Only negotiations will end our current impasse and lead to a settlement of our dispute. This is yet another defeat for the union's strategy of litigation instead of negotiation."
The league has already cancelled the first two weeks of the season, costing the players about $100m in lost salaries. More cancellations will probably be announced next week, since no new bargaining sessions are scheduled and the sides are far apart on the main issue of controlling the growth of player salaries.
"I kind of expected it," the union's director, Billy Hunter, said. "I was hoping Dean Feerick would be inclined to see things our way, but we knew it would be a giant leap for him to take, especially since he is a labour lawyer by profession."
The uncertainty of how Feerick would rule had been a factor in the stalemate all summer and was one of the reasons the sides have met only three times for formal bargaining sessions.
The players' resolve will be tested as they will not now receive pay cheques until the lock-out is settled. They had been holding out in the hope that a verdict in their favour would pressure the owners to soften their stance and come to the table with a better offer.
"The players don't seem to realise they can't get that money back. It's gone, gone forever, and they seem to think that's not the case," said the commissioner David Stern.
Hunter said that he and Ewing, the union's president, had spoken to 20 players since Feerick's decision was announced. "If you thought the guys were zealous about staying committed to the cause, they're probably more rabid than they were before," Hunter said.Reuse content