I think at this point everyone is pretty aware of the situation that occurred between the Denver Broncos and DE Elvis Dumervil, but lets recap anyway. The Broncos wanted Dumervil, slated to earn $12 million in cash and carry a $13.623 million cap charge, to take a paycut or be released. The two sides eventually agreed to a figure of $8 million in cash salary with a stipulation that Dumervil have the contract to the Broncos by a certain time due to avoid language in his prior contract from kicking in that could cause his $12 million dollar salary to become fully guaranteed on Saturday. Basically Denver wanted the deal complete before the NFL day ended at 4PM EST.
Due to a broken fax machine and an apparent lack of technology on Dumervil’s end the deal never made it to the Broncos who wanted to cover their financial backside and subsequently released Dumervil. About 30 minutes later the new contract made its way to Denver which has made the Broncos irate and Dumervil I’m sure upset. While there are probably hurt feelings on both sides as they try to blame the other side publically they need a way to resolve the situation to which I want to offer two suggestions for thought.
Before getting to deals I think its important to point out that the $8 million Dumervil was going to earn from Denver was going to be his best offer. The market crashed this year, specifically on the defensive end, and one of the reasons why Dumervil agreed to this paycut in the first place is because it was the most money he and his agent felt he could likely earn. So to think that another team will swoop in and may him more money to steal him from Denver is probably not realistic. It could happen but the odds would be against it in my opinion.
There are two components to Dumervil’s deal that we need to look at- cash flow and salary cap flow- as both are of importance to the Broncos. Under the terms of the restructured deal Dumervil was going to earn $8 million in cash in 2013 and carry a cap charge of $9.623 million. His cash takehome in 2014 was slated to be $10 million with a cap charge of $11.623 million. Also important that season to Denver is his dead money charge. His dead money in 2014 was set to be $3.246 million in the event they wanted to walk away next year, a likely occurrence due to their desire to cut his salary in 2013.
Because Denver released Dumervil they immediately face a cap charge of $4.869 million from the acceleration of his $2.538 million dollar signing bonus received in 2010 and $6 million dollar salary advance, that was treated as a signing bonus for cap purposes, in 2011. The Broncos can not avoid that cap charge. So for those suggesting just paying him $8 million it does not work because of the salary cap implications. An $8 million dollar salary would lead to cap allocations of $12.869 million for Dumervil, a number Denver clearly was looking to avoid with the paycut. So we need a method to make Denver whole with regard to their cap obligations while also keeping Dumervil whole in regard to his promised pay.
The first pay structure I would suggest is to offer Dumervil a salary of $4,754,000 in 2013, and raises in each of the next two seasons of $1,623,000 with a 2014 and 2015 fully guaranteed salary of $1,623,000 with no offsets. Under this scenario Dumervil is guaranteed his $8 million dollars while the effect on the Broncos cap and cash flow is zero compared to the original agreed to restructure. Here is how it would work (I am including acceleration as prorated money just for the sake of clarity):
Under this deal the cap charges match for both sides and the potential cash will match. When Dumervil is released in 2014 the dead money obligation for the Broncos is the same so it’s a net neutral position for them. We have essentially brought our contracts right back to where they were at the start. The one negative on the contract is that it would take Dumervil more time to earn his money since he would not get his $8 million immediately as he would in the original deal. He would likely need to wait until he is released. Since it seems his side was the side with more blame that would seem reasonable.
If not then we need a structure where Dumervil can maximize his cash earnings in 2013. Under this deal we are going to pay Dumervil a base salary of $3,131,000 and pay him a signing bonus of $4,869,000 that is prorated over the next 3 seasons. This brings Dumervil’s earnings next year to $8,000,000 while putting the rest of the contract back in its normal state in terms of cap charges and dead money. The only thing Denver would want to consider here is the timing of the signing bonus payments in real terms. While the dead money total if he was cut this year would be high the odds of Dumervil being cut after agreeing to the terms of the original restructure were basically zero anyway.
My guess is the second option is more reasonable to both sides, but either way both are an easy option to let both sides save face and bring the team back to where they want it to be and the player back to the salary he wanted to earn. Its not the epic disaster people are making it out to be and there are very simple solutions that can keep both sides happy with a little thought.
Jason is the founder of OTC and has been studying NFL contracts and the salary cap for over 15 years. Jason has co-authored two books about the NFL, Crunching Numbers and the Drafting Stage, which are widely circulated in the industry and hosts the OTC Podcast. Jason’s work has been featured in various publications including the Sporting News, Sports Illustrated, NFL Network and more. OTC is widely considered the leading authority on contract matters in the NFL.