I’ve received a few questions concerning Kyle Orton’s potential retirement from the Dallas Cowboys. It is definitely an interesting situation in that Dallas clearly want’s Orton to play and is holding it over his head that they will invoke their rights under the CBA to recover forfeiture provisions of his prior signing bonus money if he retires.
When a player receives a signing bonus it is essentially a prepayment of salary that is contingent upon the player fulfilling his contract. If released from that contract he keeps the signing bonus because he fulfilled his obligation and the team chose to terminate the deal. This is common in the NFL. However in some instances a player chooses to walk away from the NFL and not fulfill his obligation to the team. When this occurs a team has the right to demand repayment of the remaining salary cap charges attributed to signing bonus money for the current league year as well as all future league years covered by the contract.
Usually teams do not go after bonus money when a player retires. Most of the time they know that the player could retire when they sign him and thus the bonus is looked at as the cost of doing business. Brett Favre, when traded to the New York Jets, tweaked his contract to protect himself from any forfeiture. While the Packers never would have looked to recover money the Jets were an entirely new situation for him so he wanted protection. His outlook may have been molded in part due to Jake Plummer being traded to the Tampa Bay Buccaneers the year before and refusing to play for the team, opting instead for retirement. Tampa Bay immediately wanted to recover money.
Dallas would have never suspected Orton to be considering retirement when they signed him to a three year contract in 2012. Orton was just 30 years old at the time and, as a backup, the physical workload should be minimal barring injury to starter Tony Romo. Orton was to be the highest paid backup in the NFL, making this a very lucrative situation for Orton. Nothing would point towards a potential retirement.
For Dallas this might not be an issue if Romo was healthy, but he isn’t. Romo is coming off another back operation and while all signs point to him being ready the realization is there that they need another viable option to keep the offense moving. This is the exact situation they signed Orton for and they do not want to see him bail out. If Orton walks away the Cowboys are left with Brandon Weeden, a bust with the Browns, as perhaps the best option to play the position. So Dallas will flex whatever power they can to force Orton to earn that money they paid him in the past.
Due to the Cowboys salary cap situation they often use high signing bonuses for their players to reduce cap hits. This was no different for Orton who received $5.9 million in salary in 2012 of which $5 million came in the form of a signing bonus. Overall 47.6% of Orton’s entire contract was paid in that 2012 bonus. While the contract was initially panned as overspending just for the sake of overspending, Dallas may have assumed that in the worst case scenario Orton would be called into action for one full year. The $10.5 million total contract value would have been on par with signing a lower level starter like Ryan Fitzpatrick, so one season of play justified the entire three year investment. They expected him to be a Cowboy for three years for that purpose.
In addition to the $5 million bonus, Orton also converted $510,000 of his 2013 salary into a signing bonus to provide the Cowboys cap relief. As far as I know this bonus, which was paid as a signing rather than a guaranteed roster bonus, should be subject to forfeiture as well. If so that was a mistake by his agents to not receive the bonus using a different mechanism. Other types of prorated signing bonuses are usually only subject to forfeiture in the year they are earned rather than in the future years as well. Perhaps this bonus was protected but for the sake of this we will assume it is not.
Had this been a standard contract, Orton would have been deemed to have “earned” $3,588,332 of his bonus money. If he retired he would then be forced to repay the Cowboys $1,921,668, which is a pretty large sum of money. That number would represent about 26.5% of his earnings for the last two years. However, Dallas often does not use standard contracts and, for cap purposes, uses void seasons which are used as placeholders for signing bonus prorations.
Even though Orton would technically be a free agent in 2015, his contract is valid through 2016. The way the forfeiture rules are written Dallas should be able to recover money attributed to 2014, 2015, and 2016. That number is a whopping $3,382,500, or about 46.7% of his earnings over the last two seasons. If forced to repay back that money he would essentially have played the last two seasons for $1.9 million a year, which is a low wage for a capable veteran backup.
For salary cap purposes the retirement of Orton would work just like a cut. Once placed on the Reserve/Retired list Orton’s bonus money will accelerate onto the salary cap. Considering this would not occur until after June 1 the resulting cap charges would be $1,127,500 charge in 2014 and $2,255,000 charge in 2015. Orton’s current cap charge is $4,377,500 so in no way would a retirement hurt the Cowboys cap.
Following his retirement Dallas can seek repayment of his money tied to this season and the next two voidable seasons. Future money would not actually be repaid until the following June and once repaid Dallas will receive salary cap credits. Usually there is a one year delay in these credits so they would receive a $1.1275 million increase in their available cap space in 2015, 2016, and 2017 rather than 2014, 2015, and 2016. If Orton retires and refuses to pay the money back to the Cowboys the Cowboys can take the case through the Arbitration process. I’m not really sure what defense Orton could have other than the fact that money attributed to 2015 and 2016 should not be recollected from Dallas.
Orton has not attended workouts this offseason so his base salary will reduce by $75,000 in 2014 if he honors his contract. Supposedly both sides are talking and I would imagine that he will receive the $75,000 if he can be convinced to return. Other discussion points are likely concerning the size of the forfeiture, which Dallas will consider non-negotiable as long as they want Orton to be on the team.
The timing of Orton’s retirement is certainly odd. While Orton was not necessarily a winning quarterback in Kansas City and Denver he put up numbers that would land someone in a spot to either compete for a job (similar to Mike Vick) or take a placeholder job with some upside incentives (Chad Henne). Instead he opted for a safe situation with good pay and an entrenched starter. With Romo injured this would seem to be his big chance to get back on the field and make himself more money in free agency in 2015. Perhaps all along Orton was playing things safe and doing all he could to protect his body while earning a very good living. There is nothing wrong with that but it certainly is a question that some might ask about his decision in 2012.
It is possible as well that this is posturing for a new contract in 2014. While I stated that Dallas might view this contract as a $10.5 million one year deal to cover for emergency, Orton probably sees himself having earned good backup money for two years and he fulfilled all his obligations. With Romo hurt the situation has changed and the risks go up for him. Maybe the salary he has his not worth the job. Maybe his opinions will change if you throw in incentives for games started, wins, yards, etc… He may want a chance to earn that $10.5 million for just this year if he has to play 16 games on a playoff contender. Maybe that is the only way to chance the injuries that happen in the NFL.
I’d imagine nothing will be resolved with this until training camp begins. Dallas can carry him on the roster and Orton should keep things status quo while trying to work out a financial settlement, whether on forfeiture or a raise for 2014. Orton will need to attend the mandatory upcoming camp to avoid fines, but again those are things that can be negotiable. I don’t think either side will make a rash move other than reiterating their points through the media in a relatively harmless manner, but odds are the financial ramifications for Orton will be pretty steep if he opts to walk away from the NFL.
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.