I came across a topic on the Atlanta Falcons message board discussing options for Falc0ns injured tackle Sam Baker and thought it would make for a decent topic about how to handle bad contracts.
The Baker contract was never a good one and also illustrates some of the shortcomings of the Falcons way of doing business in which they use multiple tiered prorated bonuses on big ticket players. When those players bust the fall is difficult. Though Baker does not have any guaranteed money left after this season, a standard release would cost the Falcons $1.9 million in cap room, with Baker’s cap number jumping from $7.3 to $9.2 million. That’s the danger of these deals as even though there is no guarantee there is limited benefit to release. It is what we call a virtual or effective guarantee. When such players are encountered teams have limited options if their salary cap situation is tight enough that they can not absorb large amounts of dead money.
The option most would consider is the June 1 cut. The June 1 cut allows a team to release a player at the start of the League Year, but have the release treated as if he was cut after June for cap purposes. In this scenario Baker’s cap charge from March through June 1 would be $7.3 million, the same as if he is on the roster, and then on June 2 it drops to $2.8 million. Atlanta would then carry a $6.4 million cap charge in 2016. They could also accomplish this by simply waiting until June to release him.
The problem with that scenario is that no salary cap benefit is realized until June. Though it may not be as popular an option, the better option is to approach Baker with a deep paycut that contains no guarantees. Baker’s options at finding a job in the NFL again would be limited so he would have little choice but to accept unless he was convinced that he would not pass a physical and thus qualify for injury protection under the CBAif released (that amount is $1.1 million) .
What the team would do is reduce Baker’s salary to something like $1 million and give him a chance to earn another $1 million in roster bonuses for games active and perhaps another $500,000+ for playing time. Because Baker did not play in 2014 the only number that would count towards the cap is the $1 million base, a savings of $3.5 million in immediate cap room.
The other benefit to this contract is because you guaranteed nothing you can still release him and have the same cap charges that you would with the June 1 cut, except here you get the benefit of immediate cap space and seeing if he can still benefit your team in any manner on the field. Here is how the scenarios would play out:
|Date||June 1 Cut||Reworked Contract||Reworked/August Release|
|June 2 Cap||$2,800,000||$3,800,000||$3,800,000|
|August 1 Cap||$2,800,000||$3,800,000||$2,800,000|
There is virtually no downside to the reworked contract. You may get something positive out of the player and if you don’t the most it will cost you is somewhere between $1 and $2 million in cap room (the figures depends on games he is active for). The 2016 season remains the same in any scenario and you gain immediate cap flexibility in 2015. So while it is early to be discussing next years roster moves, actual teams should already be looking ahead as many of their biggest moves for 2014 are already complete.