Michael Thomas’ Contract Negotiations: How the Franchise Tag and Rookie Wage Scale are Garbage

Michael Thomas and the New Orleans Saints are about four million apart on average per year according to Jeff Duncan from NOLA.com. Thomas and his representation team led by Andrew Kessler of Athletes First are asking for $22 million per year, while the Saints are offering $18 million for the wide receiver going into his fourth season of a second round rookie contract that sees him set to earn just $1.15 million in salary this upcoming season.

As Duncan points out, even though both sides are far apart, they’re hopeful they can get a deal done before training camp starts. This signals that Thomas and his team are, rightfully, trying to get this done before he has to play out a season where he makes just over $1 million to be one of the three best receivers in the league. New Orleans is hopeful because they know they’ll be able to lock him into the lowest average per year contract possible at this time due to his current 2019 salary. A deal before 2019 would also spread the cash out and make it so he has his highest cap and cash hits during years he’s most likely to be at the top of his game.

One issue in New Orleans that Danny Heifetz correctly points out is that they haven’t paid big money for a receiver in the time Drew Brees has been in town. The passing game was built on Marques Colston, Lance Moore, Devery Henderson, Robert Meachem, running backs Pierre Thomas, Reggie Bush, Darren Sproles, and Mark Ingram, plus tight end Jimmy Graham from 2006 to 2013 with none of them earning more than $4.5 million in a season. The team even traded away budding super star and first round pick Brandin Cooks after his third season, as he would soon make more money in year five. The most cap space the team used on a pass catcher under Sean Payton was the $9 million of dead money they ate to get rid of Jimmy Graham.

With Brees potentially aging out of the league after the 2020 season, it might be time to pay a receiver, as they’re likely to soon transition to a lower cost, less effective quarterback. In the meantime though, Brees is heavily reliant on Thomas and his ability to get open for the quick passing offense they now run compared to the downfield attack of years past. Heifetz writes that Brees targeted Thomas on 28.4% of passes in 2018, the most he has looked to any receiver in his 18-year career, which topped the figure Thomas set in 2017.

As I wrote in Caponomics: Building Super Bowl Champions, I’m not keen on paying a receiver this kind of money, I’m in favor of the kind of strategy the Saints have used with Brees at quarterback. However, Thomas is clearly elite and if you’re going to decide to keep someone who is worth as much as Thomas is to the Saints organization, you should have to pay full price.

Last year, considering narratives surrounding his surgically repaired broken leg as well as narratives of drama in New York, Odell Beckham couldn’t threaten a holdout and had to agree to the $18 million per year contract that reset the wide receiver market, but nowhere near the level it could have been reset at if he hit free agency. Antonio Brown got new money in his contract in Oakland by dying his mustache blonde and acting crazy on social media, so maybe that’s an option for Mr. Thomas, but I don’t think it will endear him to the fans that love him in New Orleans.

Aaron Donald and Khalil Mack were only able to force their way up to and beyond $22.5 million to reset the non-quarterback market because they both held legitimate hold outs where their teams weren’t entirely sure when, or if, they were going to report to the team. This is why Thomas has set his number at $22 million and where the top of the non-quarterback market in “pass game positions” could all be. These pass game positions are pass rusher (43DE, DT, and 34OLB) pass catcher (WR), pass “coverer” (CB), and leading pass blocker (OT).

This is the issue with all non-quarterback markets that I keep repeating on podcasts appearances this offseason: the double franchise tag after a four or five year rookie deal in a league where about 14.5% of players make it into year 8 or higher of their career isn’t true free agency and the next NFL CBA should address this lack of true free agency with shorter rookie contracts.

There’s even a potential third tag if a team is willing to pay 144% of his previous year’s tag, although that’s something we rarely see because, finally, at that point the franchise tag number begins to favor the player. A player drafted in the first round could have to wait until his 9th season to hit free agency and about 10% of the league is in year 9 or later, not a great place to be asking for your big multi-year contract as a player. About 8% of the league is in year 10 or later, 6.5% in year 11, and 5.4% in year 12 or later. No one is looking to give a record setting multi-year deal to receivers near 30-year old, as the odds are very low that they will stick around and perform at an elite value.

