Some Thoughts on Contracts, the Cap, and the Pandemic

The NFL and the NFLPA are still negotiating the economics of the covid impacted season and there are many different opinions on certain issues within the CBA and the impact on the players and league so I figured I may as well offer my opinion on some of the topics that should be discussed right now regarding contracts and the cap.

How to handle payouts on a short season?

As things stand right now the players should make 100% of their P5 salary if one and only one game is played. Any change to this would need to be negotiated with the league and the union. This is a tricky topic. While no players are going to want to lose out on the year, much like with the recent CBA negotiation this is a plan that could have a dramatic impact on star players who make big salaries while having a less meaningful impact on others. When the league proposed some type of salary deferral it worked out to be something along the lines of 50% of the salary held by the owners would be paid by just 12% of the NFL.

Because NFL contracts are not standard it would also put an unfair burden on some players while not on others. Players who recently signed a contract and received a large signing bonus would not lose much since the signing bonus in theory should be untouched. Others in the second or third year of a deal would not be so lucky. There might be some players, depending on the structure of their deal that would rather see the hits be this year while they are locked into a roster spot rather than next year where they could be cut if the cap cuts dramatically. Some people have brought up guaranteed salaries as being held in a different regard than other salaries but that should not be the case. Guaranteed salary protects players from termination. It should not be technically treated any different otherwise unless they negotiate it that way.

This is a tricky spot for the players. The owners clearly want something here as a potential way to have an immediate return for losses. Players are certainly not obligated to do so either but what if owners tell their GMs to start gutting the rosters?  Players with guarantees are safe and rookies are safe but others wont be. There is no requirement to spend on the cap and most teams are already way above the spending thresholds and could easily get somewhat cut happy in the next week if no deal is reached. If that happened the player side would lose jobs and not have a way to negotiate an equal offset on next years salary cap.

I think asking for a complete prorated loss of salary is not a fair ask by the NFL. Maybe break the season down into stages so that once you begin a stage of the year that salary is locked even if games are cancelled. In return the league should be more than willing to do a longer term massaging of the future cap to make up for any other shortfalls in revenue. The union should ask for a cap on future losses as well if they agree to anything for this season.

To comply with the current spending rules there would likely need to be a reduction to the cap for salaries that were unpaid in 2020. Since the NFL cap is also based on revenues this adjustment would be necessary to make sure that the players are getting a revenue credit here. Some teams wont be for this as not all teams will benefit equally depending on their salary structures.

How to handle per game bonuses?

This is another one that gets impacted because all contracts are not universal. Some teams use language that specifically states how much per game is earned and cap it off at the ultimate total while others just state a lump sum to be divided by the number of games. In the case of the former the team is protected from paying anything more than a prorated amount. In the latter they may be on the hook for all of the bonus in the event just a few games are played. This will most likely lead to a compromise of a blanket adjustment that all per game bonuses are paid on a 1/16th basis for the year.

What to do with incentives and escalators?

While the percentage of incentives and escalators earned is not incredibly big there are still many players who have these clauses. For players whose incentives are based on yards, sacks, interceptions, etc… they would have no way to earn them in a season that is significantly shortened. That certainly is not fair for the players. It also may not be fair to the league if the NFL plays one game and ends up paying out a large number of playtime bonuses. The is also the question of the Pro Bowl. The Pro Bowl is now a deciding factor in salary raises for rookies in addition to veteran incentives. How many games do you need to name a Pro Bowl team?  Will you name a Pro Bowl team if there is no Pro Bowl to be played?

For most incentives I think the fair thing is to prorate them for games played but with a minimum threshold of half the year. If less then 8 games are played no player should earn an incentive unless he actually makes it over the full number stated in the contract. Unfortunately for the rookies I think the Pro Bowl will need to follow the same structure.

Do Contracts Toll in a Short Year?

There is nothing in the CBA that would indicate that contract should toll in the event of a shortened year. The only parts of the CBA that deal with tolling are players on the PUP or NFI list in the final year of their contract or if they leave the team for some reason. The NFL has reportedly asked for 6 games to be played to avoid tolling. That number is in line with what is needed to gain an accrued season for free agency and what is typically used for the cutoff of a player holding out for the year but that doesn’t seem very fair.

That said there are players who may want their contract to toll. While that sounds strange since the goal is always free agency again the contract structure for a player comes into play here. Its not uncommon to see contracts that contain a very high salary in the 1st year, a lower salary in the 2nd year, and even lower salary in the 3rd year, and so on. Some players may want to have the contract toll if it means another year at a high salary especially if guarantees and other terms carry over. If the players also give up salary for games lost and the contracts do not toll you may have given up a lot to opt into a lower cost year.

What about accrued seasons?

This is very important for rookies. Right now the CBA calls for players to have 6 weeks to earn a year toward free agency. I guess the phrase “should have been on full pay status” could be interpreted that cancelled games should count but it is probably better to have that figured out ahead of time. If its not then rookies, even if the contracts don’t toll, will wind up RFAs if they are draft picks and ERFAs if they are undrafteds when their contracts expire. I think as long as the year has some games every player on the roster should get a year toward free agency.

What about credited seasons?

A credited season is one in which a player is active for at least 3 games. This is what allows a player to get a raise from one year to the next. Mainly this impacts rookie level players. If for whatever reason the NFL can not play 3 games then everyone should just get a credited season.

Can players opt out?

I think if a player has a health concern or an immediate family member in their household that has a health concern the answer here should be yes. The player should have the option whether or not to toll their contract with the exception of players in the final contract year in which case the contract should toll (this is how the rules work on NFI). These players should all receive some type of compensation just as a player would when on a non football injury list. I would argue at a minimum it should be the split salary for a rookie.

For those without an underlying health condition there should be no payments and automatic tolling of the contract. There should be no fines or forfeiture however for any player that chooses to opt out.

Can players opt back in?

In all cases I think the players should have the right to come back up through the 10th week of the season this way if conditions change they can play again. There is so much uncertainty with this pandemic that it should not be a given that the players must sit the full year.

What happens to the cap in 2021 if no deals are made?

Right now all shortfalls in revenue would hit the 2021 salary cap, but I don’t think that means that the sides still could not work out a way to massage those numbers after the season. Right now the two sides are basically negotiating because the NFL knows there will be a massive change to revenues and as per the CBA are informing the NFLPA of this. While the owners are going to threaten that if nothing is done now it will all hit next season things are always negotiable and I don’t think the owners want to chance having on year that is so rough that it significantly impacts play.

The NFLPA wants a 10 year adjustment right now which I don’t think is reasonable but a three to five year one should be. The earlier you do it the more time teams will have to plan but as long as you come to an agreement shortly after the Super Bowl I think you can have a reasonable 2021 season.