NFL Salary Cap – Eliminating the loopholes in Rookie Contracts

The National Football League has gone through extensive changes over the past few seasons (on and off the field).  The League’s front office and Competition Committee have taken progressive steps toward the safety of NFL players with extensive rule changes applied to techniques long thought to be just “part of the game”.

The extension of the Collective Bargaining Agreement ensured measures to guard the health and welfare of the NFL’s pioneer players.  Concussions and their ramifications on the well being of past, current, and future NFL players, are now being studied in hopes of both treating their negative effects and developing preventative measures against neurological brain disorders.  Training camp rosters opened up to 90 players and Clubs can now designate early June 1 release intentions allowing for cap casualties to seek employment before actually hitting the books.

Reforming rookie contracts

TGC Matthew StaffordBut perhaps the most significant result was the reform of rookie contracts.  Loop holes in contract structuring and the increase in overall revenue literally sky rocketed the top 10 of the draft into top 10 salaries without ever having taken a professional snap from scrimmage.  Clubs were reluctant to trade up for fear of the consequences of signing a mega-deal first round bust.  Poor teams were forced to spend top dollar on unproven talent and then cross their fingers they weren’t adding to their already losing ways.  The new CBA all but changed that and provided more of a slotted type system that most NFL Clubs, fans, media, and veteran NFL players can now live with.

In the years prior to the most recent CBA extension NFL Clubs were limited by a “Rookie Pool” that attempted to cap the amount all rookie contracts would allocate towards the overall Team Cap expenditure for the given season.  It was originally thought that this would curb inflated deals and overspending, but agents found a way around the rookie pool with “Option and Roster Bonus” clauses in the second year of the upper echelon rookie deals.  These were protected by guarantees should the “Option Bonus” not be exercised.

There was really no way around it.

Closing the loophole in rookie contracts

TGC NFL CBAThe League and the Players’ Union put a stop to the loopholes by legislating rookie contract structure.  It was something long overdue and readily welcomed by NFL General Managers in dealing with rookie negotiations.

  • 1st round deals could extend with an option to 5 years*
  • 2nd through 7th were limited to 4 years
  • College Free Agents are set at 3 years

*A Club has the unilateral right to extend from four years to five years the term of any Rookie Contract of a player selected in the first round of the Draft (the “Fifth-Year Option”). To do so, the Club must give written notice to

the player after the final regular season game of the player’s third season but prior to May 3 of the following League Year (i.e., year four of the contract). 

For a Drafted Rookie selected with one of the first ten overall picks in the Draft, the Paragraph 5 Salary for the player’s Fifth-Year Option shall equal the Transition Tender that applies in the League Year that is the fourth year of Rookie Contracts for players at the same position at which the Rookie participated in the most plays during his third League Year. No other Salary is permitted for the Fifth-Year Option.

For any other Drafted Rookie selected in round one, the Paragraph 5 Salary for the player’s Fifth-Year Option shall equal an amount that would apply in the fourth League Year of Rookie Contracts if one calculated the Transition Tender for that League Year by using … the applicable third through twenty-fifth highest Salaries for players at the position at which the Rookie participated in the most plays during his third League Year.

The entire Paragraph 5 Salary for the Fifth-Year Option shall be guaranteed for injury-related termination only, effective upon the Club’s exercise of the Option.

Breaking down allowable salary in rookie contracts

TGC Allowable SalaaryRookie salaries are only allowed to include;

  1. Traditional signing bonus, defined as signing bonus committed to players by the Club upon execution of rookie contracts.
  2. Offseason workout bonus
  3. Paragraph 5 Salary
  4. Paragraph 5 Salary guarantees
  5. Permitted performance incentives
  6. Roster bonus
  7. Reporting bonus

Notice anything missing?  Option Bonuses, at least in the old way of doing 1st round rookie contracts.  Straight from the CBA;

Prohibited Terms. The following contract provisions are prohibited in a Rookie Contract: option bonuses, option exercise fees, option nonexercise fees, Salary advances, voidable year(s) provisions, buybacks of voidable year(s) provisions, and any “contract within the contract” (i.e., terms and conditions of a contemplated superseding contract within the Rookie Contract).

The Option Bonus is no longer a loop hole in rookie contracts and with that, trying to figure out how sign a top 10 pick isn’t “just part of the game”.

More on rookie contracts to come.

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