Thoughts on Jaylon Smith’s Contract Extension

The Cowboys announced a big extension yesterday, not for one of the big name offensive players, but instead for star linebacker Jaylon Smith. Smith was in an interesting position when it came to a contract extension. Though he was entering the final season of his four year contract he was technically not eligible for unrestricted free agency due to spending his rookie year on the NFI list and would thus have been a restricted free agent. Rather than having the whole RFA tender process play out the sides agreed to what is technically a six year extension, but is being valued as a five year, $63.75 million contract as if the RFA tender and season occurred.

When the contract for Smith was first announced and numbers started leaking in the $13 million a year range with over $30 million in guarantees there were immediately some critics of the contract because the Cowboys controlled Smith’s rights this year and next. The first with the full contract numbers was Mike Florio of PFT who reported it as a $12.75 million a year contract but when you added up the numbers you realized you were pulling up short of that figure and that the average per year was around $11.4 million a season.

Based on Smith’s status as a RFA in 2020 the Cowboys could have used either the original draft round compensation tender (worth around $2.15 million), a first round tender (worth around $4.7 million), or the franchise tag (worth around $16.7 million) on Smith. The franchise tag clearly never would have happened but from the numbers being reported it is clear that the two sides agreed that Smith would have been given a RFA tender at the first round level and played next year at $4.71 million. Once you add that into the contract the value hits the reported $12.75 million.

It is an interesting way to approach a contract extension. While things like the tag and tenders do certainly come up in and influence negotiations this is the first time I’ve really seen a contract reported in this manner with the tender being used before its applied.  We’ll be running with that on OTC since that was the clear intent of the contract but most times it really isn’t. It is certainly a fine way for the players side to inflate the new money APY of a contract while at the same time eliminate the riskiness of playing out a season.

At $12.75 million Smith will be the 6th highest paid linebackers in the NFL. His APY will rank behind that of Bobby Wagner, CJ Mosley, Deion Jones, Kwon Alexander, and Anthony Barr. His $35.4 million in injury protection ranks second.  That guarantee number is I think what is still setting people off on the Cowboys handling of the contract.

When you do early extensions with players, IMO, there are a number of factors you take into account. One of the primary ones should be market inflation. The market for linebackers had been relatively stagnant for four or five years. There were, however, signs of life in 2018 was a handful of linebackers made it to free agency and landed contracts that were probably $3 million per year increases over what similar players had signed for the last few seasons. The market exploded in 2019 with the Jets going to a stunning $17 million for Mosley, the 49ers going to $13.5 on Alexander, and the Vikings, with an assist from the Jets, to $13.5 million on Barr.   The Wagner and Jones contracts continued to move the market.

The point is that the prices at this position may be moving forward and at the very least Smith should compare favorably Jones who signed an extension with Atlanta worth over $14 million a season. So whether you value the contract at $11.4 or $12.75 million in either case you are getting about a 10% discount on a stagnant market and probably a 15 to 20% one if the market grows over the next two seasons.

Dallas also has two other situations regarding new contracts. With Dak Prescott, Ezekiel Elliott, and Amari Cooper all looking for contract extensions that will cost the team in the ballpark of $67 million a season you do not want to necessarily compromise the rest of your roster. If you can get an easier extension done you should get that out of the way and get that player situated within your salary cap structure. It also protects you from losing a player like Smith in the RFA process due to cap considerations (and this is the only reason besides the Cowboys throwing Smith a bone that I would see using a first round tender).

Secondly two of those pending three free agent discussions have gotten a little ugly, especially in the case of Elliott.  Sometimes you just want to send a good message through your locker room and to the outside about how you are dealing with your players. This certainly accomplishes that goal.

When we get into guaranteed salary sometimes we get wrapped up in overall numbers. We learned years ago with contracts not to get wrapped up in the total value of deals yet never did the same with guarantees. We also, rightfully so, try to value deals in new money terms to better compare free agents with extended players. Yet with guarantees that isn’t the case. We do this with our premium section but realistically when we look at guarantees you should be looking at the new guarantee as well as the guarantee per year on a contract.

