NBA Salary Cap FAQ
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Copyright © 1999-2015, Larry Coon
Check out the CBA FAQ Blog, visit the FAQ on Facebook, and follow Larry Coon on Twitter:
1/13/2015: Revised questions 14, 16, 17, 29, 38, 41, 60, 65, 66, 79, 84, 86, 99.
This FAQ is for anyone who wants to know more about the salary cap, trade rules,
and other aspects of the NBA's 2011 Collective Bargaining
Agreement. There is
a lot of information here, so there are several ways to navigate this
document. You can go to the table of contents to see
a
list of all the questions, or if you want to know about a particular topic you
may be able to find it in the index. You can also go
straight to the
questions. You can find an overview of the
differences between the 2011 and 2005 CBAs in the appendix.
If you've been following this FAQ for
a while, you can go to the
revision history to see if anything has changed. Finally,
you can see who wrote this thing or view the
copyright
notice. Enjoy!
Table of Contents
1. What is a salary cap? Why have one?
2. What is a soft cap? What is the difference between a soft cap and a hard cap? Which does the NBA have?
3. Why have a soft cap?
4. What is the Collective Bargaining Agreement?
5. Has there always been a salary cap?
6. What's the history of the CBA?
7. They came to an amicable agreement in 2005. What happened in 2011?
8. Were all issues in the 2011 labor dispute resolved in time to start the 2011-12 season?
9. When will the current CBA expire?
10. What changes did they make in the 2011 CBA?
11. Were there special rules in place for the shortened 2011-12 season?
12. What is included in Basketball Related Income (BRI)?
13. How is the salary cap set each year?
14. Exactly what is included when computing total team salaries? What is cap room?
What is a cap hold?
15. Is there a minimum amount each team must pay its players?
16. What are the players' salary restrictions?
17. Are there exceptions to the maximum salary?
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18. What percentage of revenues do the players receive?
19. How does the escrow system work? What is it for?
20. What happens when there's not enough money in the escrow account?
21. What is the "luxury tax?" Why does it exist? How is it determined? Who pays it?
22. Where does the escrow and luxury tax money go?
23. Other than financial penalties, are there restrictions on taxpaying teams?
24. How does revenue sharing work? How is it different from the luxury tax?
25. What are salary cap exceptions?
26. How do exceptions count against the cap? Does being under the cap always mean that a team
has room to sign free
agents? Do teams ever lose their exceptions?
27. If a team has more than one exception available to sign a particular player, are there
any rules regarding which one it has
to use?
28. What is the hard cap? When are teams subject to it? How does it work?
29. When a player signs mid-year for the rest of the season, is his salary pro-rated?
What is a "Rest-of-Season" contract?
30. Can a team pay a player less but arrange for an affiliated company to also pay him,
perhaps by way of an endorsement
contract?
31. Do players and teams ever have under-the-table agreements for future contracts? What
happens when the league finds out
about them? Is this what happened with the Timberwolves
and Joe Smith?
32. How is "average salary" defined?
33. How long must a player be with one team before the Larry Bird exception can be used?
34. Why a three-year wait before gaining Bird rights?
35. Does having Bird rights mean that free agents can be signed and not count against the cap?
36. I just saw that a team signed a player for more money than it has under the cap. It was another
team's free agent, so the
Bird exception wasn't used. What gives?
37. Can a team with cap room sign all the free agents it wants (up to the salary cap) and THEN
re-sign its own free agents
using the Bird exception?
38. How much do free agents count toward team salary?
39. Why do free agents continue to count against team salary?
40. When do free agents stop counting against team salary?
41. What does renouncing a player mean?
42. Can the renouncement be renounced? In other words, can a team un-renounce a player and then sign him using a Bird
exception?
43. Let's say a team arranges for all of its players to become free agents at the same time. If they
renounce everybody, do they
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then have a team salary of $0 and a full cap under which to work?
44. What is restricted free agency?
45. What is the "Gilbert Arenas" provision?
46. Haven't some restricted free agents gotten away anyway? How did this happen?
47. What if a restricted free agent has no interest in staying with his original team? Is there any way he can force the issue?
48. Does a team receive compensation when another team signs their free agent, like in some other sports?
49. First round draft picks operate under a different set of rules?
50. What about second round draft picks? What rules do they operate under?
51. What if the team and their drafted player can't agree to a contract? What options does the player
have? How long does the
team keep his draft rights?
52. Are draft picks included in team salary? If so, for how much?
53. What if a team likes its first round pick and wants to sign him, but either feels he isn't worth
the scale salary or doesn't
want to commit to a long contract?
54. If a first round draft pick is renounced, is he still bound to the salary scale for a first round pick?
55. Is there a limit to the length of a contract, or to the amount a player's salary can increase or decrease from year to year?
56. Are raises compounded? In other words, is each raise a percentage of the previous season's salary?
57. Are there restrictions based on a player's age?
58. What is the Over-36 Rule?
59. What are option clauses? What kind of option clauses are there?
60. Can existing contracts be extended?
61. Can existing contracts be renegotiated?
62. In what other ways can an existing contract be modified?
63. What are the rules for retired players? What if the player suffers a career-ending injury?
64. Are contracts always guaranteed?
65. What happens when a player is released? What are waivers? What is the Stretch provision?
66. How do released or stretched players apply to team salary? What is set-off?
67. What is a contract buyout?
68. How do buyouts affect team salary?
69. What is the Amnesty provision?
70. What is a summer contract?
71. Do injured players apply to team salary?
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72. How do players who die apply to team salary?
73. Are player contracts insured?
74. Can incentives be built into a contract? How do they apply to team salary?
75. How about signing bonuses? Are they allowed? How do they apply to team salary?
76. What are the rules relating to international players and teams?
77. What about buyouts paid to international teams? Are they allowed? How do they apply to team salary?
78. Are teams really competing on a level playing field? Since the tax rate is different in the
different states and Canada, don't
the teams in a more "tax friendly" state have an advantage
over the other teams?
79. What roster size limits exist? What is the Inactive List? What is Injured Reserve?
Do any other such lists exist?
80. What is a 10-day contract?
81. What is the NBA Developmental League (NBA D-League)?
82. What are the rules regarding trades?
83. What is the Traded Player exception?
84. How do simultaneous trades work? How much salary can a team take back in a simultaneous trade?
85. What is a non-simultaneous trade?
86. How are minimum-salary players handled in trades?
87. How are draft picks handled in trades? What is the Ted Stepien rule?
88. Can exceptions be combined when making trades?
89. What is "Base Year Compensation?" How does it affect trades?
90. What is the Poison Pill Provision?
91. Can a free agent be signed and immediately traded?
92. Can a team sign a player using the sign-and-trade rule and then say, "Ha ha, we fooled you. We're not trading you!"?
93. Why would teams or players want to do a sign-and-trade?
94. Can a player be given an extension and traded at the same time?
95. When can a team trade a free agent it signs? Do they have to keep him forever?
96. Can a team trade the rights to a free agent, so the other team will inherit his Larry Bird rights?
97. Can cash be included as part of a trade package?
98. Can players be given a bonus when they are traded?
99. How do trade bonuses affect team salary and trades?
100. When can't a player be traded? Can players be given "no-trade" clauses in their contracts?
101. I keep hearing about teams wanting to acquire "ending contracts" in trades. What are they, and why are they so valuable?
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102. How are teams able to trade players who are out of the league, like Dallas did with Keith Van Horn?
103. What is the trade deadline?
104. What is the July Moratorium?
105. Can teams find loopholes in the CBA and do things the league never intended to allow?
What is circumvention?
106. How does player discipline work? Can teams fine or suspend players for any reason? Do fines and
suspensions apply to
team salary?
107. Can fines or suspensions be appealed?
108. What is the league's drug program?
109. What is tampering?
110. What does it mean when a contract is voided?
111. How much are players fined for technical fouls and ejections? Where does the money go?
112. How does it work when the league expands? Can the league also contract?
113. Are players paid on a regular schedule? Are there other ways to pay players beside regular paychecks?
114. How do I find out the salary for a specific player?
115. The league instituted a dress code for players. Do they have the right to do that?
116. What does it mean when the players union decertifies? Why would they want to do that? What effect does it have?
117. Are there other must-read web sites for the budding capologist?
118. What are the important CBA-related dates each season?
119. Can I get a copy of the actual Collective Bargaining Agreement?
120. I see reports in the newspaper or on the Internet that would be impossible if everything you say
here is true. Is this FAQ
wrong?
121. What if this FAQ really is wrong? How authoritative is this FAQ?
122. Can I e-mail you with other CBA-related questions?
123. Can this FAQ be reproduced or distributed? Can I link my web page to it?
124. Can you translate this FAQ into (name of language)? I'll even translate it for you!
125. How should this FAQ be cited?
126. Where can this FAQ be downloaded?
History of this FAQ, acknowledgements, and about the author
Copyright Notice
Index
Revision History
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1. What is a salary cap? Why have one?
A salary cap is a limit on the amount teams can spend on player
contracts, which helps to maintain competitive balance in the league.
Without
a salary cap, teams with deeper pockets could simply outspend the
remaining teams for the better free agents. The basic idea behind a
salary
cap is that a team can only sign a free agent if its total payroll
will not exceed the cap -- so a team with deep pockets is on a more level
playing field with every other team.
While this is true in theory, NBA teams in big markets nevertheless have
been able to significantly outspend teams in small markets. For
example,
for the 2010-11 season (the final season under the previous CBA) the lowest
team payroll was approximately $45 million and the
highest was over $90
million (plus an additional $20 million in luxury tax).
As a result, the correlation between team payroll and regular season wins
is now very strong. For the 2010-11 NBA season the correlation
coefficient1
between team payroll and regular season wins was 0.53 -- high enough to
conclude that deep-pocket teams have been able, to a
certain extent, to
buy their way to success.
Interestingly, this correlation was only 0.13 (nearly orthogonal) in the
2001-02 NBA season. One possible explanation is that the NBA's luxury
tax
system (which started in 2003) stratified the league into the haves (teams
that could afford the tax burden that came with fielding a
competitive team)
and the have-nots (teams that could not afford this burden).
1
A correlation
coefficient is a number between -1 and 1, with a coefficient near 1
indicating a strong positive correlation (e.g., as payroll
goes up, wins
go up); a coefficient near -1 indicating a strong negative correlation
(e.g., as payroll goes up, wins go down); and a
correlation near 0
indicating no correlation (e.g., payroll and wins are unrelated).
2. What is a soft cap? What is the difference between a soft cap and a
hard cap? Which does the NBA have?
The NBA has a soft cap. A hard cap cannot be exceeded for any reason. A soft cap like the NBA's contains exceptions which allow teams to sign
players or make trades that exceed the cap under certain conditions. In
practice, very few NBA teams are ever under the cap during a season.
Certain components of the NBA's system function as a hard cap under
specific circumstances. See question number 28
for more information.
3. Why have a soft cap?
It promotes a team's ability to retain its own players. Nobody likes it when
a player plays with one team his entire career, the fans love him, he
wants
to stay and the team wants to keep him, but he has to leave because the team
cannot offer him a satisfactory contract. The exceptions
under a soft cap
allow teams to keep players under these kinds of circumstances.
4. What is the Collective Bargaining Agreement?
It's the legal contract between the league and the players association
that sets up the rules by which the league operates. (It's commonly
abbreviated
as "CBA," which is not to be confused with either the Chinese
Basketball Association or the Continental Basketball Association. The
abbreviation CBA will be used in the remainder of this document.)
The CBA defines the salary cap, the procedures for determining how it is set,
the minimum and maximum salaries, the rules for trades, the
procedures for
the NBA draft, and hundreds of other things that need to be defined in order
for a league like the NBA to function.
The CBA also prevents the NBA from being in violation of federal antitrust
laws. Many of the league's practices (such as the salary cap and
draft)
would violate antitrust laws were they not agreed to via collective
bargaining (see question number 116).
5. Has there always been a salary cap?
It may surprise you to learn that the NBA first had a salary cap in
1946-47, its first season. The cap that season was $55,000, with most
players earning between $4,000 and $5,000. Star player Joe Fulks earned
$8,000, and Tom King earned a league-highest $16,500 for his
combined
duties as player, publicity director and business manager for the Detroit
Falcons.
The "modern" NBA salary cap began in 1984-85, at $3.6 million.
It made steady but gradual increases of around $1-2 million each season
until
1994-95, when it was $15.964 million. Armed with a big TV contract
from NBC, the salary cap jumped to $23.0 million in 1995-96, and
increased
to $26.9 million in 1997-98, the last season of the 1995 CBA (a 647% increase
in 13 years). The ABC/ESPN TV contract, which took
effect with the 2002-03
season, provided $4.6 billion over six years, but less in 2002-03 than NBC
paid in 2001-02. As a result, the salary cap
went down for the first time
ever in 2002-03.
Under the 2005 CBA the salary cap started at $49.5 million, and finished
at $58.044 million, a 17.26% increase, and averaging 3.45% per
year.
However the salary cap decreased in 2009-10, dropping from $58.68 million
to $57.5 million.
See question number 6 for more information on NBA labor
history.
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6. What's the history of the CBA?
Bob Cousy began to organize the NBA players in 1954, although the league
refused to recognize the union until 1957. A near strike at the 1964
All-Star
game forced the league to adopt a pension plan. The first CBA was established
in 1970, and new agreements followed in 1973, 1976
and 1980. The 1976 CBA
coincided with the settlement of the "Oscar Robertson" suit, which
was filed by the players association in 1970 to
block the NBA-ABA merger.
The 1976 agreement also provided limited free agency through the elimination
of "option" clauses that bound
players to teams in perpetuity.
With the 1983 CBA the parties agreed to share league revenues. This agreement
also instituted the modern salary cap, which went into effect
in 1984. When
this agreement expired the players filed an antitrust lawsuit, resulting in
the "Bridgeman" agreement which brought unrestricted
free agency,
reduced the draft to two rounds, and added anti-collusion provisions.
Another antitrust lawsuit ensued in 1994 following the expiration of the 1988
CBA, challenging the salary cap, college draft, and right of first
refusal
provisions. The parties eventually reached a "no-strike, no-lockout"
agreement that allowed the 1994-95 season to be played.
The parties came to terms on a new agreement in 1995, but the players tabled a
ratification vote and instead filed for union decertification.
The league responded
by imposing a lockout. The parties quickly came to an agreement, and the players
subsequently voted against
decertification. A new six-year agreement was ratified
which lifted the lockout before any games were missed, although the agreement was
not
actually signed until 1996.
The NBA exercised its option to terminate the 1995 CBA following the 1997-98
season, eventually imposing a lockout which took effect on July
1, 1998 and
resulted in the cancellation of the start of the 1998-99 season and the 1999
All-Star weekend. The parties reached agreement on
a new six-year agreement
in early 1999, just in time to salvage a minimal 50-game season. The new
agreement introduced maximum salaries,
the Mid-Level exception, and the escrow
and luxury tax systems. The league invoked its option to extend this agreement
through the 2004-05
season.
The NBA and players association ratified a new agreement in July 2005, which
expired at the end of the 2010-11 season. The league had the
option to extend
it through the 2011-12 season, but elected not to do so, citing $300 million
in losses during the 2010-11 season alone.
When the 2005 CBA expired in July 2011, the league once again imposed a lockout
(see question number 7), which was settled in late
November 2011.
As a result, the 2011-12 season was reduced to 66 games.
Here is a summary of the league's collective bargaining agreements:
Start
Year
End
Year
Milestones
1970
1973
First CBA. Increased minimum salaries. Added playoff pool and per diem.
1973
1976
Arbitration.
1976
1979
Suit blocking NBA/ABA merger settled. Added limited free agency (with team compensation).
1980
1983
No-trade clauses eliminated.
1983
1987
Added Salary cap, "Bird" rights.
1988
1994
Added unrestricted free agency. Length of draft reduced.
1994
1995
Temporary "No-strike, no-lockout" agreement.
1995
1998
Ended 1995 lockout. Added rookie scale contracts. Not actually signed
until 1996, and re-opened in 1998.
1999
2005
Settled 1998-99 lockout. Added maximum salaries, Mid-Level exception;
escrow & luxury tax.
2005
2011
Luxury tax in effect every season. Reductions in contract lengths & raises.
2011
2021
Players' guaranteed share of revenue reduced. Further reductions in contract lengths
& raises. Greater penalties for
taxpaying teams.
For more information on the history of NBA labor relations, visit the Association
for Professional Basketball Research website at www.apbr.org.
7. They came to an amicable agreement in 2005. What happened in 2011?
The league started to bleed money. The 2005 CBA guaranteed the players 57% of
BRI (see question number 13). Coupled with sharply rising
expenses, slowing revenue growth caused in part by the economic downturn in
2007-08, and other factors, 22 of the 30 teams lost money in
2009-10,
collectively losing a reported $370 million. As a result, the owners sought a
complete reset of the league's economic system.
The players agreed that the league lost money under the 2005 CBA, but disagreed
over the extent of the losses. They contended that only a
small number of teams
were losing money, and that the league's problems could be addressed through
better management and revenue
sharing.
The owners' early proposals sought a $45 million hard cap coupled with rollbacks
of existing salaries. The players considered any proposal with
a hard cap to be a
non-starter, and submitted a counterproposal which included robust revenue sharing,
but left most of the features of the
2005 agreement in place.
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As a result, the sides were nowhere near an agreement when the 2005 CBA expired
in July 2011, with Commissioner David Stern
characterizing their differences as
"a gulf, not a gap." The league imposed a lockout on July 1, 2011, which lasted
until the sides ratified the
2011 CBA in early December.
The following is a chronology of the milestones in the 2011 lockout:
April 2009 through June 2011: Several meetings are held and proposals are
shared, but the sides do not make substantive progress
toward an agreement.
May 24, 2011: The players association files an unfair labor practices
charge against the league with the National Labor Relations Board
(NLRB).
July 1, 2011: 2005 CBA expires, lockout imposed.
July 16, 2011: Nets guard Deron Williams signs with Besiktas in Turkey,
after FIBA declares that NBA players who are under contract may
receive
a letter of clearance, as long as their overseas contracts allow them
to return to the NBA when the lockout ends. Williams
becomes the first
of several players to sign overseas.
August 2, 2011: The NBA files an unfair labor practices charge with the
National Labor Relations Board and a federal lawsuit seeking legal
backing should the players decertify their union.
September 23, 2011: The league postpones training camps and cancels
preseason games scheduled for October 9-15.
October 4, 2011: The league announces the cancelation of the entire
preseason schedule.
October 10, 2011: The league cancels the first two weeks of the regular
season.
October 17-19, 2011: The sides meet with a federal mediator, but fail
to reach an agreement.
October 28, 2011: The league cancels games through November 30, saying
there will not be a full regular season under any
circumstance.
November 5, 2011: The sides meet again with a federal mediator, but
again fail to bridge the gap. The league gives the players two
proposals.
The first represents their latest position and expires on November 9.
The second resets their position to where it was the
previous summer,
and will be effective if the players do not agree to the first proposal.
November 9, 2011: The league puts its deadline on hold while the sides
continue to negotiate.
November 14, 2011: The players reject the league's proposal and disclaim
interest (dissolving the union -- see question number 116)
in
preparation for antitrust litigation.
November 15, 2011: Players file class action lawsuits in California
and Minnesota, which are consolidated into one lawsuit in
Minnesota.
November 23, 2011: The sides initiate settlement talks
November 25-26, 2011: The sides reach a tentative agreement, with the
aim of opening a 66 game season on Christmas Day.
December 8, 2011: Both sides ratify the new agreement. The players
drop their lawsuit.
December 9, 2011: Free agency and training camps open, ending the
161-day lockout.
8. Were all issues in the 2011 labor dispute resolved in time to start the 2011-12 season?
The sides reached a tentative agreement on the principal issues in the 2011
labor dispute on November 25-26, 2011, with a stated goal of
opening the
season on Christmas Day, 2011. This left very little time to recertify the
union, draft and ratify a new CBA, and hold training
camps and a preseason
before the season started. As a result the sides agreed to table several
issues, and agreed to convene a joint
committee to review these issues and
implement resulting rule changes. The committee will consist of coaches,
general managers, players,
league personnel and union personnel. The issues
to be discussed include:
The age for draft eligibility (see question number 57)
Rules for the NBA's draft combine
The number of rounds in the NBA draft
The rules for NBA D-League assignment (see question number 81)
"Two-way" contracts that are applicable to both the NBA and
the NBA D-League (see question number 81)
Player days off
Player activity on days following back-to-back games
Player use of team facilities on days off
A separate panel is also being convened to determine whether there is a valid
test for Human Growth Hormone (HGH), and if so, to
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recommend testing procedures
(see question number 108).
9. When will the current CBA expire?
The CBA runs through the 2020-21 season, although either side may opt out
after the 2016-17 season. To do so, notice must be given by
December 15, 2016.
The CBA also may be terminated early under certain conditions:
Certain types of collusion (the players association may terminate).
National TV revenue drops significantly in the next television agreement
(the league may terminate).
Certain "force majeure" events (such as war or terrorism) make
it impossible or economically impractical for the league to fulfill the
agreement (the league may terminate).
Certain provisions of the CBA are struck down in court (either side may
terminate).
10. What changes did they make in the 2011 CBA?
Please see the appendix for a summary of the
differences between the 2011 and 2005 CBAs. The appendix includes links to
questions with
additional information.
In addition, the final version of this FAQ for the 2005 CBA may be found
here, and the final version for the 1999 CBA
may be found here.
11. Were there special rules in place for the shortened 2011-12 season?
Due to the 2011 labor dispute (see question number 7), the
2011-12 season consisted of 66 games played over 124 days beginning on
December
25, rather than the usual 82 games played over approximately 170 days beginning
in late October or early November. Due to this
unique situation a number of
adjustments needed to be made, which applied to 2011-12 only.
Calendar and roster adjustments:
Teams were allowed to carry 13 players on their active rosters. If 13
players were active, their Inactive List could be empty.
The period in which options in rookie scale contracts could be exercised,
or players on rookie scale contracts could be extended was from
December 9
to January 25, rather than the first day following the July Moratorium
to October 31 (see question numbers 49 and
60).
The amnesty waiver period was from December 9 to 16, rather than the
first seven days following the July Moratorium (see question
number
69).
Trade exceptions that expired between July 1 and December 15 were extended to
December 16 (see question number 85).
Restricted free agents had until December 25 to accept a pending Qualifying
Offer, rather than October 1 (see question number 44).
The first league payday was January 1, rather than November 15 (see question
number 113).
10-day contracts could be signed beginning February 6, rather than January
5 (see question number 80).
All contracts became guaranteed for the remainder of the season on February
10, rather than January 10 (see question number 64).
Exceptions began to reduce in value on February 10, rather than January
10 (see question number 26).
Players who signed as free agents could not be traded for two months or until
March 1, whichever is later. The normal restriction is for
three months or
until December 15 (January 15 for certain sign-and-trade transactions),
whichever is later (see question number 95).
The trade deadline (see question number 103) was March
15, rather than late February.
The date after which waived players were ineligible for the playoffs was
March 23, rather than March 1 (see question number 65).
Financial adjustments:
All salaries were pro-rated to 66/82 of their full value (however playoff
shares and guaranteed salary paid to previously waived players
were not
pro-rated).
For performance bonuses (see question number 74) based
on numerical benchmarks, bonus amounts and benchmark values were
reduced
to 66/82. For example, a $100,000 bonus based on the player scoring 1,600
points during the season was reduced to an
$80,488 bonus based on the player
scoring 1,288 points. Benchmarks were not reduced if they were based on
averages (e.g., 20 points
per game) ratios, league honors, or playoff
performance.
Luxury tax payments were reduced to 66/82 of their full value (see question
number 21).
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Signing bonuses (see question number 75) in new contracts
were reduced by 16/82 of the portion of the signing bonus that is charged to
the 2011-12 season.
The amount of a loan can't exceed 66/82 of the player's guaranteed salary for
the 2011-12 season (see question number 113).
The following items were not adjusted for the shortened 2011-12 season:
Team salary amounts, player's salaries (as applied to team salary), and
league-wide salary totals.
Secondary waiver bids under the amnesty provision (see question number
69).
Likely/unlikely bonus designations. For example, if the player has a bonus
based on playing 70 games, and the player played in at least
70 games in
2010-11, then the bonus will be deemed likely even though the 2011-12 season
is only 66 games. However, the opposite is
true for 2012-13 -- the numbers
for 2011-12 will be multiplied by 82/66 to determine whether 2012-13
bonuses are likely or unlikely
(see question number 74).
12. What is included in Basketball Related Income (BRI)?
Basketball Related Income (BRI) essentially includes any income related to basketball
operations received by the NBA, NBA Properties1, NBA
Media Ventures, or any other
subsidiaries. It also includes income from businesses in which the league, a league
entity or a team has an
ownership stake of at least 50%. BRI includes:
Regular season gate receipts, minus taxes and certain charges including
those related to arena financing
Broadcast rights
Exhibition game proceeds
Playoff gate receipts
The value of all complimentary tickets, minus "excluded complimentary
tickets" (1.6 million tickets in 2011-12, increasing by 50,000 each
season
thereafter)
Novelty, program and concession sales (at the arena and in team-identified
stores within proximity of an NBA arena)
Parking
Proceeds from team sponsorships
Proceeds from team promotions
Arena club revenues
Proceeds from summer camps
Proceeds from non-NBA basketball tournaments
Proceeds from mascot and dance team appearances
Proceeds from beverage sale rights
40% of proceeds from arena signage
40% of proceeds from luxury suites
50% of proceeds from arena naming rights
50% of the proceeds from team practice facility naming rights
Proceeds from other premium seat licenses
Proceeds received by NBA Properties, including international television,
sponsorships, revenues from NBA Entertainment, the All-Star
Game, and
other NBA special events.
Some of the things specifically not included in BRI are proceeds
from the grant of expansion teams, fines, all forms of revenue sharing,
interest
income, and the sale of assets.
1
NBA Properties controls the licensing rights for the names, logos,
photos & footage, uniforms, league & team programming, and
editorial
content for the league and teams.
13. How is the salary cap set each year?
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For 2011-12 the league and players association agreed to use a set figure of
$58.044 million, which was the same as the 2010-11 cap.
Starting in 2012-13 the salary cap is calculated based on projected amounts for
Basketball Related Income (BRI) and benefits for the upcoming
season. The
projected BRI is a matter of negotiation between the league and players
association. Each year the sides meet to try to agree on
an amount. If they
cannot agree before the end of the July Moratorium, they instead use:
The set amount for national broadcast rights (which is determined in
advance), plus
The BRI for the previous season (other than national broadcast rights),
increased by 4.5%.
The salary cap calculation beginning in 2012-13 takes 44.74% of projected
BRI, subtracts projected benefits, and divides by the number of
teams in
the league1.
In 2012-13 the salary cap was guaranteed to be at least $58.044 million if
the calculation produced a lower amount. This prevented a drop in
the salary
cap as a result of a drop in revenues due to the 2011 lockout.
Starting in 2013-14, the following adjustments are made to the salary cap
calculation each season:
If the league didn't pay the players enough the previous season, i.e.,
if they had to cut the players a supplemental check to make their
guarantee, then the shortfall, divided by the number of teams in
the league1, is added to the cap. For example, if the players
are paid
$15 million less in 2012-13 than they are guaranteed, then the
2013-14 cap is adjusted upward by $500,000.
If there is an overage -- i.e., if the players were paid more (pre-escrow)
than their guaranteed share in the previous season -- and the
system is
getting close to exceeding what the league can get back through the escrow
system, then the cap (and tax level) may be
reduced in order to put on the
brakes (see question number 20 for more information).
Here are the salary cap amounts for each season under the 2011 CBA:
Season
Salary cap
2011-12 $58.044 million
2012-13 $58.044 million
2013-14 $58.679 million
2014-15 $63.065 million
The salary cap adjusts each year on the first day following the July Moratorium
(see question number 104).
1
All formulas that divide by the number of teams in the NBA (currently 30)
ignore any expansion teams in their first two seasons in the
league.
14. Exactly what is included when computing total team salaries? What is cap
room? What is a cap hold?
A team's cap room (referred to simply as "room" in the CBA) refers to its
ability to sign players to free agent contracts. If a team is above the
cap,
then its room is limited to the exceptions it possesses. If the team is below
the cap, then its room is how far it is below the cap when all
salaries and
cap holds are included. Cap holds are "placeholders" for players the team
is expected to sign in the future. For example, a team is
expected to sign
its unsigned first round draft pick, so an amount is reserved for this
signing in the form of a cap hold. A team $10 million
below the cap with
$4 million in cap holds therefore has $6 million in room. A team $5 million
under the cap with $6 million in cap holds is not
considered to be under the
cap at all, and must use exceptions to sign players. The following are
included in team salary:
Salaries of all active and inactive players1, including likely bonuses.
The full season salary of any players the team acquires in midseason trades.
Salaries paid or payable to waived players, minus any set-off amounts2
and subject to the Stretch provision (see question number 66).
Any salary still being paid to retired players (see question number
63).
A cap hold for amounts paid or expected to be paid in conjunction with certain
grievances.
A cap hold for salaries in contracts that have been agreed to but not yet executed
(i.e., verbal agreements or agreements pending
physicals). Note: During the July
Moratorium (see question number 104), teams may not enter into
verbal or written agreements.
Therefore any agreements that are struck during the
moratorium are still characterized as negotiations, and do not count toward team
salary.
A cap hold for a percentage of the previous salary of every unrenounced free agent
(see question number 38).
A cap hold for salaries offered in offer sheets to restricted free agents (see
question number 44).
A cap hold for the "scale" amount for the team's unsigned first round draft pick(s)
(see question number 52). This amount begins to apply
to team
salary immediately upon selection in the draft3. This amount can be
excluded from the team salary for the current season if,
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before the season starts,
the team and player agree in writing that the team will not sign the player during
that season.
A cap hold called an "incomplete roster charge" if the team has fewer than 12 players
(players under contract, free agents included in
team salary, players given offer
sheets, and first round draft picks). This charge is equal to the rookie minimum
salary for each player
fewer than 12. For example, if there are 11 players included
in team salary, then an amount equal to the rookie minimum salary is added
to the team
salary4; if the roster is completely empty, then 12 times the rookie
minimum salary is added to the team salary. This charge
only applies during the
offseason.
A cap hold for the combined amount of any Mid-Level, Bi-Annual, Disabled Player (see
question number 25) and trade exceptions (see
question number
85) available to the team (see question number 26),
if the team is under the salary cap. (Teams may renounce these
exceptions, in which
case they no longer are included in team salary.)
Salaries for completed contracts (such as 10-day contracts) are included in team
salaries for the remainder of that salary cap year
(through June 30).
They use a slightly different calculation for determining the team salary
in relation to the apron -- the point $4 million over the tax line. This
applies
to the Bi-Annual, Non-Taxpayer Mid-Level, and Taxpayer Mid-Level exceptions
(see question number 25), and for Sign-and-Trade
transactions (see question number 91). For these purposes
they use the team salary as defined above, with the following modifications:5
All unlikely bonuses are included for contracts and extensions signed
under the current CBA.
Amounts that could be included in team salary as the result
of certain grievances are included.
For rookies and players with one year of experience who were signed as free
agents (not as draft picks) and whose salary is less than the
two-year minimum
salary, the two-year minimum salary is used in place of their actual salary.
For the team's restricted free agents, the amount of any outstanding
qualifying offer or first refusal exercise notice (both including
unlikely
bonuses), whichever is greater, are included.
The amount of any required tenders for the team's draft picks is included
(80% of the scale salary for first round picks; the rookie
minimum salary
for second round picks).
Cap holds for free agents are excluded.
Cap holds for first round draft picks are excluded.
Cap holds for the team's outstanding exceptions are excluded.
They do this because those exceptions and sign-and-trade transactions affect
whether the team is subject to a hard cap (see question number
28),
and these modifications to the team salary calculation ensure that subject teams
remain below the apron.
The following are not included in team salaries:
The full season salary of any players the team trades away in midseason trades.
Salaries of some players with long-term or career-ending injuries or illnesses
(see question number 63).
The "scale" amount for the team's unsigned first round draft pick(s)
when the player signs with a non-NBA team. The scale amount is
excluded from the
team salary on the date he signs a non-NBA contract or the first day of the regular
season, whichever is later. The
scale amount goes back onto the team
salary on the following July 1 or when his non-NBA contract ends, whichever is
earlier. In other
words, these cap holds are removed for players
playing elsewhere during the regular season only. Scale amounts are also excluded
from
team salary when the team and player both agree in writing that they will
not sign a contract that season.
Salaries from summer contracts (see question number 70).
Salaries of players selected in an expansion draft (see question number
112) and waived by the expansion team prior to the start
of the
season.
Salary not paid to players due to set-off2 (see question number
66).
The salaries of players waived via the Amnesty provision (see question number
69).
For certain purposes, 50% of salary not paid to players who were suspended by
the league is excluded. For example, if a player with a
$10 million salary is
suspended by the league for exactly half the season, then he loses $5 million,
and 50% of this amount, or $2.5
million, is excluded from certain calculations
including escrow and luxury tax. The team does not receive extra cap
room which it can use
to sign another player.
1
For players who have been in the NBA for three or more seasons and are
playing under a one-year, 10-day or Rest-of-Season contract at
the
minimum salary, the minimum salary for a two-year veteran is used in place
of the player's actual salary (see question number 16).
2
Set-off amounts are not deducted from team salary until after the end
of the regular season; however they apply set-off retroactively to
the
final game of the regular season.
3
The scale amount is applied immediately upon selection in the draft, but is
applied to the team salary for the next salary cap year, which is
the
salary cap year in which a rookie scale contract can be signed. For example,
as soon as a team makes a pick in the 2013 draft, the
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scale amount is
applied to the team's 2013-14 team salary. Nothing is applied to the team's
2012-13 team salary.
4
Since teams are required to have at least 13 players on their rosters (see
question number 79), the roster charge reserves a minimum
amount of cap space to sign 13 players. For example, if a team has 11
players on its roster, the roster charge reserves cap space to sign
the
team's 13th player, and the remainder can be used to sign the 12th player.
5
Roster charges for empty roster spots are not excluded for apron purposes;
however they are not added to replace other things that are
excluded. For
example, a team that has nine players under contract, two free agent cap
holds and one empty roster charge is considered
to have nine players under
contract and one empty roster charge for apron purposes.
15. Is there a minimum amount each team must pay its players?
There is a minimum team salary (see question number 14),
which for this purpose includes the salaries of players who were amnestied
(see
question number 69) or suffered a career-ending
injury or illness (see question number 63), and excludes
all cap holds. The team salary must
be at or above a defined percentage of
the salary cap on the date of the team's last regular season game:
Season
Minimum
Amount
2011-12 80% of the cap $46.435 million
2012-13 85% of the cap $49.337 million
2013-14 90% of the cap $52.811 million
2014-15 90% of the cap $56.759 million
2015-16 90% of the cap
2016-17 90% of the cap
2017-18 90% of the cap
2018-19 90% of the cap
2019-20 90% of the cap
2020-21 90% of the cap
Teams with a team salary below the minimum are surcharged for their shortfall,
with the money distributed among the players on that team.
Amounts paid as buyouts to international teams (see question number
77) do not count toward the minimum team payroll.
16. What are the players' salary restrictions?
Players have both minimum and maximum salaries, and both are based on how long
the player has been in the league. The minimum salaries
scale upward each
season starting in 2013-14. Here are the minimum salaries (these amounts
begin to pro-rate starting on the first day of the
regular
season -- see question number 29):
Years in
NBA1
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20
2020-21
0
$473,604
$473,604
$490,180
$507,336
$525,093
$543,471
$562,493
$582,180
$602,557
$623,646
1
$762,195
$762,195
$788,872
$816,482
$845,059
$874,636
$905,249
$936,932
$969,725 $1,003,665
2
$854,389
$854,389
$884,293
$915,243
$947,276
$980,431 $1,014,746 $1,050,262 $1,087,021 $1,125,067
3
$885,120
$885,120
$916,099
$948,163
$981,348 $1,015,696 $1,051,245 $1,088,038 $1,126,120 $1,165,534
4
$915,852
$915,852
$947,907
$981,084 $1,015,421 $1,050,961 $1,087,745 $1,125,816 $1,165,220 $1,206,002
5
$992,680
$992,680 $1,027,424 $1,063,384 $1,100,602 $1,139,123 $1,178,992 $1,220,257 $1,262,966 $1,307,170
6
$1,069,509 $1,069,509 $1,106,942 $1,145,685 $1,185,784 $1,227,286 $1,270,241 $1,314,700 $1,360,714 $1,408,339
7
$1,146,337 $1,146,337 $1,186,459 $1,227,985 $1,270,964 $1,315,448 $1,361,489 $1,409,141 $1,458,461 $1,509,507
8
$1,223,166 $1,223,166 $1,265,977 $1,310,286 $1,356,146 $1,403,611 $1,452,738 $1,503,583 $1,556,209 $1,610,676
9
$1,229,255 $1,229,255 $1,272,279 $1,316,809 $1,362,897 $1,410,598 $1,459,969 $1,511,068 $1,563,956 $1,618,694
10+
$1,352,181 $1,352,181 $1,399,507 $1,448,490 $1,499,187 $1,551,659 $1,605,967 $1,662,176 $1,720,352 $1,780,564
Here are the league-wide maximum salaries. Note that there are
exceptions to the maximum salary (see question number 17).
Years in NBA1 Defined maximum salary
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2011-12
2012-13
2013-14
2014-15
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0-6
25% of cap2
$12,922,194 $13,668,750 $13,701,250 $14,746,000
7-9
30% of cap2
$15,506,632 $16,402,500 $16,441,500 $17,695,200
10+
35% of cap2
$18,091,071 $19,136,250 $19,181,750 $20,644,400
A free agent's maximum salary in the first year of a new contract is never
less than 105% of his salary in the last year of his previous contract.
For example, a ten-year veteran free agent who most recently earned $20
million has a maximum salary of at least $21 million, even if that is
above
the league-wide maximum. A free agent does not need to remain with the same
team in order to receive 105% of his previous salary,
although the team
that signs him is subject to the same salary cap restrictions as with any
other free agent.
A first round draft pick who completed all four years of his rookie scale
contract, or a second round draft pick or an undrafted player who has
four
years of service, is eligible to receive a higher maximum salary if he meets
certain criteria, called the "5th Year 30% Max" criteria:
Named to the All-NBA First, Second or Third team at least twice
Voted as a starter in the All-Star game at least twice
Named the NBA Most Valuable Player at least once
Players may receive salary advances, loans, and deferred compensation
(see question number 113 for more information).
When a player has been in the NBA for three or more seasons, and is
playing under a one-year, 10-day or Rest-of-Season contract at the
minimum salary, the league reimburses the team for part of his salary --
any amount above the minimum salary level for a two-year veteran.
For
example, in 2011-12 the minimum salary for a two-year veteran was
$854,389, so for a ten-year veteran, with a minimum salary of
$1,352,181,
the league would reimburse the team $497,792. Only the two-year minimum
salary is included in the team salary, not the player's
full salary. They
do this so teams won't shy away from signing older veterans simply
because they are more expensive than younger veterans.
Other notes on league reimbursement of minimum-salary contracts:
The team is reimbursed even if the player is waived during the season, as
long as the player was paid more than the minimum salary for
a two-year
veteran.
If the player is traded mid-season the reimbusement is pro-rated between
the two teams, in proportion to the amount of time he spent
with each
team.
For a Rest-of-Season contract (see question number 29)
the reimbursement threshold (the two-year veteran minimum salary) itself
is
pro-rated. For example, in 2011-12 the minimum salary for a two-year
veteran was $854,389. If a team signed a ten-year veteran to a
Rest-of-Season
contract on the 60th day of this 170-day season, the league would reimburse
the team for any salary paid above
$552,840, which is 110/170 of $854,379.
The pro-rated $552,840 amount also would be included in the team salary.
First round draft picks have a more restrictive salary scale, based on their draft position (see question number 49 for more
information).
1
A player is credited with a year of service for each season in
which he is on a team's active list or inactive list for at least one
day during
the regular season.
2
They use a different cap calculation to determine the maximum salaries,
which is based on 42.14% of projected BRI rather than 44.74%.
In 2005 the
sides negotiated a different formula for setting the salary cap but not
maximum salaries, so the two became decoupled, and
this continued in the
2011 agreement. For this reason the maximum salaries are not actually 25%,
30% or 35% of the cap, and instead
are a slightly lower amount. For example,
even though the salary cap for 2011-12 is $58.044 million and 25% of this
amount is $14.511
million, the 0-6 year maximum salary is actually
$12,922,194. In addition, for 2012-13 a 5.8% increase in maximum salaries
was agreed
to, even though the salary cap stayed the same as 2011-12.
17. Are there exceptions to the maximum salary?
Yes. In multi-year contracts only the first season's salary is subject to
the maximum, but there are restrictions about how big raises can be
from year
to year (see question number 55).
In addition, a first round draft pick who completed all four years of his
rookie scale contract, or a second round draft pick or an undrafted
player
who has four years of service can qualify for more than the 0-6 year (25%)
maximum, and up to the 7-9 year (30%) maximum if he
has met the "5th Year
30% Max criteria" (see question number 16). However, a
player's eligibility for the higher maximum salary doesn't imply
he will
actually receive this amount -- as with all salaries, it's a matter of
negotiation between the player and his team.
18. What percentage of revenues do the players receive?
Contracts are individually negotiated between players and teams, and
several factors control the amount each player individually can receive.
Collectively, the players are guaranteed to receive at least 51.15% of
revenues in salaries & benefits for the 2011-12 season. Starting in
201213 they are guaranteed to receive 50% of forecasted revenues1,
plus (or minus) 60.5% of the amount by which revenues exceed (or fall short
of) the forecasts, with a lower limit of 49% of BRI and an upper limit
of 51% of BRI.
