Why Everything Lowers the Salary Cap, and Why Undrafted Free Agents are Unlucky
If you haven’t read the first part of my breakdown regarding the CBA amendments regarding economics, you can find it here.
Now we’re going to look at what NFL players are going to get paid this season, the intricacies of the “stipend,” and why any benefits paid retroactively by the NFLPA will lower the salary cap in the future.
The Stipend That Isn’t a Stipend
The timing of any cancellations is critical for fringe NFL players. By now, everyone has heard the ubiquitous reports that players could have opted-out either voluntarily or by qualifying as a high-risk player. Since the deadline has passed to opt-out, the next milestone that matters is the final cutdown at the end of training camp.
All NFL teams currently have 90 man rosters. Practice squads aren’t established until cuts happen at the end of training camp. Should the season be cancelled during training camp and before the final roster cuts, players will receive a $250k stipend as well as health insurance. Two clarifications. First, it’s not really a stipend if it’s credited against next season’s salary. Second, not everyone receives this treatment. That only applies to players who received a credited or accrued season in 2019, as well as all 2020 draft picks. If you don’t fall into one of those categories (looking at you, undrafted free agents), then you’re left with a $50k stipend and no health insurance.
Since the NFL keeps chugging along and the opening game is less than a month away, let’s say we get right up to the start of the regular season and then the season gets cancelled. After the final cutdown, the stipend payments increase to $300k for main roster players and $100k for practice squad players. Should we actually have games played, the stipend amounts are offset by any base salary that players earn from game checks.
Regardless of when the season may be cancelled, players receive any money that has been earned or owed to them by that point in time. For example, any signing bonus, roster bonus, workout bonus, etc. that has been fulfilled will still be paid, if not already. Additionally, any base salary for games played remains unchanged.
Incentives
Then there is the issue of performance incentives. Forgetting the NFL’s current situation, more incentives should be percentage-based. If I were negotiating on a player’s behalf, I would advocate for percentage-based incentives for statistics that aren’t typically measured in percentages. For example, playtime incentives are measured as a percentage of team snaps, but what about sacks? Let’s say the incentive was to finish the season within 10% of the league leader in sacks as opposed to having 20 sacks. There is now the risk of someone else setting the bar really high, but your downside risk is covered in the case of a shortened season. Just an idea.
However, that sacks incentive is now going to be prorated. If you were set to earn $2m for 20 sacks and half the season is played, then your new threshold is 10 sacks. The money is prorated as well. Now the incentive pays out only $1m. On the bright side, if you were able to get 20 sacks in half of a season, you would still receive the original $2m.
Rolling Guarantees, and How the Cap Keeps Taking Hits
There are different levels of guarantees for NFL player contracts. For example, salary can be fully guaranteed or just guaranteed for injury. With an injury guarantee the player could still be cut and have those guarantees voided if they’re not injured. Players often have early contract years guaranteed at various levels and then later years might be unprotected (hence the saying “Not For Long”). If a player has their salary fully guaranteed this season and half the season is cancelled, what happens?
The NFL and the NFLPA, to remedy this situation, agreed to roll those guarantees forward to the next equal amount of unprotected salary. Let’s say someone is in the middle of a five year contract and their 2020 and 2021 salaries are fully guaranteed, but their 2022 salary is not fully guaranteed. The equivalent amount of guaranteed money lost in 2020 would become guaranteed in 2022.
I know what you’re thinking. What happens if a player gets cut after the 2020 season and never plays another down in the NFL? The solution is that “the NFLPA may create a Benefit from future Player Costs to protect a player who did not have an eligible 2021 contract for his unexhausted Guarantee and did not otherwise exhaust that guarantee through the 2023 season.” In other words, they’d still see that guaranteed money at some point. There are some caveats though. First, this money can’t be paid out until the True-Ups are completely recovered by the NFL. Second, these payouts lower the salary cap in the future.
To further illustrate this point, consider the benefits mentioned in part 1 that the players will be going without for the near future. Once the True-Ups are fully recovered by the NFL, the NFLPA may offset previous reductions to benefits (e.g. tuition assistance) dating back to 2020. “By way of example, if in the 2025 League Year, the Player Cost is $300 million per Club, and Benefit costs otherwise would be $50 million per Club, and the NFLPA elects to to designate an additional $10 million per Club to be paid to 2020 players in a new form of Benefit, the resulting Salary Cap for the 2025 League Year will be set at $240 million.” That’s a long-winded way of saying, “if you want to make up for lost benefits, fine, but it’s coming out of the future salary cap.” Player costs, the salary cap, COVID True-Ups, they’re all interconnected.
The NFL salary cap is suddenly on a much different trajectory than just a few months ago. In a few years we might be looking back at this letter amending the CBA and wonder just why these concessions were made.