Last May, when the NFL owners exercised their option to end the CBA a year earlier, a new set of Salary Cap rules for 2009 and possibly 2010 were triggered. These rules are part of the CBA and dictate how Salary Cap matters are to be handled if the league reaches the “last capped year” and the “uncapped year”. At present – barring a newly agreed upon CBA – 2009 will be the “last capped year” and 2010 will be “uncapped”.
Many fans have been fearful that if the NFL were to go “uncapped”, the league would turn into a new version of Major League Baseball with teams like the Dallas Cowboys and Washington Redskins becoming the New York Yankees of the NFL. Mindful of this, the NFL owners and the NFL Player’s Association negotiated rules in the CBA that are aimed at limiting any such unfettered spending.
In an effort to shed some light on just how teams will have to operate differently and the ramifications of the new rules, we will take a look at the more important of the new rules:
2009: THE “LAST CAPPED YEAR”
NEW RULE – 5 YEAR BONUS PRORATION: As of the last game on the 2008 regular season, all signing bonus money can only be prorated over the number of years of the contract, up to a maximum of 5 years.
OLD RULE: Prior to the owner’s opt out, the proration for 2009 was supposed to be 6 years (as it was in 2006-08).
RAMIFICATIONS: This will make it more difficult for teams to fit players under the Salary Cap because signing bonus money will now have to be prorated over a shorter period, thereby increasing the yearly portion of bonus money that will count against the Cap each year.
NEW RULE – NO JUNE 1 CAP SAVINGS: Any player released in 2009 – regardless of when – will have all unaccounted-for bonus proration shares accelerate and count against the 2009 Cap.
OLD RULE: If a team released a player after June 1, they received a Salary Cap rebate of the player’s entire base salary for that year and only that year’s portion of bonus proration counted against the Cap for that year. If there were any remaining unaccounted for bonus shares remaining, all of those would count against the following year’s Cap.
RAMIFICATIONS: If a player signed a 5-year deal with a $5M signing bonus, then the bonus money would count $1M in each year, and when added to the player’s base salary for each year would make up the player’s Salary Cap number for that year. In the past, if the player was released after June 1 of his 3rd season, then his base salary would be rebated against the Cap, but that year’s $1M of bonus proration would still count in that year. The remaining 2 years of $1M bonus shares would then count against the Cap in the following year.
Now that 2009 is the "last capped year", the entire $3M in unaccounted for bonus shares will now all count in 2009 and nothing can be pushed forward into 2010.
This rule was put in place to prevent teams from dumping players in 2009 and pushing off the larger part of the Salary Cap hit into 2010, the “uncapped year”, when that amount would not be a limiting factor on what the team can spend. Essentially, this rule is aimed at not giving teams a “get out of jail free” card for bad contracts signed prior to the “uncapped year”.
If this rule did not exist, there’s a pretty good chance that the Ravens would have released Willis McGahee this year after June 1 thereby pushing the larger portion of “dead money” into the “uncapped year” where it would not limit their Salary Cap space.
NEW RULE – SALARY CAP ACCOUNTING FOR INCENTIVES: All Incentives will count against the 2009 Cap, regardless of whether they are Likely To Be Earned Incentives (LTBE) or Not Likely To Be Earned Incentives (NLTBE). All NLTBE Incentives are charged to the Cap when earned and all LTBE Incentives are deducted when it is no longer possible for those to be met.
OLD RULE: All LTBE Incentives counted against the Cap in the present year and if unearned were credited against the Cap in the following year, while all NLTBE Incentives did not count in the present year, but if earned, would be charged against the following year’s Cap.
RAMIFICATIONS: This could cause teams a major headache in December, if a team is low on Cap space and has a NLTBE incentive that is about to be earned, thus counting against the Cap immediately. Because of this, it is likely that teams negotiating new contracts this year will steer clear of using incentives in order to avoid this type of complication.
One other major ramification of this rule change is that teams will not be able to take advantage of using “phony” incentives to try and carry Cap space from one year to the next. Basically, teams would adjust contracts late in the year and add incentives that were unattainable. Those incentives would count immediately (all incentives added during the season were considered to be LTBE and counted immediately), thereby eating up the team’s remaining Cap space. When those incentives weren’t reached – since they weren’t expected to be – they would then be credited back to the team the following year, thus allowing the team to carrying excess Cap space from one year to the next. In 2009, teams will not be allowed to carry over Cap space into 2010, although if 2010 does become the "uncapped year", such additional Salary Cap space isn’t necessary since there would be no cap anyway.