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Here are the revenue forecasts for 2012-13 through 2020-21, with 50% of the
forecast value (upon which the guarantee is based):
Season
BRI Forecast 50% of Forecast
2012-13 $4.308 billion
$2.154 billion
2013-14 $4.481 billion
$2.2405 billion
2014-15 $4.660 billion
$2.330 billion
2015-16 $4.870 billion
$2.435 billion
2016-17 $5.089 billion
$2.5445 billion
2017-18 $5.318 billion
$2.659 billion
2018-19 $5.557 billion
$2.7785 billion
2019-20 $5.807 billion
$2.9035 billion
2020-21 $6.069 billion
$3.0345 billion
For example, if BRI for 2012-13 is $4.408 billion, then the players
collectively are guaranteed $2.2145 billion, which comes from:
$2.154 billion, which is 50% of the $4.308 billion forecast, PLUS
$60.5 million, which is 60.5% of the amount by which BRI ($4.408
billion) exceeded the forecast for 2012-13 ($4.308 billion)
If instead BRI for 2012-13 was $3.9 billion, then the players'
guarantee would be $1.911 billion, which comes from:
$2.154 billion, which is 50% of the $4.308 billion forecast, MINUS
$246.84 million, which is 60.5% of the amount by which BRI ($3.9
billion) fell short of the forecast for 2012-13 ($4.308 billion).
The above equals $1.90716 billion, which is below the lower limit,
so the players would receive $1.911 billion.
Here is what actually happened in each season:
2012-13
2013-14
Forecasted BRI:
$4.308 billion
$4.481 billion
Actual BRI:
$4.293 billion
$4.522 billion
Excess or shortfall:
$15 million shortfall $41 million excess
60.5% of excess or shortfall:
$9.1 million
$24.8 million
50% of forecasted BRI:
$2.154 billion
$2.2405 billion
Players' guarantee (50% of forecast plus/minus
$2.145 billion
60.5% of excess/shortfall):
$2.265 billion
Actual guarantee percentage:
50.09%
49.96%
Since individual salaries are negotiated before the season starts (in many
cases years before), and BRI is not determined until the season
concludes,
there are mechanisms in place to adjust when salaries miss their target. If the
players receive less than their guaranteed share of
BRI, the league cuts a check
to the players association for the difference, and this amount is distributed
to the players (this happened in 201011, under the 2005 CBA).
The escrow system adjusts the players' salaries when they earn more than
their guaranteed share (see question number 19).
A new benefits pool is funded with 1% of BRI, which comes out of the
players' share. The pool is used to fund post-career benefits and
annuities
for players who have vested. The specific benefits to be provided will be
negotiated by the league and players association. If there is
an escrow
overage (see question number 20) and the escrow fund
is insufficient to bring salaries & benefits down to the players'
designated
share, they take the remainder out of this benefits pool.
1
BRI forecasts were determined when the CBA was originally negotiated.
This differs from projected BRI, which is determined each July (see
question number 13).
19. How does the escrow system work? What is it for?
The escrow system works hand-in-hand with the players' revenue guarantee
(see question number 18) to control the amount of league
revenues that go to the players.
The escrow system tries to ensure that salaries & benefits do not
exceed the players' guaranteed share of BRI. To do this, 10% of
the players'
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salaries is withheld from their paychecks and deposited
into an escrow account. At the end of each season they compare the
players'
guaranteed share of BRI to the amount they were actually
paid in salaries & benefits. If there was an overage (i.e., if
the players were paid
more pre-escrow than they were guaranteed), then
the amount of the overage is returned to the teams from the escrow
account. The players
then receive any escrow money that remains.
It is also possible that they find themselves at the end of the season
with insufficient escrow funds to cover the overage. Here are some
examples to illustrate what could happen in the escrow process. In
Example A there is not an overage. In Example B there is an overage,
but
the escrow is sufficient to reduce salaries to the designated
percentage. In Examples C there is an overage, which the escrow is
insufficient to
cover.
Example A
Example B
Example C
BRI:
$4.308 billion $4.308 billion $4.308 billion
Designated share:
$2.154 billion $2.154 billion $2.154 billion
Salaries:
$2.00 billion
$2.15 billion
$2.30 billion
Benefits:
$120 million
$120 million
$120 million
Amount held in escrow:
$200 million
$215 million
$230 million
Overage (amount salaries & benefits
$0
exceeded designated share):
$116 million
$266 million
Returned to owners:
$0
$116 million
$230 million
Given to players:
$234 million1
$99 million
$0
In Example A, salaries & benefits are less than the designated share,
so the escrow money isn't needed. The players get to keep it all, in
addition to receiving a supplemental payment to meet their guaranteed
share. In Example B the escrow system successfully lowers salaries
back
down to the designated share, and the players get to keep what's left over. In
Example C there isn't enough escrow money to lower
salaries back down to the
designated share. The players "owe" $266 million, but the escrow account
contains only $230 million. The owners
receive the entire balance of the
escrow account, but the players don't have to pay any additional money (see
question number 20 for more
information on this situation).
Here is what actually happened in each season:
2011-12
2012-13
2013-14
BRI:
$3.375 billion
$4.293 billion
$4.522 billion
Designated share:
$1.727 billion
$2.145 billion
$2.265 billion
Salaries:
$1.610 billion
$2.109 billion
$2.134 billion
Benefits:
$173.8 million $204.9 million $207.4 million
Amount held in escrow:
$162 million
$212.2 million $214.4 million
Overage/underage (amount salaries & benefits
$57.0 million
exceeded designated percentage):
$168.7 million $76.4 million
Overage amount retained by NBA:
$57.0 million
$168.7 million $76.4 million
Remainder of escrow given to players:
$105.0 million $43.5 million
Supplemental check to players
(in event of an underage):
N/A
N/A
$138.0 million
N/A
Question number 22 describes how the escrow money
is distributed to the teams.
1
Includes the entire escrow balance, plus a supplemental payment to
meet the players' revenue guarantee (see question number
18)
20. What happens when there's not enough money in the escrow account?
Players never lose more than 10% of their salaries to the escrow system1.
If they reconcile the numbers after the season and discover that the
escrow
fund is insufficient to return salaries & benefits back down to the
players' designated share, they take the shortfall out of the new
benefits
pool that is funded with 1% of BRI (see question number 18).
If they use the entire benefits pool and still haven't brought salaries
down to the designated share, they stop there. The players don't lose any
additional money, and will have earned more than their designated
share that
season.
However, there is a system in place to try to prevent this from happening.
If there is an overage -- i.e., if the players were paid more than
their
guaranteed amount in the previous season (pre-escrow) -- and the system is
getting close to exceeding what the league can get back
through the escrow
system, then the cap and tax levels may be reduced in the following season
in order help put on the brakes.
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If the overage was less than 6% then no action is taken.
If the overage was between 6% and 9%, then they look at projected
BRI (see question number 13). No action is taken
if projected BRI
will be high enough to mitigate the problem on its
own. If the projected BRI is not high enough, then the cap and tax
levels are reduced.
If the overage exceeds 9%, they put on the brakes (by reducing
the cap and tax levels) without regard to projected BRI.
For example, if the total salaries and benefits for 2013-14 are $2.27
billion and this resulted in an overage of $170 million (7.5% of total
salaries and benefits), and if the projected BRI for 2014-15 exceeds
the BRI for 2013-14 by 9%, then the 2014-15 salary cap is adjusted
downward by $500,000, and the tax level is reduced by $380,000.
If the players ever end up earning more than their designated share due
to a substantial decline in revenues, then both sides will negotiate in
good faith to revise the CBA in order to address the issue.
The exception is when there is money that should be on
deposit with the escrow agent but is not, for example if there is
a procedural or
accounting error. Any such shortfall is deducted
from the players' salaries the following season.
1
21. What is the "luxury tax?" Why does it exist? How is it
determined? Who pays it?
The luxury tax is a mechanism that helps control team spending. While it
is commonly referred to as a "luxury tax," the CBA simply calls
it a
"tax" or a "team payment." It is paid by high
spending teams -- those with a team salary exceeding a predetermined tax
level. These teams
pay a penalty for each dollar their team salary (with
a few exceptions, see below) exceeds the tax level. The tax level is
determined prior to
the season, and is computed as follows:
For 2011-12 the league and players association agreed to use a figure of
$70.307 million for the tax level.
In 2012-13 the tax level was determined by taking 53.51% of projected BRI
(see question number 13), subtracting projected
benefits,
and dividing by the number of teams in the league1.
For 2012-13 the tax level was guaranteed to be no less than $70.307
million.
Starting in 2013-14 they apply the same formula as 2012-13, except there
is no guaranteed minimum.
Starting in 2012-13, the tax level may be adjusted based on what happened
during the previous season:
If the league didn't pay the players enough the previous season, i.e., if
they had to cut the players a supplemental check to make their
guarantee,
then the shortfall, divided by the number of teams in the league1,
is added to the tax level. For example, if the players are
paid $15 million
less in 2012-13 than they are guaranteed, then the 2013-14 tax level is
adjusted upward by $500,000.
If there is an overage -- i.e., if the players were paid more (pre-escrow)
than their guaranteed share in the previous season -- and the
system is
getting close to exceeding what the league can get back through the escrow
system, then the tax level (and salary cap) may
be reduced in order to put
on the brakes (see question number 20 for more
information).
The amount of tax a team pays depends on the season, the team salary as of the
team's last regular season game, and whether the team is a
"repeat offender":
For 2011-12 and 2012-13, teams pay $1 for every $1 their team salary exceeds
the tax level. There is no repeater rate.
For 2013-14 teams pay an incremental rate based on their team salary. There
is no repeater rate.
For 2014-15 teams pay an incremental rate based on their team salary. They
pay the repeater rate if they also were taxpayers in all of
the previous
three seasons.
For 2015-16 and all subsequent seasons, teams pay an incremental rate
based on their team salary. They pay the repeater rate if they
were taxpayers
in at least three of the four previous seasons.
Here are the tax rates beginning 2013-14:
Team salary above tax
level
Non-repeater
Repeater
Lower
Upper
Tax rate
Incremental
maximum
Tax rate
Incremental
maximum
$0
$4,999,999
$1.50
$7.5 million
$2.50
$12.5 million
$5,000,000
$9,999,999
$1.75
$8.75 million
$2.75
$13.75 million
$10,000,000
$14,999,999
$2.50
$12.5 million
$3.50
$17.5 million
$15,000,000
$19,999,999
$3.25
$16.25 million
$4.25
$21.25 million
$20,000,000
N/A
$3.75, and increasing $.50
for
each additional $5 million.
N/A
$4.75, and increasing $.50
for
each additional $5 million.
N/A
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For example:
A team with a team salary $12 million over the tax level in 2011-12
pays a tax of $12 million.
A team with a team salary $12 million over the tax level in 2013-14
pays a tax of $21.25 million (the incremental maximum of $7.5
million for $0 to $4,999,999, plus the incremental maximum of
$8.75 million for $5 million to $9,999,999, plus $2 million times
the
incremental rate of $2.50 for $10 million to $14,999,999).
A team with a team salary $4 million over the tax level in 2015-16
pays a tax of $10 million ($4 million times the repeater rate
of $2.50
for $0 to $4,999,999) if they also were taxpayers in
three of the previous four seasons, or pays a tax of $6 million
($4 million times the
non-repeater rate of $1.50 for $0 to
$4,999,999) if they were not taxpayers in at least three of the
previous four seasons.
When determining the amount of tax a team owes, the league uses its
team salary (see question number 14) on the date of
its last regular
season game (i.e., if a player is traded away before the
end of the season, then none of his salary is taxed), with the following
adjustments:
Cap holds and exceptions are ignored.
Any "unlikely bonuses" (see question number 74) that
were actually earned are added to the team salary.
Any "likely bonuses" (see question number 74) that
were not earned are subtracted from the team salary.
Any trade bonuses (see question number 98) for players
received in trade after the last regular season game are added to the team
salary. This amount may be pro-rated -- see question number 99
for details.
Any amounts from settlements of grievances are added to the team salary.
For players who signed as free agents (i.e., not draft picks) under the current
CBA, and make less than the two-year minimum salary, the
minimum salary for a
two-year veteran is used in place of their actual salary.2
For minimum salary players whose salary is partially paid by the league (see
question number 16) only the amount paid by the team (the
two-year minimum salary) is taxed.
The salaries of players waived via the Amnesty provision (see question number
69) are exempt from the luxury tax.
Here are the tax levels in each season, and the teams that paid the tax:
Season
Tax Level
Taxpaying Teams (amount paid in $millions)
2011-12 $70.307 million Lakers ($12.6), Celtics ($7.4), Heat ($6.1), Mavericks ($2.7), Spurs ($2.5),
Hawks ($0.7)
2012-13 $70.307 million Lakers ($29.3), Heat ($13.3), Nets ($12.9), Knicks ($10.0), Bulls ($3.9), Celtics ($1.2)
2013-14 $71.748 million Nets ($90.6), Knicks ($36.3), Heat ($14.4), Lakers ($9.0), Clippers ($1.3)
2014-15 $76.829 million
In addition to the financial penalties, a number of restrictions
are placed on taxpaying teams, which are described in question
number 23.
Where does the tax money go? This is described in question number 22.
1
All formulas that divide by the number of teams in the NBA (currently
30) ignore any expansion teams in their first two seasons in the
league.
2
If a player in this situation was non- or partially-guaranteed and waived prior
to Jan 10 (when all contracts become guaranteed for the
remainder of that season),
his salary is taxed at the two-year veteran minimum salary, pro-rated for the
number of days the player was
on the roster. For example, if the player's contract
was terminated on the third day of the regular season, his salary for tax
purposes is
3/170 of the two-year veteran minimum salary.
22. Where does the escrow and luxury tax money go?
The money collected from the escrow (see question number 19)
and luxury tax (see question number 21) systems may be
distributed to teams
or used for league purposes, subject to certain rules:
Escrow money:
Some or all of the escrow money may be given to teams, but only if
given to all teams in equal shares.
Any escrow money not distributed to teams will be used for "league
purposes."
Tax money:
Up to 50% of the tax money may be given to non-taxpaying teams. Note
that there is no requirement that any of the tax money be
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distributed to teams in this manner.
Any tax money not distributed to teams will be used for "league
purposes." In other words, at least 50% of the tax
revenue will be
used for league purposes each season.
"League purposes" essentially means for any purpose the league
decides, including distributing the money back to teams. The league decided
that in 2011-12, 100% of the tax revenue will be used as a funding source
for the league's revenue sharing program (see question number
24). Starting in 2012-13, 50% of the tax revenue will be
used as a funding source for the revenue sharing program, and the remaining
50%
will be distributed to non-taxpaying teams in equal shares.
To understand the consequence of crossing the tax line, consider a team
just below the tax line that suffers injuries and needs to sign a
replacement player. This team would pay the player's salary, pay tax on
the amount by which they are now above the tax line, and forfeit any
tax distribution they otherwise may have received.
Here is what actually happened to the escrow and tax money in each season:
2011-12
2012-13
2013-14
BRI:
$3.375 billion
$4.293 billion
$4.522 billion
Designated percentage:
$1.727 billion (51.15% of BRI) $2.145 billion (49.96% of BRI) $2.265 billion (50.09% of BRI)
Total salaries and benefits:
$1.784 billion
$2.314 billion
$2.341 billion
Escrow collected:
$162 million
$212.2 million
$214.4 million
Overage1:
$57 million
$168.7 million
$76.4 million
Escrow share per team:
$1,899,756
$5,622,650
$2,547,001
Tax level:
$70.307 million
$70.307 million
$71.748 million
Total tax collected:
$31.972 million
$70.566 million
$151.631 million
Tax share per team:
$02
$1.470 million
$3.033 million
$35.283 million
$75.815 million
Used to fund revenue sharing: $31.972 million
1
Salaries & benefits minus designated percentage.
2
In 2011-12 100% of the tax revenues were used to fund revenue sharing.
23. Other than financial penalties, are there restrictions on taxpaying teams?
In addition to the tax payments described in question number 21,
taxpaying teams have the following restrictions. Note that most of these
restrictions
aren't triggered unless the team would be over the "apron" -- the point $4
million above the tax level -- following a signing or
trade.
Teams above the apron cannot use the Bi-Annual exception (see question
number 25).
Teams above the apron have a smaller Mid-Level exception (see question
number 25). Teams above the apron can offer contracts
no
longer than three years, while other teams can offer four. The
starting salary is also lower (for example, in 2011-12 it is $3 million
for
teams above the apron, versus $5 million for other teams).
Taxpaying teams can acquire less salary in a simultaneous trade (see
question number 84).
Starting in 2013-14, teams cannot receive a player in a sign-and-trade
transaction (see question number 91) if their team
salary is above
the apron at the conclusion of the trade.
Teams above the apron do not have the same protections under the Gilbert
Arenas provision (see question number 45). Under the
Arenas
provision other teams can offer restricted free agents salaries
starting at the Non-Taxpayer Mid-Level exception. If a team with the
right
of first refusal does not have Early Bird rights to the player
and is over the apron, it will have only the smaller Taxpayer Mid-Level
exception at its disposal, and cannot match an offer for the full
Non-Taxpayer Mid-Level exception.
In addition, taxpaying teams do not receive a distribution from the league wide
tax fund. However, they do receive a distribution from the
escrow fund (see
question number 22).
24. How does revenue sharing work? How is it different from the luxury tax?
The high revenues generated by the big-market teams increases BRI, which
increases the salary cap, which increases the amount all teams
(including
low-revenue, small-market teams) are forced to spend on player salaries --
leading to an unsustainable system. The league's
revenue sharing plan works
in parallel with the CBA (including the luxury tax) as a one-two punch to
address franchise economic disparity. It is
designed to help redistribute
money from high-revenue teams (generally in big markets) to needier teams
(generally in small markets). All 30
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teams were projected to be profitable
under this system by 2013-14 if they met reasonable revenue and expense
standards1.
The NBA also had a revenue sharing system in place with the 2005 CBA. It
was funded entirely through luxury tax revenues, and redistributed
an average
of $40 million per season. However in many cases teams were getting back
money they had put into the pool themselves, so the
net redistribution of
money was much lower than the gross distribution. Under the old plan teams
received much less than under the new plan,
with the highest individual receipts
averaging $5 million. With the new plan, $231.8 million was projected to be
redistributed in 2013-142, with
two teams receiving over $20 million
each, and five additional teams over $17 million each.
The concept behind the plan is that teams contribute an equal percentage
of their total revenues into a common pool (minus certain expenses
such as
arena expenses), then receive an allocation equal to a 1/30 share of the
pool3. Small market teams with lower revenues will therefore
contribute less than they receive, and will be net beneficiaries under the
plan. Large market teams will contribute more than they receive, and
will
be net payers under the plan. Other components of the plan are as follows:
The plan makes teams responsible for meeting revenue benchmarks, based
on the size of the market (based on the number of TV
households in the
team's designated market area) in which they play. Any team that
falls short of its benchmark has to make up the
difference in its
contribution into the pool -- in other words, teams are penalized for
underperforming. Revenue benchmarks range from
65% (New Orleans) to 160%
(New York and Brooklyn) of the league average revenues.
Teams falling short of their revenue expectations are required to work
with the league office to develop and implement a business
improvement
plan, which could include reorganizing business operations, hiring or
replacing staff, or adopting new sales strategies. If a
team fails to
satisfactorily implement such a plan it could forfeit a portion of its
revenue sharing payments (up to 25%).
The percentage of revenues teams contribute to the pool is based on the
percentage of league-wide revenues that go to player salaries.
For example,
if player salaries are 50% of league-wide revenues, then each team would
contribute 50% of its revenues into the pool.
Teams in markets with fewer than 1 million TV households do not have to
contribute more than 15% of their revenues.
Teams in markets with more than 2.5 million TV households cannot receive a
revenue sharing payment. Teams in markets with 2 million
to 2.5 million TV
households receive a percentage of a full payment (for example, a team
with 2.25 million TV households receives a
50% payment). A team with fewer
than 2 million TV households receives a full payment.
If a team is profitable without revenue sharing, it receives a smaller or
zero payment. Any payments from revenue sharing that would
lead a team to
have a profit over $10 million are eliminated.
High revenue teams are limited in the amounts they have to pay. No team
pays more than 30% of its profits in excess of $5 million.
The plan contains an additional discretionary fund of $15 million each year.
Teams can apply for assistance payments from these funds.
Revenue sharing calculations are performed and payments are made the February
following the season. For example, revenue sharing
reconciliation for the
2013-14 season will occur February 2015.
The following chart is a simplified illustration of what might happen to teams
under the revenue sharing plan. Team A is a low-revenue, smallmarket team, and
Team B is a high-revenue, big-market team:
Team A
Team B
Total revenues (minus expenses): $84.0 million
$281.0 million
Profit before revenue sharing:
($20.0 million loss)
$165.0 million
Percentage to fund pool:
55.8%
55.8%
Amount contributed into pool3:
$46.9 million
$156.8 million
Total pool size:
$2.073 billion
$2.073 billion
Amount received (1/30 of pool):
$69.1 million
$69.1 million
Net paid/received:
$22.2 million received $87.7 million paid
Contribution limits:
N/A
Actual amount paid/received:
$22.2 million received $48.0 million paid
Profit after revenue sharing:
$2.2 million
$48.0 million
$117.0 million
The revenue sharing pool is always "fully funded," i.e., it is always funded
to its full amount despite some teams having contribution limits.
When there
is a shortfall, the difference is made up through luxury tax receipts and
collective league sources4. This full funding guarantee did
not
apply to the 2011-12 season, due to the effects of the 2011 lockout. In order
to ensure adequate funding of the revenue sharing pool,
100% of the 2011-12 tax revenues was earmarked to fund the revenue sharing plan. Starting with
the 2012-13 season, 50% of tax revenues
goes to fund revenue sharing, with the
remaining 50% distributed back to non-taxpaying teams.
The revenue sharing plan will be reviewed following the 2013-14 season to see
if any adjustments are warranted.
1
The actual results for 2013-14 were that 21 teams were profitable
after revenue sharing and luxury tax redistributions, and the remaining
nine teams lost money.
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2
As of June 2014.
3
The pool itself really exists only on paper. A team that "contributes"
$150 million into the pool and "receives" $70 million really
just sends
in a check for the $80 million difference.
4
As of June 2014, $3.6 million from collective league sources was
projected to be used to fully fund the pool for the 2013-14 season.
25. What are salary cap exceptions?
The basic rule of the NBA's salary cap is that a team can't sign a player
or make a trade that leaves the team's team salary above the cap,
unless
the team is using an exception. In a system with a soft cap,
exceptions are the mechanisms that allow teams to function while above
the cap. Some exceptions are available only for making trades, and are
described in detail starting in question number 82. The
exceptions
available for signing players are as follows1:
LARRY BIRD EXCEPTION -- This exception allows teams to
exceed the cap in order to re-sign their own free agents, up to the
player's
maximum salary. Teams are said to have "Bird rights"
to players who qualify. To qualify for this exception a player essentially
must play for
three seasons without clearing waivers or changing teams as a
free agent, however there are nuances to this rule, which are explained
in
question number 33. This means a player can qualify
by playing under three consecutive one-year contracts, a single contract
of at least three
years, or any equivalent combination. It also means that
when a player is traded, his Bird rights are traded with him, and his new
team can
use the Larry Bird exception to re-sign him. These contracts can
be up to five years in length, with raises up to 7.5% of the salary in the
first
season of the contract. Players who qualify for this exception are
called "Qualifying Veteran Free Agents" in the CBA, and this
exception is
formally a component of the Veteran Free Agent exception.
The 1983 CBA introduced the modern salary cap, and with it the provision
allowing a team to exceed the cap to re-sign its own players. It is
commonly believed that this exception acquired its common moniker because
Larry Bird was the first such player to be re-signed. However,
this is
apocryphal, as Bird signed a seven-year contract in 1983 (before this
provision took effect), and did not sign another until 1988.
Starting January 10 of each season, this exception begins to reduce in
value. See question number 26 for details.
EARLY BIRD EXCEPTION -- This is a weaker form of the
Larry Bird exception. It also allows teams to exceed the cap to re-sign
their own free
agents, but with more limited contracts than the Larry
Bird exception. To qualify for this exception the player must play for
two seasons
without clearing waivers or changing teams as a free
agent (see question number 33 for details and nuances
to this rule). A team may use the
Early Bird exception to re-sign its
own free agent for up to 175% of his salary in the previous season2
(not over the maximum salary, of
course) or 104.5% of the average salary
in the previous season, whichever is greater (see question number
32 for the definition of "average
salary").
Early Bird contracts must be at least two seasons in length, which
prevents teams from using the Early Bird to sign a one-year
contract,
then signing the same player with the full Larry Bird exception the
following season. Early Bird contracts can be up to four years in
length,
with raises up to 7.5% of the salary in the first season of the contract.
Early Bird is also a component of the Veteran Free Agent
exception, and
qualifying players are called "Early Qualifying Veteran Free
Agents" in the CBA.
If the player is a restricted free agent with two years of service and
qualifies for the Early Bird exception, then the player's prior team
may use
the Early Bird exception to match an offer sheet he receives
from another team (see question numbers 44 and
45). This is true even if the
starting salary for
the Early Bird exception is lower than the starting salary in the
offer sheet, which is based on the Non-Taxpayer Mid-Level
exception.
A team can renounce its Early Bird rights to a player, and instead
re-sign him with the Non-Bird exception (see below). They might do this in
order to sign the player to a one-year contract, instead of the minimum
two years required by the Early Bird exception.
Starting January 10 of each season, this exception begins to reduce
in value. See question number 26 for details.
NON-BIRD EXCEPTION -- This is also a component of the
Veteran Free Agent exception. Its name is somewhat of a misnomer, since
Non-Bird
really is a form of Bird rights. Players who qualify
for this exception are called "Non-Qualifying Veteran Free Agents"
in the CBA. They are
veteran free agents who are neither Qualifying Veteran
Free Agents nor Early Qualifying Veteran Free Agents, and include the
following:
Players who finished the season with a given team, who have played
no more than one season without clearing waivers or changing
teams
as a free agent.
Players who were Early Bird free agents, but whose team renounced
its right to use the Early Bird exception to re-sign the player.
Players who were to be Larry Bird or Early Bird free agents, were
playing on one-year contracts, and were traded mid-season.
This exception allows a team to re-sign its own free agent to a salary
starting at up to 120% of his salary in the previous season2
(not over the
maximum salary, of course), 120% of the minimum salary, or
the amount needed to tender a qualifying offer (if the player is a restricted
free
agent -- see question number 44), whichever is
greater. Raises are limited to 4.5% of the salary in the first year of
the contract, and contracts
are limited to four seasons when this
exception is used.
A partial season counts as a full season for the tenure calculation
related to Bird rights. If a team signs another team's free agent to
a Rest-ofSeason contract mid-way through the season, then at the end
of that season the player is a non-Bird free agent.
Starting January 10 of each season, this exception begins to reduce in
value. See question number 26 for details.
NON-TAXPAYER MID-LEVEL EXCEPTION -- This exception is
available only when a team is below the "apron" (i.e., not paying luxury
tax, or
less than $4 million above the tax line). This determination is
made after the exception is used, so a team below the apron cannot
use this
exception if doing so takes it above the apron. It cannot be used
by a team that has already used the Taxpayer Mid-Level Exception or the
Room Mid-Level exception. It allows a team to sign any free agent to a
contract with a starting salary up to the following amounts3:
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Season
First-year salary
2011-12 $5.000 million
2012-13 $5.000 million
2013-14 $5.150 million
2014-15 $5.305 million
2015-16 $5.464 million
2016-17 $5.628 million
2017-18 $5.797 million
2018-19 $5.971 million
2019-20 $6.150 million
2020-21 $6.335 million
This exception may be split and given to multiple players. It may be
used for contracts up to four years in length, with raises up to 4.5%
of the
salary in the first year of the contract. Signing a player to a
multi-year contract does not affect a team's ability to use this
exception every year
-- for example, a team can use this exception to
sign a player to a four-year contract, and use it again the following
year to sign another
player. Also see question number 26
for more information on the availability and use of this exception.
If the player is a restricted free agent with one or two years of service
and receives an offer sheet from a new team, the player's prior team
may
use the Non-Taxpayer Mid-Level exception to match the offer sheet (see
question numbers 44 and 45).
Again, this exception is only available to teams that are below the "apron,"
i.e., below the point $4 million above the tax line. Teams above the
apron instead must use the smaller Taxpayer Mid-Level exception (see
below). Further, any team that uses its Non-Taxpayer Mid-Level
exception
cannot go above the apron for the remainder of that season. In other words,
once a team uses its Non-Taxpayer Mid-Level
exception, it is hard-capped
at the apron (see question 28 for more information).
However, if a team uses its Non-Taxpayer Mid-Level exception but does not
exceed the constraints of the Taxpayer Mid-Level exception (e.g.,
in
2011-12 they use the Non-Taxpayer Mid-Level exception to sign a player for
$3 million or less), then the team is allowed to later exceed the
apron (i.e.,
it is not hard-capped). If the team later exceeds the apron, then it is
considered to have used the Taxpayer Mid-Level exception
rather than the
Non-Taxpayer Mid-Level exception. But the converse is not true -- if a team
is above the apron and spends any of its Taxpayer
Mid-Level exception, it
cannot drop below the apron and spend the remaining money as part of its
Non-Taxpayer Mid-Level exception. Finally,
a team that was above the apron
but did not spend any of its Taxpayer Mid-Level exception has full access
to the Non-Taxpayer Mid-Level
exception if it later drops below the apron.
A different team salary definition is used for determining whether a
team is above or below the apron. See question number 14
for details. In
addition, this exception begins to pro-rate downward
daily starting on January 10 each season (see question numbers
26 and 29), and expires
following the
last day of the team's regular season.
TAXPAYER MID-LEVEL EXCEPTION -- This exception
is available only when a team is above the "apron" (i.e., with a
team salary $4 million
or more above the tax line). This
determination is made after the exception is used, so a team
below the apron must use this exception rather
than the Non-Taxpayer
Mid-Level exception if doing so takes them above the apron. This
exception cannot be used if the team has already
used the Bi-Annual,
Non-Taxpayer Mid-Level or the Room Mid-Level exception. Starting in
2013-14, it cannot be used if the team has received
a player that
season in a sign-and-trade transaction (see question number 91).
This exception allows a team to sign any free agent to a contract
with a starting salary up to the following amounts3:
Season
First-year salary
2011-12 $3.000 million
2012-13 $3.090 million
2013-14 $3.183 million
2014-15 $3.278 million
2015-16 $3.376 million
2016-17 $3.477 million
2017-18 $3.581 million
2018-19 $3.688 million
2019-20 $3.799 million
2020-21 $3.913 million
This exception may be split and given to multiple players. It may be
used for contracts up to three years in length, with raises up to 4.5%
of
the salary in the first year of the contract. Signing a player to a
multi-year contract does not affect a team's ability to use this
exception every
year -- for example, a team can use this exception to
sign a player to a three-year contract, and use it again the following
year to sign another
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player. Also see question number 26
for more information on the availability and use of this exception.
If the player is a restricted free agent with one or two years of service
and receives an offer sheet from a new team, the player's prior team
may
use the Taxpayer Mid-Level exception to match the offer sheet, but only
if the offer is within the constraints of the Taxpayer Mid-Level
exception
(see question numbers 44 and 45).
If a team uses its Non-Taxpayer Mid-Level exception but does not
exceed the constraints of the Taxpayer Mid-Level exception (e.g., in
2011-12
they use the Non-Taxpayer Mid-Level exception to sign a player for
$3 million or less) and the team later exceeds the apron, then the team
is
considered to have used the Taxpayer Mid-Level exception rather than
the Non-Taxpayer Mid-Level exception. But the converse is not true -- if
a
team is above the apron and spends any of its Taxpayer Mid-Level exception,
it cannot drop below the apron and spend the remaining money
as part of its
Non-Taxpayer Mid-Level exception. Finally, a team that was above the apron
but did not spend any of its Taxpayer Mid-Level
exception has full access
to the Non-Taxpayer Mid-Level exception if it later drops below the apron.
A different team salary definition is used for determining whether a
team is above or below the apron. See question number 14
for details. In
addition, this exception begins to pro-rate downward
daily starting on January 10 each season (see question numbers
26 and 29), and expires
following the
last day of the team's regular season.
ROOM MID-LEVEL EXCEPTION -- This exception is
available only to teams that drop far enough below the cap to use cap
room, and lose
their Bi-Annual, Non-Taxpayer Mid-Level and Taxpayer
Mid-Level exceptions (see question number 26). This
exception cannot be used if the
team has already used the Bi-Annual,
Non-Taxpayer Mid-Level or Taxpayer Mid-Level exceptions. This exception
becomes available once the
team salary drops far enough that the team
loses its other exceptions, and expires following the last day of the
regular season.
This exception allows a team to sign any free agent, starting at up
to the following amounts:
Season
First-year salary
2011-12 $2.500 million
2012-13 $2.575 million
2013-14 $2.652 million
2014-15 $2.732 million
2015-16 $2.814 million
2016-17 $2.898 million
2017-18 $2.985 million
2018-19 $3.075 million
2019-20 $3.167 million
2020-21 $3.262 million
This exception may be split and given to multiple players. It may be
used for contracts up to two years in length, with raises up to 4.5%
of the
salary in the first year of the contract. Signing a player to a
multi-year contract does not affect a team's ability to use this
exception every year
-- for example, a team can use this exception to
sign a player to a two-year contract, and use it again the following
year to sign another
player. Also see question number 26
for more information on the availability and use of this exception.
Once a team has used this exception, it can no longer use the Bi-Annual,
Non-Taxpayer Mid-Level or Taxpayer Mid-Level exception.
BI-ANNUAL EXCEPTION -- This exception is available
only to teams that are below the "apron" (i.e., not paying luxury tax,
or less than $4
million above the tax line). This determination is made
after the exception is used, so a team below the apron cannot
use this exception if
doing so takes them above the apron. It cannot be
used if the team has already used the Taxpayer Mid-Level Exception or
the Room Mid-Level
exception. It allows a team to sign any free agent,
starting at up to the following amounts:
Season
First-year salary
2011-12 $1.900 million
2012-13 $1.957 million
2013-14 $2.016 million
2014-15 $2.077 million
2015-16 $2.139 million
2016-17 $2.203 million
2017-18 $2.269 million
2018-19 $2.337 million
2019-20 $2.407 million
2020-21 $2.479 million
This exception may not be used two years in a row (and if this
exception was used under the previous CBA in 2010-11, it may not
be used in
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2011-12). It may be split and given to more than one
player, and can be used to sign players for up to two years, with
raises limited to 4.5%
of the salary in the first season of the
contract. Also see question number 26 for more
information on the availability and use of this exception.
A team that uses its Bi-Annual exception cannot go above the apron
for the remainder of that season. In other words, once a team uses
its BiAnnual exception, it is hard-capped at the apron (see question
28 for more information).
A different team salary definition is used for determining whether
a team is above or below the apron. See question number 14
for details. In
addition, this exception begins to pro-rate downward
daily starting on January 10 each season (see question numbers
26 and 29), and expires
following
the last day of the regular season.
ROOKIE EXCEPTION -- Teams may sign their first round draft picks
to rookie "scale" contracts even if they will be over the cap as a result
(see question number 49).
MINIMUM PLAYER SALARY EXCEPTION -- Teams can offer players
minimum salary contracts even if they are over the cap. Contracts can
be up
to two years in length. For two-year contracts, the second season salary is
the minimum salary for that season. The contract may not
contain a bonus of
any kind. This exception can also be used to acquire minimum salary players
via trade. There is no limit to the number of
players that can be signed or
acquired using this exception.
This exception begins to reduce in value after the first day of the season.
For example, if there are 170 days in the season, then this exception
reduces in value by 1/170 of its initial value each day. So if a team signs
a minimum salary player 90 days into the season, it can pay the
player only
80/170 of the minimum salary.
See question number 86 for more information on how minimum
salary players are handled in trade.
DISABLED PLAYER EXCEPTION -- This exception allows a team
which is over the cap to replace a disabled player who will be out for the
remainder of that season (it can also be granted in the event of a player's
death). This exception is granted by the league, based on an
application from
the team and a determination by an NBA-designated physician that the player
is substantially more likely than not to be
unable to play through the
following June 15.
If this exception is granted, the team can acquire one player via free agent
signing, trade or waiver claim, to replace the disabled player:
The team may sign a free agent for one season only, for 50% of the
disabled player's salary or the amount of the Non-Taxpayer MidLevel
exception, whichever is less.
The team may trade for a player in the last season of his contract
only (including any option years)4, who is making no more
than 50%
plus $100,000 of the disabled player's salary, or the amount of
the Non-Taxpayer Mid-Level exception plus $100,000, whichever is less.
The team may claim a player on waivers who is in the last season of
his contract only (including any option years), who is making no
more than 50% of the disabled player's salary, or the amount of the
Non-Taxpayer Mid-Level exception, whichever is less.
Teams can apply for this exception from July 1 through January 15, and cannot
apply after January 15. Once granted, the exception expires
when a player is
acquired, when the disabled player is traded or returns to the team, or on
March 10 of that season, whichever comes first.
This exception is granted on
a season-by-season basis -- if the player will also be out the following
season, the team needs to apply for this
exception again the following season.
This exception can only be granted to the team for which the player was
playing when his injury or illness was known, or reasonably should
have become
known. A team cannot trade for an injured player and subsequently apply for
a Disabled Player exception for that player.
If a team's application for a disabled player exception is denied, the team
must wait 90 days before submitting another request related to the
same
player, and then only for a new injury or aggravation of the same injury.
Whether the application was approved or denied, the team can
apply again
(including for the same injury) the following season.
If the disabled player comes back sooner than expected he may be
activated immediately, and the replacement player is not affected.
Don't confuse the Disabled Player exception with the salary cap relief
teams sometimes receive after losing a player to a career-ending injury
or death (see question number 63). The Disabled
Player exception allows a team to acquire a replacement player. The
salary cap relief
removes a contract from the team's books.
Also see question number 26 for more information
on the availability and use of this exception.
REINSTATEMENT -- If a player was banned from the league for a
drug-related offense and later reinstated, his prior team may re-sign
him for
up to his previous salary, or the average salary for the season in
which he is reinstated, whichever is less.
See question number 108 for more information on
reinstatement.
Summary of Salary Cap Exceptions
Larry
Bird
Who
Own free
agent, 3
seasons
without
Early
Bird
NonBird
Own free
agent, 2 Own free
seasons agent, if
without
not
changing
Larry
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NonTaxpayer
Taxpayer
MidMidLevel
Level
Any
Any
Room
MidLevel
Any
Bi-Annual
Rookie
Any
Team's
first
round
Minimum
Any
Disabled
Reinstatement
Player
Any
Reinstated
players resigning with
NBA Salary Cap FAQ
Qualifies
Minimum
Years
Maximum
Years
changing
teams as
a free
agent
1
5
Maximum
salary
Maximum
(see
Salary
note in
text)
teams
as a
free
agent
Bird or
Early
Bird
2
1
4
Greater
of
175%
of
previous
salary
or
average
salary
4
Greater
of 120%
of
previous
salary or
120% of
minimum
salary
draft
pick(s)
1
4
1
3
Set
amount
(see
text)
Set
amount
(see
text)
1
2
their prior
team
1
2 plus
two
team
options
1
1
1
2
2 plus
two
team
options
2
1
4
Player's prior
salary
Set
amount Set amount
(see
(see text)
text)
120% of
scale
amount
Minimum
salary
Lesser of
50% of
injured
player's
salary or
average
salary
Maximum
Raises
7.5%
7.5%
4.5%
4.5%
4.5%
4.5%
4.5%
Defined
in salary
scale
Salary
always
minimum
N/A
4.5%
Can be
split?
No
No
No
Yes
Yes
Yes
Yes
No
No
No
No
Other
Cannot be
used in
consecutive
seasons
Restricted
free
agency
following
option
years
Approval
from the
league
required.
Can be
used for
a limited
time
only.
1
The Traded Player exception is not listed because it cannot be used
to sign players.
2
If the player was awarded to the team through a partial waiver claim
under the amnesty provision (see question number 69),
his full
salary prior to amnesty is used as the basis for determining
the amount that can be offered under the non-Bird and Early Bird
exceptions.
3
In the previous CBA the Mid-Level exception was tied to the average
salary. This is no longer the case.
4
This means the Disabled Player exception cannot be used to acquire a
player in a sign-and-trade transaction. A sign-and-trade requires
signing the player for at least three years (see question number
91).
26. How do exceptions count against the cap? Does being under the cap always mean
that a team has room to sign free agents?
Do teams ever lose their exceptions?
If a team is below the cap, then its Disabled Player, Bi-Annual, Mid-Level
(either the Taxpayer or Non-Taxpayer Mid-Level, whichever applies to
the team)
and/or trade exceptions are added to their team salary, and the league
treats the team as though they are over the cap1. This is to
prevent
a loophole, in a manner similar to free agent amounts (see question number
39). A team can't act like it's under the cap and sign free
agents using cap room, and then use their Disabled Player, Bi-Annual, Mid-Level
and/or trade exceptions. Consequently, the exceptions are
added to their
team salary (putting the team over the cap) if the team is under the cap and
adding the exceptions puts them over the cap. If a
team is already over the cap,
then the exceptions are not added to their team salary. There would be
no point in doing so, since there is no cap
room for signing free agents.
So being under the cap does not necessarily mean a team has room to sign
free agents. For example, assume the cap is $58 million, and a
team has $51.5
million committed to salaries. They also have a Non-Taxpayer Mid-Level exception
for $5 million and a trade exception for $5.5
million. Even though their
salaries put them $6.5 million under the cap, their exceptions also count toward
their team salary, increasing their
total to $62 million, or $4 million over the
cap. So the team actually has no cap room to sign free agents, and instead must
use its exceptions
to sign players.
