I spent a ton of time over the past week meticulously going through all of the player contracts on our site and updating those that needed updating. As our General Managers running virtual NFL teams on our site know, their players’ contracts match (exactly, or nearly exactly) the real-life contracts of their players.
Going through this process can be tedious, but it’s also very educational, and it provides some great insights into how NFL General Managers manage the salary cap and their rosters overall.
First, a few words about our source, OverTheCap.com. Jason Fitzgerald, who runs OTC, is a kindred spirit – a fellow NFL geek (and I mean that lovingly,) who devotes countless hours to the tiniest contract details and gives us all a reliable resource for this esoteric data. So, thanks Jason!
Examining contracts on OTC is a great way to see the NFL’s salary cap rules in full effect. Most of our audience has a pretty good understanding of the basics of how the cap works. If you were not aware that signing bonuses are pro-rated over the years of the contract, for example, you may have some catching up to do, but don’t worry, you’ll get there.
NFL Salary Cap Rules Not Everyone Knows
When a player receives a signing bonus as part of a contract, the total amount of this bonus is pro-rated over the life of the contract. However, the maximum number of years of proration is five, per the NFL Collective Bargaining Agreement (Article 13, Section 5(b)(i)):
“The total amount of any signing bonus shall be prorated over the term of the Player Contract (on a straight-line basis, unless subject to acceleration or some other treatment as provided in this Agreement), with a maximum proration of five years, in determining Team Salary and Salary…”
This doesn’t come up often, as most NFL contracts by far are five years or less in duration. It does happen, though, as you can see here with the (highly newsworthy) contract extension Von Miller signed with the Broncos in July:
Note that the $17M signing bonus received by Miller is fully amortized over the first five years of the six-year contract, and no bonus is counted against the Broncos’ 2021 cap. Of course, only the most secure NFL General Managers are thinking about their 2021 cap situation today!
Similarly, proration of signing bonuses in NFL rookie contracts cannot exceed four years. While the CBA specifically spells this out, that’s essentially unnecessary. The only rookie contracts that can exceed four years at all are those of first-round draft choices, and those contracts specify club options for a fifth year at a much higher base salary.
Von Miller’s contract above is also useful in illustrating this. As a very high draft choice in the 2011 NFL Draft – second overall – Miller got a nice, fat rookie deal (though not as nice and fat as it would have been under the prior CBA!) You can see his rookie signing bonus prorated over the first four years of that contract.
On May 1st, 2014, the Broncos exercised their Fifth-Year Option on Miller’s rookie contract, and I’m sure they’re glad they did. The CBA provides a deadline of May 3rd for clubs to exercise Fifth-Year Options. As you can see, his salary jumped to nearly $10M, but his rookie signing bonus dropped off the team’s Salary Cap calculations, as it had been fully amortized over the first four years.
Also interesting (to me, anyway) is that Miller’s 2015 base salary became fully guaranteed (well, pretty much… read on) when Denver exercised their option. In OTC’s standard way of presenting contracts data, the guarantee is indicated by the italicized base salary. The CBA verbiage that provides for this guarantee reads as follows:
“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. The entire Paragraph 5 Salary for the Fifth-Year Option shall be guaranteed for skill, injury, and Salary Cap-related termination if the player is on his Club’s Active/Inactive roster at the start of the player’s fifth League Year (i.e., the option year).”
So, if Miller had gotten hurt after the Broncos exercised their option, he’d still get paid. If, however, the star linebacker had gone on a diet of Twinkies and Budweiser and put on 150 pounds while simultaneously completely forgetting how to play football, the team had a window to cut him after exercising their option up until the start of the following League Year in March of 2015, about ten months later.
Something else you might notice on OTC is that some players show differing amounts for signing bonuses in the first year of a current contract than in the ensuing years, as is the case with Doug Baldwin, above. “How can this be,” you might wonder, “when signing bonuses are prorated – equally – among the contract years?”
The answer lies in how Jason chooses to show the unamortized (not yet accounted for) signing bonuses remaining from renegotiated contracts. Baldwin renegotiated his contract with the Seahawks on June 27th, 2016. At the time, there was still $1.6M in unamortized signing bonus left over from his previous contract – in the world of NFL Salary Cap calculations, the Seahawks hadn’t paid for it yet. OTC rolls this amount into his prorated bonuses for the 2016 NFL League Year, showing the total of $3M.
Another player in the same situation is the Chargers’ Keenan Allen, who negotiated a new contract with the team on June 10th, 2016, as shown here:
While we’re in full-on geek mode, let’s take a look at how the Franchise Tag affects NFL player salaries. The Rams applied their Franchise Tag to CB Trumaine Johnson, who was a third-round draft choice in 2012, following his breakout 2015 campaign.
As with the Fifth-Year Option of rookie contracts for first-round draftees, application of the Franchise Tag generally fully guarantees the player’s base salary, as Johnson’s italicized $13,952,000 for 2016 indicates. The verbiage from the CBA that specifies this reads as follows:
“If a player subject to a Franchise Player designation accepts the Required Tender, the resulting Player Contract shall be fully guaranteed if the player’s contract is terminated because of lack of comparative skill; as a result of an injury sustained in the performance of his services under his Player Contract; and/or due to a Club’s determination to create Room for Salary Cap purposes. For purposes of this Subsection only, any contract termination due to the failure of the player to establish or maintain his excellent physical condition will be subject to review of a neutral physician appointed by the parties, whose physical findings will be conclusive in any arbitration proceeding relating to the physical condition of the player at the time of the exam, provided that such exam takes place within twenty (20) days of the contract termination.”
In the next blog post, I’ll share some opinions and observations about specific players and teams that I noticed in this process.
If you have seen interesting ways that specific player contracts illustrate the rules that NFL General Managers (and therefore our virtual NFL GMs here on PowerHouse) follow, please post in the comments!