The double franchise tag should be abolished to further empower the bargaining rights of players, as teams have abused it and used it as a threat for all top players. Another, likely less controversial option, is re-adjusting the franchise tag to take into account the first year cash flows of the five biggest contracts at a position to re-adjust the number towards the true cash, rather than the cap hit cost, which is what’s currently done. This would force teams into negotiating with their rookie contract players in good faith regarding extensions.

When you understand the difference between first year cash payouts on second contracts and the franchise tag being calculated based on the average of salaries, you realize the tag is a rubbish system of measurement. It gives all the leverage to the team, who already have all the leverage, and none to the player who has no ability to fairly bargain for true value and isn’t being ensured true value.

For example, defensive end Demarcus Lawrence made $17.1 million on the franchise tag in 2018. He was going to make $20.5 million on a second tag this year, but he worked out a new deal with the Cowboys. This deal gives him $31.1 million in year one cash and $48 million by year two.

This contract was of course influenced by the year two and year three franchise tags with the threat of holdout for a player disgruntled with being tagged twice, plus eventually free agency hanging over the Cowboys. But that said, two years on the tag for Lawrence would have equaled just $37.6 million compared to that $48 million cash flow number of the new deal. His year one cash earnings are $13.4 more than the first franchise tag and still $10.6 million more than the second franchise tag!

Jadeveon Clowney is set to play on a franchise tag of $15.9 million this year because, as Troy Chapman of @TexansCap reminded me, the NFL decided he should be tagged as an OLB rather than a defensive end, which is where he had more snaps. Meanwhile Khalil Mack made $41 million in cash last year and he’ll still see $15.5 million this year. Even when adjusting down to two-year earnings to be conservative in the face of that $41 million number, that’s $28.25 million per year over the first two years of his deal, but Clowney will be making 56% of that this year.

I think the franchise tag itself should be abolished, but I know that’s a non-starter for owners. Owners think they have a right to the franchise tag and getting rid of it is reportedly a complete non-starter in terms of negotiations.

Average veteran starters in the NFL are worth about 1.5% of the cap, but by the time you get to the end of the first round, players are making one to 1.5% of the cap over the course of the deal. By the time we get to Michael Thomas at pick #47, it’s below 1% for a draft slot that should certainly result in a quality starter or else your organization has completely failed.

It’s a ridiculous concept that these owners believe they have a right to further control a player’s earnings ceiling past their rookie contract in a league with an average length of career just over three years. That number is frequently used for all players, but even for elite players, an average career for them is likely in the 7-9 year range. It’s not like a large percentage of players, spend much of their career on contracts determined by the market, rather than the league.

There could also be a system in place that breaks the terms of a rookie contract for a player if he performs at a specific level. I’d say that a PFF grade in the top 10 at a player’s position in year two or later of the contract should result in his contract becoming the average of the top 10 salaries at his position for the remainder of it. One way to help the teams would be to push half of the cap impact into the year following the contract, which would be dead money if the player wasn’t re-signed and also an incentive a team to work out a more equitable solution rather than what they’re currently doing, which is using their leverage to artificially deflate his value on his second contract after taking advantage of below value rates of his rookie contract. Just spitballing some ideas here.

Teams have already displayed that dead money just doesn’t matter as much with the cap nearing $200 million with teams like the Eagles and Saints using dummy years at the end of contracts to decrease cap impact in the short-term, while relying on cap growth to help overcome the dead money cost.

As stated earlier, Beckham couldn’t reset the market because the Giants had the threat of the tag for two seasons, which diminished his potential earnings, as I detailed with Pat Leonard last April in The New York Daily News. Odell could ask for $20 million per year all he wanted, but the Giants knew they had the threat of the tag after his fifth-year of his rookie contract, which was only at $8,459,000, so the numbers on the tag only forced the team to go up to $18 million.

It’s probable that the only option Thomas has to earn towards that $22 million number is via a hold out, which then brings a whole slew of issues that he and his agent Kessler will have to address to keep the public informed as to the bad deal the NFL CBA is for rookie contracts and for all non-quarterbacks, plus the fact that owners are abusing these arbitrarily established ceilings on a player’s earnings for the first four to seven years of his career. Jason Fitzgerald has illustrated on this site how much lower rookie contracts were in the value they paid players versus the value that players drafted in that slot are expected to create on their rookie contracts

But let’s be real, a holdout isn’t going to happen if he has the opportunity to make $18 million per year on his next deal over the $1 million he’s currently slated to earn.