Teams have the option to renounce their exceptions in order to reclaim their
cap room. So in the example above, if the team renounced their
Traded Player
and Mid-Level exceptions, then the $10.5 million is taken off their team
salary, which then totals $51.5 million, leaving them
with $6.5 million of cap
room which then can be used to sign free agent(s).
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Starting January 10 (February 10 in 2011-12) of each season, the Mid-Level
(Non-Taxpayer, Taxpayer and Room), Bird (Larry Bird, Early Bird
and Non-Bird)
and Bi-Annual exceptions begin to pro-rate2 (reduce in value). For
example, if there are 170 days in the season, then these
exceptions reduce in
value each day by 1/170 of the amount remaining on January 10. So if a team
had a $5 million Non-Taxpayer Mid-Level
exception and spent $1 million before
the start of the season, then on January 10, and each day thereafter, it would
reduce in value by 1/170
of $4 million, or $23,529. If the team signs another
player on February 1 for $1 million, the daily pro-ration would still be 1/170
of $4 million.
A team's exceptions may be lost entirely, or the team may never receive them
to begin with. This happens when their team salary is so low
that when the
exceptions are added to the team salary, the sum is still below the salary
cap. If this happens when the exceptions arise, then
the team doesn't get
their exceptions at all. If the team salary ever drops below this level during
the year, then any unused portions of their
exceptions are lost (and do not
return if the team salary increases).
For example, assume there is a $58 million salary cap, and during the
offseason a team has $50 million committed to salaries, along with a
Non-Taxpayer Mid-Level exception for $5 million, a trade exception
for $2.5 million, and an unrenounced free agent whose free agent amount
is
$2 million. Their salaries and exceptions total $59.5 million, or $1.5
million over the cap. What if their free agent signs with another team?
The $2 million free agent amount comes off their cap, so their team salary
(including their remaining exceptions) drops to $57.5 million. This
total
is below the cap so the team loses its Non-Taxpayer Mid-Level and trade
exceptions.
There is logic behind this. The whole idea behind an "exception"
is that it is an exception to the rule which says a team cannot go over
the
salary cap. In other words, an exception is a mechanism which allows
a team to function above the cap. If a team isn't over the cap, then the
concept of an exception is moot. Therefore, if a team's team salary ever
drops this far, its exceptions go away. A rule of thumb is that a team
may
have either exceptions or cap room, but it can't have both at the same
time. However, a team in this situation does qualify to use the
Room
Mid-Level exception (see question number 25).
1
This is just for determining a team's ability to sign free agents
and use salary cap exceptions. It has no effect on such things as
the luxury
tax.
2
The Traded Player and Disabled Player exceptions do not pro-rate
this manner. The Minimum Salary exception also pro-rates, beginning
on
the first day of the regular season.
27. If a team has more than one exception available to sign a particular player,
are there any rules regarding which one it has to
use?
The team has the right to choose which of its available exceptions to use to
sign a player. However, teams may not combine exceptions, or
combine exceptions
with cap room, in order to sign a player. For example, a team $2 million under
the salary cap that has not used its $5
million Non-Taxpayer Mid-Level exception
may not combine the exception and the cap room to sign a player for $7 million.
This is explained
more thoroughly in question number 88.
28. What is the hard cap? When are teams subject to it? How does it work?
As described in question number 23, teams above the apron
-- the point $4 million above the tax line -- have a smaller Mid-Level exception,
cannot use the Bi-Annual exception, and cannot receive a player in a sign-and-trade
transaction. These exceptions are reserved for teams that
are below the apron.
This applies to the entire season in which one of these exceptions is used -- for
example, if a team is below the apron and
utilizes its Bi-Annual exception, it
commits itself to remaining below the apron for the remainder of that season
(through the following June
30).
In other words, when a team is below the apron and uses its Bi-Annual exception,
receives a player who is signed-and-traded, or uses its MidLevel exception to
sign a player to a contract larger than the Taxpayer Mid-Level exception allows,
the team becomes hard-capped at the apron
for the remainder of that season. This
eliminates any potential loophole where a team could first use one of these
exceptions and subsequently
add salary to go above the apron, since adding salary
first and then using the exception would be illegal.
If a team is hard-capped, it cannot exceed the apron under any circumstance. If
the team subsequently needs to sign a player (for example, to
replace injured
players) it must first create room under the apron by waiving player(s) with
non-guaranteed salary, waiving player(s) with
guaranteed salary and utilizing
the stretch provision, trading downward in salary, etc. A team that is hard-capped
can sign players to nonguaranteed contracts for training camp or the regular
season, but must rid themselves of such players before their salary would take the
team
above the apron. A team subject to the hard cap can also sign players to
Rest-of-Season contracts during the season, as long as the salary
pro-ration keeps
the team below the apron.
A modified version of the team salary calculation is used for all transactions
related to the apron and to the hard cap. See question number 14
for details.
29. When a player signs mid-year for the rest of the season, is his salary pro-rated?
What is a "Rest-of-Season" contract?
A "Rest-of-Season" contract is exactly what its name implies -- it is a
contract signed after the start of a season, which is in effect for the
remainder of that season.
With the exception of minimum-salary contracts, salaries do no pro-rate
during the season. However, the exceptions that enable players to be
signed are subject to pro-ration (see question number 26).
For example, a team that has not used its Non-Taxpayer Mid-Level exception
could
use its full amount to sign a player on the last day of the regular
season. By that day this exception will have pro-rated down to less than
half
its original value. However a player could sign a rest-of-season
contract on that day for the entire pro-rated amount, earning it all for
just one
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game.
The minimum salary begins to pro-rate on the first day of the regular
season. The minimum salary on a Rest-of-Season contract is based on
the
fraction of the season remaining when the contract is signed. For example,
if there are 170 days in the season, then a minimum salary
contract
signed on the 60th day of the season is worth 110/170 of the full
minimum salary amount.1 If a player signs a multi-year minimum
salary contract partway through the first season, then the first season is
pro-rated and the salary in subsequent seasons is the full minimum
salary.
Raises are based on the actual salary in the first season of the contract.
For example, if a free agent signs a two-year contract on the last day
of
the regular season and the salary for the first season is $1 million, then
the second season salary may range from $955,000 to $1.045
million.
10-day contracts (see question number 80) are also
pro-rated. The salary on a 10-day contract is based on the number of
days actually
covered by the contract (a 10-day contract lasts 10 days
or three games, whichever is longer).
1
It is not considered a minimum-salary contract if a player signs
for more than the pro-rated minimum -- i.e., it cannot be signed
using the
Minimum Player Salary exception (see question number
25), the player cannot be traded as a
minimum-salary player (see question
number 86),
and the team cannot receive reimbursement for a portion of the
salary (see question number 16).
30. Can a team pay a player less but arrange for an affiliated company to also
pay him, perhaps by way of an endorsement
contract?
I suppose it could happen, but the NBA will investigate if it suspects that an
outside person or organization is paying a player on behalf or at
the request
of a team (even if the compensation is ostensibly for non-basketball services).
If they find out that such circumvention has
occurred, they will penalize the team.
For the first offense the fine can be up to $3 million, forfeiture of a first
round draft pick, and/or voiding
the player's contract (see question number
110). The penalties increase for subsequent violations.
See question number 105 for more information on circumvention.
Incidentally, players are no longer allowed to become player-coaches. This is
because it would be possible to circumvent the cap by signing a
player as a
player-coach, and paying him less as a player but overpaying him as a coach.
31. Do players and teams ever have under-the-table agreements for future
contracts? What happens when the league finds out
about them? Is this
what happened with the Timberwolves and Joe Smith?
Teams and players are not allowed to negotiate terms a new contract (other than
an extension) prior to the July 1 when the player becomes a
free agent1.
Teams are required to notify the league office immediately upon reaching any verbal
or written agreement with a player, and all
contracts must be filed with the
league office within 48 hours of signing. If a team makes an agreement with
a player that is not reported to
the league, the penalties can be even harsher
than those described in question number 30. Such a violation
is considered by the league to be
among the most serious a team can commit. Again,
the league will investigate any allegations of wrongdoing. A violation can result
in a fine up
to $6 million, forfeiture of draft picks, voiding the player's
contract(s) (see question number 110), and/or the suspension
for up to one year of
any team personnel who were involved. In addition, the player
himself can be fined up to $250,000, and prohibited from ever signing with that
team.
This is what happened in 2000 with Joe Smith and the Minnesota Timberwolves.
Smith left the Philadelphia 76ers in 1999 (following the
lockout) to sign
with the Minnesota Timberwolves for their $1.75 million Mid-Level exception.
They made an under-the-table agreement that
Smith would play under three
consecutive one-year contracts at below market value, and the Timberwolves
would reward him by using their
Bird rights to sign him to a huge contract
beginning with the 2001-02 season. Unfortunately, they reduced this agreement
to writing, and the
written agreement eventually found its way into the
league's hands.
It had long been rumored that such under-the-table agreements existed, but
this was the first time the league had hard evidence in the form
of a signed
contract. The league responded by fining the team the maximum (at the time)
$3.5 million, taking away their next five draft picks
(two were later
returned), and voiding Smith's then-current contract. Owner Glen Taylor and
GM Kevin McHale also agreed to leaves of
absence (in lieu of suspensions, at
which time the fifth draft pick was returned). Most interestingly, the league
also voided Smith's two
previous, already-completed contracts. This essentially
stripped the Timberwolves of any Bird rights to Smith, preventing them from
re-signing
Smith for any salary above the minimum (they had already used their
other exceptions). Smith left Minnesota and signed with the Detroit
Pistons,
but returned to Minnesota in 2001.
1
Nor can a team negotiate before July 1 with an unrestricted free agent
who did not play in the NBA during the prior season.
32. How is "average salary" defined?
The league computes the average player salary for a season by dividing the
total salaries paid during that season1 by 13.2 times the number
of
teams (other than expansion teams in their first two seasons). The current
denominator is 13.2 times 30, or 396.
The average player salary for a season is not determined until the league audit
in July, following the conclusion of the season. Before the
average salary is
determined they use an estimated average salary, which is 104.5% of the average
salary for the previous season. The
estimated average salary figure is used when
determining the amount of the Early Bird exception, the cap hold for unsigned
free agents, and
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the salaries of reinstated players. Here are the average salary
values for each season:
Season
Estimated average salary Average salary
2011-12 $5.38 million
$5.048 million
2012-13 $5.276 million
$5.325 million
2013-14 $5.565 million
$5.389 million
2014-15 $5.632 million
1
Including any supplemental payment to the players in the event of
a shortfall in the players' share of BRI (see question number
18).
33. How long must a player be with one team before the Larry Bird exception can be used?
The basic idea is that a player must play for the same team for three seasons
for his team to gain Bird rights (two seasons for Early Bird
rights). It can be
a single three-year contract, a series of three one-year contracts, or any
combination that adds up to three seasons (or two
for Early Bird). However there
are a number of complications:
When a player is traded, his new team inherits his Bird rights. For example,
if a player signs a three-year contract, plays two and a half
seasons with
that team, and is traded at the trade deadline in the third season, then his
new team has full Bird rights following the third
season.
The first season of the three-year tenure doesn't have to be a full
season. If a player signs midseason in year one, then plays for two
additional
full seasons, his team will have full Bird rights following the third season.
The player must complete his contract immediately prior to becoming a free
agent, which essentially means he can't have cleared
waivers. If he signs a series
of contracts, then this only applies to the last contract. If a team signs a
player and waives him after one
game, signs and waives him after one game
again the next year, and in the third year signs him and keeps him the entire
season
(assuming he didn't sign elsewhere during those three seasons), then
they will have full Bird rights following the third season.
The same is true for Early Bird rights. For example the Chicago Bulls signed
John Lucas III to a one-year contract for 2010-11, but waived
him in October,
2010. They signed him again to a non-guaranteed contract in November 2010, but
waived him again in January 2011
(just before the league wide contract guarantee
date). They signed him again in March 2011 to a two-year contract (with a team
option
for 2011-12, which the Bulls picked-up). Despite having three contracts
and being waived twice over a two-year period, the Bulls have
Early Bird rights
to Lucas in 2012.
Once Bird rights are established, they don't go away unless the player is
renounced or signs with another NBA team. This means teams
retain Bird rights
to many players who have long since retired, and could still use those Bird
rights to re-sign such a player if that player
attempts a comeback (but not
for a sign-and-trade transaction -- see question number 102
for details).
If the player is out of the NBA for at least one season before re-signing, the
clock resets when he re-signs with his prior team. This is
because Bird rights
are established on the basis of the immediately preceding three (or two) seasons
when a player becomes a free
agent. For example, if a team had Larry
Bird rights to a free agent in 2011 and that player signed overseas for 2011-12,
then the team
still has full Bird rights if the player returns to the NBA in 2012
(because when the player became a free agent in 2012 they had full Bird
rights, and those rights didn't go away when the player signed outside the NBA).
However, if that player signs a one-year contract with
his previous NBA team for
2012-13 then the clock resets, and the team will have only Non-Bird rights in
2013 -- because the player
becomes a free agent again in 2013, so his
Bird status is re-evaluated on the basis of the 2010-11, 2011-12 and 2012-13
seasons. Since
the player did not play for the team in 2011-12, the one-year
version of Bird rights (non-Bird) is awarded.
The clock resets when the player signs with a different NBA team as a free agent.
An interesting case occurred in the 2008-09 season
with Antonio McDyess, who
had played exclusively for the Pistons since the 2004-05 season. In 2008-09
the Pistons traded him to the
Nuggets, the Nuggets waived him, and he re-signed
with the Pistons. Even though he only signed contracts with the Pistons and he
completed his last contract without being waived, his Bird clock reset when he
re-signed with the Pistons because he changed teams as a
free agent.
If a player is waived and is claimed by another team before he clears waivers,
his Bird clock does not reset. This was settled in an
arbitration decision
in June, 2012. However, players who are waived and claimed by another team do
not retain full Bird rights unless the
player was waived through the Amnesty
provision (see question number 69).
If a player is selected in an expansion draft, then his Bird clock resets.
Bird rights do not exist if the player's last contract was a 10-day contract
(see question number 80). However, if the player's last
contract
was not a 10-day contract, then any preceding 10-day contracts
could count toward Bird rights. For example, if a player signs only a 10day
contract in 2012-13, and a regular, one-season contract for 2013-14, then he
is an Early Bird free agent in 2014.
If a team renounces a player (see question number 41), they
can't use the Bird exception to re-sign him. However, if that team then resigns
the player by some other means (for example, with cap room), the team reclaims
its Bird rights.
34. Why a three-year wait before gaining Bird rights?
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It closed a salary cap loophole. There used to be no waiting period,
but this was abused by Portland with Chris Dudley and Phoenix with
Danny
Manning. Both teams signed these players to one-year deals at
small salaries. The next year, Bird rights in hand, they signed new
contracts far
in excess of the cap. The three-year rule prevents
these types of cap circumventions.
35. Does having Bird rights mean that free agents can be signed and not
count against the cap?
With very few exceptions, all salaries are included in team salary.
The Bird exception simply enables a team to exceed the cap to sign
certain
players. The player's new salary applies toward the team
salary just like the salaries of the team's other players. So if a
team is over the cap
and uses the Bird exception to re-sign its own
free agent, it will end up farther over the cap.
36. I just saw that a team signed a player for more money than it has under the cap.
It was another team's free agent, so the
Bird exception wasn't used. What gives?
If one of the other exceptions wasn't used, it may just be the way the
deal was reported. In most cases, only the first season's salary must
fit
under the cap, but signings are often reported using the total salary
for the entire contract. For example, if a team is $10 million under the
cap, they can sign a player to a four-year contract for $10 million, $10.45
million, $10.9 million and $11.35 million, respectively, for the four
seasons. The deal then gets reported as four years for $42.7 million.
But only the first-year salary counts when determining whether the
team
has enough cap room, and the first-year salary fits perfectly.
37. Can a team with cap room sign all the free agents it wants (up to the salary cap) and
THEN re-sign its own free agents using
the Bird exception?
A team's ability to do this is very limited. The team's free agents continue to
be included in team salary. This charge is called the "free agent
amount," which
is a form of cap hold. There may not be enough money available under the cap to
sign another team's free agent, because the
team's own free agents are taking up
all its cap room.
38. How much do free agents count toward team salary?
The free agent amount depends on the player's previous salary and what kind
of free agent he is:
Kind of free agent
Previous salary
Free agent amount
Any
Minimum salary
Portion of minimum salary not reimbursed by the league (see question
number 16)
Larry Bird, not coming off rookie scale
contract
At least the estimated
average salary1
150% of his previous salary2
Larry Bird, not coming off rookie scale
contract
Below the estimated
average salary1
190% of his previous salary2
Larry Bird, following the fourth season of
his rookie scale contract
At least the estimated
average salary1
200% of his previous salary2
Larry Bird, following the fourth season of
his rookie scale contract
Below the estimated
average salary1
250% of his previous salary2
Larry Bird, following the third season of his
Any
rookie scale contract
The maximum amount the team can pay the player using the Larry
Bird exception
(see question number 25)
Early Bird, following the second season of
his rookie scale contract
Any
The maximum amount the team can pay the player using the Early
Bird exception
(see question number 25)
Early Bird (all others)
Any
130% of his previous salary2
Non-Bird
Any
120% of his previous salary2
Note that if a player was amnestied and claimed by another team in a partial waiver
claim (see question number 69), the percentages in the
above
chart are based on the player's full season salary, and not just the portion paid
by the claiming team. If the player was signed pursuant
to the Gilbert Arenas provision
(see question number 45), the percentages in the above chart are
based on the team salary value (the average
salary in the entire contract), and not
on the actual salary in the final season of the contract.
A restricted free agent is included in team salary by the greatest of:
His free agent amount (as defined in the table above)
The amount of his qualifying offer (see question number 44)
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The first-year salary in a first refusal exercise notice (a notice
given to the player that the team is exercising its right of first
refusal by
matching an offer sheet (see question number
44)
Here's an example of how to use this chart: Let's say a player who made
$5 million during the previous season becomes an Early Bird free
agent,
and is not coming off the second season of his rookie scale contract.
According to this chart, the player's free agent amount is 130% of
his
previous salary. So $6.5 million is included in team salary while he
is a free agent.
See question number 49 for more information on rookie
"scale" contracts, question number 41 for
information on renouncing players, and
question number 44
for information on restricted free agency.
1
See question number 32.
2
A player's free agent amount is never less than his minimum salary
or greater than his maximum salary, based on his years of service
(see question number 16).
39. Why do free agents continue to count against team salary?
It closes a loophole. Teams otherwise would be able to sign other teams'
free agents using their cap room, and then turn their attention to
their own
free agents using the Bird exception. This rule restricts their ability to do
that. It uses the player's current status (type of free agent,
whether coming
off a rookie contract, and previous salary) as a rough guideline to predict
the amount the player is likely to receive in his next
contract, and sets
that amount aside in the form of a cap hold. But while it functions as a
rough guideline, it's obviously not perfect -- for
example, in 2005 Michael
Redd's free agent amount was just $6 million, even though the Bucks intended
to re-sign him for the maximum
salary. By waiting to sign Redd last, the Bucks
were able to take advantage of the difference by signing Bobby Simmons. Had
they signed Redd
first, they would not have had enough cap room to sign Simmons.
40. When do free agents stop counting against team salary?
Free agents continue to be included in team salary until one of the following
three things happens:
The player signs a new contract with the same team. When this happens, the
team salary reflects the player's new salary rather than his
cap hold.
The player signs with a different team. As soon as this happens, the player
becomes his new team's problem, and his salary no longer
counts against his
old team.
The team renounces the player. (See question number 41)
41. What does renouncing a player mean?
As detailed in question number 38, free agents continue
to be included in team salary. By renouncing a player, a team gives up its
right to use
the Larry Bird, Early Bird, or Non-Bird exceptions (see question
number 25) to re-sign that player. A renounced player no
longer counts toward
team salary, so teams use renouncement to gain additional
cap room. Teams are still permitted to re-sign renounced players, but only
with cap
room or an exception other than the Bird exception1. The
exception to this rule is that an Early Bird free agent, at the team's option,
can be
renounced to the Non-Bird level. A team might do this in order to sign
the player to a one-year contract, instead of the minimum two years
required
by the Early Bird exception.
If the player does not sign with any team (his prior team or any other team)
for the entire season, then his renouncement continues. In other
words, the
team is not permitted to renounce a player, let him sit idle for the year, and
then re-sign him the following summer using Bird
rights. However, if the player
re-signs with his prior team, then his renouncement is no longer in effect when
his contract ends. For example, if
a team renounces their Larry Bird rights to
a player, then re-signs that player to a one-year contract using cap room, the
player will be a Larry
Bird free agent once again the following summer.
After renouncing a player, a team can still trade the player in a
sign-and-trade agreement (see question number 91).
1
The team is bound to the restrictions on salary, contract length and
raises associated with the means they use to sign the player.
42. Can the renouncement be renounced? In other words, can a team un-renounce
a player and then sign him using a Bird
exception?
Only in one specific circumstance -- when they renounce one or more of their
players in order to create enough cap room to sign another
team's restricted
free agent, but the restricted free agent's original team matches the offer
sheet and keeps him. If that happens, the team can
rescind the renouncement.
However, a team can't rescind a renouncement if doing so takes them from
below the salary cap to above it; or if they are already above the
cap and
rescinding the renouncement takes them farther above the cap than they were
before the renouncement. This closes a loophole -- it
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prevents a team from
rescinding a player in order to make an offer, then if the offer isn't
accepted using the resulting cap space to sign
another free agent, before
rescinding the renouncement to get back the renounced player's Bird rights.
Incidentally, they use a different system for teams that submit partial
waiver claims in conjunction with the Amnesty provision (see question
number
69). If a team needs to renounce a free agent to create
cap room for a partial waiver claim, they can submit a bid without renouncing
their free agent. If they are the winning bidder, then the renunciation must
occur immediately when the amnestied player is awarded to the
team.
See question number 44 for more information on restricted
free agency.
43. Let's say a team arranges for all of its players to become free agents at the same time.
If they renounce everybody, do they
then have a team salary of $0 and a full cap under
which to work?
No. There are lots of things that are included in team salary besides active
contracts -- see question number 14 for a full list. Note
especially
that there is a roster charge when a team has fewer than 12 players
under contract, free agents included in team salary, players given offer
sheets,
and first round draft picks -- so even if a team has no contracts and renounces
all its free agents, exceptions and draft picks, it will still
have a non-zero
team salary.
44. What is restricted free agency?
There are two types of free agency: unrestricted and restricted. An
unrestricted free agent is free to sign with any other team, and
there's
nothing the player's original team can do to prevent it.
Restricted free agency gives the player's original team the right to
keep the player by
matching a contract the player signs with
another team. This is called the "right of first refusal."
Restricted free agency exists only on a limited basis. It is allowed
following the fourth year of rookie "scale" contracts for
first round draft picks
(see question number 49).
It is also allowed for all veteran free agents who have been in the
league three or fewer seasons. However, a first
round draft pick
becomes an unrestricted free agent following his second or
third season if his team does not exercise its option to extend his
rookie scale contract for the next season. All other free agency is
limited to unrestricted free agency.
In order to make their free agent a restricted free agent, a team
must submit a qualifying offer to the player between
the day following the
last game of the NBA Finals and June 30. The
qualifying offer is a standing offer for a one-year guaranteed
contract, which becomes a regular
contact if the player decides to
sign it. This ensures that the team does not gain the right of first
refusal without offering a contract themselves.
The amount of the
qualifying offer for players on rookie "scale" contracts is based on
the player's draft position. The qualifying offer for all
other players
must be for 125% of the player's previous salary, or the player's
minimum salary (see question number 16) plus
$200,000,
whichever is greater. However, a player may qualify for a
higher or lower qualifying offer based on whether or not he met the
"starter criteria"
in the previous season, or in the average of the
previous two seasons. The starter criteria are based on starting 41
games or playing at least
2,000 minutes in the regular season1.
If the player was drafted with picks 10-30 and met the starter criteria,
his qualifying offer equals the amount of the qualifying offer2
applicable to the ninth pick in the same draft class.
If a second round pick or undrafted player met the starter criteria following
his second or third season in the league, his qualifying offer
equals the
amount of the qualifying offer applicable to the 21st pick in the first round
of the draft class whose rookie scale contract is
now finishing3,
if this amount is higher than the qualifying offer he otherwise would have
received.
If the player was drafted with picks 1-14 and did not meet the
starter criteria, his qualifying offer can be no higher than the amount
of
the qualifying offer2 applicable to the 15th pick in the
same draft class.
A qualifying offer automatically expires on October 1, unless it
is extended by the team (which is rarely done). A qualifying
offer cannot be
extended past March 1. If the deadline passes and
the qualifying offer is neither withdrawn nor accepted, the
player continues to be a
restricted free agent. The team and player
are free to negotiate a new contract after the qualifying offer
expires -- the deadline only affects the
player's ability to accept
his qualifying offer.
If the player is coming off the fourth year of his rookie scale
contract, then in addition to a qualifying offer, his team can also
submit a
maximum qualifying offer. A maximum
qualifying offer is for five seasons at the maximum salary with
7.5% annual raises. It can contain no
options, ETOs or bonuses of
any kind, and must be fully guaranteed. When a team submits a maximum
qualifying offer (in essence "stepping
up" with a maximum
contract offer before the player hits the free agent market), it
places a more stringent requirement on other teams' offer
sheets
(see below).
A player can elect to accept his qualifying offer and play the
following season under its terms. This is sometimes done in order
to become an
unrestricted free agent the following summer (see
question number 46).
When a restricted free agent wants to sign with another team, the
player and team sign an offer sheet, the principal
terms of which the
original team is given three days to match.4
The offer sheet must be for at least two seasons (not including option
years). If the player's prior
team also submitted a maximum qualifying
offer, then the offer sheet must be for at least three seasons (not
including option years). If the
player's original team exercises its
right of first refusal within three days, the player is then under
contract to his original team, at the principal
terms of the offer
sheet (but not the non-principal terms). If the player's original
team does not exercise its right of first refusal within three
days
(or provides written notice that it is declining its right of first
refusal), the offer sheet becomes an official contract with the new
team.
The principal terms of an offer sheet consist of the following. Any
other terms of an offer are not considered to be principal terms,
and the
player's original team is not required to match:
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The number of years, including option years.5
The base salary
The amount of any signing bonus or deferred compensation,
including the payment schedule
Certain bonuses -- those considered to be "likely"
for both teams (see question number 74),
and those based on generally recognized
league honors6
Any allowable amendments such as guarantees, options and trade
bonuses
As with any contract offer, a team must have enough room -- either
cap room or room provided by an exception -- for the offer sheet. It
must
maintain the necessary room from the time the offer sheet is
signed until the time the new contract is in place or the player's
prior team
exercises its right of first refusal.
Likewise, the player's prior team cannot match an offer sheet that
is greater than its room -- again, either cap room or a satisfactory
exception
-- and must maintain the necessary room from the time it
gives notice of first refusal to the time the new contract is in place.
There are additional restrictions placed on offer sheets for players
with one or two years in the league, under a rule known as the
"Gilbert
Arenas provision." This provision helps enable
teams to retain their restricted free agents under certain
circumstances. This is described in
question number 45.
An offer sheet cannot be signed after March 1. If the player
does not sign an offer sheet by that date, his only choice is to
re-sign with his
previous team (or remain unsigned for the rest
of the season). This happened with Wilson Chandler, who signed
in China during the 2011
lockout and did not return to the NBA
until after March 1, 2012. Chandler ended up re-signing with the
Nuggets to a five-year contract shortly
after returning to the
United States.
A team may relinquish its right of first refusal, making the player
an unrestricted free agent. If a qualifying offer is
outstanding, the team can
withdraw it unilaterally through July 23.
It can be withdrawn after July 23 if the player consents, in which
case the player is also renounced as
a free agent7 (see
question number 41). If a qualifying offer is
not outstanding, then a team can relinquish its right of
first refusal at any time
by providing written notice.
To summarize, a restricted free agent essentially has five options:
He can accept his prior team's qualifying offer, play for one
season, and become a free agent again the following summer.
He can accept his prior team's maximum qualifying offer (if
applicable, and if one has been submitted) and play under a
long-term
contract at the maximum salary.
He can negotiate a new contract with his prior team that is
independent of the qualifying offer or maximum qualifying offer.
He can sign an offer sheet with another team through March 1,
which his prior team is given the opportunity to match.
If he doesn't sign a qualifying offer, a contract, or an offer
sheet for one year, his prior team can submit a new qualifying
offer (or
maximum qualifying offer), and the player becomes a
restricted free agent again the following offseason.
There can be no compensation given to a team in return for their
submitting or not submitting an offer sheet, or for matching or
not matching
an offer to a restricted free agent. For example,
Houston could not sign Golden State's restricted free agent to
an offer sheet, then send Golden
State a draft pick in exchange
for their not matching the offer.
If a team matches an offer sheet and retains its free agent, then
for one year they cannot trade him without his consent, and during
that year
cannot trade him at all to the team that signed him to
the offer sheet. They also can't trade the player in a sign-and-trade
transaction (see
question number 91). A restricted
free agent's resulting contract (whether with the new team or the
contract is matched by the player's prior
team) cannot be amended in
any manner for one year.
1
For 2011-12 the player's games started and minutes played were
multiplied by 82/66 when determining whether he met the starter
criteria.
2
Determined by taking 120% of that pick's scale amount for the third
season, adding the percentage raise for the fourth season specified
in
the salary scale, and then adding the percentage raise for the
qualifying offer specified in the salary scale.
3
For example, in 2014 a qualifying offer is based on the scale amount
for the 21st pick in the 2010 draft class, since the rookie scale
contracts for the 2010 draft class are finishing in 2014. The amount
is determined by taking 100% of that pick's scale amount for the
third
season, adding the percentage raise for the fourth season specified
in the salary scale, and then adding the percentage raise for the
qualifying offer specified in the salary scale.
4
The team must submit a First Refusal Exercise Notice within three
days -- the actual contract usually comes a couple days later. The
First
Refusal Exercise Notice creates a binding agreement where the
principal terms of the offer sheet will need to be part of the new
contract.
5
By definition, an offer sheet cannot contain an Early Termination
Option (ETO) since an ETO cannot occur prior to the end of the fourth
season, and the maximum length of an offer sheet is four seasons.
6
Generally recognized league honors includes MVP, Finals MVP,
Defensive Player of the Year, Sixth Man, Most Improved
Player, All-NBA
Team (first, second and third), All-Defensive
Team (first and second), and All-Star selection.
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7
If a team withdraws its qualifying offer on or before July 23
it retains its Bird rights to the player.
45. What is the "Gilbert Arenas" provision?
Before 2005 it was sometimes possible to sign restricted free agents
to offer sheets their original teams couldn't match. This happened
when a
player was an Early Bird or Non-Bird free agent (see question
number 25) and the team didn't have enough cap room
to match a sufficiently
large offer. For example, Gilbert Arenas was
Golden State's second round draft pick in 2001, and became an Early
Bird free agent in 2003.
Golden State could only match an offer sheet
(or sign Arenas directly) for up to the amount of the Early Bird
exception, which was about $4.9
million at the time. Washington signed
Arenas to an offer sheet with a starting salary of about $8.5 million,
which Golden State was powerless
to match.
This loophole was addressed starting with the 2005 CBA (although not
closed completely -- see below). Teams are now limited in the salary
they can offer in an offer sheet to a restricted free agent with one
or two years in the league. The first-year salary in the offer sheet
cannot be
greater than the Non-Taxpayer Mid-Level exception (see
question number 25). Limiting the first-year salary
in this way enables the player's
original team to match the offer
sheet by using the Early Bird exception (if applicable -- see question
number 25), or Non-Taxpayer Mid-Level
exception
(provided they have it and haven't used it already)1.
The second-year salary in such an offer sheet is limited to the standard
4.5% raise. The third-year salary can jump considerably -- it is allowed
to be as high as it would have been had the first-year salary not been
limited by this rule to the Non-Taxpayer Mid-Level exception2.
The salary
in the fourth season may increase (or decrease) by up to 4.1%
of the salary in the third season. The offer sheet can only contain the
large
jump in the third season if it provides the highest salary allowed
in the first two seasons, it is fully guaranteed, and it contains no
bonuses of
any kind.
If the raise in the third season exceeds the standard raise (4.5% of the
salary in the first season of the contract), then an additional restriction
exists. In order to determine how large the offer can be, the team doesn't
just have to fit the first-year salary under the cap. Instead, they
must
fit the average salary in the entire contract under the cap. So a team $8
million under the cap is limited to offering a total of $24 million
over
three years, or $32 million over four years. If the offer sheet does not
contain a third-season raise larger than 4.5% of the first-season
salary,
then they only have to fit the first season salary under the cap.
Putting this all together, if a team that is $9 million under the cap in
2011-12 wants to submit a four-year offer sheet, and wants to provide
a
large raise in the third season, they can offer a total of $36 million
over four years. The first-year salary is limited to the Non-Taxpayer
MidLevel exception, or $5 million. The second-year salary will be $5.225
million (4.5% raise). This leaves $25.775 million to be distributed over
the
final two seasons of the contract, with a 4.1% raise from year three
to year four. So the entire contract looks like this:
Season Salary
Notes
1
$5,000,000
Non-Taxpayer Mid-Level amount for 2011-12
2
$5,225,000
4.5% raise over season 1
3
$12,628,613 This is the amount that yields $25.775 million over the final two seasons with a 4.1% raise3
4
$13,146,387 Raise is 4.1% of season 3 salary
Total
$36,000,000 Average is $9 million, which equals the team's cap room
For the team making this offer, this contract would count for $9.0
million (i.e., the average salary in the contract) of team salary in
each of the
four seasons if they sign the player. If the player's
prior team matches the offer and keeps the player, then the actual
salary in each season
counts as team salary.4 The player's
original team is allowed to use any available exception (e.g., the
Non-Taxpayer Mid-Level or the Early
Bird) to match the offer.
Since a team must fit the average salary from the entire contract under
the cap in order to offer the large third-season raise, it must have
some amount of cap room above the Non-Taxpayer Mid-Level exception
amount in order to utilize this provision. For example, suppose the
Non-Taxpayer Mid-Level exception amount is $5 million, and a team wants
to provide a four-year offer sheet. If they want to offer a third-year
raise greater than 4.5%, their cap room will be determined by the
contract's average salary, so the total contract must pay $20.4 million
or
less. However, since a four-year offer starting at $5 million with
standard 4.5% raises would total $21.35 million, the Arenas provision
would
be ineffective unless it offered more than this amount. So the
team in this example would need at least $5.3375 million in cap room in
order to
utilize the provision.
As I said above, the loophole was addressed with this rule, but not
closed completely. The Gilbert Arenas provision is primarily intended
to
protect teams from losing their successful second round picks, who
are typically Early Bird free agents after two years. There are several
situations where a team still might be unable to match an offer sheet:
If the player is a Non-Bird free agent, the team only has the Taxpayer
Mid-Level exception, and the offer sheet is higher or for more
years
than allowed by the Taxpayer Mid-Level exception.
If the player is a Non-Bird free agent and the team already used
their Non-Taxpayer Mid-Level exception to sign another player.
If the player is a Non-Bird or Early Bird free agent with three
years in the league (this rule applies only to players with one or
two years in
the league).
If a team has two Non-Bird free agents with one or two years in
the league. They can use their Non-Taxpayer Mid-Level exception to
keep
one of them, but would lose the other.
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1
Teams can also use cap room to match, of course.
2
To determine whether the team has enough cap room to offer a contract
with a substantial increase in the third season, they compare the
cap
room to the average salary in the offer sheet.
3
If you want to know how I got that exact amount, you solve for
(4R - 2.045E) / 2.041. R is the room the team has under the cap,
so the
entire four-year contract pays 4R. E is the Non-Taxpayer
Mid-Level Exception amount, which is the maximum the team can
offer in the
first season. The second season has a 4.5% raise,
and the first two seasons together account for E + 1.045E, which
is 2.045E. So the last
two seasons total 4R - 2.045E, and with a
4.1% raise from year three to year four, we can say (if Y is the
year 3 amount) Y + 1.041Y =
4R - 2.045E, so the year three amount
is (4R - 2.045E) / 2.041.
4
If a player signed pursuant to the Gilbert Arenas provision is
later traded, his trade value is equivalent to his cap amount, and
new team
inherits the same cap hit as the team that traded him.
In other words, if the player goes to the team submitting the
offer sheet and that
team later trades him, the average salary
of the contract is charged to his new team's cap. If instead the
player's original team matches
the offer sheet, keeps the player,
and subsequently trades him, the player's actual salary is charged
to his new team's cap.
46. Haven't some restricted free agents gotten away anyway? How did this happen?
For one, the team can simply decide not to match the offer sheet. If this
happens, the offer sheet becomes an official contract with the new
team
after three days. The team can also provide the league with a written
statement declining their right to match the offer sheet, in which
case
the player becomes a member of his new team right away.
It is sometimes possible to sign a player to an offer sheet his prior
team cannot match, as described in question number 45.
47. What if a restricted free agent has no interest in staying with his original team?
Is there any way he can force the issue?
If the player really wants to leave, he can sign his original team's
qualifying offer, which constitutes a one-year contract at a scale
salary. He
must then play with his original team for one season, and
following that season he will become a free agent again. If he meets
the tenure
requirement he will be an unrestricted free agent,
and then can sign with any other team.
This strategy typically would not be effective for players who would
continue to be subject to restricted free agency. For example, if a
second
round pick completes a two-year contract, he will be a restricted
free agent at the end of his second year. But if he accepts his
qualifying offer
and plays an additional season with his previous team,
he would be a three-year veteran the following summer and therefore
still subject to
restricted free agency.
48. Does a team receive compensation when another team signs their free agent,
like in some other sports?
No. A team that loses a free agent does not receive anything. It used
to be the case in the NBA a long time ago, but not any longer. Perhaps
the
most famous example of this is when the Lakers' Gail Goodrich signed as
a free agent with the New Orleans Jazz. The Lakers received a
draft pick
as compensation, which turned out to be Magic Johnson.
49. First round draft picks operate under a different set of rules?
Yes. There's a salary scale for first round draft picks and their first
contracts. They do this because it was previously common for rookies to
hold out, not signing with their team until they got the contract they
wanted. There was also backlash from the veteran players who saw
rookies
with no NBA experience getting more money than they were. The last year
without a salary scale was 1994, when it was rumored that
first overall
pick Glenn Robinson was going to hold out for $100 million, and he
eventually signed a 10-year, $68.15 million contract.1
Beginning in 1995, salaries for first round picks were set according
to a strict scale, determined by their draft position. The salary scale
is
determined for all picks in all seasons when the CBA is written.
Rookie scale contracts are always for two seasons, with team options
for the
third and fourth seasons. Scale amounts are provided for the
first three years (two guaranteed years and the first team option
year), and the
fourth year (second team option year) is defined in
terms of the percentage raise over the year-three salary (with all other
terms and
conditions unchanged from the first option year). The salary
scale also dictates the amount of the qualifying offer should the
player become a
restricted free agent (see question number
44) following his fourth season.
For example, here are the scale salary figures for the #1 overall draft
pick in each season from 2011-12 through 2020-21:
Season
1st year
salary
201112
2nd year
salary
3rd year team
option salary
4th year team option (% raise over
3rd year salary)
Qualifying offer (% raise over 4th
year salary)
$4,286,900 $4,479,800
$4,672,700
26.1%
30.0%
201213
$4,286,900 $4,479,800
$4,672,700
26.1%
30.0%
201314
$4,436,900 $4,636,600
$4,836,300
26.1%
30.0%
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201415
$4,592,200 $4,798,900
$5,005,500
26.1%
30.0%
201516
$4,753,000 $4,966,800
$5,180,700
26.1%
30.0%
201617
$4,919,300 $5,140,700
$5,362,100
26.1%
30.0%
201718
$5,091,500 $5,320,600
$5,549,700
26.1%
30.0%
201819
$5,269,700 $5,506,800
$5,744,000
26.1%
30.0%
201920
$5,454,100 $5,699,600
$5,945,000
26.1%
30.0%
202021
$5,645,000 $5,899,100
$6,153,100
26.1%
30.0%
By comparison, the 30th and last pick in the first round has a first-year
scale salary figure of $850,800 in 2011-12, and $1,120,300 in 202021. A
listing of the salary figures for all draft picks and all years can be found
HERE.
A team may sign a player for as little as 80% or as much as 120% of the scale
salary figure. Teams usually spring for the full 120%, but there
have been
exceptions. Teams over the salary cap use the Rookie exception to sign their
first round picks (see question number 25).
As an example, for the first pick in the 2013 draft, here are the scale
amounts for each season (from the chart above), along with the
minimum
and maximum amounts the player can be paid each season:
Season
Scale amount
Minimum salary Maximum salary
2013-14
$4,436,900
$3,549,520
$5,324,280
2014-15
$4,636,600
$3,709,380
$5,563,920
2015-16
$4,836,300
$3,869,040
$5,803,560
2016-17
26.1% raise
$4,878,859
$7,318,289
Qualifying offer 30% above 2016-17 salary $6,342,517
$9,513,776
If the player is not signed by January 10, the scale amount pro-rates (reduces
in value) each day for the remainder of the season. For
example, if there are 170
days in the season, then the scale amount reduces by 1/170th each day starting
January 10, until the player is
signed.
The exact percentage increase for the fourth (second team option) year and
qualifying offer varies by the player's draft position. For the fourth
(second team option) year it is 26.1% for the first pick, scaling up to
80.5% for the 30th pick. For the qualifying offer it's 30.0% for the first
pick, scaling up to 50.0% for the 30th pick.
Teams have until the October 312 preceding the player's second
regular season to exercise their option for the player's third season. Likewise,
they have until the October 312 preceding the player's third
regular season to exercise their option for the player's fourth season (see
question
number 59 for more information on options). If
the team invokes both options (keeping the player for all four seasons)
and submits a
qualifying offer after the fourth season, then the player
becomes a restricted free agent (see question number 44
for more information on
restricted free agency). If the team declines either option, then the player enters free agency as an unrestricted free
agent.