The guarantee is essentially a tradeoff of risk. The player had the risk of injury. The burden now falls to the team. As a tradeoff teams will receive either a better annual value on the contract or better terms. For the big priced linebackers here is how the guarantees really work out.

Player Guaranteed New Guarantee Fully Guaranteed Injury Guarantee per year Full Guarantee Per Year
Mosley $51,000,000 $51,000,000 $43,000,000 $10,200,000 $8,600,000
Wagner $40,250,000 $38,750,000 $24,500,000 $13,416,667 $8,166,667
Smith $35,400,000 $29,400,000 $19,000,000 $7,081,000 $3,800,000
Jones $34,000,000 $32,930,000 $18,800,000 $8,500,000 $4,700,000
Barr $33,000,000 $33,000,000 $15,900,000 $6,600,000 $3,180,000
Alexander $27,500,000 $27,500,000 $14,250,000 $6,875,000 $3,562,500

When you use those numbers you see that the Smith contract, because it runs five rather than four years and because it has two years of existing salaries baked into the guarantee the monster $35.5 million doesn’t stand out as much. Dallas gets an added year of cost control on a player and throws in a guarantee label on salary he was already expected to make.

The only risk for Dallas here is that they are more or less pre-buying into a franchise tag in 2021 (Smiths new money through the end of 2021, when he would have been tag eligible) is $20.2 million. If things were to go south this year or next that is a lot of coin to pay for a player, but that is a risk you take when you get what is a discount.

On a year by year cash flow basis there are advantages for Smith. Here is the market comparison.

Player Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
C.J. Mosley $0 $19,000,000 $35,000,000 $51,000,000 $68,000,000 $85,000,000
Bobby Wagner $13,000,000 $24,000,000 $37,400,000 $54,000,000
Deion Jones $12,380,140 $25,750,140 $34,430,140 $44,570,140 $57,000,000
Anthony Barr $0 $16,000,000 $26,100,000 $39,000,000 $52,000,000 $67,500,000
Kwon Alexander $0 $15,000,000 $27,100,000 $40,500,000 $54,000,000
Jaylon Smith $13,000,000 $20,200,000 $29,400,000 $40,400,000 $51,400,000 $63,750,000

His extension year salaries are solid and his first year number beats out Mosley. He will out earn two higher priced players through year 2 and will still top Barr in year 3. Those are the most important years for a player, though less important for an extension like this than a pure free agent contract. The turn to the Cowboys favor comes in year 4 and especially year 5 where most of the other players will get another chance at free agency.

From a cap standpoint there isn’t anything too wild. The team had to use an option in 2020 to make the 30% rule work but $13 million in staggered prorated money is workable. Despite the $12.75 million valuation only once will the cap rise above that figure and the front end is very manageable.

Overall Dallas should be pretty happy because this is a PR win and they get a pretty deep discount assuming Smith remains healthy. Like with the La’el Collins contract a few years ago they also send a message to the locker room of trust. Smith should be happy as well with some financial certainty and up front numbers for someone who a few years ago wasn’t sure if he would be playing again.

The Raiders and Antonio Brown

The Antonio Brown situation has gotten absurd at this point. From something resembling frostbitten feet keeping him out of practice to now refusing to play because the NFL will no longer allow him to use an old helmet. The Raiders have now seemingly come to a breaking point after weeks of distractions with GM Mike Mayock finally saying he needs to know whether Brown is going to be with the team this season or not. Still this is more or less unchartered territory for a team and how they can handle the situation.

I could not come up with a good comparable to this. The closest I could think of was Albert Haynesworth in Washington where he was suspended by the team after refusing to play in certain defensive packages and refusing to listen to coaches. But that was more reminiscent of Brown in Pittsburgh trying to find his way off the team by undermining the organization at the end of the 2018 season. There was of course Terrell Owens who held court in his driveway doing situps as a member of the Eagles when he was looking for a new deal. Owens eventually was sent home for the season, but Owens was, like many players who hold out, looking for more money. Brown isn’t doing that.

