A Proposal to Scale Back Rookie Contracts
One of the major sticking points in the current labor relations between the NFL and the NFLPA is how to treat incoming rookies in regards to pay. The NFL's argument is that they are paying far too much money for unproven college players and that money hinders the performance of the team if the player busts due to both cash outlay and cap space outlay that is more or less guaranteed to the players. The poster child for the debate is former Oakland Raider Jamarcus Russell, who basically stole 32 million dollars from the Raiders while doing everything in his power to not become a better football player. DeMaurice Smith, executive director of the NFLPA, basically agrees with the NFL that they need to curb the salaries of the rookies, but wants to do so, in part, by eliminating long term rookie contracts and restricted free agency, which could make it very hard for a team to keep their own players that they developed. Somewhere there has to be a fair compromise, but what is it? This is an idea I've been tossing around in my head and with football news pretty slow for the next month, thought it might be a good time to jot it down on paper.
Lets analyze the main issues that both sides want to deal with. The easiest one to look at is just the gross salary paid to incoming rookies, since both sides agree that it has grown too large. Really this is an issue that only pertains to the first round draft picks and in particular the players selected in the top 10 in the draft. The solution here should be simple and that is to create a hard cap for the incoming players. Currently the NFL has a system that is designed to limit salary increases for rookies to just 25% , but its a soft cap in that there are all kinds of loopholes designed to get around that number by meeting easily attainable performance thresholds that escalate the salaries. For example lets look at our QB, Mark Sanchez. Sanchez received a contract worth $50.5 million with 28 million in guarantees. The day he signed the contract, however, his deal was only worth $19.1 million, all of which was guaranteed, to comply with the 25% rookie raise rule. So how did 19.1 grow to 50.5? By meeting ridiculously easy playing time incentives, as allowed in the CBA, Sanchez triggers a slew of salary advances, workout bonuses, roster bonuses, and escalated salaries over the final four years of his deal.
Such loopholes would have to be removed in order to actually have a hard cap which works in the NFL. What the hard cap would mean is that there are no escalators or incentives that can increase the amounts of salary to be paid to the rookie. What he signs for is what he receives. These numbers would be kept under control in the same manner that the NFL currently uses to keep first year salaries down by using a “rookie pool cap” that limits the amount of money a team can allocate to all of their draft selections and undrafted free agent signings.
The second issue is the length of the contract. If the league is going to reduce the amount of money they pay for their draft picks, those players have to have an opportunity to earn their second contracts faster than they currently do. As it currently stands any player selected in the top 15 can be signed for up to six years, players in the remainder of the first round for five years, and everyone else for four seasons. This time frame has been the primary reason behind holdouts from players who feel they have exceeded their rookie deals and are looking to be paid at fair market value. The lifespan of an NFL player is short and the longer certain players are forced to wait to receive a new contract the less money they are going to make. This is something that mainly affects the players selected outside of the top 10 who actually grow to be superstars, such as Chris Johnson of the Tennessee Titans. To help solve the issue the NFL needs to reduce the maximum contract length to four years for all first round players and three years for everyone else.
While some will think that these numbers are too short, the reality is after three years is all a team needs to evaluate a player. The six year contract, as currently used in the NFL, is almost always a sham. It is one last season filled with funny money that is put in place for two reasons- one to give the team an extra year to spread out a cap charge and two to make the agent look good for tacking on an additional 10 million or so to the overall contract number. So the reality is every rookie is really signed for a maximum of five years, and players that don't play well are gone long before the contract expires and those who do well are normally extended before the contract expires. So by reducing the years all that is being done is to force the hand of all 32 teams a year early in exchange for limiting the salaries of those players at the top of the draft.
So thus far how would this work in practice. Lets turn to Mark Sanchez again. To fit him into the rookie pool allotment in 2009, the Jets paid Sanchez $2.545 million in salary. His salary the next three years, to comply with the 25% rule, would have been about $3.2, $3.8, and $4.4 million. The Jets would basically be on the hook for $14 million, rather than something like 30 million under the current system in the event that Sanchez busts, which represents over 50% in savings for the NFL club. Those salary numbers would also be the players cap charge, making it acceptable in the event the player flops to retain him. In contrast, Sanchez' cap charges will be 9 million, 16.5 million, and 14 million under the current system, .This system would save a team around 70% of the cap charges on the player in the event he turns into the next Ryan Leaf. So this has the desired effect for the NFL team of keeping costs and cap figures low to help the team compete. It also keeps in effect some type of slotting system for rookies where the players drafted highly are rewarded with higher compensation than someone selected lower.
