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Tom Brady and Voidable Contract Years

So Tom Brady signed a new contract yesterday and it was widely reported as a two year extension that would tie him to the Patriots until 2021. More details came out today that completely changed the story- Brady actually received a raise for this year from the Patriots but the two extra years are voidable years meaning the Patriots have no rights to Brady past 2019. The question that Im getting now after that information came out is what exactly are void years?

Voidable contract years are basically fake contract seasons that are simply used for salary cap manipulation. I’m not entirely sure where they began but they have been used for ages dating back to old rookie contracts where void years were used to defer when teams would take a cap charge for a bonus. The purpose of the void year is to allow a team to pay a player a signing bonus and prorate for more years than actually exists on the contract. Basically its buying on credit with the cap- buy now and pay later.

Because this deals with Brady and the Patriots and there has always been this feeling that those two work hand in hand to gain an edge some are wondering if this is some sneaky Patriots shenanigans, but this is a common thing in the NFL. In fact teams like the Eagles and Saints live by using voidable contract years for many of their players.

The reason New England needed to use this with Brady is because they were not going to have the cap room to give Brady a raise. Did they have to give Brady a raise? No, but last year Brady was unhappy with his $15 million salary and they added incentives to earn another $5 million so it would make sense that the two sides would do a new deal since he was playing on the same $15 million salary this year.

The Patriots had in the ballpark of $7.5 million in cap room before the new deal with Brady which obviously is not enough to give Brady a straight raise. Even a moderate raise would run them so close to the cap limit once they go to a regular season accounting system so they had to find a way to reduce Brady’s cap charge while giving him a raise.

By my calculations the Patriots likely gave Brady a $20.25 million bonus and reduced his base salary from $15 to $2.75 million. They will now get to prorate that $20.25 million over three seasons ($6.75M a season) rather than take the hit all this year, lowering his cap hit by $5.5 million even though they increased his compensation. By lowering his cap figure it technically also would have made it even easier for the Patriots to franchise tag him after the year, hence the no tag provision in the contract.

Here is how the cap charges work out on this contract with a void and without a void.

Year Void Contract Non-Void Contract
2019 $21,500,000 $35,000,000
2020 $6,750,000 $0
2021 $6,750,000 $0

So as you can see it’s a pretty big swing in cap room for 2019 by using the void. In both cases they have to account for $35 million on the cap its just the timing that the void changes.

The way the contract will work is as follows. Brady will play with the Patriots this season just as he would have had there been no raise. The Patriots and Brady as the season plays out can work on an extension that would keep Brady as a Patriot. The two sides have until the day before free agency begins in 2020 to sign an extension. If they sign a new deal before that date Brady will have to account for $6.75 million in proration from the $20.25 million bonus in 2020 and 2021.

If Brady and the Patriots fail to reach a new agreement by that date Brady’s remaining two contract years will void and he becomes a free agent. If that happens, Brady’s $6.75 million proration from 2021 will accelerate into 2020, meaning the team would need to account for $13.5 million in cap charges next year just from this contract. Nothing would prohibit Brady from signing back with the Patriots after the contract voids but the Patriots would have to account for that added $6.75 million on the cap in addition to any new salary.

Void years are not really a bad thing if used properly. The big downside is when you use the void years well beyond what is the expected playing time for a player you are setting yourself up for a massive cap charge down the line for a player not on the team. I guess you can argue that if a Brady or a Drew Brees retires you are going to go into such a deep rebuilding mode than it doesn’t matter what the cap charge is since you are pulling back and don’t care about the cap but teams that use it for multiple players can waste valuable space if they don’t have any intention of bringing the player back.

From a quick glance at this deal my guess is the Patriots are internally thinking Brady will likely be a starter for at least 2019 and 2020 and perhaps 2021. $13.5 million in dead money next year would not be a killer if things really went south and $6.75 million in 2021 is certainly manageable. In that respect this is better than the Brees contract where voids were not staggered as well and would cost the Saints over $20 million if he retired after this season.

But the real gist of the contract is that the Patriots were doing a raise for Brady and this was the way they could do it from a cap perspective. Given Brady’s age its easier to work year by year than negotiating a long term deal and most likely they agree on a new one year deal in February and keep going and going in that manner until Brady one day shows his age.

Looking at the NFL Training Camp Holdouts

There are not many ways for a player to get the attention of his team when he is looking for a new contract so the best way is to hold out. So I wanted to look at the reasons things sometimes come to this and where the current players likely stand. (more…)

Thoughts on the Cowboys and Ezekiel Elliott

While I am certainly in the camp that believes it is foolish to heavily invest in a running back there is also the reality that it could happen in Dallas with Ezekiel Elliott. First round draft picks basically get one chance in five years to threaten a hold out and it seems Elliott may do it this year which makes this an interesting case to take a look at as Dallas comes off a playoff season that I am sure many credit to Elliot’s presence on the offense. With that in mind lets look at the financial risks for the Cowboys and why, if they do plan on extending him at some point, they should just do it now rather than waiting. (more…)

Thoughts on the Contract Impasse Between Melvin Gordon and the Chargers

With NFL training camp just a few weeks away we begin the period where more and more players begin to open up about the potential of holding out if they are not offered a new contract. Chargers running back Melvin Gordon is the most recent on to state he will hold out and demand a trade if he does not receive a new contract. (more…)

Looking Ahead to the Vikings 2020 Salary Cap

Following the Vikings extension of tight end Kyle Rudolph a few days ago talk jumped to the Vikings salary cap situation in 2020. Currently the Vikings have in the ballpark of $213 million committed to 2020, the second highest total in the NFL (the Jaguars are at the top around $215 million) which sounded the offseason alarm among Vikings fans and some media outlets looking ahead for what was a non-playoff team in 2018 which did not exactly add a lot of new parts for this season. So let’s take a look and see if the panic is warranted. (more…)

Carson Wentz’ New Contract and the CBA

A few days ago the Eagles and Carson Wentz agreed to a reported $128 million contract extension that would potentially tie Wentz to the Eagles through the 2024 season. The contract became official either on June 10 or June 11 and the numbers began to trickle in via a series of tweets by ESPN’s Field Yates which has led to a bunch of confusion surrounding the contract. Yates later added more details as did MMQB’s Albert Breer who indicated that the contract was so complex his head hurt trying to figure it out.  With those details in mind (and knowing that the numbers may not be 100% accurate) I’d like to try to clear out most of the confusion surrounding the contract. (more…)

June 1 Salary Cap Rules are In Effect

The change in NFL accounting for the 2019 season is now official with June 1 officially in the books. For those not familiar with NFL salary cap accounting the league makes a distinction between the way they handle the salary cap charge for players released after June 1. For players released from multi year contracts all accelerated salary will now count towards the 2020 salary cap rather than 2019. In addition four teams used a June 1 designation on players this offseason and now those players will no longer count in full on their former team’s salary cap. Here is a quick look at the players and the cap space gained by the teams they used to play for. (more…)