The contract situation with Brown is somewhat straightforward but can also be somewhat complex. Brown, following a trade to Oakland, renegotiated his contract to raise his salary in 2020 and 2021 while also giving him $30.125 million in guarantees. Unlike most deals, however, Brown’s contract included no signing bonus so while the guarantees are large no money has likely exchanged hands yet outside of maybe a guaranteed workout bonus worth $500,000, that I am assuming he earned from the team this offseason.

Guarantees are a funny thing. They protect a player from not being paid for declining performance,  being injured, or for any salary cap reasons, but in most cases they are easily voided. Though I am not familiar with the particulars of the Raiders contract with Brown, most contracts will see the guarantees void in a contract due to suspension from a team or the NFL, being arrested, refusing to report to camp, refusing to practice, personal conduct that reflects poorly on a team, non football related injuries preventing him from playing, retirement, engaging in an activity that brings on potential risks, etc… It is generally a very broad range of possibilities that will void the guarantee on a contract.

My assumption is that Brown has already done enough to warrant the Raiders to explore the possibility of voiding the guaranteed portion of the contract due to failure to practice. Even if that is not the case he has to already be close to the threshold needed to suspend some for conduct detrimental to the team, which would also likely void the guarantees on the contract.

If Brown’s guarantees void the Raiders would be able to escape the contract with minimal impact on their salary cap. The only charges at that point should be a $333,333 charge this year and $666,667 charge next season for the salary cap treatment of his guaranteed workout bonuses. The Raiders would offset $500,000 of that charge as a credit on next years cap, so basically this entire episode would just cost them $500,000.

However there is no recovery of draft selections that the team gave up in a trade if they were to cut Brown. If I were the Raiders I would be livid that the player I just traded for is showing no effort to play for the team. I would question whether he either wants to play football or just doesn’t want to play with the Raiders and is looking for an escape. This is where things are more complex.

Because Brown was traded rather than the released from the Steelers, the Raiders should hold the rights to recover Brown’s signing bonus prorations that remain from Pittsburgh if Brown refuses to play. This is a substantial amount of money- at a minimum $11.4 million (there are other prorations from a restructuring but more often than not teams are ineligible to reclaim that money).

This forfeiture of bonus money is a reason why Brown never would have retired from the Steelers unless it was under amicable circumstances where they agreed to not recover the money. Likewise if he truly does not want to play football it is why he would never retire now and would want to be released if he was done playing in the NFL. If the Raiders release him they should not have an avenue to recover that money. The forfeiture can begin to be triggered in the preseason so they could threaten that if he is actually not even showing up to work. So in a sense it is a game of high stakes chicken as to how long the drama should unfold if this carries over to the regular season.

Even if the Raiders void the guarantee on the contract I believe that Brown, if he is on the active 53 man on week 1, would have his salary guaranteed via the Termination Pay benefit of the CBA. That can also be voided if Brown continues to behave erratically and refuses to participate or show reasonable effort to prepare for a game.  As far as an in-season suspension the Raiders are only able to suspend for a max of 4 games, a rule that is in place to prevent a team from essentially banning a player from the NFL as the Eagles did with Owens.

If the Raiders do not void the guarantee then there really is no way to release him. Brown would immediately count for nearly $29.5 million on the 2019 salary cap if he was cut and that would leave Oakland with under $4 million in cap room for the start of the season. They would also owe him $30 million in cash which would be insane for them to pay if he was cut. They could trade him but given how the last 9 months have gone who would trade for him?

I think Brown’s deal has offsets on his guarantees (I don’t know that for a fact but it was never reported that they were of the no-offset variety) so while the Raiders would recover some money if he signed with another team, how substantial could that be?  If the Raiders owe him $30 million would you have any reason to pay him more than the minimum?  Probably not.