However, if the team declines either option and the player becomes a free
agent, the team cannot re-sign him to a salary greater than he
would have
received had the team exercised its option. In other words, teams can't
decline an option year in order to get around the rookie
salary scale and
give the player more money. This applies to all types of signing, including
the Bird exception, the Mid-Level exception, and cap
room.
The qualifying offer for a player coming off a rookie scale contract is
a defined percentage over his fourth-year salary. The percentage is set in
the rookie scale based on the player's draft position. However, the player
may qualify for a higher or lower qualifying offer based on whether or
not
he met the "starter criteria" in the previous season, or in the
average of the previous two seasons (see question number 44).
A buyout to an international team or organization is the only form of
signing bonus allowed in a rookie scale contract (see question number
77). Performance bonuses are allowed in rookie scale
contracts, but only with respect to the salary above 80% of the scale
amount (see
question number 74). Loans are not permitted
with rookie scale contracts (see question number 113).
Teams select players in the draft at their own risk. If a player's draft
eligibility is contested, the league will investigate. If the player is
determined to be ineligible, the team will have forfeited the pick it used
to select the player.
1
Dan Rosenbaum analyzed the effectiveness of the salary scale system
and concluded that it has resulted in the annual redirection of $200
million from non-veterans to veterans. Rosenbaum's paper currently
is unavailable online.
2
Or the next business day, if October 31 falls on a weekend or holiday.
For 2011-12 the exercise period is December 9, 2011 to January 25,
2012.
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50. What about second round draft picks? What rules do they operate under?
Unlike first round picks, who have a scale salary (see question number
49), second round picks do not have any specific
salary restrictions.
They may sign for any amount from the minimum to
the maximum, but players who last to the second round of the draft
seldom command
more than the minimum salary.
Also unlike first round picks, teams do not receive a salary cap
exception specifically for their second round picks. These players
must be
signed using cap room or an available exception (see question
number 25), such as the Minimum Salary exception
or the Mid-Level exception.
It is most common for a second round
pick to receive the minimum salary and be signed using the Minimum
Salary exception. However, since
the Minimum Salary exception limits
contracts to two seasons, it is not uncommon for teams to use a
portion of their Mid-Level exception in
order to sign the player for
three seasons. This gives the team full Bird rights at the end of
the contract, and avoids the Gilbert Arenas
provision (see question
number 45).
Unsigned second round draft picks do not have a cap hold.
51. What if the team and their drafted player can't agree to a contract? What options does the player have?
How long does the
team keep his draft rights?
The player's options are limited. What happens depends on a number of factors:
If the player is already under contract to, or signs a contract with a
non-NBA team, the team retains the player's draft rights for one year
after the player's obligation to the non-NBA team ends. Essentially, the
clock stops as long as the player plays pro ball outside the NBA.
Players
are not included in team salary during the regular season while the
player is under contract with a non-NBA team.
If the player goes on to play college ball after he was drafted, then the
team retains the player's draft rights until one year following the
draft
the player would have entered had he not declared early. For example, if
a team drafts a college sophomore in 2012 and he returns
to college and
plays intercollegiate basketball, then they retain his draft rights until
the 2015 draft. Note that the NCAA rules state that
players lose their
NCAA eligibility if they are drafted, so the player currently cannot return
or go on to play college ball. This rule exists in
the CBA in the event
the NCAA rules ever change.
If the player was eligible to play in college before he was drafted but
does not go on to play college basketball, then the team retains the
player's
draft rights until the draft the player would have entered had he not declared
early. For example, if a team drafts a college
sophomore in 2012 and he does
not return to college and play intercollegiate basketball, they
retain his draft rights until the 2014 draft.
For all other players, the team retains the player's draft rights until
the date of the next draft.
In any of the above cases, if the team does not sign the player in the
allotted time, the player can enter the next draft. If the team that selects
the player in the next draft doesn't sign him either, he becomes a rookie
free agent on the date of the following draft.
When a team signs a first round draft pick within three years after he is drafted,
they use the salary scale for the year in which he signs
(usually the player signs
in the same year he is drafted). After three years they have the option of either
using the salary scale or signing him
as if he was a free agent -- using their cap
room or any available exception, with the standard raises. They can only do the
latter if the player
did not play intercollegiately in the interim. Such a contract
must be for at least three seasons, and the salary in the first season must be
greater than 120% of the applicable rookie scale amount.
52. Are draft picks included in team salary? If so, for how much?
Unsigned first round picks are included in team salary immediately upon their
selection in the draft. They count as 100% of the scale salary for
that pick,
unless there is a verbal agreement for a higher salary. An incident occurred
in 1997 when Vancouver selected Antonio Daniels with
their first pick, and
Daniels subsequently revealed in an interview that he and the team had verbally
agreed to a contract starting at the
maximum allowed salary (120% of the scale
amount). Since verbal agreements apply to team salary, the league then
changed Daniels' cap
figure from the scale amount to 120% of scale.
Once a first round pick signs a contract, his actual salary is included in
the team salary, of course.
An unsigned first round pick is removed from team salary if the team and
player both agree in writing not to sign any contract through the
following
June 30. The scale amount is returned to the team salary the following July 1.
If the team renounces its draft rights, the player's
scale amount is
removed from the team salary permanently, and the team relinquishes its draft
rights to the player (see question number 54).
If a first round pick signs with a non-NBA team, his scale amount is
excluded from the team salary on the date he signs his non-NBA contract
or the first day of the regular season, whichever is later. The scale
amount goes back onto the team salary on the following July 1 or when
his
non-NBA contract ends, whichever is earlier. In other words, these
cap holds are removed for players playing outside the NBA, but only
during
the regular season.
Unsigned second round picks are not included in team salary. This is a
loophole teams sometimes leverage by trading late first round picks for
second round picks in order to clear cap room.
As described in question number 87, the trade
value of an unsigned first or second round draft pick is always $0.
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53. What if a team likes its first round pick and wants to sign him, but either feels
he isn't worth the scale salary or doesn't want
to commit to two seasons?
They're stuck. In essence, this makes late first round picks less valuable,
because they force teams to make a two-year commitment to a
marginal player.
In 1996, rather than give their first round pick Travis Knight (29th overall)
a three-year guarantee, the Bulls renounced him,
making him a free agent.
The guaranteed portion of a rookie scale salary was shortened from three seasons
to two with the 2005 CBA.
54. If a first round draft pick is renounced, is he still bound to the salary scale
for a first round pick?
No. The salary scale only applies to the team that drafts the player or the
team to which the player's draft rights are traded. When Chicago
renounced
first round pick Travis Knight in 1996, he then signed with the Lakers for
one year at the league minimum salary.
Since a renounced draft pick is not constrained by the rookie scale, he is
also free to negotiate a larger contract. It is therefore possible for the
renouncement to work to the player's advantage.
55. Is there a limit to the length of a contract, or to the amount a player's
salary can increase or decrease from year to year?
The maximum years and raises depend on the type of contract, however the "standard"
maximum length is four seasons and the "standard"
maximum raise is 4.5% -- for
example, when a team signs another team's free agent using cap room. The following
are exceptions to the
standard:
Type of contract
Maximum years
Maximum raise
Notes
Larry Bird exception
5
7.5%
See question number
25
Early Bird exception
4
7.5%
See question number
25
Non-Bird exception
4
4.5%
See question number
25
Non-Taxpayer Mid-Level
exception
4
4.5%
See question number
25
Taxpayer Mid-Level exception
3
4.5%
See question number
25
Room Mid-Level exception
2
4.5%
See question number
25
Bi-Annual exception
2
4.5%
See question number
25
Disabled Player exception
1
N/A
See question number
25
Minimum Salary exception
2
Both seasons at minimum salary
See question number
25
First round draft pick
2 plus 2 team option
years
Defined in salary scale
See question number
49
"Arenas" restricted free agents
4
Can have a substantial raise in year 3
See question number
45
Sign-and-Trade
4
4.5%
See question number
91
Extensions (veteran)
41
7.5% of the salary in the first season of the
extension
See question number
60
Extensions (rookie scale
contracts)
51
7.5% of the salary in the first season of the
extension
See question number
60
Extensions (Designated Players)
61
7.5% of the salary in the first season of the
extension
See question number
60
Extend-and-Trade
31
4.5% of the salary in the first season of the
extension
See question number
94
The raise limit also applies to salary decreases -- for example, since the
Larry Bird exception limits raises to 7.5% of the first-year salary, the
salary may also decrease by up to 7.5% of the first-year salary.
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The percentage (4.5% or 7.5%) applies to regular salary, i.e., the player's
base salary, not including signing bonuses or anything treated like a
signing
bonus (see question number 75), and not including incentives
(see question number 74). The maximum amount (determined
from the
base salary in the first season) applies to both the base salary and
the total salary (which includes signing bonuses and anything treated like a
signing bonus). Because of this rule, certain combinations of signing bonuses
and non-guaranteed salary are incompatible.
For example, suppose a team has $5 million of cap room and uses it to sign a
player for four years with 4.5% raises. The first three seasons
are fully
guaranteed and the fourth season is non-guaranteed. The player also receives
a 15% signing bonus. This contract would not be legal.
Here's why (see question
number 75 for more information on the allocation of signing
bonuses):
Year Base salary Guarantee Signing bonus Total
1
$3,946,719
100%
$1,053,281
$5,000,000
2
$4,124,322
100%
$1,053,281
$5,177,602
3
$4,301,924
100%
$1,053,281
$5,355,205
4
$5,532,807
0%
$0
$5,532,807
The base salary in the first season is $3,946,719, and 4.5% of that amount
is $177,602 which is the maximum amount that either the base
salary or the
total salary (the rightmost column) can change from year to year. However,
in this example the base salary changes from the
third season to the fourth
season by $1,230,883 -- which makes this contract illegal. In fact, it is
not possible to construct a legal four-year
contract with 4.5% maximum
raises, utilizing $5 million in room where the final season is non-guaranteed
and containing a 15% signing
bonus. This contract could be fixed in a number
of ways, by adjusting the raises, the guarantees and/or the signing bonus.
For example, the
following contract is legal with a 58% guarantee in the
final season:
Year Base salary Guarantee Signing bonus Total
1
$4,130,582
100%
$869,418
$5,000,000
2
$4,316,458
100%
$869,418
$5,185,876
3
$4,502,334
100%
$869,418
$5,371,752
4
$4,688,210
58%
$504,262
$5,192,472
Incidentally, raises take effect July 1 of each year.
1
Extensions always include the remaining seasons of the current contract.
56. Are raises compounded? In other words, is each raise a percentage of the
previous year's salary?
No. Raises are limited to a percentage of the base salary in the first season
of the contract. Raises in extensions are based on a percentage of
the base
salary in the first season of the extension. If a team signs another team's
free agent (4.5% maximum raises) to a four-year contract
starting at $10 million,
the maximum raise is $450,000 each year. This player's four-year salary would be:
Year 1 $10,000,000
Year 2 $10,450,000
Year 3 $10,900,000
Year 4 $11,350,000
57. Are there restrictions based on a player's age?
There are rules regarding the minimum age for draft eligibility. A player can't play
in the NBA unless he's been eligible for at least one draft (he
doesn't have to actually
be drafted, he just has to have been eligible). A player who is eligible for a draft must
be at least 19 during the
calendar year of that draft, and if a U.S. player, at least one
year removed from high school. In addition, at least one of the following must be
true:
The player has graduated from a U.S. four-year college or university prior to or
during the calendar year of the draft, and has no
remaining NCAA eligibility.
The player is attending or has previously attended a U.S. four-year college or
university, his original class has graduated prior to or
during the calendar year
of the draft, and has no remaining NCAA eligibility.
The player attended high school in the U.S., did not attend college, and four
years have elapsed since he graduated (or his class
graduated, if he did not
graduate).
The player has played as a professional outside the NBA prior to January 1
of the draft year.
The player has declared himself an "Early Entry" player.
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The player is an international player (see question number 76)
for whom at least one of the following is true:
Is 22 during the calendar year of the draft (an international player
who is older than 22 and was not drafted in the year of his 22nd
birthday
is a free agent)
Has played as a professional in the U.S. but outside the NBA
Has declared himself an "Early Entry" player.
The league and players association decided to table the discussion of
raising the age for draft eligibility in order to facilitate a settlement of
the
2011 lockout and start the 2011-12 season on December 25, 2011. The sides
will form a joint committee to review and implement new rules
regarding the
age of eligibility. The rules from the 2005 CBA have been left in place until
this committee has made its determinations (only the
timing of contracts for
players playing professionally outside the U.S. was changed in the meantime).
There are also rules which prevent teams from padding extra years onto
contracts for older players. The "Over-36" rule is described in
question
number 58.
58. What is the "Over-36" rule?
The Over-36 rule addresses a loophole. Suppose a player is nearing retirement,
and he wants to finish his career with a team that can only
offer him their
Non-Taxpayer Mid-Level exception. If they want to give this player more
money than is allowed by the exception, they could
instead offer a contract
for more years than they expect the player to play -- continuing to pay
the player past his retirement.
For example, suppose the Non-Taxpayer Mid-Level exception is $5 million.
With 4.5% raises, a three-year contract would total $15.675 million.
But
if they added a fourth year to the contract, the salary would total
$21.35 million. If the player retires after three seasons and continues
drawing his salary for the additional season, then he effectively will
be paid $21.35 million for three years' work. In essence, they are giving
the player a three-year contract with additional deferred compensation.
This loophole is addressed by the Over-36 rule.
Certain contracts that extend past the player's 36th birthday are
deemed Over-36 contracts. In an Over-36 contract, the presumption
is that
the seasons at the end of the contract are likely to come
after the player retires. Therefore, the salaries in those seasons
are classified as
deferred compensation as described above. This is
significant because deferred compensation is charged to team salary
in the year it is earned,
not the year it is paid.
As with the previous example, suppose the Non-Taxpayer Mid-Level
exception is $5 million, and a 34-year-old player signs a contract
with
4.5% raises. Here are the three-year and four-year versions
of the contract:
Season Three-year
Four-year
1
$5 million
$5 million
2
$5.225 million
$5.225 million
3
$5.45 million
$5.45 million
4
N/A
$5.675 million
Total
$15.675 million $21.35 million
The four-year contract is classified as an Over-36 contract. In this contract,
salary in the fourth season is classified as deferred compensation
earned in
the first three seasons. Therefore, the $5.675 million from the fourth season
counts toward team salary in each of the first three
seasons, in proportion
to the salary in each of those seasons. The next chart shows the salary paid,
the amount reclassified as deferred salary,
and the total (paid plus deferred)
counted against the cap in each season, at the time the contract is signed:
Season Paid
Deferred
Team Salary Amount
1
$5,000,000
$1,810,207 $6,810,207
2
$5,225,000
$1,891,667 $7,116,667
3
$5,450,000
$1,973,126 $7,423,126
4
$5,675,000
$0
Total
$21,350,000
$0
$21,350,000
Some things to note from this chart:
How are the amounts in the "Deferred" column calculated? The
fourth season's salary ($5,675,000) is treated as deferred compensation
earned in the first three seasons. The total (non-deferred) amount
earned in the first three seasons is $15.675 million. In the first
season
the player earns about 31.9% of the $15.675 million. Therefore,
about 31.9% of the $5.675 million deferred amount, or $1,810,207, is
charged against the cap in the first season. A similar calculation is
performed for the second and third seasons.
The total four-year salary is still $21.35 million. The fourth season's
salary was simply shifted onto the first three seasons.
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The fourth season has a team salary amount of $0 when the contract is
signed because the salary was shifted onto the earlier seasons.
The CBA
calls this a "zero year."
But this shifting of salaries creates a big problem -- note that the cap
amount in the first season is now greater than the team's $5 million
NonTaxpayer Mid-Level exception! To make the contract fit within the
exception, the salaries need to be reduced:
Season Paid
Deferred
Team Salary Amount
1
$3,670,960
$1,329,040 $5,000,000
2
$3,836,154
$1,388,847 $5,225,000
3
$4,001,347
$1,448,653 $5,450,000
4
$4,166,540
$0
Total
$0
$15,675,000
$15,675,000
As before, the salary from the fourth season is divided up and shifted
onto the first three seasons, in proportion to the salaries earned in
those
seasons. In the first season, the reduced salary and deferred
amounts now add up to exactly $5 million -- so the total fits within
the team's
Non-Taxpayer Mid-Level exception.
Note the effect the Over-36 rule has on the contract -- since the salary
had to be reduced, the player earns exactly the same amount ($15.675
million) over four years as he would have earned with a three-year contract
that was not subject to the Over-36 rule. In other words, the
Over-36 rule
completely eliminates the advantage of adding the additional year onto the
contract, effectively closing the loophole described
earlier. It does not
matter how many additional years are added on -- as more years are added,
more salary is classified as deferred and
counted against the cap in the
earlier seasons, and the base salary in the earlier seasons has to be
reduced further to fit the total within the
maximum allowed amount. The
player therefore receives no more money in a longer contract than he would
receive in a three-year contract.
It is often reported that the Over-36 rule prevents teams from
signing older players to long contracts, but this is false. Teams are not
prevented from signing longer contracts -- the Over-36 rule simply removes
any incentive for doing so.
The Over-36 rule is mostly a remnant of earlier CBAs, when contracts could
be longer and therefore more salary could be paid after the player
retires.
With contracts now limited to four or (in a few cases) five seasons, the
overall impact of the Over-36 rule has been reduced.
So what contracts are classified as Over-36 contracts, and in those
contracts, what are the zero years? Like everything else related to this
rule,
it's complicated -- it depends on the length of the contract, the
player's birthdate and age when the contract is signed, and whether the
player
was a full Bird free agent.
The following chart indicates what free agent contracts are subject to the
Over-36 rule, and which years are zero years. For example, if a 33year-old
Qualifying Veteran Free Agent (a player with full Bird rights) re-signs
with his prior team for five seasons, then his contract is classified
as
Over-36, and the fifth season is considered a zero year. "N/A"
indicates that the contract is not Over-36 because it is specifically
excluded
from the Over-36 rule in the CBA1.
Qualifying Veteran Free Agents
Other Free Agents
Age
4 year contract 5 year contract 4 year contract
32
N/A
5
N/A
33 or 34 N/A
5
4
35+
4 and 5
4
4
So why the odd span of time ending September 30? For the Over-36 rule only,
seasons are defined to commence on October 1. If the player's
birthday is
October 1 or later, then the season will commence before his
birthday. Also, if the player was born during the July Moratorium and
signs
his contract within the first five days after the July Moratorium ends, then
he is not charged with being a year older. For example, if the
July Moratorium
ends on July 7, the player's birthday is July 3, and he signs his contract
on July 9 -- just after turning 33 -- then for Over-36
purposes he is
considered to be 32 when he signs his contract.
Other notes about Over-36 contracts:
The columns in the chart for Qualifying Veteran Free Agents only apply when
the player re-signs with his prior team. If the player signs
with a different
team, the "Other Free Agents" column applies instead.
The Over-36 rule also applies to extensions and renegotiations. They always
start counting from the date the extension or renegotiation is
signed.
For example, if a contract with two years remaining is extended by two
additional years, it's counted as a four-year contract.
The Over-36 rule has an additional component. As the player continues playing,
and therefore proves the assumption (that the player will
retire before earning
all his salary) wrong, the deferred salary stops being classified as deferred,
and is shifted back onto the zero years of the
contract. This begins to happen
two seasons before the first zero year, and continues for each remaining year
of the contract. In the previous
example, the first (and only) zero year was
the fourth season of the contract, so beginning with the second season, the
team salary amount is
readjusted. Here is the remainder of the contract at that
point in time (copied from the previous example):
Season Paid
Deferred
Team Salary Amount
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2
$3,836,154 $1,388,847 $5,225,000
3
$4,001,347 $1,448,653 $5,450,000
4
$4,166,540 $0
$0
To readjust the team salary amount, they take that season's team salary amount, plus the cap amounts for the following two seasons (or
however many remain if there are fewer than two), average them together, and distribute that amount evenly among those seasons. In this
case there
are three seasons with team salary amounts of $5.225 million, $5.45
million and $0. The average of these amounts is $3,558,333.
This becomes
the team salary amount for those three seasons:
Season Paid
Team Salary Amount
2
$3,836,154 $3,558,333
3
$4,001,347 $3,558,333
4
$4,166,540 $3,558,333
Prior to the third season they repeat this process, averaging the team
salary amounts for the third and fourth seasons. Since these team salary
amounts were both $3,558,333, the average doesn't change:
Season Paid
Team Salary Amount
3
$4,001,347 $3,558,333
4
$4,166,540 $3,558,333
Repeating the process prior to the fourth season, the team salary amount
stays the same:
Season Paid
4
1
Team Salary Amount
$4,166,540 $3,558,333
A 32-year-old whose birthday falls after the July Moratorium and before
September 30, and who signs a contract prior to his birthday is
considered
to be 33 for the purpose of the Over-36 rule.
59. What are option clauses? What kind of option clauses are there?
An option clause allows a contract to be extended for one additional season
after the date it is scheduled to end. For example, a three-year
contract with
an option for the fourth year means that if the option is exercised, then the
contract extends through the fourth season, but if the
option is not exercised,
then the contract ends after the third season. Once exercised, an option cannot
be revoked (for example, a player
cannot invoke an option on June 20 and change
his mind on June 25). Conditional options are not allowed -- the availability
of the option may
not be contingent on some condition, such as the
number of games the team wins or the player's points per game1.
There are three types of options:
Team Options give the team the right to invoke the option. There
can be only one option year (except in the case of rookie scale
contracts).
Player Options give the player the right to invoke the option. There
can be only one option year.
Player Early Termination Options (ETOs) give the player the right to terminate
the contract early. An ETO can't occur prior to the end of
fourth season of the
contract (which implies that the contract must be for five seasons). An ETO is
not allowed in a veteran extension
(see question number 60).
A contract may not contain more than one option in the same season (for
example, the last season cannot contain both a player option and a
team
option). In fact, a contract may not contain more than one option at all,
with the following two exceptions:
A rookie scale contract for a first round draft pick contains a team
option before both the third and fourth seasons. No other options
are
permitted in rookie scale contracts. See question number
49 for more information.
Under the previous CBA a six-year contract could contain an ETO prior
to the fifth season and an option (player or team) prior to the sixth
season. Since six-year contracts are not permitted under the current
CBA, this is no longer possible. Only Chris Bosh, LeBron James and
Dwyane Wade (each with an ETO in 2014 and a player option in 2015)
remain with both an ETO and a player option.
Here's a summary of the differences between an option and an ETO:
Options can be included in any multiyear contract, but ETOs are allowed
only with five-year contracts.
Options can be held by the player or the team, but ETOs are always held by
the player (i.e., there's no such thing as a team Early
Termination
Option).
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Option years may not have a lower salary than the previous season. ETOs
have no such restriction.
A contract with a player option can be extended (see question number 60)
when the option is not exercised. A contract with an ETO may
not be extended
if the ETO is exercised.
When determining the amount of a trade bonus (see question number 98),
option years are not counted as part of the remaining value of
the contract, but years
following an ETO are counted.
All contracts with player options contain a clause that indicates whether the
player receives his salary for the option year in the event his
contract is
terminated (i.e., he is waived and clears waivers) prior to invoking his option.
See question number 66 for an interesting implication
of
this rule.
While the salary in an option year may be greater (but not less) than the salary
in the prior season, all other contract terms, including the
payment schedule
and the percentage of salary that is guaranteed, must be the same as the prior
season.
Options have a window of time during which they may be exercised. The specific
opening and closing dates of this window are a matter of
individual negotiation,
except in the following circumstances:
For team options in Rookie Scale contracts, the window opens on the day
following the July Moratorium and closes on October 312 of the
calendar year prior to the year the option takes effect.
If the contract contains a clause stating that the player does not receive his
salary for an option year if he is waived prior to exercising his
option, then
the window cannot open sooner than the day following the team's last game of
the season prior to the option year.
The window for players who will be restricted free agents can close no later
than June 25 of the year the option takes effect (an earlier
date may be
specified as a matter of individual negotiation).
The window for all other options can close no later than June 29 of the year
the option takes effect (an earlier date may be specified as a
matter of
individual negotiation).
Interestingly, there is no mechanism to notify the league that an option or ETO
will not be exercised. Teams and players might want to do this
in order
to make the player tradable after the season ends but before July 1 (see
question number 100), or because the player wants to be
traded
to a team which does not want the player if he might become a free agent. As
described in question number 62, under these
circumstances the
team and player can mutually amend the contract to remove the option or ETO.
Player options were previously used as a way to give the player more money.
A long-term deal was agreed upon with a player option after the
player
obtained Larry Bird rights. The player invoked the option, became a free
agent, and then the team & player signed a new contract for
more money
using the Bird exception. However they closed this loophole by preventing
player options and ETOs before all but the last season
of a contract.
1
Conditional options can be simulated using non-guaranteed salary.
2
Or the next business day, if October 31 falls on a weekend or holiday.
For 2011-12 the window is open from December 9, 2011 to January
25,
2012.
60. Can existing contracts be extended?
Contracts for fewer than four seasons may not be extended. Longer
contracts can be extended under certain circumstances:
Type of contract
Can be extended
Four, five or six1 seasons Three years after contract signed
Extended contracts
Three years after extension signed
Renegotiated contracts
Three years after renegotiation signed, if a salary was renegotiated upward by more than 10%
Rookie scale contracts
From the day following the July moratorium to the October 31 preceding the player's last option season2
The rules for extensions depend on whether the contract being extended
is a rookie scale (first round draft pick) contract, or other (veteran)
contract.
Rookie scale contract extensions:
Rookie scale contracts may be extended for up to four seasons beyond
the last option season in the contract, bringing the total contract
length
to five seasons. Teams can also select one player (called their
"Designated Player") who can receive a five-year extension, bringing
the total
contract length to six seasons. A team can have at most one
player on its roster whom they have designated for a longer extension,
plus at
most one player designated by another team whom they acquired
in trade.
For example, the Oklahoma City Thunder extended Russell Westbrook's
rookie scale contract in 2011 (with the extension taking effect in
201213). They selected Westbrook as their Designated Player and
extended him through 2016-17 (five new years, six total). The Thunder
therefore
are not allowed to designate another player for a five-year
extension (Kevin Durant signed his five-year extension under the 2005
CBA) until
2017, as long as Westbrook is on their roster. However,
they can trade for one (and only one) player who was designated by
another team.
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The complete list of Designated Players is as follows:
Team
Designated Player Expires
Chicago
Derrick Rose
2017
Cleveland
Kyrie Irving
2020
Houston
James Harden
2018
Indiana
Paul George
2018
LA Clippers
Blake Griffin
2018
Oklahoma City Russell Westbrook
2017
Washington
2019
John Wall
The salary in the first year of an extension to a rookie scale contract
(other than for a team's Designated Player) may be any amount up to the
player's maximum. This is usually the 0-6 year maximum, which is based
on 25% of the salary cap (see question number 16).
However, a
player may receive up to the 7-9 year maximum, which is based
on 30% of the cap, if he meets any of the following criteria (called the
"5th
Year 30% Max criteria"):
Named to the All-NBA First, Second or Third team at least twice
Voted as a starter in the All-Star game at least twice
Named the NBA Most Valuable Player at least once
The salary in the first year of an extension to a rookie scale contract
for a team's Designated Player must be the player's maximum salary. If
the player has also met the 5th Year 30% Max criteria, the player's
salary may be any amount between the 0-6 year maximum and the 7-9
year
maximum.
Since the maximum salaries for the following season are not known at
the time the extension is signed, and the player may meet the 5th Year
30% Max Criteria during his fourth season (also after the extension is
signed), the following amounts can be specified in lieu of a specific
salary:
"The Maximum Annual Salary applicable to such player in the first
Season of the extended term" (for any player)
"XX% of the Salary Cap in effect during the first Season of the
extended term," where XX% is between 25% and 30% (if the player has
already met the 5th Year 30% Max criteria)
"25% of the Salary Cap in effect during the first Season of the
extended term, or, if the player meets at least one of the 5th Year
30%
Max Criteria during the fourth Season of his Rookie Scale
Contract, XX% of the Salary Cap in effect during the first Season
of the
extended term," where XX% is between 25% and 30% (if the
player has not already met the 5th Year 30% Max criteria)
When the first season of the extension arrives and the maximum salaries
for that season have been defined, the salaries in the extension are
filled-in (or amended downward, if necessary).
Extensions for players signed using the 5th Year 30% Max criteria must
be at least four seasons (not including the fourth season of the player's
rookie scale contract).
The following players were signed using the 5th Year 30% Max criteria:
Team
Player
Chicago
Derrick Rose
Cleveland
Kyrie Irving
Houston
James Harden3
Indiana
Paul George
LA Clippers
Blake Griffin
Sacramento DeMarcus Cousins3
Washington
John Wall
Raises in a rookie scale extension are limited to 7.5% of the salary in
the first year of the extension4. If the salary in the first
year of the
extension is filled-in or amended downward, the salaries in
all subsequent seasons are filled-in or amended as well.
Rookie scale contracts can be extended even if the team receives the player
in trade. For example the Oklahoma City Thunder traded James
Harden to the
Houston Rockets on October 27, 2012, and the Rockets signed him to an extension
four days later.
A rookie scale contract can be extended through an extend-and-trade
transaction, although there is no benefit in doing so (see question
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number 94).
Veteran extensions:
Extensions to contracts that are not rookie scale contracts
(i.e., veteran extensions) may be signed up to June 30, the day before
the player
would have become a free agent.
A contract that contains an Early Termination Option (ETO) cannot be
extended if the ETO is exercised (ending the contract early). A contract
with an option can be extended if the player (or team) opts-in. A contract
with an option can also be extended if the player (or team) opts-out,
as
long as the extension adds at least two new seasons onto the contract
(excluding any new option year) and the salary in the first year of the
extension is not less than the salary in the non-exercised option year.
See question number 59 for more information on options
and ETOs.
A veteran extension can contain an option (player or team), but cannot
contain an ETO.
If the player agrees to waive a portion of his trade bonus in order to
facilitate a trade (see question number 99), his
contract may not be
extended for six months following the trade.
Veteran extensions are limited to four seasons, including the seasons
remaining on the current contract. Even if the extension is signed in
late
June, the current season counts as one full season toward the
total. For example, a contract with two seasons remaining may be
extended for
up to two additional seasons. However, an extension signed
in conjunction with an Extend-and-Trade transaction (see question
number 94) is
limited to three seasons,
including the seasons remaining on the current contract.
The salary in the first year of a veteran extension may be any amount
up to 107.5% of the player's previous salary5, but no more
than the
player's maximum salary in that season (i.e., the maximum
salary the player can receive if he were to sign a new contract that
year as a free
agent -- see question numbers 16
and 17).
Since the maximum salaries for an upcoming season are not known at
the time the extension is signed, it is possible that the extension
will
specify a salary that is greater than the maximum salary. If
this happens, the salaries in the extension are amended downward
once the
maximum salaries are defined.
Raises in each year of a veteran extension are limited to 7.5% of the
salary in the first year of the extension6. If the salary
in the first year of
the extension is amended downward, the salaries
in all subsequent season are amended as well. If the contract being
extended contained
bonuses, then the extension must contain the same
bonuses -- teams can increase or decrease the bonus amounts by up to
7.5%, but they
can't leave them off.
An extension can contain a signing bonus, which is payable no sooner
than July 1 of the year the extension takes effect. The signing bonus
may be for up to 15% of the total salary of the extension. The signing
bonus is charged to team salary in all guaranteed years of the
extension, in proportion to the percentage of salary in each season
that is guaranteed. For example, if an extension adds two additional
years
to a contract, with the first 100% guaranteed and the second 50%
guaranteed, then 2/3 of the signing bonus is charged to the cap in
the first
year, and 1/3 of the signing bonus is charged to the cap in
the second year. If the extension is entirely non-guaranteed, then the
entire signing
bonus is charged to the first season of the extension.
If the team is under the cap when the extension is signed, then the
signing bonus may be paid before the first season of the
extension (i.e., it
can be paid right away). When this happens, the
extension is treated as a renegotiation (see question number
61). The signing bonus is
charged to team salary
in all remaining years of the current contract and the extension,
in proportion to the percentage of salary in each
season that
is guaranteed (as described in the previous paragraph). If all
remaining years of the contract and the extension are entirely
nonguaranteed, then the entire signing bonus is charged to the
season in which the extension is signed. The signing bonus cannot
exceed 15% of
the total salary in the extension, and the portion of
the signing bonus charged to the year in which the extension is
signed also can't exceed
the team's cap room.
Other rules related to extensions:
An extension cannot contain an Exhibit 6 (requiring the player to
pass a physical exam for the contract to be valid). Only new contracts
can contain an Exhibit 6.
An extension cannot contain bonuses that are not in the original contract,
and the bonus amounts must be within plus or minus 7.5% of
the bonus
amounts in the original contract.
Contracts can also be extended in conjunction with a trade. See question
number 94 for details.
1
Six-year contracts are not permitted under the current CBA,
but some six-year contracts remain from the 2005 CBA.
2
Provided the team had previously picked up the option for that season.
The deadline is the following business day if October 31 falls on a
weekend or holiday. For 2011-12 the window is open from December 9,
2011 to January 25, 2012.
3
Signed as a 5th Year 30% Max player contingent upon meeting the criteria,
but did not meet the criteria so received the 25% maximum.
4
Raises in a rookie scale extension for a team's Designated Player
must be 7.5%.
5
If the player has played with his current team for 10 or more seasons
and there was a decrease in salary from the second-to-last to the
last
season before the extension, then the salary in the first year of an
extension can be 107.5% of the contract's average salary (back to
when
the contract was signed or most recently extended), if this is higher
than 107.5% of the salary in the last season before the
extension.
6
Except extend-and-trade transactions, which are limited to 4.5% (see
question number 94).
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61. Can existing contracts be renegotiated?
A contract for four or more seasons can be renegotiated after the third
anniversary of its signing, extension, or previous renegotiation (if
the
previous negotiation increased any season's salary by more than 4.5%).
Contracts for fewer than four seasons cannot be renegotiated. A
contract
cannot be renegotiated between March 1 and June 30 of any year.
Only teams under the cap can renegotiate a contract, and the salary in
the then-current season can be increased only to the extent that the
team
has room under the cap (and cannot increase the player's salary beyond
the maximum salary). A renegotiation can only be used to
provide a salary
increase -- players can't take a "pay cut" in order to create
more cap room for the team.
If the player agrees to waive a portion of his trade bonus in order to
facilitate a trade (see question number 99), his
contract may not be
renegotiated for six months following the trade.
Every category of compensation (base salary, likely bonuses, and unlikely
bonuses) that are increased in the renegotiated season must also
increase
in all subsequent seasons of the contract. Raises (and decreases) in
subsequent seasons are limited to 7.5% of the salary in the first
renegotiated season.
A renegotiated contract can be extended simultaneously (see question
number 60). If a player's contract is extended and
renegotiated
simultaneously in this manner, his salary may not decrease
by more than 40% from the last season before the extension (after it
is
renegotiated) to the first season of the extension. For example, if
the salary in the last season of a contract is renegotiated to $10
million and
the contract is simultaneously extended, the salary in the
first season of the extension cannot be less than $6 million.
Other rules for renegotiations:
A signing bonus cannot accompany a renegotiation unless the contract
is extended simultaneously (see question number 60).
A rookie scale contract (see question number 49)
cannot be renegotiated.
A contract cannot be renegotiated in conjunction with a trade.
62. In what other ways can an existing contract be modified?
Other than extensions (see question number 60) and
renegotiations (see question number 61), a team and
player can mutually modify an
existing contract as follows:
To alter the amount of compensation protection -- i.e., the guarantee
(see question number 64). This is commonly done as
part of a
buyout (see question number 67).
To eliminate an option or ETO (see question number
59). Note that eliminating an option does NOT
constitute illegally shortening a
contract, since an option year isn't
considered part of the original term of a contract until it is
invoked.
To reduce the amount of a trade bonus (see question number
98), but only to the extent necessary to make a
trade legal.
To waive set-off (see question number 66), which is
commonly done in conjunction with a buyout (see question number
67).
To alter the pay schedule (however, when a contract signed under the
current CBA is terminated through the waiver process, the pay
schedule
is automatically "stretched" -- see question number
113).
To alter the window of time during which an option may be invoked
(rare).
To alter the list of outside activities in which the player is
allowed to participate (rare).
To change the section of the standard contract that permits the
team to suspend the player if the player does not maintain
sufficient
physical condition.
The contracts of both Dwight Howard and Chris Paul were amended during the 2011-12 season. Paul was traded from the Hornets to the
Clippers during the preseason with one season remaining on his contract, plus a player option for 2012-13. The Clippers would not agree to the
trade without a two-year commitment from Paul, so Paul agreed to alter his contract to remove the option (locking him in for 2013-13) as a
part of the trade. Howard had an ETO in 2012, and was widely reported to be on the verge of exercising his ETO and leaving the Magic as a
free agent. Right before the 2012 trade deadline Howard decided to remain with the
Magic through 2012-13, and agreed to the Magic's request
to alter his
contract to remove his ETO.
63. What are the rules for retired players? What if the player suffers a career-ending injury?
There's nothing binding about a player announcing his retirement.
The player can still sign a new contract and continue playing (if
he's not
under contract), or return to his team (if he is still
under contract) and resume his career.
The only exception to this is when a player is still under contract,
wants to quit, and his team doesn't want to let him out of his
contract. Under
these circumstances the player can file for retirement
with the league. The player is placed on the league's Voluntarily
Retired list (see question
number 79), forgoes his
remaining salary, and cannot return to the league for one year. The
latter requirement prevents players from using
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retirement as an
underhanded way to change teams, and can be overridden with unanimous
approval from all 30 teams. For example, guard
Jason Williams signed
with the LA Clippers in August 2008, then changed his mind the following
month, announcing his retirement. He applied
for reinstatement in early
2009, but his request was denied by a vote of 24-6. Williams later
signed with the Orlando Magic once the one-year
anniversary of his
retirement announcement had passed.
Any money paid to a player is included in team salary, even if the
player is no longer playing or has retired.
There is one exception whereby a player can continue to receive his
salary, but the salary is excluded from team salary. This is when a
player
suffers a career-ending injury or illness. The team must waive
the player, and can apply for this salary exclusion following a waiting
period.
Only the player's team at the time the injury or illness was
discovered (or reasonably should have been discovered) can apply for
this salary
exclusion.
The waiting period depends on the number games in which the player
played in the season:1
If the player played 10 or more games in a season, the team can
apply on the one-year anniversary of the player's last game.
If the player played fewer than 10 in a season, the team can apply
60 days after his last game, or the one-year anniversary of his
last
game in the previous season, whichever is later.
The determination as to whether an injury or illness is career ending
is made by a physician jointly selected by the league and players
association. The determination is based on whether the injury or
illness will prevent the player from playing for the remainder of his
career, or
if it is severe enough that continuing to play constitutes
a medically unacceptable risk.
If the injury exclusion is granted, the player's salary is removed
from the team salary immediately.
If the player later "proves the doctors wrong" and resumes his
career, then his salary is returned to the team salary when he plays
in his 25th
game1 in any one season, for any team. This
allows a player to attempt to resume his career without affecting
his previous team unless his
comeback is ultimately successful. If
the 25th game was a playoff game, then the player's salary is returned
to the cap effective on the date of
the team's last regular season
game (i.e., the returned salary counts toward the luxury tax).
There are a few additional nuances to the salary exclusion:
If the player resumes his career and his salary is returned to
the team salary, the team can re-apply for the salary exclusion
under the
same rules (including the rules for the waiting period).
If a player retires, even for medical reasons, his team does
not receive a salary cap exception to acquire a replacement
player.
A team cannot apply for this salary exclusion if they have applied
for a Disabled Player exception (see question number 25)
that season,
whether the exception was granted or not.
If this salary exclusion is granted, the team cannot re-sign or
re-acquire the player at any time.
This salary exclusion can be used when a player dies while under
contract.
1
They count only regular season and playoff games, and do not count
preseason games. This was not specified prior to the 2011 CBA.
During
the 2008-09 season Darius Miles (whose salary was excluded from Portland's
cap) played in 10 games for Boston and Memphis
(the limit was 10 games at
the time), which included preseason games. The league counted the preseason
games toward the total, and
returned Miles' salary to Portland's cap.
64. Are contracts always guaranteed?
There are only a few specific types of contracts that must
be guaranteed. All other guarantees are a matter of individual
negotiation between
the player and team. In practice, the majority
of NBA contracts (especially for established veterans) are fully
guaranteed. Non-guaranteed
salary is most often used for fringe
players (either at the beginning or end of their careers) or for
the later years of long-term contracts (often
in conjunction with
benchmarks that allow the salary to become fully guaranteed over
time).
Only a player's base salary can be guaranteed -- not bonuses or
incentives. The percentage of base salary that is guaranteed cannot
increase
from one year to the next (e.g., if 50% of a player's
salary is guaranteed one season, then no more than 50% can be
guaranteed in any
subsequent season of the contract).
There are actually several types of guarantees:
Lack of skill: A "catch-all" that means the player
cannot play well enough to justify remaining on the team.
Death: The player dies while under contract.
Basketball-related injury: The player cannot render
his playing services as a direct result of an injury sustained while
playing or
practicing for the team.
Injury/illness: The player cannot render his
playing services as a direct result of any illness or injury, whether
or not it was basketball
related.
Mental disability: The player cannot render his
playing services as a direct result of a mental disability.
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Each type of guarantee is independently negotiated, so, for example, a
contract might be fully guaranteed for injury or illness, but not for
mental disability. Players do not qualify if their condition was caused
by participation in a prohibited activity (for example, skydiving),
suicide,
alcohol or substance abuse.
