With players beginning to opt out of the 2020 NFL season I have started to get a number of questions relating to the contracts. This is kind of uncharted territory so lets start with the statement that this is my interpretation of the rules and could be incorrect. If anyone sees something incorrect please contact me by email (you can find it on the top of the page if you don’t already have it) and let me know so I can fix it. Ill update things on the site as we do get more information on the procedures.
What is the Difference Between the Opt Outs Categories?
The NFL has created two different categories that players can fall into. One is a high risk pool in which the player has been medically diagnosed with an underlying condition that puts him in a much higher risk category if he contracts Covid. The second category is for players with no underlying health condition. This is a voluntary opt out to better insulate themselves and their family from potentially contracting the virus.
What happens to the contract of the high risk opt out?
A high risk player who opts out from his contract will be paid a stipend of $350,000 for the NFL season. His contract will toll by one season- meaning a player under contract from 2020 to 2023 will now be under contract with the team from 2021 to 2024. All conditions of the contract carry forward so if the 2020 salary is guaranteed, his 2021 salary is now guaranteed. If he has a workout bonus in 2020 he will have a workout bonus in 2021. The only terms not carried over are if the player already earned one time salaries like an offseason roster bonus or a signing bonus. The player also automatically earns an accrued season toward free agency and a credited season to earn the minimum salary raise. Basically, the player is treated as if he spent 6 weeks on the roster which is a pretty big deal for players who were going to be restricted or exclusive rights players at the end of their contracts and may be eligible to move up a class when the contract expires.
What happens to the contract of the voluntary opt out?
There are a few key differences. The primary difference is that the players are given a $150,000 salary advance versus a stipend. This is money that will be deducted from future salary and/or paid back to the team. Not all players are eligible for the advance- to earn this advance you either had to be on a roster at least 3 weeks in 2019 or drafted in 2020. If you were a free agent all of 2019 but were signed as a tryout you will not receive an advance. Likewise, an undrafted player in 2020 will not receive an advance. The contract of the player will toll in the same manner as the high risk player however no credited or accrued season is earned.
How does this impact the salary cap?
I believe that a player will keep the cap charges for any bonuses paid prior to the opt out (edit that this will indeed include signing bonuses which I did not believe was the case when I first wrote this). I think the players base salary will drop to $0 with an adjustment made after the season for stipends paid out. It is also possible those will count this year. For voluntary opt outs they will have their 2021 base salary reduced by $150,0000. In any event a players 2020 cap number should drop significantly. As an example if a players has a $15M base salary, $5M in bonus proration, a $3M March roster bonus and a $500,000 workout bonus his cap charge should change from $23.5M to $3.5 million for 2020. Those savings can either be rolled over into 2021 or spent on signing free agents this summer. Here is a brief example as to how a multi year contract might work on the cap and with the tolling.
Here is an example contract
Here is what the contract should look like after an opt out
What happens if the season is cancelled?
This depends on when the season is cancelled. If the season is cancelled before the start of the regular season players will not be paid any salary other than a small stipend that will depend on your roster status in 2019. If you earned a credited year you will receive $250,000 and your health insurance. The same applies to those drafted in 2020. If you are undrafted in 2020 or did not received a credited season you will receive a $50,000 stipend. The contracts toll for all players in the NFL if the year is cancelled.
Once games are played the equation changes.
If we make it to final roster cutdowns then the players contracts will not toll. Stipends will also increase to $300,000 and $100,000 respectively though that amount will be offset by any salary earned prior to the cancellation date. All players who made the final rosters and practice squad will also receive insurance. These players will earn an accrued year toward free agency if 1 game is played and will earn a credited season towards raises if 3 games are played. Note that if you sign in season you will need the full amount of games played to earn the accrued season.
How much do players earn if there is a partial season?