The only other way for the Raiders to remove themselves from the contract and possibly recover their money would be if his feet were such an issue that they felt they had a case to place him on the non-football injury list. Players on NFI do not have the right to receive their salary and can also trigger bonus forfeiture. My guess is that ship has sailed since the Raiders have seemingly let the issue slide and allowed some level of participation after that injury occurred. If they were able to place him on NFI it would end his season.

In the event Brown was released following a voided guarantee or placed on NFI it would likely lead to a grievance process. This is also costly on the salary cap, but not prohibitive. While the grievance is outstanding the team would take on a charge around $11.5 million (40% of his remaining guarantee) until the grievance was settled. While its possible the end result could happen this season it seems to be complex enough of an issue to where the Raiders would not have to worry about taking the balance of the charge if they lost until next season.

The Raiders have to be running out of patience but need to carefully be looking at their options. Because Brown is such a star they have certainly done things that would not be done for 90% of the NFL so far but that is probably about to change and I would imagine the other 31 organizations will carefully monitor what happens here to make sure that they are all protected by such events in the future.

The Texans Options with Jadeveon Clowney

The Texans had months to figure out what to do with Edge rusher Jadeveon Clowney, but somehow failed to come up with anything. Now with just a few weeks left to go before the season begins the Texans “GM by committee” has apparently decided that trying to trade Clowney is the best idea. So lets explore the situation a bit.

One of the first things to note is that the Texans can not just trade Clowney. Clowney is tendered at the moment and counts against the Texans salary cap, but he is not under contract to the organization. The NFL does not allow a team to trade the rights to a player so if they want to trade Clowney, Clowney needs to agree to the trade.

While that may seem like an easy task given that Clowney seemingly would like out of Houston at this point, Clowney would likely have some demands of his own. Currently Clowney is scheduled to earn $15,967,200 as a Franchise player. That number is based on his designation as a linebacker which is a point of contention. If classified as a defensive end Clowney would earn $17.1 million. At the very least he would likely want that higher salary to make his move out of Houston.

Clowney’s trade value would also be at an all time low if traded now. Not only does he carry a high salary cap figure that probably only 1/3 of the NFL could deal with, but a team would not be permitted, by the rules of the CBA, to extend him. So in essence this is a one year rental with a franchise tag provision. Had the Texans orchestrated a trade prior to July 15 a team would have been able to sign him to a long term contract the same way the 49ers did with Dee Ford when they negotiated a sign and trade. Clowney could as a condition of the trade go so far as to ask for a no franchise provision to further put pressure on the Texans to accept low compensation if he were to hold firm to that demand.

Clowney’s value, under normal circumstances, should fall somewhere between Khalil Mack’s multi first round trade and the 49ers 2nd rounder for Ford. Probably something like a first round pick and a mid round selection or a player thrown in on the trade. With the Texans looking as if they are in crisis mode the best they may be able to do is a second round pick.

The Texans best option, in my opinion, is to just hit the reset switch on the whole scenario and wait it out until next season when they actually have a GM making decisions. If Clowney fails to play this year he does not earn any salary. For each week he misses the Texans will get a $939,247 salary cap credit. The Texans would also retain the rights to Clowney next year and would have the ability to franchise tag him again. The Texans have a ridiculous amount of cap space next year (in the ballpark of $110 million) so holding a tender for Clowney is not difficult.

If tagged next year the franchise compensation falls from two first round picks to a first and third rounder. That is reasonable enough that it would not be a surprise if another team signed Clowney in free agency under those terms. At the very least they would be able to get a first round pick for him given that he would sign a long term deal with a new team as soon as the trade was executed.

There is no downside to this option. If Clowney refuses to report the Texans don’t spend a dime, don’t have Clowney, and have the rights to tag him again and trade him next year. If he does report they get Clowney for a season, hope it’s a good year, and retain his right to tag him and trade him next year. If they are aggressive with the trade market they should be able to get a pick in the 2020 draft the same as if they were to trade him now for pennies on the dollar. Who knows maybe they even come to terms on a long term contract.