Some salaries are only partially guaranteed, and/or the guaranteed amount
can change based on certain conditions. For example, the salary in
the
final season of a player's contract might be unprotected for lack of skill,
with the protection changing to full if the team has not requested
waivers
on the player (see question number 65) prior to the team's
first regular season game of that season1. The protection can
even be tied
to performance benchmarks -- for example a player's
guaranteed amount might increase if he played 1,600 minutes the previous
season.
However, in practice these types of performance-based guarantees
are rare.
The required guarantees are as follows:
For sign-and-trade contracts (see question number 91),
the first season must be protected for lack of skill.
For rookie "scale" contracts (see question number
49), all seasons must be protected for lack of skill
and injury/illness for at least 80% of
the rookie scale amount.
Qualifying offers to restricted free agents (see question number
91) must be protected for lack of skill and
injury/illness.
If an offer sheet to a restricted free agent is subject to the Gilbert
Arenas provision (see question number 45), all
seasons must be
protected for lack of skill and injury/illness.
In addition, on January 102 the base salary in all contracts
becomes guaranteed for the remainder of that season (except for one
case -- see
question 67). A player must clear waivers
before this date, so teams have to waive players by 5:00 PM Eastern Time
on January 7th in order to
have them off their rosters before January 10.
Also, if a player is waived prior to January 10 but is injured as a direct
result of playing basketball with his team, then his salary is guaranteed
until he is ready to play again or until the end of that season, whichever
comes first. However, this does not apply to players whose contracts
utilize
Exhibit 9 of the Uniform Player Contract (see question number
70).
Due to the rules for the allocation of signing bonuses and the limits on raises,
certain combinations of signing bonuses and non-guaranteed
salary are
incompatible. See question number 55 for more information.
1
A non-guaranteed season can be similar in function to a team option.
Teams often prefer the additional flexibility provided by nonguaranteed
salary -- the guarantee can change on a date of their choosing, they
can guarantee partial amounts, and they can attach
different conditions
to the protection.
2
February 10 in 2011-12.
65. What happens when a player is released? What are waivers? What is the Stretch provision?
Waivers are a temporary status for players who are released by their
team. A team initiates the waiver process by "requesting waivers" on
the
player they are releasing. The player stays "on waivers" for 48
hours (including weekends and holidays), during which time other teams
may
claim the player and assume his contract. If no team has claimed
the player before the end of the waiver period (which is always 5:00 PM
Eastern Time), he "clears waivers." The player's contract is terminated
and he becomes a free agent. The only way to terminate a contract
early
(other than with an ETO -- see question number 59)
is through the waiver process.1
The term "waived" is ambiguous -- it can be used as a verb to refer to
a waiver request (for example, "The Bulls just waived Michael Jordan"),
or as an adjective to refer to a player who has cleared waivers (for
example, "A team can sign a waived player."). This ambiguity is usually
easily resolved by the context in which the term is used. In this
document the term "waived" is used as an adjective, unless otherwise
made
clear.
A team can claim a player on waivers only if one of the following is true:
The team is far enough under the salary cap to fit the player's
entire salary.
The team has a Disabled Player exception for at least the
player's salary (see question number 25),
and the player is on the last season
of his contract.
The team has a trade exception for at least the player's
salary (see question number 85).
The player has a minimum salary contract.
If a team makes a successful waiver claim, it acquires the player
and his existing contract, and pays the remainder of his salary --
the waiving
team is relieved of all responsibility for the player.
There is a fee of $1,000, payable to the league office, for
claiming a player on waivers. If
more than one team tries to claim
a player on waivers, the team with the worst record gets him.
If the player clears waivers he becomes a free agent, and is free
to sign with the team of his choice. The player's roster spot is
freed-up as
soon as the team places the player on waivers. It can
sign a new player or acquire one via trade immediately, without
waiting for the player to
be claimed or to clear waivers.
The waiving team continues to pay the guaranteed portion of the
terminated contract (see question number 64). For
contracts signed or
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extended before the current CBA took effect, the
team and player may negotiate a revised payment schedule (see question
numbers 67 and
68). The revised
payment schedule may call for the guaranteed portion of the player's
salary to be paid over a longer or shorter period of time
than originally
specified in the contract, or even as a lump sum.
Individually negotiated revisions to the payment schedule are not allowed
for contracts signed or extended under the current CBA2. For
these
contracts or extensions, a waived player's guaranteed salary for the
remaining seasons3 is "stretched" and paid in equal amounts over
a
greater time span, as follows:
If the player is waived from July 1 to August 31, then his remaining
salary is paid over twice the number of years remaining on his
contract, plus one. For example, if the player is waived on August 1
with two seasons remaining on his contract at $10.2 million and
$10.3
million, respectively, then his remaining salary is paid over five
years (two seasons times two, plus one), in even amounts of $4.1
million per year.
If the player is waived from September 1 to June 30, then the current
season is paid per the normal payment schedule, and any
remaining
years are stretched over twice the number of years remaining plus one
as described above. For example, if the player is
waived on December 1
with two seasons remaining on his contract at $10.2 million and $10.5
million, respectively, then the current
season (at $10.2 million) is
paid normally, and the final season (at $10.5 million) is stretched
over three years (one season times two,
plus one) and paid in even
amounts of $3.5 million per year4.
The effect of stretched players on the team's salary cap is described in
question number 66.
When a player clears waivers and signs with a new team, his new salary is
a matter of negotiation. Few players are actually claimed while on
waivers,
since the claiming team inherits his entire contract. It is far more common
for teams to wait for the player to clear waivers, and then
sign him to a
much smaller (even minimum salary) contract.
Other rules related to waivers:
Once a team puts a player on waivers, the waivers cannot be
withdrawn.
If a team requests waivers on a player after March 1 (March 23
in 2011-12), the player is ineligible to be included in the playoff
roster of
any team that subsequently acquires him.
Players claimed from waivers retain their Early-Bird rights (see
question number 25) just as if they had been
traded. However full Bird
rights are only retained when the player
is waived through the Amnesty provision (see question number
69)5. If a player with full Bird
rights is claimed from waivers and the player was not
waived through the amnesty provision, his status drops from full
Bird to Early Bird.
When a team trades a player who is subsequently waived by the
receiving team, it cannot claim the player off waivers or re-sign
the
player until the one-year anniversary of the trade, or until
the July 1 following the end of his contract6, whichever
is earlier7.
A "buyout" is actually a combination of altering the
players contract to change the guarantee and/or payment schedule,
and waiving the
player (see question number 67).
For players waived through the Amnesty provision (see question number
69), the player's full salary comes off the team
salary as soon as
the team requests waivers. For non-amnesty waiver
requests on or after July 1, 2013, the player's non-protected salary
is removed from
the team salary immediately, and the remainder is
removed when the player clears waivers. For non-amnesty waiver requests
prior to
July 1, 2013, the player's entire salary is removed from the
team salary when the player clears waivers.
If a team claims a player on waivers, it cannot trade the player
for 30 days if the claim was made during a season. If the player
was
claimed during the offseason, he cannot be traded until the 30th
day of the following season.
The waiver period is 48 hours even when the team requests waivers on June
29 or 30, and the waiver period extends into the July
Moratorium (see
question number 104). In such a circumstance, teams
would be allowed to make a waiver claim during the
moratorium.8
1
This does not apply to 10-day contracts, which can be terminated
upon written notice to the player, without utilizing the waiver
process.
2
In the special case of a contract signed under the 2005 CBA and
extended under the 2011 CBA, individually negotiated revisions to
the
payment schedule are allowed for the seasons that were on the
contract prior to the extension.
3
All seasons remaining on a contract are considered "remaining seasons"
for the purpose of the stretch provision except seasons following a
team option. For example, the Clippers waived and stretched Miroslav
Raduljica in 2014 with two seasons remaining on his contract, one
fully
guaranteed and the other non-guaranteed. Both seasons counted in his
stretch calculation, so his remaining guaranteed salary was
stretched
over five seasons.
4
Therefore the effective deadline for stretching the salary of a
player with one season remaining on his contract is August 31. If
the player
is waived after this date, his one remaining season will
continue to be paid (and charged to the cap) normally.
5
Per an arbitration settlement on June 29, 2012, the league and
players association agreed that Chauncey Billups and J.J. Hickson
would
have full Bird rights in the 2012 offseason, and that Jeremy
Lin and Steve Novak would have Early Bird rights. This assigned
greater Bird
rights to Novak than should have been allowed -- as
a player who was traded while playing under a one-year contract,
Novak should have
become a non-Bird free agent (see question
number (100).
6
For contracts with options or ETOs, the end date of the contract is
interpreted as the June 30 before an option year, and the
June 30 after
an ETO year.
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7
Interestingly, by the letter of the rule a player could be traded
to a third team, waived by the third team, and be eligible to re-sign
with his
original team before the waiting period expires. However,
the league likely would disallow such signing per the general
prohibition on
circumvention (see question number 105)
if this was done in order to circumvent the rule.
8
The salary cap doesn't adjust until the end of the moratorium, so the
previous season's cap is used to determine whether a team in this
situation has the necessary cap room to make a waiver claim.
66. How do released or stretched players apply to team salary? What is set-off?
Guaranteed salary must be paid even if the player is released, and
continues to be included in team salary after the player is waived.1
For
example, if a player is waived with $10 million in guaranteed
base salary remaining on his contract, then that $10 million will
be included in
team salary. If a player is waived part-way through
a season, then the portion of team salary that is charged to the cap
for that season reflects
either the guarantee or the salary that was
actually paid, whichever is greater. For example, if a player has a
$6 million salary with $3 million
guaranteed and is waived 1/3 through
the season, then $3 million (reflecting the 50% that is guaranteed)
continues to be included in the team
salary. If instead he is waived
2/3 through the season, then $4 million (reflecting the salary
actually paid) continues to be included. Players on
non-guaranteed
"summer contracts" are not included in team salary at all
unless they make the team's regular season roster (see question
number
70).
As described in question number 65, if the contract
or extension was signed under the previous CBA, then the team and
player may negotiate
a revised payment schedule. If the contract or
extension was signed under the current CBA, the remaining guaranteed
salary is paid over twice
the number of remaining years, plus one, per
the Stretch provision:
If the player's salary payments are spread-out using the Stretch
provision, the team may elect to stretch the salary cap
charge to
match2. For example, if two seasons remain on
the player's contract when he is waived, and the payment is
spread-out over five years
per the Stretch provision, then the
team may elect to spread-out the salary cap hit over those same
five years.
In all other cases (i.e., when the contract or extension was not
signed under the current CBA, or when the team elects not to
spread-out
the cap hit per the Stretch provision), the player's
remaining guaranteed salary is included in team salary in the
remaining years of the
contract, ignoring any revisions to the
payment schedule. For example, if a player who signed under the
previous CBA is waived with two
seasons remaining on his contract
and the team & player negotiate a lump-sum payout of the
remaining guaranteed salary, the player's
salary continues to be
included in team salary over the next two seasons.
The remainder of the contract includes any seasons following an Early
Termination Option (ETO), but not a season following a player or team
option. However, as mentioned in question number 59,
all contracts with player options contain a clause indicating whether the
player receives
his salary for the option year in the event he is waived
before the option is picked-up. This clause states that the benefit is
"to the same
extent" as if the option had been exercised. The league
interprets this to mean that the team salary is charged to all seasons of
the contract,
including the unexercised option season. For example, when
Derek Fisher was waived by the Houston Rockets during the 2011-12 season,
his
player option for the 2012-13 season was unexercised. His remaining
guaranteed salary (he agreed to take less in a buyout arrangement) was
charged to the Rockets' cap in both 2011-12 and 2012-13.
If another team signs a player who has cleared waivers, the player's
original team is allowed to reduce the amount of money it still owes the
player (and lower their team salary3) by a commensurate amount.
This is called the right of set-off. This is true if the player
signs with any
professional team -- it does not have to be an NBA
team. The amount the original team gets to set off is limited to one-half
the difference
between the player's new salary and the minimum salary
for a one-year veteran (if the player is a rookie, then the rookie minimum
is used
instead).
For example, suppose a fifth-year player is waived with one guaranteed
season remaining on his contract for $5 million. If this player signs
a
$1 million contract with another team for the 2011-12 season, his original team gets to set off $1 million minus $762,195 (the minimum
salary
for a one-year veteran in 2011-12), divided by two, or $118,902.
The team is still responsible for paying $4,881,098 of the original
$5 million.
Note that between his prior team and new team the player
will earn a combined $5,881,098, which was more than he earned prior
to being
waived.
Teams and players may negotiate a waiver of the team's set-off rights.
Typically this is done when a contract is altered as part of a buyout
(see question number 67), but not at other times.4
1
The exception is the Amnesty provision, which does remove
the player's salary from team salary. See question number
69 for details.
2
If a team elects to stretch the team salary charge, it must inform the
league by 11:59 PM on the day following the day the player clears
waivers.
A team is not permitted to stretch the team salary charge if in any
future season the team salary charges for all the team's
waived players
(and other former players) would add up to more than 15% of the salary
cap for the season in which the player is waived.
For example, if a
player is waived in 2011-12, the team cannot elect to stretch the
player's team salary charge if the sum of the team
salary charges for
all of its waived players in any future season would exceed $8,706,600
(15% of the salary cap in 2011-12). Teams are
not allowed to stretch
only a portion of a waived player's salary, either to conform to the
15% limit, or for any other reason.
3
Set-off amounts are not deducted from team salary until after the end
of the regular season (when they know for sure how much the
player has
earned in his new contract, and that the new contract won't be affected
before the end of the season by a buyout or waiver),
however they apply
set-off retroactively to the last game of the regular season.
4
Teams typically do not waive their set-off rights when waiving players
through the amnesty process.
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67. What is a contract buyout?
Sometimes players and teams decide to divorce each other. They do this
by mutually agreeing that:
The team will waive the player
If the player clears waivers, the player's guaranteed salary will
be reduced or eliminated (see question number 64)
In contracts signed or extended under the previous CBA, the payment
schedule for the remaining salary may be shortened or lengthened
(see
question number 65)
Optionally the team's set-off rights (see question number
66) may be waived
After the player clears waivers, he and his former team are free to go
their separate ways. There is a quid-pro-quo between the player and
team
regarding contractual obligation and salary -- in exchange for gaining
his freedom, the player agrees to give the team a break on the
remaining
salary he is owed.
But there's a twist, which needed an arbitrator's ruling to resolve.
As detailed in question number 64, on January 10 all
contracts become
guaranteed for the remainder of that season. Although
compensation protection ensures the player is paid after he is waived,
the
compensation protection does not kick-in if the player is waived after
January 10, because the player does not lose any salary. Even though
the
team and player can mutually agree to reduce or eliminate the player's
compensation protection, he is still owed his full salary if waived
after
January 10.
This was challenged by John Starks during the 1999-2000 season. Starks had
been traded to the Bulls, and wanted to sever ties with the team
after
January 10. The arbitrator ruled that in the last season of a player's
contract a team and player can choose to eliminate the protection
that
kicks-in on January 10. Starks and the Bulls were therefore free to walk
away from each other with no money owed.
The Voluntarily Retired List (see question number 79)
can also be utilized when the player wishes to end his employment with his
team.
However, since the player is not free to sign with another team, it
is typically utilized when the player really intends to retire, and not
when the
parties are simply seeking a divorce.
68. How do buyouts affect team salary?
Any guaranteed salary still owed to the player as the result of a buyout
continues to be included in team salary, just as with any waived player.
See question number 66 for details.
69. What is the Amnesty provision?
Amnesty is a one-time opportunity for teams to release one player via the
waiver process (see question number 65) and remove him
from
their team salary and luxury tax computations. For a player to be
eligible for the Amnesty provision he must be on his team's roster
continuously from July 1, 2011 to the date he is amnestied, without any new
contract, extension, renegotiation or other amendment to his
contract in
the meantime. Players who were waived prior to July 1, 2011 and are still
receiving guaranteed salary are also eligible. Teams
cannot amnesty players
they sign, receive in trade, extend, renegotiate, or otherwise amend after
July 1, 2011.
Amnesty can be used prior to the 2011-12 through 2015-16 seasons, although
teams may use the provision only once in total -- not once per
season. For
the 2011-12 season the Amnesty provision was available from December 9-16,
2011. For the 2012-13 through 2015-16 seasons it
is available for the first
seven days that follow the July moratorium (see question number
104). The waiver period for amnestied players is 48
hours, the same as for all other waivers.
Players waived using this provision are not counted in team salary (see
question number 14) or luxury tax (see question number
21)
computations, except for the following:
Amnestied players continue to count toward the minimum team payroll
(see question number 15).
Amnestied players continue to count toward the players' league-wide
revenue guarantee (see question number 18).
As with any other waived player, teams must continue to pay the guaranteed
base salary of their amnestied players. The player's full salary
comes off
the team salary as soon as he is placed on waivers.
Also as with any other waived player, another team may place a waiver claim
in order to acquire the player before he clears waivers (see
question number
65). But amnesty is different from the normal waiver
process in that it allows teams to make either a full or partial waiver
claim.
When a team makes a full waiver claim it acquires the player, assumes his
full contract, and pays all remaining salary obligations (and
the waiving team
has no further salary obligation to the player). Full waiver claims have
precedence over partial waiver claims -- if one team
makes a full waiver
claim and another makes a partial waiver claim, the team making the full
waiver claim is awarded the player. If multiple
teams make full waiver claims,
the player is awarded to the team with the worst record.
A partial waiver claim is a bid for a single dollar amount. If no team makes
a full waiver claim, the player is awarded to the team submitting
the highest
bid in a partial waiver claim. If multiple teams bid the same amount, the player
is awarded to the team with the worst record.
When a team is awarded a player
via a partial waiver claim, it pays the following portion of the player's
salary:
The amount of their bid, spread across all remaining guaranteed seasons of
the player's contract (all seasons with any protection at all),
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in proportion
to the total salary in each season
All non-base compensation, such as bonuses
100% of the player's salary in non-guaranteed seasons
The waiving team continues to pay the remainder of the player's salary -- any
portion that is not paid by the claiming team1. For example, the
New
York Knicks amnestied Chauncey Billups in 2011 with one year remaining on his
contract for $14.2 million. The Los Angeles Clippers
submitted the only bid,
for $2,000,032. The Clippers paid Billups the amount of their bid, with the
Knicks responsible for the remaining
$12,199,968. This system (plus the rules
for minimum bids, as described below) helps ensure that the waiving team doesn't
have to pay the
player more than they would have paid had they waived their
player without amnesty.
The minimum bid for a partial waiver claim is whichever of the following is larger:
The sum of the player's minimum salary for all remaining "protected"
years of his contract.2
The sum of all non-guaranteed salary in protected years.
For example, if a 10+ year veteran is amnestied in 2012 with three years
remaining on his contract at $10 million each season, and his salary
is
guaranteed 100% in 2012-13, 60% in 2013-14, and 0% in 2014-15, then the
minimum bid for a partial waiver claim is $4 million -- the
unprotected
amount in the partly-protected 2013-14 season, which is larger than the
sum of the minimum salaries for the 2012-13 and 201314 seasons. Since
the 2014-15 season is completely unprotected, it is ignored when
determining the minimum bid amount.
If instead the above player's salary was 100% guaranteed in all three
seasons, the minimum bid amount would be $4,200,178 -- the sum of
the
minimum salaries for a 10+ year veteran for those three seasons.
In order to submit a bid for a partial waiver claim, the bidding team must
have cap room equivalent to the portion of their bid that would be
charged
to team salary in that season, plus the amount of any likely bonuses (see
question number 74) for that season. If necessary, teams
can create this cap room by waiving non-guaranteed players, but not by making
trades. The team must make the cap room available
immediately upon being
awarded the amnesty claim.
An amnestied player's Bird clock does not reset when he is awarded to the
team with the winning bid. In addition, for the purpose of the Bird
exceptions
(see question number 25) his prior salary is considered
to be his full season salary. For example, if a player with a $10 million
salary is amnestied, claimed by another team for $1 million, and subsequently
becomes an Early Bird free agent, his free agent cap hold (see
question number
38) is $13 million (130% of $10 million), and his team can
re-sign him for up to 175% of his full $10 million salary (subject
to maximum
salary restrictions) using the Early Bird exception.
The waiving team may not re-sign or re-acquire the player for the length
of his contract (which includes seasons following an ETO or option),
and the
claiming team is prohibited from trading the player until the following July 1.
If the player is eventually traded, his new team becomes
the claiming team.
When an amnestied player is claimed on a partial waiver claim and subsequently
waived by the claiming team, any guaranteed salary in
partially-guaranteed
seasons continues to be split among the two teams, in proportion to the split
of the full salary. For example, suppose an
amnestied player has a $10 million
salary that is 50% guaranteed, with the claiming team paying $6 million and the
amnestying team paying
$4 million. If the claiming team waives the player prior
to the start of that season, he will receive $3 million from the claiming team
and $2
million from the amnestying team.
The above only applies to salary that was guaranteed at the time the player was
amnestied. The claiming team is responsible for any salary
that becomes
guaranteed subsequent to the amnesty. If the player in the above example earned
an additional $1 million of salary protection
subsequent to the amnesty (bringing
the total protection to $6 million) and is later waived, he will receive $4
million from the claiming team
and $2 million from the amnestying team.
If instead the player walks away from the claiming team without being waived or
agreeing to a buyout, neither the amnestying team nor the
claiming team owes him
any additional money. The player is contractually obligated to provide services
as a player, and if he walks away he
walks away from his contract and
not just his current team. Just as the claiming team no longer would be obligated
to continue paying his
salary in this situation, neither would the amnestying team.
The players on whom the Amnesty provision was used each year are as follows:
Team
Year Amnestied player Claimed by
Charlotte
2013 Tyrus Thomas
Chicago
2014 Carlos Boozer
Cleveland
2011 Baron Davis
Dallas
2012 Brendan Haywood
Denver
2012 Chris Andersen
Golden State
2011 Charlie Bell
Houston
2012 Luis Scola
Indiana
2011 James Posey
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Bid amount
LA Lakers
$3,251,000
Charlotte
$6,150,000
Phoenix
$13,525,513
NBA Salary Cap FAQ
LA Lakers
2013 Metta World Peace
LA Clippers
2012 Ryan Gomes
Miami
2013 Mike Miller
Milwaukee
2013 Drew Gooden
Minnesota
2012 Darko Milicic
New Jersey/Brooklyn 2011 Travis Outlaw
Sacramento Kings $12,000,000
New York
2011 Chauncey Billups
LA Clippers
$2,000,032
Orlando
2011 Gilbert Arenas
Philadelphia
2012 Elton Brand
Dallas
$2,100,500
Phoenix
2012 Josh Childress
Portland
2011 Brandon Roy
Toronto
2013 Linas Kleiza
Washington
2012 Andray Blatche
1
Teams have been known to check with other teams in order to "test
the waters" prior to deciding whether to amnesty a player, and only
amnesty the player if another team indicates it would assume a
significant portion of the player's salary in a partial waiver
claim.
2
A protected year is one in which any of the salary is guaranteed.
Seasons following ETOs and player options are considered to be protected
years, but not seasons following team options (see question number
59). The minimum bid does not include salary in seasons
that are
completely non-guaranteed; however the team with the winning
bid is responsible for paying this salary. Interestingly, the CBA does
not
specify the minimum bid amount when the entire remaining contract is
non-guaranteed, although there is no reason for such a contract to
be
amnestied.
70. What is a summer contract?
A summer contract is typically used for training camp invitees, because
the player's salary is not included in team salary until the first day
of
the regular season. In other words, it is a "make-good"
contract -- the player must make the team's opening day roster in order
to receive his
salary and for his contract to be included in team salary.
If the player is a veteran free agent who last played for that team, the
contract must be for one season at the minimum salary (see question
number 16). In all other cases there are no special
limits to the salary or number of years -- a team could theoretically
sign a player to a
summer contract for four seasons at the maximum
salary. However, summer contracts frequently utilize Exhibit 9 of the
Uniform Player
Contract, which adds further limitations (see below).
A summer contract can be signed from the first day after the July Moratorium
(see question number 104) to the last day before the regular
season. To avoid counting as team salary, the player must clear waivers prior
to the first day of the regular season. To qualify as a summer
contract no
compensation of any kind can be earned or paid prior to the start of the regular
season. The salary cannot be guaranteed or
insured. However, the player may
receive per diem, lodging and transportation expenses, and disability insurance
covering summer leagues
and training camp.
Since summer contracts do not count against the team's cap until the start of
the regular season, teams can effectively sign players to summer
contracts when
they do not have room (cap room or an exception) for the contract, and delay
creating the necessary room until the start of the
regular season.
A summer contract does not need to utilize Exhibit 9 of the Uniform
Player Contract (One Season, Non-Guaranteed Training Camp Contracts),
but doing
so limits the team's liability in the event the player becomes injured. If a
player with an Exhibit 9 becomes injured and unable to play
basketball prior to
the team's first regular season game and the injury is a direct result of
playing basketball for the team, then the team pays
the player $6,000 when it
waives him. This is in lieu of the rule for ordinary contracts guaranteeing
the salary of an injured player until he is
ready to play again or until the end
of that season, whichever comes first (see question number 64).
If Exhibit 9 is used, the contract must be
for one season at the
minimum salary, with no bonuses of any kind.
A team cannot sign a player using Exhibit 9 unless it has at least 14 players
on its roster, not including summer contracts.
When a player on a summer contract is traded before the start of the regular
season, his salary for trade purposes is $0 and the trade is
treated the same
as a trade for draft rights. Teams cannot receive trade exceptions (see question
number 85) when trading summer contracts,
and the acquiring
team does not need to match salaries, have cap room, or use an exception.
However, the acquiring team must create the
necessary room or designate an
exception prior to the start of the regular season, when the player's salary is
added to the team's cap.
71. Do injured players apply to team salary?
Injured players are included in team salary. An exception is made for
players who are forced to retire for medical reasons -- see question
number 63 for details.
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In certain cases, teams can gain an exception which allows them
to exceed the cap to sign a replacement. See question number
25 for more
information on the Disabled Player
exception.
72. How do players who die apply to team salary?
Sadly, a number of players have died while they were active, including
Jason Collier, Reggie Lewis, Drazen Petrovic, Bobby Phills, Malik Sealy
and Nick Vanos.
A player who dies is treated the same as one who has suffered a
career-ending injury or illness. See question number 63.
73. Are player contracts insured?
There is a league-wide policy that insures the contracts of around 150
players each season. Each team submits at least five players for
coverage
from their five most expensive contracts based on total remaining salary
(with two or more years remaining) and their five most
expensive contracts
based on current season salary. Teams also have the option of submitting
additional names for coverage. The carrier has
the right to exclude 14
contracts per season, such as when they consider a player with a very
large remaining contract to be a medical risk. For
example they excluded
Luol Deng in 2008-09 because he had $71 million remaining and a history of
back injuries. The list of excluded players
changes each year, so a player
who is not covered one season might be covered the following season.
However, once a player is covered the
carrier can't exclude the player for
the remainder of his current contract.
If an insured player is disabled, there is a 41 game waiting period,
after which the insurance company pays 80% of the guaranteed portion
of
the player's remaining base salary, up to $175,000 per regular
season game. The waiting period can span seasons, and the player even
can
attempt to come back -- if he does and finds that he is unable to
play, the 41-game count resumes (as long as he stopped playing due to
the
same injury).
If the player is traded, his new team receives the benefit -- for example,
even though Cuttino Mobley's heart condition was discovered prior to
his
trade to the Knicks, the Knicks received the insurance payout.
74. Can incentives be built into a contract? How do they apply to team salary?
There are three categories of allowable incentives: performance,
academic/physical achievement, and extra promotional. The latter two
categories are always included in the player's salary and team salary
amounts. Performance incentives are classified as either "likely
to be
achieved" or "not likely to be achieved," with only the likely
incentives included in the player's salary and team salary amounts.
The
determination of whether an incentive is likely or unlikely is
based on whether the criterion was achieved in the previous season.
For example,
if a player had seven assists per game the previous
season, then an incentive based on seven assists per game would be
classified as likely to
be achieved, but one based on eight assists
per game would be classified as not likely.
If either the league or players association feels that the previous
season does not fairly predict the performance in the current season, then
a
jointly-selected expert determines whether the default classification
should be overruled. This can happen when the player was injured the
previous season.
Unlikely bonuses in any season are limited to 15% of the player's
regular salary in that season. In the first season of a contract the
base
salary, likely bonuses and unlikely bonuses must all fit within
the salary cap or exception. The league determines a team's available
room
under the cap or an exception by adding in the unlikely bonuses
for all players who signed that season. This prevents a team
from signing
multiple players to lower salaries but with lots of
unlikely bonuses that collectively exceed the cap room it has to offer.
For example, if the NonTaxpayer Mid-Level exception is $5 million
and this exception is used to sign a player to a contract with $2
million in base salary and $200,000
in unlikely incentives, then only
$2.8 million of their Non-Taxpayer Mid-Level exception can be used to
sign other players.
Incentives must be structured so that they provide an incentive for
positive achievement by the player or team, and are based
upon numerical
benchmarks (such as points per game or team wins) or
generally recognized league honors1. The numerical benchmarks
must be specific -- for
example, a bonus may be based on the player's
free throw percentage exceeding 80%, but may not be based on a relative
measure such as
the player's free throw percentage improving over his
previous season's percentage. Certain kinds of incentives are not
allowed, such as those
based on the player being on the team's roster
on a specific date or for a specific number of games.
All performance incentives are re-evaluated at the start of each
season to determine whether they should be classified as likely or
not likely to
be achieved. Performance incentives are recomputed when
a player is traded, but only if they are team-related and based on
the previousseason performance of the team. For example, suppose Team
A won 25 games last season, and Team B (with the league MVP) won 55.
Also
suppose the MVP has a performance incentive that is based on his
team winning 30 games. Going into the season this incentive would be
classified as likely to be achieved, since his team (Team B) won 55
games the previous season. Now suppose this player is traded to Team A
in
exchange for draft picks. The incentive would be recomputed upon the
trade, and in this case would be reclassified from likely to unlikely
to be
achieved, since the player's new team won fewer than 30 games
the previous season (even though adding the MVP should easily push
Team
A's win total above 30).2
Other rules related to incentives:
Minimum salary contracts cannot contain bonuses of any kind.
The rules for raises (and decreases) also apply to incentives. When
salary increases or decreases are limited to 4.5% or 7.5%, then
likely
and unlikely bonuses may each increase or decrease by 4.5%
or 7.5%, respectively (see question number 55).
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If a contract with bonuses is extended (see question number
60), then the extension must have the same bonuses.
The bonus amounts
may increase or decrease by up to 7.5%, but they
can't be left off.
The Amnesty provision has specific rules related to incentives.
See question number 69 for more information.
1
Generally recognized league honors includes MVP, Finals MVP,
Defensive Player of the Year, Sixth Man, Most Improved
Player, All-NBA
Team (first, second and third), All-Defensive
Team (first and second), and All-Star selection.
2
An interesting case of bonus recomputation occurred during the
2013-14 season. Luke Ridnour had a performance bonus that was
based
on his team making the playoffs. At the start of the season
he played for Milwaukee, which had made the playoffs the previous
season, so
his bonus was classified as likely. Ridenour was later
traded to Charlotte, which had missed the playoffs the previous
season, so his bonus
was reclassified to unlikely upon the trade.
Therefore, Ridnour ironically went from having a likely bonus he
wasn't going to earn, to
having an unlikely bonus he was
going to earn.
75. How about signing bonuses? Are they allowed? How do they apply to team salary?
Teams are allowed to offer the players they sign a bonus worth as
much as 15% of the total compensation.1 The total
compensation includes
the signing bonus itself, but excludes any
incentive compensation. It also includes seasons following an option
or ETO. A signing bonus is paid
up-front, but it is charged to the
salary cap across the guaranteed seasons in the contract (not
including option years or years following an
ETO), in proportion to
the percentage of salary in each of those seasons that is
guaranteed2. This can create a problem when a player is
signed
to the maximum salary or the team's room under the salary cap
or an exception. For instance, if the Non-Taxpayer Mid-Level exception
is $5
million, then a team could sign a player to a four-year contract
with 4.5% raises (without a signing bonus) as follows:
Without Signing
Bonus
Year
Salary
1
$5,000,000
2
$5,225,000
3
$5,450,000
4
$5,675,000
Total $21,350,000
The maximum (15%) signing bonus is $3,202,500. It must be allocated
to each season of the contract (assume there is no option year or
ETO). But in order to fit the first-year salary plus the portion of
the signing bonus allocated to the first season within the $5 million
exception,
the first-year salary must be reduced, and the bonus
recalculated:
With Signing Bonus
Year
Base salary Portion of signing bonus Total
1
$4,207,400
$792,600
$5,000,000
2
$4,396,733
$792,600
$5,189,333
3
$4,586,066
$792,600
$5,378,666
4
$4,775,399
$792,600
$5,567,999
Total $17,965,598 $3,170,400
$21,135,998
Note that in order to fit the first-year amount (salary plus a
pro-rated portion of the signing bonus) within the $5 million
exception, the firstyear salary had to be reduced to $4,207,400. The
net effect is that the player gets more money in the first year (he
receives his base pay of
$4,207,400 plus his entire signing bonus of
$3,170,400, for a total of $7,377,800), but he receives less in the
subsequent years. Also note that
the total value of the contract
($21,135,998) is lower, because raises are based on the lower base
salary in the first season3.
For extensions, the signing bonus can be paid no sooner than July 1 of
the year the extension takes effect, and the signing bonus is allocated
to team salary over the years of the extension (per the same formula
as described above for contracts). However, if the team is under the
salary cap when the extension is signed, then the signing bonus may be
paid before the extension takes effect. If this happens, then the
extension
is deemed to be a renegotiation (see question number 61)
and the signing bonus is charged to team salary over both the extension
and the remaining seasons of the current contract. Under these circumstances
the amount of the signing bonus is limited -- the portion of the
signing
bonus charged to the season in which the extension is signed must fit
within the team's cap room. Except in this special case of a
renegotiation
in conjunction with an extension, a renegotiation cannot contain a
signing bonus.
The following are also treated like signing bonuses for the purpose
of determining a player's salary and the allocation of the player's
salary to
the team salary:
Payments in excess of the Excluded International Player Payment
Amount (see question number 77) that are made to
international teams
or organizations to release a player's rights.
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Trade bonuses (see question number 98).
Except for international player buyouts, rookie scale contracts for
first round draft picks cannot contain signing bonuses.
Also see question number 91 for information on including
signing bonuses in sign-and-trade contracts.
1
10% in offer sheets to restricted free agents.
2
The calculation for allocating the signing bonus to the years of a
contract is somewhat confusing. It is not proportionate to
the salary, but
rather to how much of the salary in each season is
guaranteed. If there are four years in the contract, there is no
option year or ETO, and
each year is 100% guaranteed, then 25% of
the signing bonus is allocated to each season of the contract, even
if the salary increases
throughout the contract. However, if the
fourth season of this contract was only 50% guaranteed, then 2/7 of
the bonus would be
allocated to the first three seasons, and 1/7
would be allocated to the fourth season. If the entire contract is
non-guaranteed, then the
entire bonus is charged to the first season.
3
In the example note that the signing bonus of $3,170,400 is 15% of
the final contract ($21,135,998) and not the original contract
($21,350,000). How are the final results calculated? It's kind of
complicated, and I go over the details in a separate (and more
technical)
document available here.
I also provide a spreadsheet for calculating contracts (including
contracts with signing bonuses) here.
Also note
that due to the bonus allocation and the limits on raises,
certain combinations of signing bonuses and non-guaranteed salary
are
incompatible. See question number 55 for
more information.
76. What are the rules relating to international players and teams?
A player is considered to be an international player if he has maintained
permanent residence outside the U.S. for the three years prior to the
draft
while playing basketball (as either an amateur or pro) outside the U.S., and
who never completed high school or enrolled in a college or
university in the
U.S. An international player is eligible for the NBA draft that is held in
the same calendar year as his 22nd birthday. An
international player who is
at least 19 but younger than 22 also can become draft eligible by declaring
himself an early entry player. An
international player who is older than 22
or was not selected in the draft in the same calendar year as his 22nd
birthday is considered a rookie
free agent.
The NBA has a formal agreement with the Federation Internationale de Basketball
(FIBA) recognizing each other’s contracts. A player who is
currently playing
or last played on a FIBA team must obtain a letter of clearance from the
basketball federation of the country in which he
played before signing with an
NBA team. The letter of clearance ensures that the player does not have an
“existing and validly binding”
contract with any FIBA team. Likewise, a player
who last played in the NBA must secure a FIBA license before signing with a
FIBA team, which
requires FIBA to contact the NBA to obtain a written statement
that the player is not subject to an existing and validly binding NBA contract.
NBA teams signing international players are allowed to pay a buyout to the
player’s team or organization in order to release the player to sign
in the NBA
(see question number 77).
The NBA’s agreement with FIBA also requires NBA teams to allow their players
to play for their national teams in major FIBA competitions,
including the
European Championships, the World Championships and the Olympics, as long as
the competition does not conflict with an NBA
game and the player is adequately
insured. NBA teams can’t take any steps to dissuade their players from
participating in such competitions,
such as asking their players not to
participate or making public statements suggesting they do not want their
players to play in these
competitions.
77. What about buyouts paid to international teams? Are they allowed? How do they apply to team salary?
NBA teams signing international players1 are allowed to pay a
buyout to the player's team or organization in order to release the player
to sign
in the NBA. The buyout amount is a matter of negotiation between
the player and the international team or organization. NBA teams are
allowed
to pay up to the Excluded International Player Payment Amount, and
this amount is not charged to the team salary. Any amount above
the Excluded
International Player Payment Amount comes out of the player's (after-tax)
salary, and therefore is included in the team's team
salary. Here are the
Excluded International Player Payment Amounts:
Season
Excluded amount
2011-12
$525,000
2012-13
$550,000
2013-14
$575,000
2014-15
$600,000
2015-16
$625,000
2016-17
$650,000
2017-18
$675,000
2018-19
$700,000
2019-20
$725,000
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2020-21
$750,000
It is a common misconception that a buyout cannot exceed the excluded amount.
On the contrary, buyouts can exceed the excluded amount,
but any amount
above the excluded amount essentially comes out of the player's paycheck. For
example, if a team's second round pick in
2011 has a $1 million buyout, the team
can use its (Non-Taxpayer or Taxpayer) Mid-Level exception to sign the player,
with $1 million going to
the player's international team or organization. Since
$525,000 is excluded in 2011-12, $475,000 of the player's (after tax) salary
will be used
to fund the buyout, with the remainder going to the player. The
amount above the excluded amount is charged to the team's team salary as a
signing bonus (see question number 75).
It is trickier to pay more than the excluded amount for a first round
draft pick, which is why international players with large buyouts
often drop
to the second round of the draft. A first round pick's first
contract must be a rookie scale contract2 (see question number
49), with a salary
between 80% and 120% of the scale
amount. It is possible to write the contract for 120% of the scale amount,
with the player paid less than
that amount and the remainder used as a
buyout to the international team in excess of the excluded amount.
For example, the 30th pick in the 2011 draft has a scale amount of $850,800.
The player could be paid $680,640 (80% of the scale amount),
with up to
$1,020,960 (120% of the scale amount) charged to the team salary in 2011-12.
Since the buyout is charged to the cap as a signing
bonus, and signing
bonuses are allocated to the guaranteed years of a contract, the player's
total buyout could be up to $1,205,6403.
1
This applies to any player playing on an international team, and not just
to "international players."
2
Unless the player waits three years without signing or playing
intercollegiately in the interim (see question number
51).
3
Two times the difference between 80% and 120% of the scale amount for the 30th pick in 2011-12, plus the $525,000 excluded amount.
Since signing bonuses are allocated to team salary in proportion to the percentage of salary that is guaranteed, and the first two seasons
of a rookie scale contract are both 100% guaranteed, the amounts allocated to the first two seasons must be the same. Also note that
since $525,000 of the buyout is excluded from cap calculations, the remaining $680,640 that is charged as a signing bonus is less than
15% of the total value of the contract ($5,209,508).
78. Are teams really competing on a level playing field? Since the tax rate is
different in the different states and Canada, don't
the teams in a more "tax
friendly" state have an advantage over the other teams?
Yes they do. For example, an offer from Orlando will provide a higher net
income than the same offer from Los Angeles, because the player will
play
at least half his games in a state with no state income tax. But the
advantage is not quite as large as you might expect, because most
jurisdictions
with NBA teams require visiting athletes to pay state income taxes (often
called a "jock tax") for each "duty day" they spend
there. There is not a
universal definition for a duty day, but it is generally considered to be any
day the player spends in a particular
jurisdiction, including for preseason,
regular season and postseason games. For example, if there are 170 duty days
in a season and a player
plays five of those duty days in a state with a jock
tax, then the player will pay state income taxes in that state based on 5/170
of his income.1
Currently:
Florida (Heat and Magic), Tennessee (Grizzlies) and Texas (Mavericks,
Rockets and Spurs) have no state income tax.
Florida (Heat and Magic), Ontario (Raptors), Tennessee (Grizzlies),
Texas (Mavericks, Rockets and Spurs) and Washington D.C. (Wizards)
do
not make visiting athletes pay a jock tax.
Illinois (Bulls) does not make visiting athletes pay a jock tax if
they come from jurisdictions without a jock tax. However, Illinois does
not
credit its residents for jock taxes paid out of state, so Bulls
players can be double-taxed for some road games.
The league also has regulations to help neutralize the tax disadvantage
of Canadian teams, and there is language in the CBA to help protect
players'
benefits from any adverse effects caused by changes in Canadian legislation
or tax laws.
Incidentally, players are always paid in U.S. dollars, even if their team
is located in Canada.
1
Tax laws are nuanced and complicated, and vary considerably from state
to state. For this reason it is very difficult to determine a player's
net income based on his salary and the state in which his team plays.