The players will earn a prorated salary for the year. So if 12 games are played players should earn 13/17ths of their salary (I am assuming that all bye weeks will be paid at a certain number of games). If just 1 game is played than just 1/17th of their salary. The stipends mentioned above would kick in for those who have not earned the stipend level at the time of cancellation.
If the contracts don’t toll but the season is cut short where do all the salaries go?
They vanish. So if you have a non-guaranteed $10M salary this year and $5M salary in 2021 it may benefit a player to voluntarily opt out to push his more expensive salary from 2020 into 2021 to prevent losing out on the $10M season in the event of a shortened year. Using the above salaries let’s say the season lasts just 3 weeks and the players earns 3/17ths of his 2020 salary. That would make his earnings for 2020 and 2021 combined just $6.76M, assuming he makes the team in 2021, despite taking the risk of covid. If he opts out and his contract tolls he will earn $10M in 2021 (again assuming he makes the squad) and still be eligible for the $5M in 2022 if he makes the team.
On the other hand if your contract pays less in 2020 and more in 2021 it may be worth the risk to not have your contract toll and hope that you play more weeks this season to keep the bigger number next year. Flipping the above example ($5M salary in 2020 and $10M salary in 2021) if the league went on for 3 weeks the player could earn up to $10.882 million by playing in 2020 and making the team in 2021. In contrast if he has his contract toll he would earn a max of $5M by 2021 and need to make the team in 2022 to earn that $10M.
I think there is a lot that has to go into the decision making process and each situation is unique. Hopefully players will get good and fair advice from their agents and union leaders.
How do guarantees work?
If you have a guaranteed salary this year and the season is cut short or cancelled, they will make the next year that you have a non-guaranteed salary, guaranteed. So if you have a fully guaranteed salary this year worth $15 million, and you only earn $5 million then the league will protect $10M of your future injury only guaranteed or non-guaranteed salary. It is important to note that this does not protect your wages from 2020 it just adds a guarantee on an equal amount of future wages. If you are a star player who is still playing at a high level this protection is pretty much meaningless and you will simply lose out. For bubble players who still have guarantees in their contract this is extremely beneficial.
For players who are not on multi year contracts or have fully guaranteed multi year deals the protection will come from a separate benefit pool. The system will run just like the one above in that they will apply whatever you did not earn in 2020 as an offset on future non-guaranteed salary. Again these are all protections against early termination of contract and offer limited benefit if you happen to be playing in the near future on a non-guaranteed deal.
Shouldn’t the guaranteed player opt out then?
I think that any player with a large guarantee for this season should strongly consider opting out rather than having the guarantee rollover protection. This goes back to the concept of playing in a short season and likely losing out on salary (for example a good QB who is never going to be cut regardless of the contractual guarantee) versus making sure your entire salary and entire contract vale are protected in the future. Financially there really is no negative to opting out and just delaying your full salary for the year whereas there could be a big negative if the year is cut short and all you are doing is getting a future guarantee on salary you were always going to earn no matter what. Note that this applies to veterans. For young draft picks the benefit of quickly getting to the second contract free agency window is likely more beneficial than protecting a relatively small guaranteed salary this year.
What about the compensatory picks for free agent opt outs?
Good question and I don’t know. I would guess that a free agent signed this year who opts out will count in the equation but his playtime and honors rankings boost will equal 0, potentially reducing his round.
Will incentives count this year?
Yes and they will be prorated for however many games are played. So if a player has an incentive for 17 sacks and only one week is paid he will earn 1/16th of the bonus if he had one or more sack in that game. If he somehow had 17 sacks in one game he would earn the full bonus.
Should a roster bubble player opt out?
Depends on the situation. The $150,000 is not free money. It is simply a salary advance that is repayable so basically it is a loan. If you wind up cut next year you will have to pay the team back that $150,000. Considering the amount of players who could opt out this year, my gut feeling is that a bubble player who might get cut this year under normal circumstances will instead make the team this year due to the roster shortage. If that is their primary concern it most likely means he should not opt out.
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.