Quarterbacks are the only position that can wait out a franchise tag and expect to see a top of market contract that *almost* makes up for lost earnings as Kirk Cousins did with Minnesota. Essentially every other position has to get the best deal they can get as soon as possible because waiting out for free agency can put you too close to 30-years old to see the type of record setting earnings a top player may be seeking. After two years on the tag, Thomas would be 29-years old heading into free agency in 2022.

Everyone other than quarterbacks, and even quarterbacks, are under the threat of the franchise tag. And that’s the key word: threat.

This forces the top players into market setting, but not market blasting earnings as they re-sign with the team they’re under contract with, rather than wait out two franchise tags to get to free agency. Looking at the top 10 earning wide receivers, only one of the 11 top players in average per year signed with the team they’re with via free agency. Sammy Watkins is that one player, the beneficiary of a Chiefs team that had the offensive cap space to splurge with Patrick Mahomes and Tyreek Hill on rookie contracts. Every other player was under contract or under threat of the franchise tag.

This is a driver behind the quarterback market growing by $10 million per year from June 2017 (Derek Carr) to April 2019 (Russell Wilson), a 40% increase; so excess value is being pushed into this market. It’s almost like a piece of the about $10 million per year that’s been added to the salary cap every year for the past few years has been pushed into the quarterback market, while other markets aren’t seeing the same kind of growth. The pass game positions, because they have seen some strong market growth, but especially the quarterbacks, are the main beneficiary of the below market contracts that rookie contract players earn, which is how 50% of the $5 billion in league salaries in 2017 went to 150 players in a league of almost 1700.

New Orleans knows they have Thomas in a position where he’s only slated to earn $1.15 million this year, there’s the threat of a 2020 franchise tag around $18 million, then there’s the threat of a potential lock-out if he wants to keep holding out from a below market contract heading into 2021, his second potential franchise tag season, which would be at $21.6 million.

So the way the story is going to go, is that Thomas won’t get the $22 million number that he would certainly get if he hit free agency in 2020 and all 32 teams had a shot to sign him. Instead, he’ll have to take something closer to the $18 million number or else play out the 2019 season earning far below his market value and running the risk of injury and age again, then potentially two tagged years that combine for $39.6 million. With the 2019 number, that’s $40.75 million over three, only $13.6 million per year, so the Saints are going to squeeze him to that $18 million, while still maintaining that he’s getting a record setting contract for a receiver.

That’s the whole standard they’re using for this negotiation: “Sure, he’s not getting a fair market deal, but we could lock him into three years at just $13.6 million per year, so we’re doing him a favor by giving him this record setting contract!” That’s going to be the position the Saints take with the public to try and create a narrative that supports their position. My goal is to just illuminate that Thomas is right to want much more. And set the expectation that Thomas has ever right to expect a pay increase or hold out three to four years from now when the market has passed up his contract and he’s continued to play at a high level.

It’s the same hogwash, notice how I’ve used a thesaurus three times to find words to use other than bullshit, that Reggie White went to court for in 1993 seeking the complete free agency that resulted in the modern cap era we exist in. Sure, players have free agency, but they don’t really have free agency considering the average length of a career, when they hit free agency, and how long a franchise tag can control a top player’s ability to make it to free agency.

In the case of Thomas, first the Saints got the benefit of receiving huge value out of drafting an elite player with the #47 pick, which is a place a team should generally expect they should be able to find a contributor who outpaced the ridiculously low four-year, $5.1 million contract Thomas received. To put that $1.275 million in perspective, that’s below what a good veteran special teams player signs for. Sure, not every player picked at #47 is going to become a star, but it doesn’t take a lot to outperform a deal worth $5.1 million over four-years. No veteran in the NFL accepts that kind of deal as a veteran, $1.275 million per year is “prove-it” money, not four year money.

After Thomas already performed at a rate that’s worth $16 million a year and now the Saints get the benefit of him having very little leverage considering the threat of tags and hitting free agency at 28 or 29, so they’ll get another “discount” over the next four to six years.

The franchise tag and the rookie wage scale need to change in the next CBA and a contract like Mr. Thomas’ illustrates this need for change.

Zack Moore is a writer for OverTheCap.com and author of the book, “Caponomics: Building Super Bowl Champions,” which is now available on Amazon, which explains how Super Bowl rosters are constructed in the salary cap era. You can follow him on Twitter @ZackMooreNFL.