For example, California does not exempt players from taxes on
income
earned while playing in other states. Instead it nets jock taxes paid
in other states against California taxes, so a player based in
California may owe taxes to two states for the same road games.
79. What roster size limits exist? What is the Inactive List? What is Injured Reserve?
Do any other such lists exist?
Normally an NBA team can have a maximum of 15 players on its roster during a
season (and up to 20 during the offseason). A team normally
has 12 or 13 players
on its Active List, who are eligible to play in games, and can have as few
as 11 for up to two weeks at a time. Any
remaining players must be on the team's
Inactive List, and are ineligible to play in games. Teams temporarily can have
four players on their
Inactive List (bringing their roster size to 16) with
league approval in the event of a hardship1. Teams must suit-up at least eight players for
every game. The following table
summarizes the allowable compositions of team Active and Inactive Lists:
Total Players Active Inactive Notes
16
12
4
With league approval in the event of a hardship
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15
13
2
15
12
3
14
13
1
14
12
2
14
11
3
13
13
0
13
12
1
13
11
2
Two week limit
12
12
0
Two week limit
12
11
1
Two week limit
11
11
0
Two week limit
Two week limit
The composition of the Inactive List can change on a game-by-game basis --
no less than 60 minutes prior to tipoff, the team must present to
the
official scorer a list of the players who will be active for that game. A
player can be inactive for as little as one game. While individual
teams
are only required to carry a minimum of 13 players, (12 active and one
inactive), the NBA also guarantees a league-wide average of at
least 14
players per team. The league is surcharged if it does not meet this obligation.
In addition to the Active and Inactive Lists, the following lists exist:
Suspended List: Any player who is suspended by
his team for four or more games may be transferred to the team's
Suspended List
following the third game of his suspension (and
may be placed on the team's Active List or Inactive List for the
first three game). Any
player who is suspended by the league for
six or more games may be transferred to the team's Suspended List
following the fifth game
of his suspension (and must remain on
the team's Active List for the first five games).
NBA Draft List: The NBA Draft List contains the
players with whom the team holds exclusive negotiating rights.
Voluntarily Retired List: A player who wishes to
retire while under contract may be placed on his team's Voluntarily
Retired List if both
the team and player agree. Such players cannot
return to active status for one year without the unanimous consent
of the NBA Board of
Governors (see question number 63),
and cannot be traded. By utilizing the Voluntarily Retired List
rather than agreeing to a buyout
(see question number
67), the team is left with some ongoing rights
-- for example, the player is not able to sign with another team.
Armed Services List: Used for players who are on
active duty in their country's armed services.
Injured Reserve is the former name of the Inactive List. It was
originally intended for players who were injured and unable to play,
however
teams often used it as a convenient place to stash extra
players. While a medical reason was required for players to be put
on Injured Reserve,
the league did not insist on an independent
physician confirming the diagnosis. Thus it was common for a
seemingly healthy player to suddenly
develop "back spasms"
right before rosters were cut to 12 players, and spend the entire
season on Injured Reserve as a result. With the 1995
CBA they gave
up the ghost, dropped the medical requirement, and changed the
designation to "Inactive List." (The cynic will note that
marginal NBA players seem to have a lot fewer back spasms nowadays.)
Players assigned to the NBA Developmental League (see question
number 81) are automatically placed on their
team's Inactive List.
Since players who are on the Suspended, NBA Draft, Volunarily Retired
and Armed Services lists are on neither the Active nor Inactive List,
these players are ignored for roster size limitations. For example, in
early 2015 the Sixers had 15 players on its roster, and had placed
Andrei
Kirilenko on its Suspended List. This freed up a roster spot for
the team to acquire Jared Cunningham from the Clippers.
1
A hardship can be deemed to exist when a team has four players
who are sick or injured and have missed at least three games, and
will
continue to be unable to play. If a hardship is granted, the
hardship ends when one of the sick or injured players is physically
able to
resume playing. The team must then release player(s) to get
back to the roster limit, although teams have the option to retain
the
hardship player and release a different player to get back to
the limit.
80. What is a 10-day contract?
A 10-day contract is just that, a player contract which lasts ten
days (or three games, whichever comes later). Teams may sign players
to 10day contracts starting January 51 each season. Teams
cannot sign players to 10-day contracts that would extend past their
last regular season
game. In other words, after their 80th game (64th
in 2011-12) or after the 10th day before their last regular season
game (whichever comes
first) teams can no longer sign 10-day contracts.
A team may sign an individual player to two 10-day contracts in one season
(they may or may not be consecutive). After the second 10-day
contract,
the team can only retain the player by signing him for at least the remainder
of the season. A team can't have more 10-day contracts
than they have
players on their Inactive List, except if a team has 13 players on its
Active List, it can have one more 10-day contract than they
have players
on their Inactive List.
The base salary in a 10-day contract is negotiable, although they are almost
always signed for the minimum salary. The salary is then prorated for the
number of days covered by the contract (10 days or three games, whichever is
longer).
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1
Or the first business day thereafter. Teams were able to sign players
to 10-day contracts starting February 6 during the 2011-12 season,
due
to that season's late start.
81. What is the NBA Developmental League (NBA D-League)?
The NBA Developmental League (also known as the NBA D-League or NBADL)
is a separate league run in affiliation with the NBA. An NBA team
may
assign its players at any time to its affiliated NBA D-League team as
follows:
Season(s) Players
Number of
assignments
2011-12
Players with 0-1 years' experience can be assigned at any time.
Players with two or more years' experience
can be assigned if
both the player and the union consent.
3
2012-13
and later
Players with 0-2 years' experience can be assigned at any time.
Players with three or more years' experience
can be assigned if
both the player and the union consent.
No limit
If an active player is assigned to the NBA D-League, he is automatically
placed on his NBA team's Inactive List. There is no minimum or
maximum
length of an NBA D-League assignment, and players have 48 hours to report
to the NBA D-League team once they are assigned.
Players continue to
receive their NBA salary while assigned to the NBA D-League, but their
performance in NBA D-League games does not
count toward NBA incentives.
NBA D-League rosters are normally 10 players, but can expand to 12 to
accommodate assigned NBA players. In some cases where one team
might
be overstocked with assignees or players at a particular position,
players might be reassigned to a different team. NBA teams do not
control the playing time their assignees receive -- that is up to the
discretion of the NBA D-League coaches.
Further information for the NBA D-League can be found on their website:
http://www.nba.com/dleague
82. What are the rules regarding trades?
Teams under the salary cap may make trades as they please, as long
as they don't finish more than $100,000 above the salary cap following
any trade. But if a team finishes more than $100,000 over the cap, whether
they started out above or below the cap, then an exception is
required.
An exception is the mechanism that allows a team to make trades or sign
players and finish over the salary cap. Since most teams
are usually
over the salary cap, trades are usually completed using exceptions.
Some exceptions are available only for signing free agents, and those
exceptions are covered in question number 25. The
exceptions available
for making trades are as follows:
The Traded Player exception is the principal means
through which most trades are made. It is described in question numbers
83, 84
and 85.
The Minimum Salary exception can be used for either
trades or signing free agents. It allows teams to acquire minimum-salary
players. See question number 86 for more information.
The Disabled Player exception also can be used for either
trades or signing free agents. It allows teams to replace certain injured
players (see question number 25 for more information).
Sometimes there are multiple ways to configure the same trade. For example,
a minimum-salary player might be acquired using either the
Traded Player
exception or the Minimum Salary exception, or a two-for-two trade might
also work as two separate one-for-one trades. Teams
are allowed to choose
the configuration that works best for them. See question number
88 for an example of this.
Trades require at least two teams, and in theory the maximum limit is
the number of teams in the league -- i.e., it is possible (although very
unlikely) for there to be a single trade in which every NBA team is involved.
Each team in a trade must send something out and take
something
back, where the following requirements must be met:
In all trades (no matter how many teams are involved), each team must
send out and take back at least one of the following:
A player under contract.
A future draft pick. If a pick is protected (see question number
87), then no more than 55 picks in a single
draft can be protected.
The draft rights to an "NBA prospect" -- a player with a reasonable
chance of becoming an NBA player during his career, or a
contributing player in a reputable professional league (as
determined by the league office).
The right to swap unencumbered picks in a future draft.
$75,000 or more.
In addition to the above, in a three (or more) team trade, each team must
"touch" at least two other teams in the trade. To qualify as a
touch, at
least one of the following must be sent (in either direction):
An active player contract
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At least $750,000 cash
A future pick that will actually be conveyed (for example, a team can't
meet the touching requirement by sending a top-55
protected pick, that
switches to $100,000 cash if it falls within the top 55)
The draft rights to an actual NBA prospect (same description as above)
For example, a three-team trade in which Team A exchanges players with
both Team B and Team C, but Teams B and C do not exchange
assets, is
illegal. However, the above trade is legal if Team B sends Team C an
unprotected draft pick or Team C sends Team B one.
Cash cannot be the only asset sent out in trade for a first round draft
pick. In other words, teams can't "sell" their first round draft picks,
but they can sell second round picks, player contracts or draft rights.
When teams wish to complete a trade they must set up a "trade call" with
the league office. If the teams wish to complete the trade over a
weekend
they must notify the league office on Friday, otherwise the trade call
cannot be held until the following Monday. The trade is not
complete
until all terms have been agreed to during the trade call.
During the trade call the teams and the league office review:
The exact terms of the trade (players involved, cash, draft picks, etc.).
Contract details for each player, including remaining seasons, salary
and any trade bonuses.
Health information for all players, including any factors that could
affect a player's ability to play basketball at any point in his career.
Teams must disclose any relevant health information.
Insurance information, including any exclusions (see question number
73).
Each team's responsibilities and understandings.
Following the trade call each team sends the league office an email with
the terms of the transaction, and the league office sends the involved
teams instructions for conditions that must be satisfied before the trade
becomes official (such as physical exams). When all conditions have
been
satisfied, the league office sends another email notifying the teams that
the trade is complete. Any term or condition that is not specified
in the
trade call is not enforceable.
Players cannot play, practice or work out with their new teams until the
league office notifies the teams that the trade is complete.
If a team misrepresents or fails to disclose any pertinent information
during the trade call, the Commissioner can impose penalties including
a
fine up to $1 million, suspension of the team executives who were
involved, rescinding the trade, and/or the forfeit of draft picks.
Traded players must report to their new teams within 48 hours of receiving
notice of an in-season trade, or within one week if the trade
occurred
during the offseason. If a player fails to report to his new team following
a trade it can be deemed conduct prejudicial to the NBA, and
subject the
player to a fine and/or suspension.
83. What is the Traded Player exception?
As described in question number 82, exceptions
are the mechanisms that allow teams to sign players or make trades that
leave them above
the salary cap. Any trade which leaves the team over
the salary cap requires an exception -- even if the team is moving
downward in salary.
For example, if the salary cap is $60 million, a
team has a team salary of $65 million, and they want to trade a $5
million player for a $4
million player, they still have to use an
exception. Even though their team salary is decreasing by $1 million
as a result of the trade, the fact
that they would finish over the
salary cap ($64 million) means that an exception is required.
The Traded Player exception is the primary means by which teams over the
cap complete trades. It allows teams to make trades that leave
them over
the cap, but it places several restrictions on those trades. Trades using
the Traded Player exception fall into two categories:
simultaneous and non-simultaneous. As
its name suggests, a simultaneous trade takes place all at once. Teams
can trade players together
and acquire considerably more salary than
they trade away in a simultaneous trade. Simultaneous trades are
described in question number 84.
A
non-simultaneous trade may take up to a year to complete, but the team
can only trade away one player, and its team salary can increase
by no
more than $100,000 as a result of the trade. Non-simultaneous trades
are described in question number 85.
In short:
A simultaneous trade gives the team more money but less
time
A non-simultaneous trade gives the team more time but
less money
It is important to view a trade from each team's perspective separately,
rather than as a single, unified transaction. This is because the same
trade may be organized differently according to each team's needs. For
example, a trade might be classified as a simultaneous trade from one
team's perspective, but from the other team's perspective it's actually
broken into two separate trades, one simultaneous and the other
nonsimultaneous (completing a trade they made months earlier).
There are several restrictions on trades (either simultaneous or
non-simultaneous) which are described in other questions in this FAQ.
These
include the following:
The Ted Stepien rule (question number 87)
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Trading draft picks (question number 87)
Combining exceptions (question number 88)
Base Year Compensation (question number 89)
The Poison Pill provision (question number 90)
Sign-and-trade (question numbers 91,
92, 93 and 102)
Extend-and-trade (question number 94)
No-trade conditions and provisions (question numbers 95
and 100)
Including cash in trades (question number 97)
Trade bonuses (question numbers 98 and
99)
The trade deadline (question number 103)
In addition, performance incentives can complicate trades, and trades can
affect performance incentives (see question number 74).
Also be aware that while the term "Traded Player exception"
refers to the entire exception which allows teams to make trades above
the salary
cap (including both simultaneous and non-simultaneous
trades), it is also commonly used to refer to the one-year monetary
credit teams
receive while a non-simultaneous trade is pending completion.
Be aware of this potential ambiguity. In this document "Traded Player
exception" is used to refer to the exception, and "trade
exception" is used to refer to the one-year credit.
84. How do simultaneous trades work? How much salary can a team take back in a simultaneous trade?
A simultaneous trade takes place all at once. The amount of salary a
team can take back in a simultaneous trade depends on the outgoing
salary and whether the team is a taxpayer.1 They always use
the post-trade team salary when looking at whether a team is a taxpayer,
so a
team under the tax level would be considered a taxpayer if the
trade takes them over the tax level.2,3
For non-taxpaying teams (again, they must be under the tax level after
the trade), the salaries that can be acquired depend on the total
salaries
the team is trading away:
Non-Taxpaying Teams
Outgoing salary
Maximum incoming salary
$0 to $9.8 million
150% of the outgoing salary, plus $100,0004
$9.8 million to $19.6 million The outgoing salary plus $5 million2
$19.6 million and up
125% of the outgoing salary, plus $100,000
Taxpaying teams can take back up to 125% of their outgoing salaries,
plus $100,000, no matter how much salary the team is sending away.
For
example, a taxpaying team trading away $10 million in salaries can
acquire one or more replacement players making up to $12.6 million.
Taxpaying Teams
Outgoing salary Maximum incoming salary
Any
125% of the outgoing salary, plus $100,000
If a taxpaying team trades away a $10 million player, they can take back
one player making $12.6 million or less, two $6 million players, three
$4 million players, etc. However, there must be enough roster spots for
the incoming players. A team with a full roster of 15 players cannot
trade
one player for two players without first waiving a player on its roster
(or sending him away in another trade). This team could not acquire
two
players and simultaneously waive one of the incoming players.
Teams can send out more than one player in the same simultaneous trade. If the outgoing salaries are combined in order to acquire a
replacement player with a higher salary than would be available by trading any outgoing player alone, the process is called "aggregation." For
example, since the most a taxpaying team can receive for a $10 million player is $12.6 million, it cannot trade its $10 million player for
another team's $15 million player. However, it can aggregate the salary of its $10 million player with that of another player making $2 million.
With the combined $12 million the team can trade for up to $15.1 million, which lets them trade for the $15 million player. An aggregated
trade must be simultaneous -- aggregated non-simultaneous trades are not allowed. Also, if a team used an exception to acquire a
player
(which means it acquired the player by any means other than using
cap room), it cannot include that player in an aggregated trade for two
months.5
Avoiding aggregation (where possible) can be advantageous to a
non-taxpaying team. Suppose the team wants to trade two players who
make
$10 million each. By aggregating the team can take back 125% plus
$100,000 of the aggregated $20 million (see the chart above), or $25.1
million. But if the team trades the players individually -- without
aggregation -- it can take back $15 million for each player, for a
total of $30
million. The other advantage to avoiding aggregation
is that trades of individual players can be non-simultaneous,
possibly gaining the team a
trade exception (see question number
85).
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As described in question number 82, a team below the
cap may disregard salaries when making trades, as long as the team
finishes no more
than $100,000 above the cap as the result of a trade.
However, a team below the cap can choose to use the trade rules for teams
above the
cap if it works to the team's advantage. For example, if a team
is $1 million below the cap, then by using the trade rules for teams below
the
cap it can trade an $8 million player for a player making up to $9.1
million. By using the rules in place for teams above the cap, the team
could
trade the $8 million player for a player making up to $12.1 million.
1
The regular team salary is used to determine whether a team is considered
to be a taxpayer for trade purposes, and this amount
includes cap holds.
However, for a minimum-salary player with more than two years in the league
and playing on a one-year contract,
the minimum salary for a two-year
player is used. For players who were subject to the Gilbert Arenas
provision (see question number
45), the cap amount
for the trading team is used.
2
An interesting case occurred in the 2013-14 season, when the Washington Wizards
traded Jan Vessely, Eric Maynor and a pick for Andre
Miller and a pick. Before
making the trade the Wizards renounced their Bird rights to four free agents,
which removed their cap holds
from the team's team salary. This let them trade
for Miller and remain under the tax line. In doing so, the Wizards were able to
acquire
Miller with Vessely's salary alone, because they were able to take back
150% for Vessely rather than 125%. Maynor was therefore
effectively traded
separately, which gave the Wizards a trade exception for a little over $2 million.
Had they not first renounced their
free agents, they would not have received a
trade exception.
3
For extended rookie contracts, the Poison Pill Provision (see question number
90) does not affect the determination of whether the team
can
take back 125% plus $100,000, 150% plus $100,000, or the outgoing salary plus $5
million. Only the resulting Team Salary value
is used.
4
Note that the benefit of these margins is limited because a team
must end up under the tax level following the trade (or else they
would
have to use the taxpayer margin of 125%).
5
It is commonly misreported that a team cannot aggregate a player (usually worded
as trading the player with other players) for two
months if the team is over the
cap, or that a team that was under the cap when it made the initial trade cannot
aggregate the player in
a subsequent trade if it went over the cap in the meantime.
Neither of these is true. All that matters is whether the player was acquired
with
an exception or with cap room.
85. What is a non-simultaneous trade?
In some cases, teams have up to one year to acquire the replacement
player(s) to complete a trade. These trades are considered
nonsimultaneous. In a non-simultaneous trade, a team can
acquire only up to 100% plus $100,000 of the outgoing salary1
(as opposed to a higher
amount in a simultaneous trade). A trade in which
salaries are aggregated (see question number 84)
cannot be non-simultaneous.
Here is an example of a non-simultaneous trade: a team trades away a
$2 million player for a $1 million player. Sometime in the next year,
they trade a draft pick (with zero trade value itself) for a $1.1
million player to complete the earlier trade. They ended up acquiring
$2.1 million
in salary for their $2 million player -- they just didn't
do it all at once, or even necessarily with the same trading partner.
In the above example, following the initial trade of the $2 million player
for the $1 million player, it was like the team had a $1 million "credit"
which was good for one year2, with which they could acquire
salaries without having to send out salaries to match. As with simultaneous
trades, teams are allowed to acquire an extra $100,000 -- so a $1 million
credit can be used to acquire $1.1 million in salaries. This credit is
often
referred to as a Traded Player exception or a trade exception,
but be aware that the CBA uses the name "Traded Player exception" to
refer
to the entire exception which allows teams to make trades above the salary
cap (including both simultaneous and non-simultaneous
trades). In this
document "Traded Player exception" is used to refer to the exception, and
"trade exception" is used to refer to the one-year
credit.
There are several common misconceptions about trade exceptions and
non-simultaneous trades:
Teams cannot use trade exceptions to sign free agents; they can be
used only to acquire existing contracts from other teams. However, a
team can acquire a free agent using a trade exception if he is signed
by his prior team and traded in a sign-and-trade transaction (see
question number 91).
Trade exceptions are not traded from one team to another. Sometimes
it appears like this is happening when one team uses a trade
exception
to acquire salary without sending salary away, and the other team
gains a trade exception in the same process because they
sent away
salary without receiving salary in return. However, the trade exception
the first team uses and the trade exception the second
team gains are
two distinct exceptions.
Teams cannot combine trade exceptions with other exceptions (such
as the Non-Taxpayer Mid-Level exception or a taxpaying team's
125%
plus $100,000 margin from another simultaneous trade) in order to
trade for a more expensive player. For example, a taxpaying
team
with a $1 million trade exception cannot combine it with their $2
million player to trade for a $3 million player (see question
number
88 for more information on combining exceptions).
A common misconception is that players cannot be traded together in a
non-simultaneous trade. This is not true -- players can be traded
together as long as the outgoing salaries are not aggregated. For example,
trading two $10 million players for a $20 million player
requires
aggregation, and therefore must be simultaneous. But trading two $10
million players for a $12 million player can be
accomplished without
aggregation -- one of the $10 million players would be used to acquire
the $12 million player in a simultaneous
trade, and the other $10
million player would be traded for "nothing," in a non-simultaneous
trade, gaining the team a $10 million trade
exception.
Here is a more complicated example of a legal non-simultaneous trade: Team A
is a taxpaying team with a $4 million trade exception from a
previous trade,
and a $10 million player it currently wants to trade. Team B has three players
making $4 million, $5 million and $7 million, and
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the two teams want to
complete a three-for-one trade with these players. This trade is legal -- the
$5 million and $7 million players together
make less than the 125% plus
$100,000 allowed for the $10 million player ($12.6 million), and the $4 million
player fits within the $4 million
trade exception. So the $4 million player
actually completes the previous, non-simultaneous trade, so Team A is left
trading its $10 million
player for Team B's $5 million and $7 million players
in a separate, simultaneous trade. From Team B's perspective there is also a
simultaneous and a non-simultaneous trade -- it aggregates its $4 million and
$5 million players to acquire Team A's $10 million player in a
simultaneous
trade, and it sends the $7 million player to Team A for "nothing" in
a separate, non-simultaneous trade, thereby receiving a $7
million trade
exception.
Teams can consume only part of a trade exception, in which case
they can still use the remainder in a future trade. For example, if a team
trades a $4 million player for a $2 million player, they gain a $2 million
trade exception. If they later trade a draft pick for a $1 million player,
they still have $1 million left over to acquire more players and complete
the earlier trade (until one year from the date of the original trade).
Teams that are under the cap when initiating a trade cannot receive a trade
exception, even if they end up over the cap as a result of the
trade.
Also see question number 26 for more information on the
availability and use of this exception.
1
The salary used for trade is the same as the player's cap amount.
For a minimum-salary player with more than two years in the league
and playing on a one-year contract, the minimum salary for a two-
year player is used. For players who were subject to the Gilbert
Arenas
provision (see question number 45), the
cap amount for the trading team is used.
2
If the one-year anniversary of the trade falls on a weekend or
holiday, the trade exception expires on the next business day.
86. How are minimum-salary players handled in trades?
The "Minimum Player Salary exception" allows teams to acquire
minimum-salary players1 without regard to salary matching under
the Traded
Player exception (see question number 83).
For example, a team over the cap can trade a second round draft pick to
another team in
exchange for a minimum-salary player, even if he is a
10-year veteran earning over $1 million.
When a team acquires multiple players in the same trade, it essentially
ignores the incoming salary for all minimum-salary players, since they
fall under the Minimum Salary exception. Suppose a taxpaying team is over
the cap and trades a $5 million player, receiving in return a $6
million
player and two players earning $1 million each on minimum-salary contracts.
The team trading the $5 million player can accept only
$6.35 million in
return (125% plus $100,000 of $5 million), and the three incoming players
combine for $8 million in salary. However, the two
$1 million players are
covered by the Minimum Salary exception, so only the $6 million player is
traded with the Traded Player exception. Since
$6 million is within the
team's $6.35 million limit using the Traded Player exception, the trade
is allowed.
Trade bonuses are allowed in minimum salary contracts, but the bonus
doesn't vest until a trade actually occurs -- so such a contract is
considered to be a minimum salary contract for signing purposes. However,
the bonus takes effect when the player is traded, so the receiving
team
must use some means other than the Minimum Salary exception to complete
the trade. If no other means are available, the player can
elect to
waive his trade bonus so the trade complies with the Minimum Salary
exception.
Teams trading away minimum-salary players do count their
salaries (the portion not paid by the league -- see question number
16) as
outgoing salary when comparing salaries for trade.
1
Any player whose contract is longer than two seasons cannot be signed or
acquired using the Minimum Player Salary exception, even if he
is paid
the minimum salary.
87. How are draft picks handled in trades? What is the Ted Stepien rule?
Draft picks (both first and second round) count $0 for salary matching
purposes. This is true both before and after the draft, until the player
signs a contract. This can make it very difficult to construct a trade
that is equitable in both trade value and basketball value. For example,
Vancouver selected Steve Francis with the #2 pick in the 1999 draft, and
subsequently traded his draft rights to Houston. When the trade was
finally
engineered, it included three teams (Orlando was also involved), 11 players
(including Francis) and two future draft picks.
Once the draft pick signs a contract, his actual salary becomes his trade
value.
Note that even though a draft pick's trade value (for salary matching
purposes) is $0, a first round pick is included in team salary at 100% of
his scale amount once he is selected in the draft, unless he signs with a
non-NBA team (see question number 49) or agrees in writing
not to
sign an NBA contract that season (see question number
14). If an unsigned first round draft pick is traded, then
100% of his scale amount is
included in the acquiring team's team salary as
soon as the trade is completed. An unsigned second round pick does not count
toward team
salary.
The "Seven Year Rule" allows teams to trade draft picks up to
seven years into the future (for example, if this is the 2011-12 season,
then a
2018 pick can be traded, but a 2019 pick cannot). It is common to
"protect" picks depending on their position (for example, "we
keep it if it
ends up in the lottery, otherwise you get it"), although no
more than 55 picks in a single draft can be protected (for example, a top-55
protected pick is legal, but a top-56 protected pick is not). This
helps to avoid a repeat of some unfortunate past trades, such as the trade
between the Cavs and Lakers where LA received what turned out to be the
first overall pick in the 1982 draft, which they used to select James
Worthy. It is common for these protections to relax over several years. For
example, a team might convey its own pick in the first draft in
which it
is not a protected pick, where a protected pick is defined
as picks 1-14 in 2012; 1-10 in 2013; 1-6 in 2014; and unprotected in 2015.
If the team owns one of the protected picks in 2012, 2013 or 2014, then
they keep it; otherwise it is conveyed to the other team. If they make
it
to 2015 without having conveyed a pick, then the other team gets their 2015
pick unconditionally.
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Teams are restricted from trading away future first round draft picks in
consecutive years. This is known as the "Ted Stepien Rule."
Stepien
owned the Cavs from 1980-83, and made a series of bad trades
(such as the 1982 trade mentioned above) that cost the Cavs several years'
first round picks. As a result of Stepien's ineptitude, teams are now
prevented from making trades which might leave them without a first
round
pick in consecutive future years.
The Stepien rule applies only to future first round picks. For
example, if this is the 2011-12 season, then a team can trade its 2012
first round
pick without regard to whether they had traded their 2011
pick, since their 2011 pick is no longer a future pick. But they can't
trade away both
their 2012 and 2013 picks, since both are future picks.
Teams sometimes work around this rule by trading first round picks in
alternate years,
or by giving one team the right to swap picks with the
other.
When dealing with protected picks, the Stepien rule is interpreted to
mean that teams can't trade a pick if there is any chance it will leave
the
team without a first round pick in consecutive future drafts.
Suppose a team makes a trade in 2011-12 that conveys a first round pick
sometime from 2012 to 2017. The pick is protected only if it is the
first overall pick from 2012 to 2017, and if it is not conveyed by
2017, the
other team gets cash instead. In other words, in order to
avoid sending a pick from 2012 to 2016, the team would have to win the
first overall
pick in the draft lottery five seasons in a row. Even
though the likelihood of this happening is essentially nil, the team
is not allowed to trade its
2018 pick.
If a team trades two future first round picks and the first pick is
protected, then the first pick would be conveyed in the first draft in
which it is
not a protected pick (as described above), and the second
pick would be conveyed in the first allowable draft (per the Stepien
rule) in which
that pick is not protected (i.e., two years after the
first pick). But since both picks must be conveyed within seven years,
the protection on the
first pick cannot last longer than four years (i.e.,
the first pick must be conveyed by the fifth year). A team can have no
more than one trade
with such a waiting period in effect at any time.
Other rules that pertain to trading draft picks:
Teams cannot trade future picks not already in their possession.
For example, a team cannot make a trade in 2013 that conveys the
lesser of any 2016 first round pick in its possession on the date
of the 2016 draft, and subsequently acquire a pick to send.
Teams cannot subsequently acquire picks to change the "first
allowable draft" per the Stepien rule. For example, suppose a team
trades
away two picks, with the first being a conditional pick and
the second in the first allowable draft after the first pick is
conveyed. If the
first pick is conveyed in 2014, then the first
allowable draft in which the second pick can be conveyed is 2016.
If the team subsequently
acquires a 2015 pick from another team
(so it has two picks that year), the first allowable draft for the
conveyance of the second pick
remains 2016.
Any or all teams in a trade may be granted the one-time option to
defer the conveyance or receipt of a pick for one year (only). For
example, a trade between Miami and Orlando that includes Miami's
2012 first round draft pick might provide Miami with the option to
defer the pick to 2013. In addition:
A team can exercise a pick deferment only once.
The conveyance of a pick can be deferred for only one year.
A protected pick (as described above) cannot be deferred.
The deferment is subject to the Seven Year Rule. A pick in
the seventh year following a trade cannot be deferred.
Except for pick protection and the one-time option to defer the
conveyance of a pick as described above, trades must specify the
precise
year in which a pick is to be conveyed.
A traded draft pick cannot have protection based on draft position
and a one-time option to defer.
Teams are required to have only a first round pick, and not
necessarily their own first round pick. Teams may trade away
their own future
picks in consecutive years if they have another
team's first round pick in one of those years.
A team cannot sign and immediately trade a draft pick in a sign-and-trade
arrangement (see question number 91).
Teams cannot trade picks in that day's draft on the day of the draft
before the pick is made.
Lottery picks cannot be traded from 6:00 PM on the day before the draft
lottery until the lottery is complete.
88. Can exceptions be combined when making trades?
Only to a very limited extent -- teams can combine exceptions in
the same trade if they are used on different players. Teams cannot
combine
exceptions in order to acquire one player. For example, a
taxpaying team may trade a $5 million player for a $5.5 million
player and two
veterans earning approximately $1 million each on
minimum-salary contracts. The minimum salary exception is used for
the two minimumsalary players, and the $5.5 million player is
acquired using the Traded Player exception ($5.5 million is within
125% plus $100,000 of $5
million). This is allowed because two
exceptions were not combined to acquire any one player.
However, if that team has a $5 million player and a $1 million trade
exception from a previous trade, it cannot add the trade exception
to the
125% plus $100,000 margin from their $5 million player
($6.35 million), in order to trade for a player making $7 million.
This cannot be done,
as it would invoke using two exceptions on the
same player.
If a team has two trade exceptions from previous non-simultaneous
trades, they can't combine them into one larger trade exception.
Suppose
a team trades a $5 million player for a $4 million player
(generating a $1 million trade exception) and separately trades
a $3 million player for
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a $1 million player (generating a $2
million trade exception). They cannot combine the two into a single
$3 million trade exception. A rule of
thumb is that a trade
exception can only be used to acquire a player making up to the
amount of the exception plus $100,000.
(See question numbers 83 and 85
for more information on the Traded Player exception and non-simultaneous
trades. See question number 86
for more information on
the minimum salary exception.)
The legal combining of exceptions sometimes gives the appearance of
teams getting away with illegal trades. For example, as detailed in
question number 100, when a team acquires a player
in trade using an exception (and not cap room), the team cannot aggregate
that player's
salary in trade for two months. For example, New Orleans
acquired Jerryd Bayless from Portland on October 23, 2010, and traded him
with
Peja Stojakovic to Toronto on November 20, 2010. This trade did not
violate the two-month rule because New Orleans did not aggregate the
salaries
of Bayless and Stojakovic to acquire any of the Toronto players.
89. What is "Base Year Compensation?" How does it affect trades?
Base Year Compensation (BYC) is mostly an artifact of previous
collective bargaining agreements. Its intent was to prevent teams
from signing
free agents to new contracts with salaries specifically
intended to help facilitate trades. BYC was triggered when a team
was over the cap and
re-signed a player using the Larry Bird or
Early Bird exception with a raise over 20%. Once triggered, BYC
temporarily lowered the player's
salary for salary-matching purposes
(only), and therefore reduced or eliminated teams' ability to target
salaries for trade purposes.
The 2011 CBA mostly eliminated BYC -- in fact, the term "Base Year
Compensation" was removed from the agreement entirely. The rules
formerly known as BYC now apply under just one circumstance -- during
sign-and-trade transactions (see question number 91).
If a team resigns its Larry Bird or Early Bird free agent in order
to trade the player in a sign-and-trade transaction, the player's new
salary is greater than
the minimum, he receives a raise greater than
20%, and the team is at or above the cap after the signing1,
then the player's outgoing salary
for trade purposes is either his
previous salary or 50% of his new salary, whichever is greater. The team
receiving the player always uses his
new salary.
For example, a player made $5 million last season, is a Larry Bird
free agent, and re-signs with his previous team for $10 million. The
team is
a taxpayer, and therefore is over the cap following the signing.
The signing is part of a sign-and-trade transaction for another team's
$10
million player. Since the BYC conditions were satisfied the player's
outgoing salary for the trade portion of this sign-and-trade transaction
is $5
million. This trade therefore would not be allowed, even though
the players' new salaries match, since a taxpaying team cannot trade a
$5
million player for a $10 million player. The highest salary this team
could acquire in a sign-and-trade arrangement is $6.35 million2.
Once a sign-and-trade is complete, the player's actual salary is
included in his new team's team salary.
In lieu of the previous BYC rules for ordinary trades, teams are now
prohibited from trading players for three months or until January 15
(whichever is later) when the signing satisfies the BYC critieria3
(see question number 100).
1
The team salary being over the cap following the signing is what
triggers this rule. It does not matter whether the team was under
the cap
prior to the signing, nor whether the team is under the
cap subsequent to the trade.
2
The sides also might be able to complete this trade if they both
add additional salary to the transaction, or if they include a
third team that
is able to absorb excess salary.
3
Minimum salary contracts are excluded from this rule.
90. What is the Poison Pill Provision?
"Poison Pill" isn't a defined term in the CBA, but there are a couple
situations that are commonly referred to as a poison pill -- meaning
a
contract clause that creates a potential difficulty because the cap
accounting can vary from the norm.
The first is when a team extends a first round draft pick's rookie scale
contract (see question number 60) and then trades the
player between
the date the extension is signed and the date it takes effect.
When this happens, the player's trade value for the receiving team is the
average
of the salaries in the last year of the rookie scale contract
and each year of the extension. The sending team uses the player's actual
salary
when calculating their total outgoing salary, and uses the current-year
maximum salary in place of the (unknown) maximum salary for a future
season,
if necessary.
For example, if a player on the last year of his rookie scale contract earns $2 million in 2011-12, and his contract is extended for four seasons
starting
at $10 million, with 4.5% raises, then his salary in each season will be:
Season
Salary
2011-12 $2,000,000
2012-13 $10,000,000
2013-14 $10,450,000
2014-15 $10,900,000
2015-16 $11,350,000
If this player is traded during the 2011-12 season, then his outgoing
salary from the sending team's perspective is his actual salary -- $2
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million. But the player's incoming salary from the receiving team's
perspective is $8.94 million -- the average of all five seasons. Such
a player
would be very difficult to trade -- a legal trade can only be
accomplished if both teams add additional salary to the transaction,
or if they
include a third team that is able to absorb excess salary.
The Gilbert Arenas provision (see question number 45)
has also been described as containing a poison pill. This is in reference
to the third
season of contracts signed according to this provision, which
can contain a substantially larger salary than the first two seasons.
Houston used
this provision to its advantage when signing Jeremy Lin
and Omer Asik in 2012.
91. Can a free agent be signed and immediately traded?
There is a rule that allows teams to re-sign their own free agents for
trading purposes, called the sign-and-trade rule. Under this rule the
player is re-signed and immediately traded to another team. This is done
by adding a clause to the contract stipulating that the contract is null
and void if the trade to the specific team is not completed within 48
hours. To qualify for a sign-and-trade, all of the following must be true:
The player must re-sign with his prior team -- a team cannot include
another team's free agent in a sign-and-trade.
The player must finish the preceding season with that team (deals are
no longer allowed that sign-and-trade players who are out of the
league,
such as the sign-and-trade that sent Keith Van Horn from Dallas to New
Jersey as part of the Jason Kidd trade in 2008).
The player cannot be a restricted free agent who has signed an
offer sheet with another team (see question number 44).
Starting in 2013-14, the team receiving the player cannot be above the
"apron" ($4 million above the tax level) after the trade1, 2.
A
team above the apron can receive a player in a sign-and-trade if the
trade reduces the team's payroll and the team finishes the trade
below
the apron.
Starting in 2013-14, the team cannot receive a player in a sign-and-trade
if they have used the Taxpayer Mid-Level exception (see
question
number 25) that season.1
The trade must be completed prior to the first game of the regular
season (sign-and-trades are not allowed once the season begins).
The player cannot be signed using the Non-Taxpayer Mid-Level
exception, the Taxpayer Mid-Level exception, or any exception
that
cannot be used to offer a three-year contract (see question
number 25).
A sign-and-trade deal can be made with a free agent who has been renounced,
as long as all the above criteria are met. Sign-and-trade
contracts must be
for at least three seasons (not including any option year) and no longer than
four seasons3. The first year of the contract
must be fully guaranteed,
but the remaining seasons can be non-guaranteed. The combination of a three-year
minimum with a one-year
guarantee ensures that the player's new team cannot
acquire the player's Bird rights any sooner than if they had signed him
directly (if they
wanted to re-sign him in less than three years they would
first have to waive him, and lose any Bird rights -- see question number
33).
The starting salary in a contract signed for a sign-and-trade may be any
amount up to the player's maximum, however if the player meets the
5th Year
30% Max criteria (see question number 17) he cannot
receive a salary greater than 25% of the cap. Raises are limited to 4.5%.
The
player may be considered to have a lower outgoing salary for trade
purposes, which can complicate the trade (see question number
89).
If a sign-and-trade contract contains a signing bonus, then either team
can pay it. By default the team that signs the player pays the signing
bonus (as with any other contract), but since a sign-and-trade is in
essence a contract with the receiving team, the teams can agree that
the
receiving team will pay it. Any portion that is paid by the signing
team counts toward the team's annual limit for cash included in a
trade (see
question number 97), which in effect
limits the portion of the signing bonus that can be paid by the signing
team.
If a sign-and-trade contract contains a trade bonus, then the bonus is
not earned upon the trade that accompanies the signing, but rather on
the
first subsequent trade. See question number 95 for
more information on how long a team must wait before they can trade a
player.
Starting in 2013-14 if a team acquires a player in a sign-and-trade, the
apron -- the point $4 million above the tax line -- effectively becomes a
hard cap for the remainder of that season. See question number 28
for details.
1
These teams are free to send players to other teams in sign-and-trade
transactions, or to receive players in sign-and-trade transactions
who weren't signed-and-traded themselves. Also, the restriction
applies only to the sign-and-trade transaction itself -- teams are
free to
acquire players who had been signed-and-traded in earlier
transactions.
2
A different team salary definition is used for determining whether a
team is above or below the apron -- see question number 14
for
details.
3
Since the contract must be for at least three seasons, the receiving team
cannot use the Disabled Player exception to acquire the player.
The Disabled
Player exception can only be used to acquire players with one season on their
contracts (see question number 25).
92. Can a team sign a player using the sign-and-trade rule and then say, "Ha ha,
we fooled you. We're not trading you!"?
No. A sign-and-trade is treated like a single, atomic transaction, not two
separate transactions between which one party can change its mind.
The
sign-and-trade clause makes the contract invalid if a trade to the
specified team does not take place within 48 hours.
93. Why would teams or players want to do a sign-and-trade?
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Teams benefit because they can get something in return for players they would
otherwise lose to free agency. For players the benefits are
limited. Under
previous CBAs a player who qualified could receive a full Bird contract
and go to the team of his choice, which encouraged the
player to
seek a sign-and-trade once he decided to play elsewhere. Under the current
CBA a player receives the same contract via sign-andtrade (four years, 4.5%
raises) that he could get by signing with his new team directly, and can
receive a larger Bird contract only if he stays
with his previous team. In
addition, it is much simpler for the player to sign directly with his new
team, as a sign-and-trade has to be agreed to
by three parties rather than
two. A player is really only forced to seek a sign-and-trade if he wants
to go to a team that is capped-out (or
doesn't have enough cap room to give
the player his full starting salary) and can't sign him directly.
Another factor encouraging a player not to seek a sign-and-trade is
that his new team might be weakened by losing players or draft picks in
the
trade. So while a sign-and-trade is a useful tool when the team does not
have the cap room to sign the player directly, the player and his
new team
have little reason to seek a sign-and-trade when the player can be signed
without involving his previous team.
94. Can a player be given an extension and traded at the same time?
Similar to a sign-and-trade arrangement (see question number 91),
a team may sign an eligible player to an extension (see question number
60) and immediately trade him to another team. Such
an "extend-and-trade" is limited to three seasons, which include any
seasons remaining
on the player's current contract1. The salary
in the first season of the extension can have a 4.5% raise over the last
season of the existing
contract, and subsequent raises are limited to
4.5% of the salary in the first season of the extension.
A player cannot be traded in an extend-and-trade after the season (for
example, on draft day) in the last season of his contract, or in any
season
that might be the last season due to an option or ETO.
Since an extend-and-trade has greater limits than a regular extension (three
seasons and 4.5% raises vs. four seasons and 7.5% raises), the
rules prevent
teams from circumventing these limits by extending and trading the player in
separate transactions. If a team extends a player
beyond the limits of an
extend-and-trade (for example, if they sign a player to a four-year extension),
they can't trade the player for six
months. Conversely, a team cannot extend
a player it receives in trade for six months, if the extension exceeds the
limits of an extend-andtrade2.