NEW RULE – 30% RULE: For any new contract signed after the Owner’s opted out in May of 2008, a player’s salary (excluding signing bonus proration), may not increase from one year to the next by more than 30% of the first year salary. This rule also applies to all contracts that are renegotiated in 2009.
OLD RULE: There was no such limitation.
It will also make it more difficult for teams to restructure contracts in an effort to create Salary Cap room in 2009. This is usually accomplished by reducing a player’s base salary to the minimum and giving him the difference as a signing bonus. But, reducing the 2009 base salary down to the minimum will likely create a violation of the 30% rule because the 2010 salary (which was already part of the contract) will likely be greater than 30% more.
NEW RULE – ACCELERATION OF GUARANTEED SALARIES: Any future guaranteed salary for 2010 or beyond will be brought forward and count in 2009, unless the 2009 salary is also fully guaranteed.
OLD RULE: There was no such limitation.
RAMIFICATIONS: This rule is in place to prohibit teams from writing huge guaranteed salaries into an uncapped year, thereby paying that player a large amount of money whether the player is still playing or not. The rule is aimed at “thank you” contracts, whereby a team is essentially paying a retired player or an older player a large amount of salary after the fact, but in a year when it doesn’t have any Salary Cap implications.
2010: THE “UNCAPPED YEAR”
NEW RULE – SIX YEARS OF SERVICE TIME TO REACH FREE AGENCY: A player will not become an Unrestricted Free Agent (UFA) until after he completes his 6th “accrued season” in the league.
OLD RULE: In the past, a player with 3 years of accrued service would become a Restricted Free Agent (RFA) and a player with 4 years of service time would become a UFA.
RAMIFICATIONS: A longer period of time before players can reach unrestricted free agency means a lot less players being available as Free Agents in 2010. Players with 4 or 5 years of accrued service will only be RFAs and subject to their present teams being able to maintain contractual rights over them via a RFA tender (and the right to match any offer sheet signed with another team or receive draft pick compensation.
NEW RULE –ADDITIONAL TRANSITIONAL TAG: In 2010, each team will be able to use an additional Transitional Tag to use.
OLD RULE: Under the old rule, a team could use either its Franchise Tag or its Transition Tag, but not both.
RAMIFICATIONS: A team can use 2 Tags, one of which must be a Transition Tag. So, teams will have the ability to use a Franchise Tag and a Transition Tag or 2 Transition Tags.
Again, this will mean that there will be less Free Agents hitting the market, as teams will have to ability to keep more of their own players off of the market. Plus, with 2010 being uncapped, teams may be more likely – and willing – to pay the pricey Franchise tenders, since there is no Salary Cap to limit expenditures.
NEW RULE – THE FINAL EIGHT PLAN: This new set of rules limits the Free Agent activity of the 8 teams that reach the Divisional Round of the playoffs in 2009.
OLD RULE: There were no such limitations.
RAMIFICATIONS: Again, more limits on what teams – the good teams – can do in Free Agency. This rule, in theory, is in place to keep “the rich from getting richer” and essentially is aimed at prohibiting a good team from buying a championship.
Teams in the AFC and NFC Championship games can only sign a UFA after they have lost a FA of their own. They are allowed to sign players released by other teams and re-sign their own FAs.
The other 4 teams in the Final 8 have the same prohibition, but can also sign some FAs based on certain salary restrictions. These restrictions basically are aimed at keeping them from signing top tier FAs.
NEW RULE – NO LEAGUE MINIMUM SALARY: There will be no league minimum amount that a team must spend on player salaries.
OLD RULE: Since the advent of the Salary Cap, not only has there been a maximum that a team can spend, but there has always been a minimum that teams must spend.
RAMIFICATIONS: While many often thing the “uncapped year” is going to be a wild spending free-for-all, it is also possible that some teams may spend less than in the past.
So, as you can see, the NFL owner and the NFLPA, mindful of the damage an “uncapped year” could possibly cause, wrote a lot of safeguards into the CBA provisions that deal with the last couple years of the CBA effectively mitigating the possibility of wild spending by the league’s wealthier owners.
Hopefully you can rest a little easier if you worried about the NFL’s competitive balance. That balance appears to be safe under the current CBA.
Beyond that, time will tell.