What Exactly are Injury Settlements?

One of the topics of discussion that has popped up a lot on Twitter has been surrounding injury settlements. I think there are some misconceptions about what exactly an injury settlement is so let’s try to clear those up as best as possible. Feel free to chime in the comments, Twitter, or e-mail if you see something you feel is incorrect and I’ll do my best to update it.

The CBA protects players who are injured performing football activities. Essentially if you are injured your salary is protected, but it is only protected to a point. Remember there are various extents of injuries that occur in the NFL. An ACL tear is devastating and will cause a player to miss the entire season. That is a major injury and the player will earn his entire Paragraph 5 salary for the year. But many of the injuries that land a player on IR are minor and are classified as such when placement on IR occurs. Those players, as soon as they are healthy enough to play football, are released from the team. Once released they may not re-sign with their former team for the duration of the season.

Injury settlements are, in some ways, a method to skirt the above rules as well as a way to give players an opportunity to earn a better living elsewhere. Contrary to what some believe a settlement is not a negotiation of price. It’s really a negotiation of weeks.  When a minor injury occurs a determination is made for weeks that the player will miss due to injury. The options would be to hold the player until he is healthy enough to be released or to have the two sides agree right away as to the amount of weeks that the injury should keep the player sidelined.

Once the weeks are agreed upon the team simply agrees to pay the player as if he was on the roster for those weeks. Teams and players have a 5 day window to agree to this settlement. Once the settlement occurs the player is again released from the team (in most cases exposed to waivers), except in this situation the player can return to the team, with a bit of a catch. The player is not allowed to return to the team until the length of the settlement passes plus another 6 weeks.

Let’s see how this works in practice. An undrafted rookie player gets injured at the end of training camp and is waived with an injury designation, so that a team that claims him knows that they are claiming an injured player. If he goes unclaimed, which is likely, he reverts back to the teams Injured list. From that point the team and player have five days to negotiate the settlement.

Because this is a rookie he will have a split salary of $288,000. That is the baseline price that the two sides work with. They agree that the injury will sideline the player for two regular season weeks. The two sides now agree to an injury settlement of $33,822 and change. That is the same salary as if they carried him on IR for two weeks. The player is again waived with the knowledge that he agreed to a settlement for an existing injury.

The player is then free to sign with any team in the NFL at that point and agrees to waive all rights to compensation from the team in the event the injury turns out to be more serious than expected. The player will be eligible to re-sign with the team in Week 9, which is the two week settlement period plus six week waiting period.

The settlement decision is more or less a financial one for both sides. Staying on IR is a roll of the dice and eliminates a likely candidate to bring you back at some point during the season. The player is better off having an open door to potentially return while looking to find a job with another team that will pay him at the rate of $405,000 rather than $288,000.

The split salary differential can be a driving cause for the settlement to occur. An interesting case occurred today where CB Darcel McBath accepted a settlement from San Francisco. McBath had been scheduled to earn $630,000 this season, but was injured and saw his salary move to the down amount of $358,000. The difference in pay is $16,000 per week. If he refuses a settlement the most he could earn for the year from the 49ers is $358,000, assuming that his injury proved to be more serious than expected.

If McBath can find a home for 10 weeks at his original rate of pay he will earn more than if he was stuck all season on IR. If he receives a few weeks of pre=paid money from the 49ers its even less weeks to come out ahead. Plus he now has a door open to return to San Francisco at $630,000 later this year. They are most familiar with him since he spent all camp with the team and would be a likely team to call him back if they needed more help in the secondary. It’s a beneficial settlement for both sides.

One question I have gotten a few times the last two nights deals with Tony Moeaki of the Kansas City Chiefs. Moeaki is injured and has dealt with injuries for most of his career. His base salary this year is $1,323,000 which has made most fans of the cap strapped Chiefs look to him for cap relief through settlement.

In this case the financials do not benefit the team to really consider it. To the best of my knowledge, Moeaki is on a RFA tender which contains no split salary. If that is the case lets say they pay him 4weeks of salary. The cost of the settlement is $311,294. You have to replace him with someone making at least $405,000 so you have only created $600,000 in cap space and released a talented player in the process. He is talented so you know he will pick up with another team so the option for return is non-existent. The bottom line is if the team was that concerned with his injury issues they would have released him long before he had an opportunity to get injured again.

So that’s a bit about the injury settlement process and hopefully clears up a little of what happens when we hear about players receiving settlements.


 

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