NFL CBA Series: Rookie Contracts
In the past, there were all sorts of negotiating going on the end of the Draft and the start (sometimes deep into). Although there is still much to bargain over, the new CBA installed something similar to the Rookie Wage Scale in the NBA. Each of the up to 256 draft slots are given an allotment of the Total Rookie Compensation Pool.
The Player Contract for every drafted rookie is set at four years. All undrafted players will be signed to three-year terms (Art. 7 Sec 3, (a), 24).
Players drafted in the first round have a 5th-year option that is deemed a part of their Player Contracts, while picks from rounds three through seven are automatically eligible for the Proven Performance Escalator. All rookies can receive the minimum Offseason Workout per diem beginning in the player’s second season (Sec. 3, (b, i-ii) 25).
A player’s Rookie Salary includes all of the following: traditional Signing Bonus, P5 Salary, Offseason Workout per diem, P5 Salary Guarantees, permitted Performance Incentives, Roster Bonuses, and Reporting Bonuses (Sec. 3, (iii), 25).
Rookie Salary can be guaranteed for skill, cap, and/or injury. However, in a rookie contract’s third or fourth year, the player’s salary can’t be guaranteed for skill, cap, or injury unless all of the player’s previous salary has been guaranteed for similar contract termination purposes. So, if a player’s year two and three salary is fully guaranteed for skill and cap, the player’s fourth year can be guaranteed for skill and cap, just skill, or just cap (Sec. 3, (h), 27).
Cam Newton’s contract has third and fourth years that are fully guaranteed for skill, cap, and injury. The team can structure the deal with years this way only because the first two years of the deal are also guaranteed for all three termination purposes.
Outside of this, rookies can’t receive any other cash or non-cash provisions of any kind. This does not include the max of $5,000 a team can pay a player for each five promotional or sponsor activities (Sec. 3, (iv), 25). The CBA also prohibits rookies from agreeing to Option Bonuses, Option Exercise Fees, Option Nonexercies Fees, Voidable Years, Salary Advances (outside of those in (b), (iii), (3), 25).
These deals are also subject to the 25% Rule. Unless a player’s P5 Salary is set at the minimum every year, no team can sign a player to a contract that would give him a raise of more than 25% annually (Sec. 3, (e), 26). So, the second year of the contract can’t provide a salary more than 25% of the first year, and after that, each subsequent year can’t offer an increase of more than 25% of his previous year’s salary.
We can use Cam Newton’s contract as an example for the 25% Rule. Newton has P5 Salaries (2011-14: $375,000, $1,376,159, $2,377,318, and $3,378,477) and a signing bonus ($14.518 million prorated over four season or $3,629,500 per season) that make up his football salary. Though his P5 Salaries do not abide by the 25% Rule, the player’s entire Rookie Salary, which for Newton is P5 Salary plus prorated portion of signing bonus, is subject to the increase rules. His cap hits are $4,004,500 in 2011, $5,005,659 in 2012, $6,006,818 in 2013, and $7,007,977 in 2014. These numbers must not provide an annual increase of more than 25%, which Newton’s do not. His contact, therefore, is in compliance with the rule.
Rookie contracts can contain other terms pertaining to non-compensation aspects of the agreement such as forfeitures of compensation, worker’s compensation issues, insurance policies, and tax implications among others (Sec. 3, (c), 25-26).
All Rookie Salary counts towards the Total Rookie Compensation Pool, Year-One Rookie Compensation Pool, Club’s Year-One Rookie Allocation, Club’s Total Rookie Allocation, and the 25% increase rule. The only exceptions are the player’s 5th-year option and the Proven Performance Escalator (Sec.3, (f), 26), along with air travel to team city, ground transportation to team facilities, and room and board up to certain maximums (Sec. 3, 28).
Rookie contracts for draft choices can’t be renegotiated or changed in any way until the regular season finale of the contract’s third year. Undrafted free agents must wait until their conclusion of the regular season in their second season to amend his contract (Sec. 3, (k, i-iii), 28).
This January, Russell Wilson’s agent, Bus Cook, seemed to make or direct a phone call to Seattle Seahawks management “insisting that something be done” about Wilson’s contract. Wilson was selected in the third round in 2012, but instantly made an impact on his team and the NFL, leading his team to an 11-5 record and a WildCard victory. However, per the rule above, Wilson is not eligible to renegotiate his deal. Too bad Mr. Cook or one of his employees hasn’t read the CBA. If he had, he would have avoided the he-doesn’t-even-know-the-CBA press.