Extend-and-trade transactions are rare. To date they have only been used for
Kevin Garnett (traded from Minnesota to Boston in 2007) and
Carmelo Anthony
(traded from Denver to New York in 2011).
A rookie scale contract (see question number 49) can
be extended and traded in an extend-and-trade transaction, although there is
no benefit
to doing so. A rookie scale extension can be signed immediately
after the player is traded (such as with James Harden's trade to the Rockets in
2012), and a rookie scale extension (see question number 60)
can be much larger than the extension allowed through an extend-and-trade.
1
The current season counts as one full year, even if the extension is
signed as late as June 30. So if a contract is extended on June 30 with
one full season remaining, only one new season can be added to the
contract with an extend-and-trade.
2
This does not apply to extensions of rookie scale contracts. For example,
the Oklahoma City Thunder traded James Harden to the Houston
Rockets on
October 27, 2012, and the Rockets signed him to an extension four days later.
95. When can a team trade a free agent it signs? Do they have to keep him forever?
Generally a team only has to keep a player for three months after signing a
contract or December 151 of that season, whichever is later. This
does not apply to draft picks, who can be traded 30 days after signing (even
if signed using cap room in a later season -- see question number
51). For sign-and-trade transactions, the initial trade
which completes the sign-and-trade obviously is allowed, even though it occurs
right after
the player is signed. The trade restriction in a sign-and-trade
applies to the first subsequent trade.
See question number 100 for more information on trade
restrictions.
1
January 15 if the player is a Larry Bird or Early Bird free agent, re-signs
with his prior team, his team is over the cap, and he receives a
raise greater
than 20% in the first season of his contract, and his new salary is greater
than the minimum salary.
96. Can a team trade the rights to a free agent, so the other team will inherit
his Larry Bird rights?
Once a player becomes a free agent he cannot be traded, except in a
sign-and-trade arrangement.
97. Can cash be included as part of a trade package?
Players can be traded for cash, and cash can be included in trade packages. The amount of cash a team can pay or receive per season is
limited to the
"Maximum Annual Cash Limit," as shown below:
Season
Amount
2011-12 $3.0 million
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2012-13 $3.1 million
2013-14 $3.2 million
2014-15 $3.3 million
2015-16 $3.4 million
2016-17 $3.5 million
2017-18 $3.6 million
2018-19 $3.7 million
2019-20 $3.8 million
2020-21 $3.9 million
There are two separate limits, one for the cash a team pays as part of
trades each season, and the other for the cash a team receives as part
of trades each season. For example, in 2011-12 a team may pay up to $3 million
as part of one trade, and receive $3 million as part of another
trade.
The cash applies to the current season's limit even if it changes hands in a
future season. For example, suppose a team trades a draft pick that
is top-10
protected this season, top-20 protected next season, and converts to $1 million
cash if a pick is not conveyed by next season. $1
million is applied to the
teams' Maximum Annual Cash Limit for the current season.
Cash is NOT considered when matching salaries under the Traded Player exception.
For example, a taxpaying team cannot add $3 million cash
to a trade of their
$5 million player in order to acquire a $10 million player.
In a sign-and-trade arrangement, if the contract contains a signing bonus,
then any amount of this bonus paid by the signing team counts
toward the team's
Maximum Annual Cash Limit (see question number 91).
98. Can players be given a bonus when they are traded?
Teams are permitted to write a bonus called a "trade bonus"
(sometimes referred to as a "trade kicker") into contracts.
This bonus is paid to
the player when he is traded, but only upon his
first trade and not upon any subsequent trades (in the case of a
sign-and-trade, they don't
count the initial trade when the contract is
signed). The trade bonus can be defined as a specific dollar amount, a
specific percentage of the
remaining value of the contract, or some
combination (e.g., "$1 million or 10% of the remaining value of the
contract, whichever is less"). In
either case, the actual amount
cannot exceed 15% of the remaining value of the contract. For example,
suppose a player has a five-year
contract that pays $1 million per year.
This player also has a $500,000 trade bonus. Since the trade bonus is
limited to 15% of the remaining
value of the contract, the actual value
of the bonus varies from year to year, as follows (the bonus pro-rates
during the season, so these
amounts are exact only at the start of each
season):
Year Remaining value of the contract 15% of the remaining value of the contract Actual value of $500,000 trade bonus
1
$5,000,000
$750,000
$500,000
2
$4,000,000
$600,000
$500,000
3
$3,000,000
$450,000
$450,000
4
$2,000,000
$300,000
$300,000
5
$1,000,000
$150,000
$150,000
Notes on trade bonuses:
For contracts and extensions signed before the current CBA took effect,
a trade bonus is paid by the team receiving the player. For
contracts
and extensions signed under the current CBA, a trade bonus is paid by
the team trading away the player.
Option years are not counted when determining the remaining value of the
contract, unless already exercised. ETOs are counted.
Incentive compensation is not counted when determining the remaining value
of the contract -- just base compensation.
A trade bonus cannot cause a player's salary to exceed the maximum salary,
based on his years of service, during the year of the trade
(see question
number 99 for more information on this).
The value of a trade bonus is pro-rated during the season. In the above
example, if the player is traded halfway through the fifth season,
then
the trade bonus would be $75,000.
Minimum salary contracts can contain trade bonuses. The bonus doesn't vest
until a trade occurs, so it is ignored for signing purposes.
99. How do trade bonuses affect team salary and trades?
The value of a trade bonus is applied to the team salary among the remaining
years of the contract (excluding non-guaranteed years -- see
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question
number 64, and years following an Option or ETO -- see
question number 59), in proportion to the percentage of
salary in each of
those seasons that is guaranteed. For example, suppose the
player from question number 98 is traded at the start of
the fourth season of his
contract. Per the chart in that question, the
actual value of his trade bonus that season is $300,000. If every season of
the contract is
guaranteed, and there is no Early Termination Option, then
$150,000 of the trade bonus is charged to each of the final two seasons of
the
player's contract, so a total of $1,150,000 is included in the team
salary in each of those seasons. (Note that the allocation is not
proportionate
to the salary itself, but rather to how much of the salary is
guaranteed. If the player from question number 98 had a
higher salary in the fifth
season than in the fourth season, his bonus would
still be allocated equally to those seasons. However, if the fifth season
was only 50%
guaranteed, then two-thirds of the bonus would be allocated to
the fourth seasons, and one-third to the fifth season.)
Suppose the same player has an Early Termination Option following the fourth
season of his contract. In this event, the entire trade bonus
would be
allocated to the fourth season of the contract. The player would therefore
count $1,300,000 against the team salary during that
season.
In the special case of a contract where all additional years are non-guaranteed,
the entire trade bonus is applied to the cap in the season in
which the trade
occurred.
Trade bonuses can be a nuisance. When a team trades for a player with a trade
bonus, it must count the portion of the bonus that applies to
team salary in
that season as incoming salary. Let's say a taxpaying team wants to trade their
$800,000 player for the player used in the
example above, in the fourth season
of that player's contract. Assuming there is no Early Termination Option or
non-guaranteed season,
$150,000 of the trade bonus counts in the current
season, so the trade cannot be made. The team trading the $800,000 player can
accept up
to $1,100,000 in return (see question number 83),
but the player with the trade bonus counts as $1,150,000 in incoming salary.
The CBA allows the player to waive part of his trade bonus, if necessary to
make a trade permissible. To make the above trade work, the
player would need
to waive $100,000 of his $300,000 trade bonus. The bonus would then be worth
$200,000, and $100,000 of that would be
charged to the current season. The
player would therefore count $1,100,000 as incoming salary, which exactly
matches the maximum the
other team can accept in return for their $800,000
player. The player is not allowed to waive more than the amount necessary to
make the
trade legal.
A player is also allowed to waive a portion of his trade bonus to make his
incoming salary fit within another team's trade exception (see
question
number 85). In the above example, if the other team has
a $1 million trade exception (and is not trading an $800,000 player), the
player would have to waive his entire trade bonus in order for his incoming
salary to fit within the trade exception.
Another potential difficulty is that a team trading a player with a trade
bonus uses the player's pre-trade salary (without the bonus), when
comparing
salaries for trade. Here is another example, using the same player as before
(assume the player's team is a taxpayer, and can
accept 125% plus $100,000 of
the player's outgoing salary).This time, let's assume our player has an Early
Termination Option following the
fourth season of his contract, so if he is
traded during the fourth season, the entire bonus is allocated to that season.
This means that following
a trade, $1,300,000 would be included in his new
team's team salary. Suppose a taxpaying team wants to trade their $1,400,000
player for
this player. That team can accept $1,850,000 for their player, and
since our player counts $1,300,000 as incoming salary, there's no problem
on
their end. But our player counts for $1 million as outgoing salary, so the
most we can accept in return is $1,350,000. This means the trade
doesn't work
from our end. And in this case, waiving a portion of the trade bonus will not
help.
A player's salary added to his trade bonus cannot exceed the maximum
for that season (based on years of service). For example, in 2011-12
the maximum salary for a player with 7-9 years of service is $15,506,632.
If such a player has a $15 million salary and a $1 million trade
bonus,
then his trade bonus is pared down to $506,632 when he is traded1.
This happens automatically -- the player has no say in the matter.
The same
is true for trades of rookie scale contracts that include a trade bonus.
If the salary added to the trade bonus exceeds 120% of the
player's scale
salary amount (see question number 49) the trade bonus
is reduced automatically when the player is traded.
If a team is capped at the "apron" ($4 million over the tax
line) because it has used the Bi-Annual exception, Non-Taxpayer Mid-Level
exception, or (beginning in 2013-14) acquired a player in a sign-and-trade
transaction, and wants to acquire a player whose salary added to
his
trade bonus exceeds the apron, then the trade bonus cannot be reduced (even
with the player's consent); the trade is simply illegal.
There is no recomputation of the allocation of a trade bonus based on
whether the player does or does not invoke an option or ETO. For
example,
if a player with a five-year contract and an ETO following the fourth
season is traded during the fourth season of his contract, then
his
entire trade bonus is charged to the team salary that season. If the
player does not invoke his ETO that summer (locking in the fifth
season),
the allocation of the trade bonus does not change -- none of the bonus is
charged to the fifth season. In other words, the allocation of
a trade
bonus always reflects the state of the contract at the time of the trade.
1
Since a player's maximum salary is the greater of the league-wide
maximum and 105% of his previous salary (see question number
16),
the player could be entitled to more of his
bonus depending on his salary in the previous season. In this
example, if the player also had a
$15 million salary the previous
season, his maximum salary would be 105% of that amount, or $15.75
million. His trade bonus therefore
would be reduced from $1 million
to $750,000.
100. When can't a player be traded? Can players be given "no-trade"
clauses in their contracts?
A "no-trade" clause prevents the team from trading the player
without the player's consent. A no-trade clause can be negotiated into
a new
contract1 if the player has been in the NBA for at least
eight seasons, and has played for the team with which he is signing for at
least four
seasons2. They don't have to be the four most recent
seasons -- for example, Horace Grant received a no-trade clause from Orlando
when he
signed with them in 2001. He had played for Orlando for the requisite
four seasons, but had played for Seattle and Los Angeles in the interim.
Few
players actually have one of these negotiated no-trade provisions (currently
only Carmelo Anthony, Kobe Bryant, Tim Duncan, Kevin
Garnett, Dirk Nowitzki
and Dwyane Wade have them).
If a player with a negotiated no-trade clause consents to a trade and is
traded, his no-trade clause remains in effect with his new team.
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There are two additional circumstances in which a trade requires the
player's consent:
When the player is playing under a one-year contract (excluding any option year) and will have Larry Bird or Early Bird rights at the end
of the season. This includes first round draft picks following their fourth (option) season, who accept their team's qualifying
offer for their
fifth season. When the player consents to such a
trade, his Larry Bird/Early Bird rights are not traded with him,
and instead becomes a
Non-Bird free agent3.
For one year after exercising the right of first refusal to keep a
restricted free agent. The player must consent to a trade to any
team,
although he cannot be traded to the team that signed him to
the offer sheet.
In addition, teams cannot trade players under the following circumstances:
For two months after receiving the player in trade, if the trade aggregates
the player's salary with the salaries of other players. However,
the team
is free to trade the player immediately, either by himself or without
aggregating his salary with other salaries. This restriction
applies only
to players who were acquired using an exception (and not cap room). (Also
see question number 88.)
When the trade deadline has passed. Teams are free to make trades
again once their season has ended4, but cannot trade players
whose
contracts are ending or could end due to an option or ETO.
For three months or until December 15 of that season (whichever is
later) after signing a contract as a free agent or matching an offer
sheet
to a restricted free agent. This obviously does not apply to the trade
completing a sign-and-trade transaction (see question number
91).
For three months or until January 15 of that season (whichever
is later) after re-signing a free agent with Larry Bird or Early Bird
rights, if
the team is over the cap, the player's new salary is above
the minimum, and he receives a raise greater than 20%.
For 30 days after signing as a draft pick. This applies even for later-signed
first round picks, who are signed using cap room at least three
seasons
after they are drafted (see question number 51).
For six months after signing a player to an extension that is over the
limit (in terms of years, salary or raises) for an extend-and-trade
transaction5 (see question number 94).
After claiming a player on waivers, for 30 days if the player was
claimed during the season. If the player was claimed during the
offseason,
he cannot be traded until the 30th day of the following season.
A team cannot reacquire a player they traded away during that season
(a season being July 1 - June 30). If he is waived by his new
team, then
he cannot re-sign with his original team until the one-year anniversary
of the trade, or until the July 1 following the end of his
contract,
whichever comes first. However, if a team trades a player's draft rights,
they can reacquire the player during the same season.
Until the following July 1 if the player was acquired through the
Amnesty provision via a secondary waiver claim (see question number
69).
When a player is waived through the Amnesty provision he cannot be
reacquired for the length of the terminated contract.
A team cannot acquire players during a season when they do not have room
on their 15-man roster, even if they intend to waive an
incoming player
immediately. For example, a team with 14 players cannot trade one player
for three, while simultaneously waiving an
incoming player to remain at
15 players6.
1
A no-trade clause cannot be negotiated into an extension, unless
player's existing contract or extension already contained a no-trade
clause.
2
When the player has been with his team a partial season (for example,
when traded mid-season), they round his team tenure up. For
example,
when Carmelo Anthony re-signed with the Knicks in 2014, he received
a no-trade clause despite being with the Knicks only 3.5
seasons. The
logic is the same as the years of service rule, where a player is
credited for a full year of service even if he was on a team's
roster
for just a single day.
3
When there is an option year involved, they may be able to get around this
restriction by invoking the option prior to the trade.
4
Playoff teams can trade players during the playoffs who are not on
their playoff roster.
5
This does not apply to rookie scale contracts, which can be extended
without such limitations immediately after they are traded.
6
It is possible to work around this restriction by waiving a current
player, executing the trade, waiving one of the incoming players,
and
then re-signing the original player.
101. I keep hearing about teams wanting to acquire "ending contracts" in trades.
What are they, and why are they so valuable?
Sometimes teams get locked into long-term financial commitments from which they
later want to extricate themselves. Typically this is when
they have players with
expensive, long-term contracts, but have no real hope of competing for a title
before those contracts run out. These
teams usually have little hope of having
cap room to sign free agents, and may be facing large luxury tax payments as well
(see question
number 21). But if such a team were to trade a
high-salaried player for a player with a similar (or even higher) salary who is
in the last year of
his contract, then they would be able to rid themselves of
that financial obligation the following summer. This could get the team below the
tax
level, or possibly create enough cap room with which to sign a productive
free agent.
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This means that some players who aren't necessarily trade-worthy from a basketball
standpoint become valuable trade commodities from a
financial standpoint. A
competing team might be able to parlay mediocre players with ending contracts into
a much better basketball player, as
long as they are willing to assume a long-term
financial obligation. One such trade occurred in 2004-05 when Golden State traded
Speedy
Claxton, Dale Davis and cash to New Orleans for Baron Davis. With this
trade Golden State was able to upgrade its roster, while New Orleans
was able to
unload Davis' contract, which had four years and $63 million remaining.
Note that players with ending contracts (including players whose contracts
might end due to an option or ETO) cannot be traded after the trade
deadline (players whose contracts are not ending can be traded after the last
day of the team's season and before July 1 -- see question
numbers
100 and 103).
102. How are teams able to trade players who are out of the league, like Dallas did with
Keith Van Horn?
The short answer is: they can't. Under previous CBAs teams were allowed to
sign-and-trade (see question number 91) any player to
whom
they had Bird rights. Bird rights don't automatically go away once the
player is out of the league (see question number 33 for
details), so many
teams continue to hold Bird rights to players who have
long since retired (for example, as of this writing in 2012, the Lakers
still hold Bird
rights to John Salley, who last played in 1999-2000).
Teams were able to take advantage of the Bird status of retired players
when they needed to include extra salary in order to make a trade
legal
(see question number 83). By signing players out of
retirement the teams were able to complete the trades, and since a
sign-and-trade
requires only the first year of the contract to be
guaranteed, it was like they were trading an expiring contract (see
question number 101). This
kind of trade occurred twice
during the 2007-08 season, when Dallas re-signed Keith Van Horn (who had
been out of the league since 2006)
and sent him to New Jersey as part of
a package to acquire Jason Kidd, and the LA Lakers re-signed Aaron McKie
and sent him to Memphis as
part of a package to acquire Pau Gasol.
The league put a stop to this in the current CBA by restricting
sign-and-trades to players who finished the prior season on the team's
roster. A
player can no longer be included in a sign-and-trade if he has
been out of the league.
103. What is the trade deadline?
The trade deadline is the point during the season after which trades are
prohibited. It is defined as 3:00 PM Eastern Time on the 17th Thursday
of the season (March 15 in 2011-12). The prohibition on trades lasts until
the day following the team's final game of the season (see question
number
100).
104. What is the July Moratorium?
It is a period during the month of July in which teams may not sign most free
agents or make trades. Free agents become free on July 1, but
the salary cap
is not set until the league's audit is completed later in the month. Teams and
players must wait for the salary cap to be set
before trades and most free
agent signings can commence. Teams may negotiate with free agents beginning
July 1, but they have to wait until
the moratorium ends before signing a
contract. The dates for the July Moratorium are as follows:
Season
July Moratorium Players may be signed beginning
2012-131 July 1-10, 2012
July 11, 2012
2013-14
July 1-9, 2013
July 10, 2013
2014-15
July 1-9, 2014
July 10, 2014
2015-16
July 1-8, 2015
July 9, 2015
2016-17
July 1-11, 2016
July 12, 2016
2017-18
July 1-11, 2017
July 12, 2017
2018-19
July 1-10, 2018
July 11, 2018
2019-20
July 1-9, 2019
July 10, 2019
2020-21
July 1-8, 2020
July 9, 2020
There are a few types of signings that are allowed to take place during the
July Moratorium. Generally, these are the signings that do not
depend in any
way on the specific value of the salary cap:
Teams may sign their first round draft picks (to a standard rookie "scale"
contract -- see question number 49)
A second round draft pick can accept a required tender,
which is a one-year contract offer teams must submit to retain their
rights to
the player.
A restricted free agent can accept a qualifying offer
from his prior team (see question number 44).
A restricted free agent finishing the fourth season of his rookie "scale"
contract can accept a maximum qualifying offer. The player
will
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receive the maximum salary, but the actual amount is not determined
until the end of the moratorium (see question number 44).
Teams may sign players to minimum salary contracts for one or two seasons,
with no bonuses of any kind.
Teams may make a waiver claim (see question number 65)
during a player's waiver period when the player was waived June 29 or 30.
All other signings must wait until the moratorium ends.
1
There was no July Moratorium in 2011-12 due to the 2011 lockout.
105. Can teams find loopholes in the CBA and do things the league never intended
to allow? What is circumvention?
As any league executive will tell you, the CBA isn't a list of the things teams
can't do; it's a list of the things teams can do. The league
operates
in a "disallow by default" mode -- actions are not allowed except where
the CBA specifically permits them.
In other words, teams aren't allowed to put anything into a player's contract that
wasn't negotiated between the league and players association
and included in the
CBA. For example, a team signing a known drug offender couldn't insist on a
"one strike and you're out" agreement or that
the player attend mandatory drug
counseling -- instead they must follow the negotiated drug program (see question
number 108).
The CBA also has a general prohibition on circumvention which states that the rules
exist to preserve the benefit derived by the teams and
players, and that nobody
shall do anything to defeat or circumvent the intent of the agreement. The
league can use this prohibition to disallow
a trade that they feel circumvents
the CBA, even though that trade is not specifically prohibited by the agreement.
Examples of conduct considered to be circumvention include:
A team owner allowing a player to invest in a business or investment
fund controlled by the owner or a friend of the owner.
A team executive assisting a player in obtaining a product endorsement.
Any "under the table" promises for a future contract (see question number
31).
A team's arena renting retail space to a player on the team.
A team selling a sponsorship to a business in which a player has an interest.
A team hiring a player's relative or business partner as an employee.
A team owner allowing a player the use of his private plane.
A company affiliated with a team's owner making a home available to one
of the team's players.
Whenever a contract is signed, extended, renegotiated or otherwise amended,
the team, player, and player's agent must certify, under penalty
of perjury,
that there are no side agreements or understandings of any kind relating to:
Any future contract, or future extension, renegotiation or amendment of
the player's current contract.
Any outside compensation, investment, business opportunity or anything
else of value furnished to the player or any other person or
entity
controlled by, related to, or acting on behalf of the player.
The intent of these rules is to ensure that the only agreement from which either
the player or the team can benefit is the current, signed player
contract. The
rules extend to sponsors, business partners and other team affiliates, and to
player agents, representatives and family members.
106. How does player discipline work? Can teams fine or suspend players for any reason?
Do fines and suspensions apply to
team salary?
The league or a player's team can levy a fine and/or suspension for
breaking league or team rules1, respectively. Generally the
league and the
team do not both discipline a player for the same violation,
with a league penalty superseding any team penalty. However, there are a
few
exceptions where a player can be disciplined by both the league and
his team -- when the egregious nature of the act or conduct is so lacking
in justification as to warrant a double penalty. The CBA does not give a
complete list of reasons for which a player can be fined or suspended,
although some are specified:
Missing the rookie transition program: Five game suspension.
Failure to attend a promotional appearance: $20,000 fine.
Failure to attend a media training session: $20,000 fine.
Failure to attend a "Business of Basketball" program: $5,000 fine.
Failure to attend an anti-gambling training session: $20,000 fine.
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Failure to attend a licensing appearance: Fine up to $20,000.
Failure to attend a "mandatory program": $20,000 fine.
Intentional failure or refusal to render the services required under
the player's contract or the CBA: Suspension (length unspecified).
Missed practice: $2,500 for the first occurrence, $5,000 for the second,
$7,500 for the third, and greater discipline, including suspension,
for
subsequent missed practices.
Failure to report following a trade: Penalty (unspecified) from
both the league and the player's new team.
Failure to cooperate with investigations of alleged player misconduct:
Fine or suspension (amount/length unspecified).
Failure to pay union dues: Suspension until the requirement is
satisfied.
Failure to report for an NBA Developmental League assignment: Suspension
until the player reports.
Violation of NBA Developmental League's league or team rules: (Penalty
unspecified).
Any violation of team rules: (Penalty unspecified).
Wagering on NBA games: Fine, suspension or disqualification.
Player not in good physical or mental condition, and unfit to play skilled
basketball2: Suspension until ready to play.
Conduct against the best interests of the NBA or basketball: Fine up
to $50,000 and/or suspension.
Not paying hotel incidentals while on road trips: $100 file for the first
two occurrences, increasing penalties for subsequent occurrences.
Tampering or unauthorized agreement: See question number 109.
Unlawful violence (convicted of a violent felony): 10 games minimum
suspension.
Failure to attend a clinical evaluation or counseling per the "Counseling
for Violent Misconduct" program: $10,000 per day fine after the
first 72
hours.
Violations of the drug program: See question number 108.
The money from fines and suspensions is put to good use -- it's given to
charities of the NBA's and players association's choosing. Players are
not
paid while they are suspended -- for each missed game, the player is docked
1/110 of his salary, whether suspended for a preseason,
regular season or
postseason game (see question number 14 for information
on how suspensions impact team salary).
A suspended player can be traded.
1
Team rules must be in writing, reasonable, and not in violation of the
CBA or the standard player contract.
2
Except as the direct result of an injury sustained in any team game
or practice.
107. Can fines or suspensions be appealed?
Players are allowed to appeal fines and suspensions. If the penalty from
league discipline is less than the following, then the appeal is heard by
the Commissioner. If the penalty exceeds these amounts, or if the player
and players association are dissatisfied with the Commissioner's
decision,
the appeal is heard by the league's grievance arbitrator:
For on-court1 conduct or in-game conduct involving another
player, a fine of $50,000 and/or a suspension of 12 games.
For issues related to the integrity of, or confidence in the game of
basketball, a financial impact (from a fine and/or lost salary due to a
suspension) of $50,000.
Penalties imposed by a team may be appealed to the league's grievance
arbitrator if the financial impact (from a fine and/or lost salary due
to
a suspension) is $5,000 or greater. In the case of any appeal involving
penalties imposed by the league or the player's team, the arbitrator's
decision is the full and final resolution of the dispute.
1
"On-court" means any area within the arena from the time the
player arrives for a game until the time he leaves.
108. What is the league's drug program?
The NBA conducts random testing of its players, and provides both treatment
programs and penalties for players who test positive for
prohibited
substances, which are classified into the following categories:
Drugs of Abuse: Amphetamines and similar drugs, cocaine,
LSD, opiates such as heroin, codeine and morphine, and PCP
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SPEDs: Steroids, performance-enhancing drugs, masking
agents, and diuretics
Marijuana
Testing falls into two categories: reasonable cause and random. Reasonable
cause testing occurs when the league or players association
provides the
program's independent expert with information about a player's use, possession
or distribution of prohibited substances, and the
expert believes that
reasonable cause exists to order testing. If reasonable cause is found to
exist, the player can be tested without notice up
to four times in a six
week period. Players can be subjected to random testing up to four times
during a season and up to two times during an
offseason (offseason testing
is conducted for SPEDs and diuretics only). League-wide, the program will
not conduct more than 1,525 tests
during a season or more than 600 tests
during an offseason. Players who have entered a drug program can also be
directed for testing if they
miss a game, miss two team flights and/or
practices in a seven-day period, or are charged in a court of law with
driving under the influence or
driving while intoxicated.
Test samples are split into an "A" sample and a "B" sample,
with the "A" sample submitted for laboratory testing. If a player's
"A" sample
results in a positive test, the player can request that
his "B" sample also be tested, at a different lab than the one that
tested his "A" sample. A
test is also considered to be positive if
the player fails or refuses to submit for testing, fails to cooperate with the
testing process, or tries to
cheat. The program's medical director reviews all
positive tests before the results are official.
Players can come forward voluntarily for a problem involving the use of a prohibited substance. A player who comes forward voluntarily will
enter the
appropriate education, treatment and counseling program, and will not be
penalized for coming forward (although he may be
penalized for failure to
comply with his program or for advancing a stage under stage two of the
Drugs of Abuse program).
If a player tests positive for a drug of abuse, whether through reasonable cause
testing or random testing, he is dismissed from the league. If
a player tests
positive for marijuana, SPEDs or diuretics, he enters the appropriate program
where evaluation, treatment and further testing
commence. The player also
suffers the penalties associated with his specific program:
Drugs of Abuse program: There are two stages to the Drugs
of Abuse program. First-time patients enter Stage 1 of the program. A
player
who has already completed Stage 1 enters Stage 2. A player who has already
completed Stage 2 is dismissed from the league. A
player in the program can
also advance one stage for disregarding his treatment program. Players
continue to receive their salary in
Stage 1. Players in Stage 2 are
suspended during their inpatient care and for at least six months of their
aftercare, until the medical
director certifies that the player is ready to
play. Players who fail to comply with their program are suspended in Stage
1, and dismissed
from the league in Stage 2.
Marijuana program: In addition to NBA testing, a player
also enters the Marijuana program if he is convicted of possession or use
of
marijuana by a court of law. There is no limit to the number of times a
player can enter the Marijuana program. Penalties in the
Marijuana program
are as follows:
First violation: No additional penalty.
Second violation: $25,000 fine.
Third violation: Suspended five games.
Subsequent violations: Suspended an additional five games (10, 15,
etc.) for each subsequent violation.
Players who fail to comply with their program are fined $10,000, with
increasing penalties for continued failure.
SPED program: For the first violation, the player is
suspended 20 games. For the second violation, the player is suspended 45
games.
For the third violation, the player is dismissed from the league.
Players who fail to comply with their program are fined $10,000, with
increasing penalties for continued failure.
Players are also dismissed from the league if they are convicted in a court
of law of distributing drugs, of if they are convicted of the use or
possession
of a prohibited substance other than marijuana. When a player is dismissed from
the league his contract is voided (see question
number 110),
and he is disqualified from playing in the NBA for at least two years. The
exception is in the case of a first-year player who was
caught through random
testing, in which case the dismissal lasts for one year, and the player must
enter the Drugs of Abuse program. An
application for reinstatement is subject to
the approval of the league and players association. Once reinstated, any
subsequent dismissal from
the league is final.
Teams and players are not allowed to override any portion of the drug program.
For example, a team is not allowed to sign a player with a
history of marijuana
abuse on the stipulation that "one strike and he's out."
The league and players association are convening a panel to determine
whether there is a valid test for Human Growth Hormone (HGH), and if
so,
to recommend testing procedures. If a valid test exists, the league may
commence HGH testing 60 days afterward, up to two times during
each
season, and once during each offseason.
109. What is tampering?
Tampering is when a player or team directly or indirectly entices, induces or persuades anybody (player, general manager, etc.) who is under
contract with another team in order to negotiate for their
services. The NBA may impose suspensions and/or fines up to $50,000
if tampering
is discovered, however the league's practice has been
to wait until a team lodges a complaint before investigating (but
that's not to say they
don't continue to monitor the league and won't
take action independently if they discover that tampering has
occurred). Here are some
examples:
The Miami Heat were discovered to have tampered with Pat Riley in
1995 by negotiating with Riley while he was the head coach of the
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New York Knicks. The Heat "settled," and avoided
league-imposed penalties, by compensating the Knicks with $1
million and their first
round draft pick in 1996.
After Will Perdue left San Antonio in the 1999 offseason to sign
with Chicago, he commented to the press about the possibility of
the Bulls
signing Tim Duncan and/or Grant Hill in 2000. The league
considered this to be tampering, and issued Perdue a warning.
You may have noticed that when general managers and other team personnel
talk to the press, they are careful to avoid talking about specific
players who play for other teams. They do this in order to avoid tampering.
The only allowed response when talking about players under
contract with
other teams is to decline comment.
110. What does it mean when a contract is voided?
It's when a contract is canceled, i.e., rendered "null and void" because its
terms were broken. This is not the same as merely terminating a
contract by
waiving the player (see question number 65). When a player
is waived, some of the terms of the contract remain in effect -- for
example,
the player is still paid any remaining guaranteed salary. When a contract is
voided, none of its terms remain in effect. It's treated the
same
as if the contract had never existed.
Contracts might be voided under the following circumstances:
At the start of a contract, if a player fails his physical examination.
For example, Ronny Turiaf's initial contract with the Lakers in 2005
was
voided when his physical examination uncovered a heart abnormality.
At the start of a contract, if the contract is disapproved by the league.
For example, the league will disapprove a new contract if its first
year salary is higher than the player's maximum, or greater than the
team's room.
If the "trade" portion of a sign-and-trade transaction is not completed
within 48 hours.
When a player is disqualified from the league per the terms of the league's
drug program (see question number 108).
When certain instances of circumvention are discovered (see question
numbers 30, 31 and
105), at the Commissioner's discretion.
When the player violates Paragraph 16 of the standard NBA contract. The
team can void the contract when the player:
Fails, refuses, or neglects to conform his personal conduct to standards
of good citizenship, good moral character (defined as not
engaging in
acts of moral turpitude, whether or not these acts constitute a crime),
and good sportsmanship.
Commits a significant and inexcusable physical attack against any official
or employee of the team or the NBA (other than another
player), or any
person in attendance at any NBA game or event. The determination as to whether the attack was significant and
inexcusable considers the totality
of the circumstances, such as the nature of any provocation.
When the player is in violation of sections of Article 35 of the NBA Constitution
dealing with game fixing and gambling on NBA games.
During the 2011 lockout, the league suggested it had the power to void all
player contracts. Their reasoning was that player contracts
existed under
the purview of the CBA, and without a CBA, all player contracts were
unenforceable. It is unclear whether the league
actually would have tried
to void all player contracts had the lockout continued, and if they did so,
if they would have prevailed in court.
Any attempt at voiding a contract likely would be met with a grievance filed
by the players association on behalf of the player. Grievance
arbitrators have
consistently denied attempts to void contracts. For example:
The Boston Celtics were not allowed to void Vin Baker's contract in
2004, despite his alcohol abuse preventing him from playing, and his
failure to comply with his treatment program.
The Golden State Warriors were not allowed to void Latrell Sprewell's
contract in 1997 after he choked his coach, P.J. Carlesimo.
111. How much are players fined for technical fouls and ejections? Where does
the money go?
These amounts apply to both players and coaches.
Technical fouls (2011-12 regular season):
$2,000 each for the first four technicals
$3,000 each for the fifth through eighth technicals
$4,000 each for the ninth through 12th technicals
$5,000 plus a one game suspension for the 13th technical
$5,000 for each additional technical, with a one game suspension
every other technical (15th, 17th, 19th, etc.)
Technical fouls (regular season starting 2012-13):
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$2,000 each for the first five technicals
$3,000 each for the sixth through 10th technicals
$4,000 each for the 11th through 15th technicals
$5,000 plus a one game suspension for the 16th technical
$5,000 for each additional technical, with a one game suspension
every other technical (18th, 20th, 22nd, etc.)
Technical fouls (playoffs):
$2,000 each for the first and second technicals
$3,000 each for the third and fourth technicals
$4,000 each for the fifth and sixth technicals
$5,000 plus a one game suspension for the seventh technical
$5,000 for each additional technical, with a one game suspension
every other technical (9th, 11th, 13th, etc.)
Ejections:
$2,000 for the first ejection
$2,000 additional ($4,000, $6,000, $8,000, etc.) for each subsequent
ejection. The count is reset for the playoffs.
The money from technical fouls and ejections is split evenly between
charities of the league's and players association's choosing.
112. How does it work when the league expands? Can the league also contract?
To supply an expansion team with its initial complement of players,
the league holds an expansion draft1 prior to that year's
NBA draft.
Existing teams are allowed to protect up to eight players (including restricted free agents) from being selected in the expansion
draft, but
every team must expose at least one player who can't possibly
become a free agent as the result of the exercise or non-exercise of
an option
or ETO. Unrestricted free agents can neither be protected
from nor selected in the expansion draft, and are essentially ignored.
Restricted free
agents (see question number 44) may
be selected, but become unrestricted free agents upon selection (with
the caveat that they cannot then
re-sign with the team from which
they came). No team may lose more than one player in an expansion draft.
Some players may become unrestricted free agents due to the
invocation or non-invocation of an option or ETO (see question number
59). The
league uses their status on the day of the
expansion draft -- i.e., if a player has invoked his option or ETO by
the day of the expansion draft,
then he is treated as a free agent. If
a player has not invoked an option or ETO by the day of the expansion
draft, then he is treated as being
under contract (so it is possible
for an expansion team to select a player in the expansion draft who
then invokes his option, becomes an
unrestricted free agent, and signs
elsewhere).
If a team is over the cap and loses a contracted player (not a restricted
free agent) to an expansion team, they receive a trade exception (see
question number 85) equivalent to the selected player's
salary.
Existing teams are allowed to compensate expansion teams (usually with
draft picks), in exchange for selecting or not selecting particular
players in the expansion draft. For example, in the 1995 expansion draft
(when Vancouver & Toronto entered the league), Orlando left Darrell
Armstrong, Anthony Avent, Rodney Dent and Geert Hammink unprotected, but
did not want to lose either Armstrong or Hammink. They gave
Vancouver
their 1996 second round pick in exchange for Vancouver selecting Dent
with the second pick in the expansion draft. With Dent
selected by
Vancouver, Armstrong and Hammink became ineligible.
It is also common to see teams leave a desirable player unprotected,
hoping that the player's age and/or high salary will dissuade the
expansion team from selecting him. This allows those teams to protect
an additional player whom they might have been more likely to lose.
Or
in some cases, they might dangle a high-priced player hoping
the expansion team takes him off their hands.
Expansion teams have a lower salary cap for the first two years of
their existence. In their first year, their salary cap is 80% of the
salary cap
for the rest of the league. In their second year, it's 90% of
the salary cap for the rest of the league. Beginning with their third
season, they
have the same salary cap as the other teams. Their minimum
team salary (see question number 15) is also lower
by a commensurate amount.
Expansion teams often have restrictions placed on their draft position
in their first few seasons. For example, Charlotte was assigned the #4
pick in the 2004 NBA draft, and Vancouver & Toronto could not
receive the #1 pick in the NBA draft for their first four seasons in
the league.
If an expansion team drafts a player in the expansion draft and waives
him prior to the first day of the season, then that player's salary
does
not count toward team salary (although they still have to pay
him). This provides some protection against bad decisions made in
the expansion
draft -- an expansion team could select a player, later
decide they don't really want him, and waive him without their team
salary being
negatively affected.
Most league calculations (average salary, total benefits, total
salaries, BRI, salary cap) simply ignore expansion teams (and the
players on
those teams) for two years. For example, the league
calculates the average salary by adding up the team salaries for every
team, and dividing
by an amount equal to the number of teams times
13.2 (see question number 32). For this calculation
the total of the team salaries does not
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include team salaries from
expansion teams in their first two seasons, nor does the number of
teams.
Basketball Related Income (BRI) does not include the fee expansion
teams pay to join the league.
The league also reserves the right to contract (reduce the number of
teams in the league) if necessary. The league needs to provide the
players association with written notice of any decision to contract,
and the two sides will negotiate to agree on the effects of contraction
on the
players and the procedures to be followed.
1
There are similar procedures in place to conduct a "restocking
draft" in the event of a disaster, which is defined as a team
suffering the
death, dismemberment or permanent disability of
five or more players.
113. Are players paid on a regular schedule? Are there other ways to pay players beside regular paychecks?
The league's standard paydays are on the 1st and 15th of each month,
beginning November 151. For contracts signed under the current
CBA,
the default is 24 paychecks paid over one calendar year. Teams and
players whose salaries are over the minimum salary can also agree to a
12-check or 36-check schedule, paid over six months or 18 months,
respectively. For contracts signed under the previous CBA the standard
is
12 paychecks paid over six months, with teams and players also able
to negotiate a schedule of 24 paychecks paid over 12 months.
There are various ways for players to be paid at times other than the standard paydays, including signing bonuses, advances, loans, and
deferred
compensation. However the basic rule is that players must be paid at least
20% of their base compensation, not including bonuses,
on regular league
paydays. Players cannot have signing bonuses, advances, loan repayment
schedules or deferred compensation that cause
this rule to be violated.
Signing bonuses: A player can be paid a portion of
his total contract as soon as it is signed. See question number
75 for more
information.
Advances: No salary can be paid before July 1 of
the season in which it is earned, but players can be advanced some
their salary before
the first league payday on November 15. Except
in the case of a minimum-salary player, the salary advance is
limited to either 80% of
the player's guaranteed salary, or 50%
of his base salary, whichever is less. In addition, no more than
25% of the player's base salary
can be paid prior to October 1.
For minimum-salary players the salary advance is limited to either
80% of the player's guaranteed salary,
or 7.5% of his base salary,
whichever is less, and the advance is deducted from the player's
November 15 paycheck (and December 1, if
necessary).
Loans: Players may be given loans which must be
repaid out of their salary. The amount of a loan can't exceed the
player's remaining
amount of guaranteed salary for that season,
although the loan can be repaid over the number of remaining
seasons that are fully
guaranteed (and don't follow options or
ETOs). For example, a player with three fully-guaranteed years
remaining on his contract at $10
million per season can be loaned
$10 million, and repay the loan over three years. Loans may not
be given to minimum-salary players. If
the player is not charged
interest, or the interest rate is below the market rate2,
the difference is considered to be salary and is included
in team
salary. Any loan forgiveness is considered to be a contract
renegotiation. Loans are not permitted in rookie scale contracts
for
first round draft picks.
Deferred compensation: Up to 25% of a player's
compensation can be deferred, and paid after May 1 of the following
season. Deferred
compensation is included in team salary in the
season in which it is earned, not the season in which it
is paid.
When a player is waived he continues to be paid his guaranteed salary.
See question numbers 65 and 66
for more information.
Other rules:
No forms of non-cash compensation are allowed.
A player on a Summer Contract (see question number 70)
cannot earn or be paid compensation of any kind prior to the start
of the
regular season.
1
For 2011-12 the first payday was January 1.
2
The market rate is defined as the prime rate plus 1%, but no
less than 7% and no greater than 9%.
114. How do I find out the salary for a specific player?
The NBA does not publish player salaries. However, a number of unofficial
sources exist:
Basketball Insiders
ShamSports
Storyteller
Patricia Bender
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115. The league instituted a dress code for players. Do they have the right to do that?
The league has broad powers which enable them to institute a dress code
(and the players association has always acknowledged the league's
right
to do so). For example, every player's contract contains a provision
which states that the player agrees to be "neatly and fully attired
in
public." In addition, the Commissioner has the general power to
penalize players for conduct (which would include dress) detrimental to
the
league's best interests.
116. What does it mean when the players union decertifies? Why would
they want to do that? What effect does it have?
