Dave Birkett reported today that the Lions decided to exercise their contractual right to force retired center Frank Ragnow to pay back part of his signing bonus due to his retirement. I had a few questions on this and thought it would be good to share some thoughts about situations like this and what is or is not really right from the team’s perspective.
Ragnow signed a four year contract extension with the Lions worth $54 million back in 2021. At the time Ragnow had two years remaining on his rookie contract so the new contract ran six total years and would keep him under contract to Detroit through 2026. As part of the contract Ragnow received a $6 million signing bonus which would be prorated at $1.2 million per year from 2021 through 2025. In addition he received an $18 million option bonus in 2022 that would be prorated at $3.6 million from 2022 through 2026.
There was nothing special about Ragnow’s contract regarding a teams ability to recover bonus money in the event of a breach, such as retirement. Most teams just use boilerplate language in their contracts to indicate that a player is subject to maximum forfeiture as outlined in the CBA. Forfeiture of salary in this case is a maximum of $1.2 million, which was the remaining proration remaining on Ragnow’s contract from his 2021 signing bonus. The option bonus proration was not subject to forfeiture as the NFL only allows option bonus forfeiture if the breach occurs in the season the option is earned.
The NFL rules regarding signing bonus forfeiture are old and don’t really reflect the reality of veteran NFL contracts. The term “signing bonus” is loosely defined as a prepayment of a contract and there was probably a time when that was the case regarding NFL contracts, but that time has passed. Realistically they are nothing more than a salary cap accounting mechanism designed to artificially deflate the salary cap charge of a player. There is no prepayment occurring nor any salary that acts as a “bonus” above and beyond the contracted salary of the player.
The signing bonus given to a rookie fits the bill of a bonus that should be subject to forfeiture. Last year’s number one pick, Cam Ward, received a signing bonus worth $32.15 million. It represents 65.8% of Ward’s entire contract. His salaries read as follows: $32.999 million in year 1, $3.05 million in year 2, $5.28 million in year 3, and $7.5 million in year 4. That first year salary sticks out because the contract is effectively being prepaid in the first year of the contract. The signing bonus is 2.6 times his annual salary. This is a contract prepayment that would not be paid if there was thought the player would breach the contract.
Now let’s compare that to Ragnow. His $6 million signing bonus represents 8.6% of the total value of his contract. It is 0.5 times the size of his effective APY. His yearly salary runs $7.21 million in year 1, $20.75 million in year 2, $11.65 million in year 3, $8 million in year 4, $9.25 million in year 5, and $12.75 million in year 6. This does not indicate his signing bonus as anything significant relative to his contract to cause it to be treated as anything special. While his contract did make him one of the highest paid centers in the NFL, his yearly cash flows were in line with the market, which includes teams that both use and do not use signing/option/etc…. bonuses.
To chase after a signing bonus, when there is only 1 year left that you can chase after the bonus, and after 67% of a long term contract has been honored is petty on the part of a team. This was not a blindside situation. He had been contemplating retirement and it was very clear that the team knew this since he announced his retirement on June 2nd, which was the day the Lions could place him on the retired list and split his dead money across two years. He didn’t belittle the team, demand more money, or anything else. In fact he tried to come out of retirement during the year and it didn’t work out. I don’t think any other team in the NFL would have done this to be honest even though it is their right.
It really is time for the agent community to start pushing back against the use of signing bonuses, or at least bonuses with forfeiture provisions, for their veteran players. Teams use them because they need salary cap space. Nothing more, nothing less. The Lions were going to pay Ragnow $7M in 2021 no matter what, They used a bonus to fit it in best with their cap.
There are multiple bonuses that can be used to get a team the salary cap treatment they want while also protecting the players rights. These include guaranteed roster bonuses, guaranteed reporting bonuses, option bonuses, and completion bonuses. Boiler plate language can spell out retirement provisions rather than just blanket “maximum extent” statements. This is especially true of restructure bonuses that team pays as a signing bonus where they simply exercise their right to convert non signing bonus money into a signing bonus for salary cap purposes.
Why the NFL and NFLPA continue to make this different distinction for a signing bonus is baffling. The NFL lost an arbitration decision years ago when they used option bonuses as a prepayment of rookie contracts by advancing the rookies future salary as an option bonus. Due to that all sides now agree you only attack the option if the breach occurs the same year and nobody uses those bonuses as an advance of anything more than current year salary. They agreed to treat roster bonuses the same since more and more teams were using roster bonuses as a way to commit to early offseason salary. The logic behind both of those is that you should not pay a player X only to have them turn around and hold out or retire after getting a large payment.
At this point anyone dealing with the Lions should just refuse the standard signing bonus and force their hand to remove any doubt of this kind of activity, but the potential problem exists league wide and there are easy avenues to prevent it from happening. The time has come to either change the rules or change the negotiations stars are having with their teams.