The next issue is the one that is going to be harder to get the sides to agree upon and that issue is controlling rights. While the NFL argues to limit rookie pay they like the system in place that allows them to control the rights of many of their free agents via the restricted free agency system and the use of the franchise player designation. Both mechanisms allow the team to keep from entering into multiyear agreements with a player and paying large sums of guaranteed money over a long period of time. In a capped year any player is considered a restricted free agent until he has completed his fourth season in the NFL, which limits a players options for pay. The NFL, it is believed, wants to increase that total to five or six years in the new agreement. A franchise tag pays a player a large sum of guaranteed money for one year, but offers no long term security for the player and often leads to long holdouts by the player, extending through most of the preseason. The NFL argues that they spend the time developing players and tailoring their team to fit the players and they should have every opportunity to retain their services, at what the NFL feels is a reasonable cost. The NFLPA's stance is that once you are free of your contract you should be completely free. No restrictions on where you sign or for how much. Let the market decide where you go and for how much. There is a large discrepancy between both positions.
Both sides have a valid point. While it may take 3 years to evaluate a player, if the player is good you deserve the best opportunity to keep him on the team. If the player is going to play for less money initially, though, they have to have the chance to earn that money back. I believe a fair compromise is that every contract must maintain a team option, not guaranteed, to extend the term of the contract for three more seasons, at a market dictated amount of money. The way the contracts themselves would work is that every player has a base three or four year contract determined based on where they were drafted. A team would then have an open window from the day following the Super Bowl to the end of the office hours the day before free agency begins to pick up the option on their player and extend the contract.
The financial consideration are what could make the plan acceptable to both sides. The first thing is that a distinction needs to be given to players based on where they were selected for this to work properly as higher draft choices still should be rewarded for being selected highly. I would use the top 10, first round, and everywhere else as the three tiers. The financial consideration would be a rolling figure, determined similar to a franchise tag. This number would be calculated as an average of the highest salaries for the position of players signed for three or more seasons. This figure would be based on the three year salary total for the player, which is really the most widely used number when negotiating a contract since the three years are almost virtually guaranteed. The option would also contain a guarantee to give the players the long term security they desire. The guaranteed amount of the option would be determined by the percentage of the three year total that was guaranteed to the players used in the calculation. The numbers used for the three tiers would be top 5, top 7, and top 10 at the position.
An incentive based system would be allowed for a player to exceed his draft slotted tier. For example, Nick Mangold has been selected to two Pro Bowls and been named a first team All Pro in his four years in the league. Considering there is little a lineman could do on the field maybe Mangold's team would award something like 2 points per postseason honor, which would jump him from top 7 to simply matching the highest contract on the books for an interior lineman. These incentives could all be negotiated by the agents and the teams when the contract is signed and based on the current incentive clauses in the CBA, such as team improvements, rookie of the year, player of the year, MVP, leading the league in certain statistical categories, etc....That is up to the team and agent to negotiate when the player is a rookie, but this allows the pick who shines the opportunity to raise their value via performance on the field.
To show how this would work in practice, again we will use Sanchez as the example. Right now the five highest three year totals for a QB are 50.9 million of which 33 million is guaranteed. So that is the price the Jets would have to pay if they want to extend Sanchez for three added seasons. Under this system Sanchez, if he is a failure, costs the Jets only 14 million rather than 30 million. If Sanchez hits, he will end up making a potential 47 million in guaranteed money over a 7 year period and a potential 65 million over that same time. This is only a slight reduction in average per year for the player and an increase in guarantee per year over the entire term of the contract. If the Jets did not want to pay that amount they would have to let him walk away as an unrestricted free agent or try to negotiate a separate deal with him. There is nothing that could lock the team into picking up such an expensive option, but it gives them the ability to do it and, in essence, back pay the rookie for his performance over the first few years of the deal.
The one problem with this idea is how would it affect the teams cap. Nearly 50 million dollars over a three year cap period is impossible to deal with. I'd let teams prorate bonus money paid to the player over a five year period regardless of whether or not the player is on the team, allowing them to carry a dead money charge two years past the expiration of the players contract. I think this is acceptable if a team wants to do that. Nothing, of course, precludes a team from making a standard new contract with the player during that time as well.
I think a system like this would benefit everyone. The NFL keeps the rookie costs down where they get 3 or 4 years to evaluate a player before making the huge investment into the player. Players no longer have to deal with the threat of franchise tags or restricted free agency once their contract expires. There is still enough leverage for the player to negotiate ways to exceed the stated option levels to obtain a market setting contract and they get that guaranteed security if the team picks up the option, something they do not get with a franchise tag or RFA tender under the current system. Teams no longer have to deal with a Jamarcus Russell keeping a team from improving the roster and the best rookies will get guaranteed salaries over a three year period that rival those received by established players on a 6 year deal. Holdouts, in theory, will be limited due to guaranteed money kicking in during the players fourth or fifth season in the league and the threat of the various one year tags being removed. I think it could work.
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