Decertification and disclaimer of interest are similar processes to end a
union's authority to collectively bargain on behalf of its members. A
decertification is issued by the union members, while a disclaimer of
interest is issued by the union itself. They are tactics sometimes employed
(or at least threatened) by player unions in the event of a difficult labor
situation. Antitrust laws are at odds with labor laws -- while antitrust
laws prohibit cooperation among competitors and agreements that are
anticompetitive, labor laws encourage cooperation among competitors - such
as forming unions and bargaining collectively. This tension is resolved
with the "non-statutory labor exemption," which exempts
collective
bargaining agreements from the antitrust provisions. The NBA draft and
restrictions on salaries and free agency are immune from the
antitrust laws
so long as they are part of the CBA.
Courts have ruled (with the NFL) that the non-statutory labor exemption
shield continues even after the CBA expires, so long as a "labor
relationship" still exists. But if the players decertify or the union
disclaims interest -- ending the union's collective bargaining rights and
turning
it into a non-union trade association -- it ends this continuing
labor relationship and opens the league to an antitrust suit.
The NBA players association threatened to decertify in both 1995 and
1998, but ultimately voted against it both times. The union did
disclaim
interest during the 2011 labor dispute (see question number
7), filing an antitrust suit shortly afterward. The
suit was settled over the following
days (ending the labor dispute),
and the players voted to re-certify the union in order to conclude their
labor negotiations and settle on a new
CBA.
117. Are there other must-read web sites for the budding capologist?
In the last few years a number of web sites have sprung up which deal with
the business side of the NBA. Here are a few of them:
First and foremost, I maintain a blog where I discuss CBA-related matters.
http://www.cbafaq.com/blog
In addition to her salary information, Patricia Bender maintains information
on
http://www.eskimo.com/~pbender/index.html
player contracts and lots of other NBA-related data.
RealGM provides an abundance of news and resources, including a discussion
forum dedicated specifically to CBA and business matters.
http://www.realgm.com (main site)
http://www.realgm.com/boards/viewforum.php?f=4
(discussion forum)
An excellent archive of NBA transactions maintained by Frank Marousek.
http://www.prosportstransactions.com/basketball/
The Association for Professional Basketball Research contains a wealth
of
information on league history.
http://www.apbr.org (APBR site),
The Compendium of
Professional Basketball (book by Robert Bradley).
Mavericks owner Mark Cuban frequently blogs about NBA-related matters.
http://blogmaverick.com
Wizards owner Ted Leonsis also blogs about NBA-related matters.
http://www.tedstake.com
Grizzlies owner Robert Pera also blogs.
http://www.rjpblog.com
The Sports Law Blog frequently discusses NBA labor issues.
http://sports-law.blogspot.com/
This FAQ has a Facebook page where I also answer questions.
http://www.facebook.com/pages/NBA-Salary-CapCollectiveBargaining-Agreement-FAQ/53461764029
118. What are the important CBA-related dates each season?
The following dates are referenced in the CBA, starting with July 1, which
is the first day of the salary cap year. Any deadline which falls on a
Saturday, Sunday or federal holiday is extended to the next business day.
July 1
Salary cap year begins
July moratorium begins (see question number 104)
Free agents become free
Unrenounced free agents, scale amounts for first round picks playing
outside the NBA, and roster charges are applied
to team salary (see
question number 14).
Poison Pill provision expires (see question number 90)
Teams may apply for a Disabled Player exception (see question number
25)
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Free agents can be renounced (see question number 41)
Players acquired via secondary waiver claims through the Amnesty provision
can be traded (see question number 69)
July 8-11 (date varies
by year)
July moratorium ends (see question number 104)
Salary cap adjusts (see question number 13)
Salaries adjust
Exceptions arise (see question number 25)
Teams can sign free agents and make trades
Starting 2012, amnesty waiver period begins (lasting seven days -- see
question number 69)
Contracts can be renegotiated (see question number 61)
Contracts can be extended (see questions number 60)
July 16
First round draft picks become free agents if not given a required tender
(see question number 49)
July 23
Last day to withdraw a qualifying offer to a restricted free agent without
the player's consent (see question number
44).
August 15
Players remain on waivers for 48 hours (see question number 65)
August 31
Last day to waive a player signed or extended under the current CBA with the
Stretch provision applying to the
current season (see question number
65)
September 6
Second round draft picks become free agents if not given a required tender
October 1
Last day for a restricted free agent to accept a Qualifying Offer (unless it
is extended -- see question number 44)
October 31
Last day to exercise option years on rookie scale contracts (see question
number 49)
Last day rookie scale contracts can be extended (see question number
60)
Late October/early
November (date
varies by year)
Last day of offseason
Roster limit decreases to 15 players
Last day to waive summer contracts without applying to team salary
(see question number 70)
Last day for sign-and-trade transactions (see question number 91)
Unrenounced free agents, scale amounts for first round picks playing
outside the NBA, and roster charges no longer
apply to team salary (see
question number 14).
November 15
First league payday (see question number 113)
December 15
Players who signed a contract on or before September 15 can be traded2
(see question number 95)
January 5
10-day contracts can be signed (see question number 80)
January 10
Contracts guaranteed for rest of season (see question number 64).
Players who do not clear waivers prior to this date
are guaranteed.
Scale salary amounts and unused exceptions begin to reduce in value (see question
numbers 49 and 26)
January 15
Last day to apply for a disabled player exception (see question number 25).
Players who signed a contract on or before October 15 can be traded (applies only
to Larry Bird or Early Bird free
agents who re-sign with their prior team, the team
is over the cap, and the player receives a raise greater than 20%
-- see question
number 89).
February 1
First round draft picks who were playing pro ball outside the NBA may sign a rookie
scale contract that takes effect
the following season.
February 28/29
Last day contracts can be renegotiated (see question number 61)
March 1
Players waived after this date are ineligible for the playoffs (March 23 in 2011-12)
Last day for a restricted free agent to accept a qualifying offer (if
extended) or sign an offer sheet (see question
number 43)
March 10
Disabled Player exceptions expire (see question number 25)
Mid-April (date varies
Date of last regular season game
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by team and season)
Last day players can sign contracts.
Snapshot date for luxury tax (see question number 21).
June 25
Last day to exercise player option if player will be a restricted free agent
(see question number 44).
June 29
Option years (except in rookie scale contracts and player options for players
who will be restricted free agents) and
ETOs must be exercised1 (see
question number 59)
June 30
Deadline to extend a qualifying offer (see question number 44)
Last day to sign an extension (see question number 60)
Players are credited with one year of service
Salary cap year ends
1
Individual contracts may specify an earlier date.
2
Also see entry for January 15.
119. Can I get a copy of the actual Collective Bargaining Agreement?
The Collective Bargaining Agreement is a very long legal contract between
the league and the Players Association, and is written in dense
legalese.
It is my hope that this FAQ answers all your questions. However, if you
really want the CBA, it is available from the players
association's web
site at http://www.nbpa.org/cba/2011.
It is also available through the University of New Hampshire School of Law's
Sports
and
Entertainment
Law
Institute
web
site,
at
http://www.ipmall.info/hosted_resources/SportsEntLaw_Institute/UNHSportsEntLaw_Institute.asp.
In addition, members of the media with an
account on the NBA's "Media
Central" website can download it there. Bound copies of the CBA are no
longer available from the league office.
The CBA doesn't answer every possible question. Many of the league's rules,
policies and procedures are contained in these documents:
The NBA Constitution and By-Laws defines the NBA as an entity
at its highest levels, and how teams operate within the scope of the
NBA.
The NBA Operations Manual is updated annually and describes
in detail how the league operates, including all the rules regarding
game
operations.
These documents are separate and apart from whatever contracts the league
may make with other entities such as the players association. It
has always
been possible for the public to obtain the CBA. The league kept the
Constitution and By-Laws confidential until the Donald Sterling
situation
occurred in 2014, after which it was made publicly available at
http://mediacentral.nba.com/media/mediacentral/NBA-Constitutionand-By-Laws.pdf.
The league continues to keep the Operations Manual confidential.
120. I see reports in the newspaper or on the Internet that would be impossible if
everything you say here is true. Is this FAQ
wrong?
The media sometimes gets it wrong. Some members of the media simply don't pay
enough attention to the rules (they -are- pretty
complicated, after all).
However, this has improved tremendously since this FAQ was originally released
in 1999 (draw your own conclusions
about whether I had anything to do with
it). It used to be easy to separate the legitimate rumors from the made-up
ones -- the made-up ones
were often impossible under the CBA. Today it's much
harder to separate the good rumors from the bad.
121. What if this FAQ really is wrong? How authoritative is this FAQ?
This FAQ has been fact-checked against the actual CBA, and I'm pretty
confident about its accuracy. Still, this FAQ isn't necessarily 100%
accurate. If you find any errors, please contact me at
lmcoon@cox.net (please include the
source of your information, if possible). You may
also contact me if
there are additional questions you would like to see added to this FAQ,
or if you find any of the answers confusing and in
need of clarification.
The author of this FAQ is not connected to the NBA, any of its teams or
the NBA players association.
122. Can I e-mail you with other CBA-related questions?
Absolutely! Just don't rely on a prompt answer -- this isn't my job,
it's a hobby, and I'm only able to answer questions as time permits
(after
career, family and other personal obligations have been met).
I get a *lot* of e-mail, which frequently gets backed up. In addition
some
responses are delayed until I can verify facts with others, or
batched together so I can answer a set of related messages all at once.
Unfortunately, questions that are longer and involve a lot of thought,
research and/or detail on my part tend to be delayed more than simple
ones that I can answer off the top of my head. I do ask that you make
a reasonable effort to make sure the information you're looking for
isn't
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already covered in the FAQ before e-mailing me.
You will probably find that your question will be answered more quickly
if it is posted in the CBA/Business discussion forum at RealGM.com:
http://www.realgm.com/boards/viewforum.php?f=4,
simply because more people will see it. A number of CBA-knowledgeable
people, including
me, frequent that discussion forum.
Another excellent venue for questions is Twitter. Follow me at
http://www.twitter.com/LarryCoon.
Questions posted to Twitter are usually
answered quickly, although
the Twitter format precludes lengthy, detailed answers.
There is also a Facebook page for this FAQ, where I also answer questions.
Finally, I occasionally host online chats at ESPN.com
and BasketballInsiders.com
where I field questions from readers.
I also recognize that some of you (members of the media, etc.) need this
information as part of your job, and not simply because you're
curious. I
try to give these questions the highest priority. Apologies in advance to
anybody who gets put on the back burner as a result.
The bottom line is that emails sometimes quickly make their way to the
end of an inbox queue that is several hundred messages deep.
Apologies
to anyone who has sent me an e-mail and didn't receive a reply.
123. Can this FAQ be reproduced or distributed? Can I link my web page to it?
This FAQ is copyrighted, and the copyright notice
appears herein. The intent of the copyright is only to restrict the
following:
For-profit use. The author doesn't make any money from this FAQ, and
doesn't want anybody else profiting from his hard work.
Posting a copy of this FAQ on another web site. This only leads to
different versions of the FAQ being on-line and becoming out of sync.
Rather than posting a copy of this FAQ on your web site, please post a
link to this page. That way, you won't have to worry about your
copy
needing to change when this master copy changes.
Any use of this FAQ not specifically allowed in the copyright notice
requires written consent. Such consent is generally granted to any request
that does not violate the provisions listed above.
124. Can you translate this FAQ into (name of language)? I'll even translate
it for you!
I appreciate the fact that the NBA receives worldwide attention, that
there are fans around the world interested in CBA-related matters, and
that this has created a demand for this FAQ in languages other than
English. I have received requests for translations in over a dozen
different
languages, usually accompanied by kind offers to provide the
translation (which would be necessary, since I speak none of those
languages).
I had previously turned down all such requests because I had no way to
ensure that a translation would be faithful and accurate, and because I
had no way to ensure that translations would be kept up to date. However,
these issues are not unique to this FAQ, and many others have
successfully
found ways to balance the needs of their audience with the need for accuracy.
As a result, I have revised my translation policy, as
follows:
Permission is not granted to make or distribute English copies
of this FAQ, whether as a mirror, paraphrase, modified for a specific
audience, etc. The English language remains my exclusive purview for this
FAQ. See the copyright notice for additional
information.
Permission is granted for readers to create translations of this FAQ in
languages other than English, provided the translator and/or host of
the
translation agrees to all the terms of this policy.
I will not create or host your translation. You must do both.
I will not be able to assist you by verifying the correctness of your
translation.
You must state very clearly and prominently in your translation that it
is a translation of an original English document that is written and
copyrighted by Larry Coon, with a link to this FAQ. You must clearly
indicate the date of your translation, and the date of the latest
revision
to this FAQ (which can be found in the revision history). This gives
readers some indication that your translation may be out of
date.
You must agree to keep your translation up to date with changes to this FAQ. If you cannot continue to meet this requirement, you must
find someone
else who is able to do so, or delete your translation.
You must e-mail me with the URL for your translation, the language in which
it is written, and an indication that you agree to comply with
the terms of
this policy.
125. How should this FAQ be cited?
If you are citing this FAQ in an academic or scholarly context, the
following is a suggested citation. Note that you should replace the "last
visited" date with the date you actually retrieved this FAQ.
Coon, Larry (2012); "NBA Salary Cap/Collective Bargaining Agreement FAQ"
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http://www.cbafaq.com, last visited May 6, 2012
126. Where can this FAQ be downloaded?
This is the third edition and latest version of this FAQ. It can be
found at http://www.cbafaq.com.
The second edition of this FAQ covering the 2005 CBA can be found
here.
The first edition of this FAQ covering the 1999 CBA can be found
here.
History of this FAQ, acknowledgements, and about the author:
An original NBA Salary Cap FAQ was written by Tony Minkoff and covered the
1995 CBA. This FAQ originally was based on Tony's original, and
on several
articles written by Garret Okamoto for totk.com (Top of the Key). An archive
copy of Tony's original FAQ can be found
here.
The first edition of this FAQ was written in 1999, covering the 1999 CBA. An
archive copy can be found here. Tony and Garrett
participated
with me on the research and draft review process, along with
Patricia Bender, Josh Frankel, Jon Hamm, Jonathan Richards and Gary S. Simon.
The suggestions and contributions of a number of people are also acknowledged
in the revision history.
The second edition of this FAQ was written in 2005, covering the 2005 CBA. An
archive copy can be found here. Ryan Hoak, Dan
Hoelzl, Zev
Iosupovici, Eric Pincus, Dan Rosenbaum and Andy Stein participated
with me on the research and draft review process. The suggestions and
contributions of a number of people are also acknowledged in the revision
history.
This is the third edition of the FAQ, completed in 2012 and covering the 2011
CBA. A number of people were kind enough to contact me to
volunteer their
services as I prepared this edition, and I was able to put some of them to good
use. I'd especially like to thank Josh Berman for
entering the rookie scale
salary and index information, Zach Schreiber for checking the scale salaries,
index, and links from one question to
another, and Clint Peterson for updating
Zev Iosupovici's original masthead graphic.
After I had reviewed everything for the thousandth time I unleashed the trusted
eyes of Andy Stein, who quickly pointed out a hundred-or-so
things I had missed.
From there I opened it up to a small team of reviewers. My thanks to Edward
Gleason, Brett Greenberg, Ryan Hoak,
Bernie Lee, David Lord, Albert Nahmad and
Eric Pincus for providing feedback and suggestions which helped improve the final
product.
In summary, I'd like to collectively thank everybody whose contributions found
their way into this FAQ over the years. Thanks also to my
friends & colleagues
in the media who have been so kind as to inform the public of this FAQ's existence,
and for the kind words they have
written about the work I have done here.
Please note that I will not accept advertisements, and I will not carry a link
to your site unless it is directly related to the material in this FAQ.
If you
have a site you feel should be mentioned here then you can try asking, but if
it belongs here then chances are I already know about it.
About the author:
Larry Coon is a computer scientist
by both education and trade. He works as an IT Director at University of California, Irvine,
and has also
taught university Computer Science courses, specializing in database theory.
A lifelong NBA fan, he assimilated a working knowledge of the
league's salary cap and trade
rules, eventually organizing this knowledge into the Salary Cap FAQ to provide "the
kind of reference I was
looking for when I was trying to figure it all out."
Larry has been featured in the
New York Times,
Los Angeles Times
and Sports
Illustrated. He makes regular media appearances including
television (such as ESPN's
"Outside the Lines") radio and podcasts. He is a regular contributor to
ESPN.com and to
BasketballInsiders.com.
He
is often quoted and cited, both online and in print, by local and national media venues.
He has also contributed to the New York Times
Off the
Dribble
blog, and to RealGM.com.
Larry lives in Orange County, California with his wife and 15 year old
daughter, about whom he brags at every
possible opportunity.
Copyright Notice:
Copyright 1999-2015 by Larry Coon. All rights reserved. No person may (a)
re-produce more than any one question and answer contained in this FAQ; or
(b) re-produce for profit any
portion of this FAQ, in any form (including
electronic), without the express, prior written (including e-mail) consent
of the copyright holder. Links to the original copy of this FAQ may be
posted without restriction. It is the intent of the copyright holder to
prevent for-profit use and version proliferation of this FAQ, and to grant
consent for any other use.
Appendix: Differences between 2011 and 2005 CBAs
2011
CBA is in effect for ten years, with mutual option to terminate after
the sixth
year.
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2005
CBA is in effect for seven years, with league option
to terminate after
the sixth year.
See
9
NBA Salary Cap FAQ
50% of the proceeds from arena naming rights applies to BRI.
45% of the proceeds from arena naming rights
applies to BRI.
12
50% of the proceeds from practice facility naming rights applies to BRI.
N/A
12
The salary cap is based on 44.74% of BRI ($58.044 million in 2011-12)
The salary cap is based on 51% of BRI ($49.5
million in 2005-06)
13
A first round draft pick's cap hold comes off the team salary if the team and
player agree in writing not to sign a contract that season.
N/A
14
A modified formula is used for determining the team salary when a team is
N/A
using the Bi-Annual, Non-Taxpayer Mid-Level or Taxpayer Mid-Level exception,
or receiving a player in a Sign-And-Trade transaction.
14
The minimum team payroll is 80% of the cap in 2011-12 85% in 2012-13, and
90% thereafter.
The minimum team payroll is 75% of the cap.
15
Maximum salaries are based on 42.14% of Basketball Related Income (BRI)
Maximum salaries are based on 48.04% of
Basketball Related Income (BRI)
16
Qualified Players coming off rookie scale contracts can receive the maximum
salary applicable to players with 7-9 years in the league.
Maximum salary for all players coming off rookie
17
scale contracts is the
maximum salary applicable to
players with 0-6 years in the league.
Players are paid over 12 months by default. Alternatively, can have 6 or
18
month pay schedules.
Players are paid over six months by default.
Alternatively, can have 12
month pay schedule.
17
The lesser of 80% of guaranteed salary or 50% of base salary can be
advanced.
No more than 25% can be advanced prior to October 1.
80% of a player's salary can be advanced.
17
Up to 25% of a player's compensation can be deferred.
Up to 30% of a player's compensation can be
deferred.
17
A new supplemental benefits program is funded with 1% of BRI.
N/A
18
Players are guaranteed 50% of BRI, plus/minus 60.5% of the amount by
which
revenues exceed/fall short of projections, with limits of 49% and
51% of BRI.
Players are guaranteed 57% of BRI each season.
18
Escrow is based on 10% of player salaries.
Escrow is based on 10% of salaries in 2005-06, 9%
through 2009-10, and 8%
thereafter.
19
The luxury tax level is based on 53.51% of BRI.
The luxury tax level is based on 61% of BRI.
21
The luxury tax is progressive, with the rate increasing for every $5 million
the
team is above the tax line. Repeater penalty when the team is a taxpayer
in
three out of four years.
The luxury tax is $1 for every $1 the team is above
the tax line.
21
Revenue sharing redistributes approximately $180 million annually.
Revenue sharing redistributes approximately $40
million annually.
24
The Disabled Player exception can be used to sign/acquire players for one year
only.
Disabled Player exception can be used to
sign/acquire player for up to 5 years.
25
Teams cannot apply for a Disabled Player exception after January 15.
N/A
25
The Disabled Player exception expires on June 30.
The Disabled Player exception expires in either 45
days or on October 1.
25
The Bi-Annual exception is not available to teams above the apron ($4 million
above the tax line).
N/A
25
Teams over the apron have a smaller Mid-Level exception (3 years, with a
lower
starting salary).
N/A
25
Once a team has used an exception unavailable to teams over the apron, the
apron
becomes a hard cap.
N/A
28
The Room Mid-Level exception is available to teams that sign players with cap
room.
N/A
25
Penalties for circumvention are $3 million for the first occurrence, and $4.5
million for the second occurrence.
Penalties for circumvention are $2.5 million for the
first occurrence, and $3
million for the second
occurrence.
29
The penalty for an undisclosed agreement can be up to $6 million for any team
and up to $250,000 for any player.
The penalty for an undisclosed agreement can be
up to $5 million for any team
and up to $100,000
for any player.
31
Free agent cap holds for Larry Bird free agents not coming off rookie scale
Free agent cap holds for Larry Bird free agents not
38
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contracts are 150% or 190% of the player's previous salary.
coming off rookie scale
contracts are 150% or
200% of the player's previous salary.
Free agent cap holds for Larry Bird free agents coming off rookie scale
contracts
are 200% or 250% of the player's previous salary.
Free agent cap holds for Larry Bird free agents
coming off rookie scale contracts
are 250% or
300% of the player's previous salary.
38
A qualifying offer to a restricted free agent must be 100% guaranteed.
The guarantee in a qualifying offer to a restricted
free agent is the
same as the guarantee in the last
season of the player's previous
contract.
44
Teams have three days to match offer sheets to restricted free agents.
Teams have seven days to match offer sheets to
restricted free agents.
44
Qualifying offers for certain players may be higher or lower if player meets or
fails to meet starter criteria.
N/A
49
Players can receive 7.5% raises in Bird or Early Bird contracts or extensions.
Players can receive 10.5% raises in Bird or Early
Bird contracts or extensions.
55
Players can receive 4.5% raises in other contracts.
Players can receive 8% raises in other contracts.
55
Contracts for Bird free agents can be up to five years.
Contracts for Bird free agents can be up to six
years.
55
All other free agent contracts can be up to four years.
All other free agent contracts can be up to five
years.
55
Veteran extensions can total four seasons (including existing).
Veteran extensions can total five seasons (including
existing).
60
Only Designated Players can receive rookie scale extensions adding five
new
seasons.
Rookie scale extensions can add five new seasons.
60
Raises in veteran extensions are based on the salary in the first year of
the
extension.
Raises in veteran extensions are based on the
salary in the last year of
the extended contract.
60
If a contract is extended and renegotiated at the same time, the salary in
the
first season of the extension cannot decrease by more than 40%.
N/A
61
A player with a career-ending injury or illness who resumes his career is
reinstated on team salary after 25 regular season or playoff games.
A player with a career-ending injury or illness who
resumes his career is
reinstated on team salary
after 10 preseason, regular season or playoff
games.
63
Teams cannot re-sign or re-acquire players with career-ending injuries or
illnesses who resume their career.
N/A
63
Players who are traded and subsequently waived can't re-sign with the team
that traded them for one year or until the end date of their contract.
Players who are traded and subsequently waived
can't re-sign with the team
that traded them for 30
days.
65
The waiver period includes weekend days.
The waiver period does not include weekend days.
65
Guaranteed salary payments for waived players are "stretched"
across twice
the number of years remaining on the contract, plus one.
By default, guaranteed salary in terminated
contracts is paid according to
schedule. Teams and
players can negotiate shorter or longer pay
schedules.
65
Teams may elect to stretch the cap hit for waived players whose salary
payments are stretched.
The cap hit for waived players applies to all
guaranteed seasons of the
waived contract.
66
Teams can amnesty one player (total) prior to any season until 2015-16.
Amnestied
players are excluded from team salary and luxury tax
computations.
Teams can amnesty one player prior to the 2005-06 69
season. Amnestied players are
excluded from
luxury tax computations.
Teams can claim amnestied players via a secondary waiver process.
N/A
69
Unlikely bonuses may not exceed 15% of regular salary.
Unlikely bonuses may not exceed 25% of regular
salary.
74
The maximum signing bonus is 15% (10% in offer sheets to restricted free
agents).
The maximum signing bonus is 20% (17.5% in offer 75
sheets to restricted
free agents).
The overseas contract buyout amount starts at $525,000, and increases
yearly. Up to $500,000 can be paid to buy out overseas
contracts without counting
against the cap.
77
Players with two or more years of service can be assigned to the D-League
with Players with two or more years of service cannot be
the consent of the player and the players association.
assigned to the D-League.
81
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Non-taxpaying teams can receive in trade 150% plus $100,000 (when trading
$0
to $9.8 million), 100% plus $5 million (when trading $9.8 million to $19.6
million),
and 125% plus $100,000 (when trading more than $19.6 million).
Teams can receive 125% plus $100,000 in trade.
84
Base Year Compensation is eliminated in all but certain Sign-And-Trade
transactions.
Base Year Compensation applies when a player resigns with Larry Bird or
Early Bird rights, receives a
raise over 20%, and his team is over the cap.
89
Starting in 2013-14, teams above the apron cannot receive a player in a
signand-trade transaction.
N/A
91
Teams cannot complete Sign-and-Trade transactions after the season starts.
N/A
91
A player must finish the previous season on the team's roster to be eligible
for
a Sign-and-Trade.
A player must have finished his last season in the
NBA on the team's roster
to be eligible for a Signand-Trade.
91
Sign-and-trade contracts are limited to four total years.
Sign-and-trade contracts are limited to six total
years.
91
Extend-and-trade contracts are limited to three total years and 4.5% raises.
Extend-and-trade contracts are limited to six total
years and 10.5% raises.
94
Players who are extended above the limits for an extend-and-trade can't be
traded for six months.
N/A
94
Players who are traded can't be extended above the extend-and-trade limit
for
six months.
N/A
94
Teams can both send and receive up to $3 million cash in trade annually.
Teams can receive up to $3 million in cash per
trade.
97
Trade kickers are paid by the team trading the player.
Trade kickers are paid by the team receiving the
player.
98
Deferred compensation is any compensation paid after May 1 of the
following
season.
Deferred compensation is any compensation paid
after the contract ends.
113
Option buyouts are eliminated.
Contracts can have buyout amounts associated with
options and ETOs.
N/A
Index:
Numbers in bold indicate the item in which the term is principally defined or explained.
5th Year 30% Max criteria
16, 17, 60,
91
10-day contract
11, 16, 29, 33,
65, 80, 118
Active List
79, 80
Active roster
See "Active List"
Advance (salary)
113
Age (eligibility)
57
Aggregation (of salaries in
trade)
84, 85, 88, 100
Amnesty
11, 14, 15, 21, 25,
33 42, 65, 66,
69, 100, 118
Antitrust laws
4, 6, 7, 116
Apron
14, 23, 25, 28,
91, 99
Arenas provision
See "Gilbert Arenas provision"
Average salary
25, 32
Base Year Compensation
(BYC)
89
Basketball Related Income
(BRI)
7, 12, 13, 18,
19, 22, 24, 112
Benefits
13, 18, 19, 20,
78, 112
Bi-annual exception
14, 23, 25, 26,
28, 55, 99
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Bird rights
See "Larry Bird exception"
Bonus (performance)
See "Incentive"
Bonus (signing)
See "Signing Bonus"
Bonus (trade)
See "Trade Bonus"
Buyout (international)
15, 49, 75, 77
Buyout (player contract)
62, 65, 66, 67,
68, 79
Cap hold (draft pick)
14, 52
Cap hold (free agent)
14, 37, 38, 39,
40, 41
Cap room
14, 25, 26,
27, 36, 37, 39,
41, 42, 44, 45,
49, 51, 52, 60,
61, 69, 74, 75,
93, 101
Career ending injury
14, 63, 72
Cash in trade
52, 91, 97
CBA
See "Collective Bargaining Agreement (CBA)"
Circumvention
30, 31, 34, 105
Collective Bargaining
Agreement (CBA)
4, 6, 7, 8,
9, 10, 20, 116,
119, 121
Combining exceptions
27, 85, 88
Contract length
25, 55, 60, 70,
91
Contraction
112
D-League
See "NBA Developmental League (D-League)"
Death (player)
25, 63, 64, 72,
112
Decertification
6, 116
Deferred Compensation
58, 113
Designated Player
55,60
Disabled Player exception
14, 25, 26, 55,
63, 65, 82, 118
Disclaimer of interest
See "Decertification"
Dismissal (from the NBA)
108
Disqualification
See "Dismissal (from the NBA)"
Draft pick
14, 43, 49, 51,
52, 53, 54, 55,
82, 87, 95
Draft rights
51
Dress code
115
Drugs of abuse
108
Drug testing
108
Duty days
78
Early Bird exception
25, 32, 33,
38, 41, 45, 55,
65, 69, 89, 95,
100
Early entry player
57
Early Qualifying Veteran Free
Agent
See "Early Bird exception"
Early Termination Option
(ETO)
59, 60, 62,
65, 66, 98, 99,
118
Ejection (game)
111
Ending contract
101
Escrow
14, 18, 19,
20, 22, 23
ETO
See "Early Termination Option"
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Exception
2, 3, 11, 14,
21, 23, 25,
26, 27, 28, 41,
82, 83, 88, 118
Excluded International Player
Payment amount
77
Exhibit 9
64, 70
Expansion
112
Expansion draft
14, 33, 112
Extend-and-trade
55, 60, 94
Extension
31, 55, 56, 58,
59, 60, 61,
74, 75, 90, 94,
100, 118
FIBA
7, 76
Fines
30, 31, 82, 106,
107, 108, 109, 111
First Refusal Exercise Notice
44
First round draft pick
14, 16, 25, 44,
49, 51, 52, 53,
54, 55, 59, 75,
77, 80, 87, 104,
113, 118
Forecasted BRI
18
Free agent
11, 14, 16, 25,
26, 31, 33, 35,
36, 37, 38, 39,
40, 41, 42, 43,
44, 45, 46, 47,
48, 51, 53, 57,
58, 65, 70, 91,
95, 96, 101, 112,
118
Free agent amount
See "Cap hold (free agent)"
Free agent cap hold
See "Cap hold (free agent)"
Gilbert Arenas provision
23, 38, 44, 45,
55, 84, 85, 90
Grievance
14, 21, 107
Guarantee (player salary)
11, 28, 45, 49, 53,
62, 63, 65, 66,
67, 68, 69, 70, 73,
77, 91, 99, 102, 113,
118
Guarantee (league wide
salary)
7, 13, 18, 19,
20, 21, 69
Guarantee (league wide roster
size)
79
Hard cap
2, 7, 14, 25,
28, 91
Human Growth Hormone
(HGH)
8, 108
Inactive List
11, 79, 80, 81
Incentive
11, 14, 69, 74
81, 98
Income tax
78
Incomplete roster charge
14, 43, 118
Injured Reserve
79
Injury (career ending)
See "Career ending injury"
Insurance
70, 73, 76, 82
International Buyout
See "Buyout (international)"
International player
57, 75, 76, 77
Jock tax
78
July moratorium
14, 65, 104, 118
Labor negotiations
6, 7, 8, 116
Larry Bird exception
25, 26, 31, 33,
34, 35, 36, 37, 38,
39, 41, 42, 44, 55,
65, 69, 89, 91, 100,
102
Length (contract)
See "Contract length"
Letter of clearance
7, 76
Likely bonus
See "Bonus (performance)"
Loans
11, 49, 113
Lockout
6, 7, 57
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Luxury tax
1, 11, 1, 21,
22, 23, 24, 63, 69,
118
Maximum annual cash limit
See "Cash in trade"
Maximum qualifying offer
44, 104
Maximum salary (player)
16, 17, 38, 44,
60, 61, 104
Mid-Level exception
See "Non-Taxpayer Mid-Level exception" and "Taxpayer Mid-level exception"
Minimum age
See "Age (eligibility)"
Minimum Player Salary
exception
25, 29, 55, 82,
86, 88
Minimum salary (player)
16, 21, 25, 26,
29, 74, 80, 86, 104
Minimum team salary
See "Team salary (minimum)"
NBA Developmental League
(D-League)
79, 81
NBA Draft List
79
No-trade clause
100
Non-Bird exception
25, 26, 38, 41,
45, 55, 100
Non-NBA team
7, 14, 51, 52,
77, 87, 118
Non-Qualifying Veteran Free
Agent
See "Non-Bird exception"
Non-simultaneous trade
See "Trade (non-simultaneous)"
Non-Taxpayer Mid-Level
exception
14, 23, 25, 26,
45, 55, 99
Offer Sheet
14, 25, 38, 42, 43,
44, 45, 46, 64,
75, 91, 100, 118
Option year
11, 25, 44, 49, 55,
59, 60, 62, 64,
65, 66, 69, 75, 94,
98, 99, 100, 101, 112,
118
Over-36 rule
58
Overage (escrow)
13, 18, 19, 20,
21, 22
Pay days
See "Pay schedule"
Pay schedule
44, 59, 62, 65, 66,
67, 113
Payroll (team)
See "Team payroll"
Performance bonus
See "Incentive"
Player discipline
106, 107
Players Association
4, 6, 7, 9, 13,
18, 21, 57, 63, 65,
74, 105, 106, 107,
108, 112, 115, 116,
119
Poison Pill provision
84, 90, 118
Pro-ration (bonuses)
58, 60, 75, 77,
98, 99
Pro-ration (exceptions)
11, 25, 26, 29,
49, 118
Pro-ration (salaries)
11, 29, 58, 80
Projected BRI
13, 16, 18, 20,
21
Protected draft pick
87
Qualifying offer
11, 14, 25, 38,
44, 47, 49, 64,
100, 104, 118
Qualifying Veteran Free Agent
See "Larry Bird exception"
Raises
25, 29, 44, 45, 51,
55, 56, 60, 61,
74, 75, 91, 93, 94
Reinstatement
25, 108
Renegotiation
58, 60, 61, 75,
113, 118
Renouncing (draft rights)
52, 53, 54
Renouncing (exceptions)
14, 25, 26
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Renouncing (free agents)
33, 40, 41, 42,
43, 44, 91, 118
Required tender
14, 104, 118
Rest-of-season contract
16, 25, 28, 29
Restricted free agency
6, 11, 42, 44,
4959, 64, 75
Restricted free agent
14, 23, 25, 38,
44, 45, 46, 47,
49, 55, 100, 104, 112,
118
Retired player
14, 63, 67, 71,
79, 102
Revenue sharing
7, 12, 22, 24
Right of first refusal
See "Restricted free agency"
Rookie exception
25, 49
Rookie free agent
51. 76
Rookie scale contract
11, 14, 16, 25, 38,
41, 44, 49, 51,
52, 53, 54, 55, 59,
60, 61, 64, 75, 77,
87, 90, 94, 99, 100,
104, 113,
118
Room Mid-Level exception
25, 26, 55
Room (under the cap)
See "Cap room"
Roster charge
See "Incomplete roster charge"
Roster size
79, 118
Salary cap
1, 5, 6, 13,
20, 104, 112, 118
Salary decrease
55, 61, 74
Salary increase
See "Raises"
Salary (maximum player)
See "Maximum salary (player)"
Salary (minimum player)
See "Minimum salary (player)"
Salary (player)
11, 60, 114
Salary (team)
See "Team Salary"
Scale salary
See "Rookie scale"
Second round draft pick
16, 44, 45, 52, 87,
104, 118
Set-off
14, 62, 66, 67
Seven Year Rule
87
Sign-and-trade
14, 23, 25, 28, 33,
41, 44, 55, 64, 85,
87, 89, 91, 92,
93, 95, 97, 98, 99,
100, 102, 118
Signing bonus
11, 44, 49, 60, 61,
75, 77, 91, 97,
113
Simultaneous trade
See "Trade (simultaneous)"
Soft cap
2, 3, 25
Starter criteria
44, 49
Stepien rule
See "Ted Stepien rule"
Steroids and Performance
Enhancing Drugs
See "Drugs of abuse"
Stretch provision
14, 28, 62, 65,
66, 118
Summer contract
14, 66, 70, 113,
118
Suspended List
79
Suspension
14, 31, 62, 79, 82,
106, 107, 108, 109,
111
Tampering
106, 109
Taxpayer Mid-Level exception
14, 23, 25, 26,
28, 45, 55, 91
Team option
49, 59, 64, 66
Team payroll
1, 15, 91
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Team salary
11, 14, 15, 16,
21, 23, 25, 26, 28,
35, 37, 38, 40, 41,
43, 45, 51, 52, 58,
60, 63, 65, 66, 68,
69, 70, 71, 72,
74,
75, 77, 83, 84, 87,
89, 91, 99, 106, 112,
113, 118
Team Salary (minimum)
15, 69, 112
Technical foul
111
Ted Stepien rule
87
Trade bonus
21, 44, 59, 60, 61,
62, 75, 82, 91, 98,
99
Trade call
82
Trade deadline
11, 100, 101, 103
Trade exception
11, 14, 26, 65, 83,
84, 85, 88, 99,
112
Trade kicker
See "Trade bonus"
Trade (non-simultaneous)
83, 84, 85, 88
Trade restriction
44, 65, 95, 100
Trade rules
11, 23, 25, 41, 44,
65, 79, 82, 83,
84, 85, 86, 87, 88,
89, 90, 91, 92, 93,
94, 95, 96, 97, 98,
99, 100, 101,
102, 103,
104, 106, 118
Trade (simultaneous)
23, 83, 84
Traded Player exception
14, 25, 26, 82,
83, 85, 86, 88,
97
Undisclosed agreement
31
Uniform Player Contract (UPC)
64, 70
Union
See "Players Association"
Unlikely bonus
See "Incentive"
Unrestricted free agent
31, 44, 47, 49,
112
UPC
See "Uniform Player Contract (UPC)"
Verbal agreement
14, 52
Voluntarily Retired List
63, 67, 79
Waivers
11, 16, 28, 33, 42,
59, 63, 64, 65,
66, 67, 68, 69, 70,
84, 100, 104, 112, 113,
118
Years of service
16, 118
Miscellaneous links:
1999 CBA FAQ
http://www.cbafaq.com/salarycap99.htm
2005 CBA FAQ
http://www.cbafaq.com/salarycap05.htm
CBA FAQ Blog
http://www.cbafaq.com/blog
Contract calculator
http://www.cbafaq.com/Contracts.xls
Rookie salary scale http://www.cbafaq.com/scale2011.htm
Revision History:
There were 41 revisions to the first version of this FAQ (covering the 1999
CBA), which have been consolidated into the 11/16/2005 item here.
There were
23 revisions to the second version of this FAQ (covering the 2005 CBA), which
have been consolidated into the 10/23/2011 item
here.
8/30/1999
Initial release.
11/16/2005 Final revision covering the 1999 CBA. Thanks Patricia Bender, Robert Bradley, Steve Durrett, Tony
Farr, Jon Hamm, Ron
Haneberg, Ryan Hoak, Frank Hughes, Leon Jackson, Don Jones, Leaf, David Lord,
Wes McDaniel, Dan Rosenbaum, Andy Stein,
Ralph Wallace and Kevin Wilcutts for your contributions.
10/23/2011 Final revision covering the 2005 CBA. Thanks Patricia Bender, Robert Bradley, Gabe Feldman, Ryan Hoak,
Dan Hoelzl, Zev
Iosupovici, David Lord, Albert Nahmad, Eric Pincus, Dan Rosenbaum, Nick Silva, Andy
Stein & Marc Stein for your
contributions.
5/6/2012
Extensive revision for the 2011 CBA. Thanks Josh Berman, Edward Gleason, Brett Greenberg, Ryan Hoak,
Zev Iosupovici,
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NBA Salary Cap FAQ
Bernie Lee, David Lord, Albert Nahmad, Clint Peterson, Eric Pincus, Zach Schreiber,
Andy Stein.
7/10/2012
Revised questions 13, 15, 16,19,
21, 32 with new numbers for the 2011-12 season. Also revised questions
25, 33, 64, 69.
7/14/2012
Revised questions 65 and 69. Thanks Nick Silva.
1/17/2013
New question 76. Revised 12, 14, 16,
17, 24, 25, 30, 31,
38, 44, 45, 49, 52,
53, 55, 57, 60, 64,
65, 66, 69, 70, 73,
75, 79,
80, 82, 84,
85, 87, 91, 94, 100,
103, 106, 109, 112,
113, 117, 119, Index
2/3/2013
Revised questions 17, 30, 32, 58,
59, 60, 64, 65, 70,
74, 77, 80, 104, 105,
118
2/18/2013
Revised questions 14, 21, 25, 106,
117. Thanks Albert Nahmad.
7/9/2013
Revised questions 13, 15, 16, 18,
19, 21, 22, 32 with new numbers
for the 2013-14 season.
8/10/2013
New question 28. Revised questions 2, 14, 19,
22, 25, 44, 55, 56,
58, 59, 60, 64, 65,
66, 67, 69, 75, 77,
79, 87, 91, 100, 104,
114, Acknowledgements, Index. Thanks Ryan
Hoak, David Lord, Albert Nahmad, Andy Stein.
9/7/2013
Revised questions 33, 55, 63, 65,
85, 89.
1/15/2014
Revised questions 21, 60, 90, 108.
7/9/2014
Revised questions 13, 15, 16, 18,
19, 21, 22, 32 with new numbers
for the 2014-15 season. New questions 50, 110. Revised
questions
24, 25, 29, 33, 44,
59, 65, 74, 79, 81,
82, 84, 86, 87, 95,
97, 98, 100, 119.
Thanks Albert Nahmad, Nick Silva.
1/13/2015
Revised questions 14, 16, 17, 29,
38, 41, 60, 65, 66,
79, 84, 86, 99. Thanks Ryan Hoak,
David Lord, Albert Nahmad, Andy
Stein.
http://www.cbafaq.com/salarycap.htm[1/13/2015 1:20:40 PM]