If the Texans do go and find a trade scenario this year they have to make certain that unless they do get a first round pick, that any trade will escalate to a first round pick if the team that trades for him signs him to a long term contract. This is a trade condition that was used by the Jets years ago in a trade with the Saints which saw the Jets get added compensation if the Saints extended Jonathan Vilma. The Saints got around the condition by waiting a day into free agency to sign a new contract but that wrinkle was erased when the Jets, this time on the other side of a trade, agreed to something similar with the Seattle Seahawks with Percy Harvin. In this case the Seahawks drove the timeframe for a roster condition well into the late spring.

The worst thing that the Texans can do is take option 3 which is to trade him for a 3rd round pick because that’s the maximum compensatory pick they could expect. That is simply a sign of panic.

Some people have questioned how the Texans got in this position in the first place and did not do a long term deal with Clowney, but I can understand that one. Clowney has always reminded me of another former Texan- Mario Williams. Both players are/were Pro Bowl caliber players but neither, in my opinion, were once in a lifetime type of talents. However their draft status combined with the fact that they are high level players sets a salary expectation that is probably much higher than a team like the Texans sees fit.

Williams hit free agency when the Texans allowed him to walk and he signed an absolute monster of a contract with the Bills for $16 million a season. That contract in today’s salary cap environment would be worth just under $25 million a year, larger than the Mack record setting deal signed last season with the Bears. Clowney if he hit free agency could see that same kind of payday since there are a number of teams that are going to see his physical ability as so high that its worth the cost. It’s simply a situation where Clowney could never accept anything the Texans were going to offer that was “low” and the Texans likely saw no reason to make him earn such a monstrous salary when years ago they didn’t have to do the same for JJ Watt.

The Texans offseason has been nothing short of a disaster and this is just going to add to it if they don’t think this out and rush into a trade that strongly benefits another team.

Evaluation Of The 2015 Rookie Classes

The Collective Bargaining Agreement is structured in such a way that teams have inexpensive and exclusive control over players during their first four accrued seasons, before they can earn unrestricted free agency. Now that most of the 2015 rookie classes have done so, let’s take a look how those incoming players as a whole did, and look at classes that contributed the most and least on the basis of snap counts, and then see how many of those players got vested veteran contracts during this offseason.

If you wish to see all rookie classes, visit OTC’s Rookie Class Evalaution page here, and learn about the methodology behind this project here. Continue reading Evaluation Of The 2015 Rookie Classes »

2020 Compensatory Draft Picks Update (5/13/2019)

When May 7th passed, the second Tuesday after the 2019 NFL Draft, it also closed out the addition of compensatory free agents (CFAs) into the formula for the 2020 NFL Draft. After waiting to gain knowledge of relevant contracts, we can now take a look at the 2020 compensatory picks list, with only CFA subtractions now possible due to cuts or too low of a salary. Continue reading 2020 Compensatory Draft Picks Update (5/13/2019) »

Can Players Gain Financially If They Stay In College?

After Alabama’s spring game, Nick Saban said this, via ESPN:

Now, we have guys that have no draft grades, seventh-round grades, free-agent grades, fifth-round grades that are going out of the draft. And the person that loses in that is the player. If you’re a third-round draft pick, and we had one here last year — I’m not going to say any names — goes and starts for his team, so he’s making third-round money, which is not that great. He’d be the first guy taken at his position this year, probably, and make $15-18 million more.

So, the agent makes out, the club makes out, and now they’ve got a guy that’s going to play for that kind of money for three more years, all right? And everybody out there’s saying, “Well, get to your next contract.” Well, there’s obviously 50 percent of these guys never getting to a next contract. And that doesn’t mean all the rest of them got to one, either.

Is Saban correct? The short, boring answer is that there are far too many variables, of which we’ll return to in a moment, to make this statement with any kind of high confidence. But let’s presume that Saban’s draft projection as applied to this case holds up. What’s a reasonable financial projection to make to try to verify this claim? Continue reading Can Players Gain Financially If They Stay In College? »