Salary Cap 101 - Free Agents

Tom Marino is a veteran of 35 years in the player personnel field, most recently with the St. Louis Rams.  He has worked in three professional leagues (NFL, USFL, and WFL), and among his many accomplishments, is credited with the discovery of Eric Swann, the first non-collegiate player since 1946 to be selected in the 1^st round of the NFL college draft.

OK, let’s get right back at it.  Yesterday we began our Salary Cap 101 Class by talking about Exclusive Rights Free Agents, Transition Players, and Franchise Players. Today we will continue with our discussion of Free Agency by addressing both restricted and unrestricted Free Agents.  The language governing RFA’s are quite extensive, but stick with it.  We are almost finished!!!

RESTRICTED FREE AGENTS:

Players become restricted free agents when they complete three accrued seasons and their contract expires.

Restricted Free Agent Defined in Article XIX Section 2 of CBA: (a) Any veteran player with three or more Accrued Seasons (or less than four accrued seasons in any capped year), shall, at the expiration of his last player contract during such period, become a Restricted Free Agent.  Any such player shall be completely free to negotiate and sign a player contract with any club and any club shall be completely free to negotiate and sign a player contract with any such player, subject to the restrictions set forth in this Article.

(b) In order to receive the following specified Rights of First Refusal and/or Draft Choice Compensation with respect to a Restricted Free Agent, the Prior Club of a Restricted Free Agent must tender the player a Qualifying Offer on or before the first date of the Restricted Free Agent Signing Period, as follows:

Prior Club: Qualifying Offer

New Club:  Offer Sheet

*Know what round the player was originally drafted in before you make the tender.  (Simple but very important)

Prior Club: Right of 1^st Refusal

*Withdrawal of Offer Sheet

Negotiation with RFA: negotiate with agent of RFA & then send offer sheet to their team.  Only one (1) offer sheet can be outstanding at any 1 time.

In order to receive the following specified Rights of 1^st Refusal and/or draft choice compensation with respect to a RFA the Prior Club of a RFA must tender the player a Qualifying Offer (tender amounts increase each year in accordance with DGR = have to get new tender amounts each year) on or before the first date of the RFA signing period (around Feb 27) as follows:

 
(i) For Restricted Free Agents with three Accrued Seasons (Capped Years):

(1)     Right of First Refusal: one year player contract with paragraph 5 salary of at least $721,600 for the 2006 League Year, $850,000 for the 2007 League Year, $927,000 for the 2008 League Year, $1,010,000 for the 2009 League Year, $1,101,000 for the 2010 League Year, $1,200,000 for the 2011 League Year, or $1,308,000 for the 2012 League Year, as applicable;

(2)     Right of First Refusal and Draft Selection at Player’s Original Draft Round: one year Player Contract with a paragraph 5 salary of at least (a) the amount set forth in Subsection (b)(i)(1) above, or (b) 110% of the player’s prior year’s paragraph 5 salary, whichever is greater, in addition, if option (b) applies, all other terms of the player’s prior year contract are carried forward unchanged (this subsection is subject to the rules of Subsection (c) below);

(3)     Right of First Refusal, One Second Round Draft Selection: one year Player Contract with a paragraph 5 salary of at least (a) $1,300,000 in the 2007 League Year, $1,417,000 in the 2008 League Year, $1,545,000 in the 2009 League Year, $1,684,000 in the 2010 League Year, $1,835,000 in the 2011 League Year, or $2,000,000 in the 2012 League Year, as applicable, or (b) 110% of the player’s prior year’s paragraph 5 salary, whichever is greater, in addition, if option (b) applies, all other terms of the player’s prior year contract are carried forward unchanged;

(4)     Right of First Refusal and One First Round Draft Selection: one year Player Contract with a paragraph 5 salary of at least (a) $1,573,000 for the 2006 League Year, $1,850,000 for the 2007 League Year, $2,017,000 for the 2008 League Year, $2,198,000 for the 2009 League Year, $2,396,000 for the 2010 League Year, $2,611,000 for the 2011 League Year, or $2,846,000 for the 2012 League Year, as applicable, or (b) 110% of the player’s prior year’s paragraph 5 salary, whichever is greater, in addition, if option (b) applies, all other terms of the player’s prior year contract are carried forward unchanged.  

(5)     Right of First Refusal, One First Round Draft Selection, and One Third Round Draft Selection: one year Player Contract with a Paragraph 5 Salary of at least (a) $2,096,600 for the 2006 League Year, $2,350,000 for the 2007 League Year, $2,562,000 for the 2008 League Year, $2,792,000 for the 2009 League Year, $3,043,000 for the 2010 League Year, $3,317,000 for the 2011 League Year, or $3,616,000 for the 2012 League Year, as applicable, or (b) 110% of the player’s prior year’s Paragraph 5 Salary, whichever is greater, in addition, if option (b) applies, all other terms of the player’s prior year contract are carried forward unchanged.  

********Proper Compensation:  New Club that gives Offer Sheet to RFA must have proper draft round compensation available if the Prior Club elects not to match New Clubs Offer (ie: New Club tenders Offer Sheet to player’s Prior Club and player was originally drafted in the Fifth Round, New Club MUST HAVE ANY Fifth Round Draft Choice available IF Prior Club DOES NOT MATCH THE OFFER SHEET, HOWEVER, IF NEW CLUB DOES NOT HAVE A FIFTH ROUND DRAFT CHOICE AVAILABLE (previously already traded its Fifth Round Pick away), the NEW CLUB HAS TO ACQUIRE A PICK THAT WAS EQUAL TO OR BETTER THAN THE ORIGINAL PICK (ie: 9^th in the Fifth (5^th) Round) for proper compensation.

i. Poison Pills in Offer Sheet: a section of a K written by a team that makes the structure of the K hard to handle in their cap if they decide to match an offer (ex: guarantees, void able years, large up front signing or roster bonuses, etc..)

Exception #1/If a prior club tenders away any of its RFA’s originally selected in a draft round LOWER than the 1^st ROUND: a Qualifying Offer that requires draft choice compensation of 1 1^st Round Selection (“The Upgraded Tender”), the prior club shall only be eligible to receive draft choice compensation of 1 SECOND ROUND selection for any of its Restricted Free Agents originally selected in the 1^st ROUND of the draft UNLESS such RFA's have each received a Qualifying Offer of at least the amount of the Upgraded Tender.

 Exception #2/A RFA shall have the Option of Accepting a 1 Year NFL Player K for 110% of his prior year Paragraph 5 Salary (with all other terms carried forward): in lieu of the alternative.

     a.  June 15 RFA Restructured Tender:  if the player’s Qualifying Offer is GREATER than 110% of the Player’s Paragraph 5 Salary the club may WITHDRAW the Qualifying Offer on June 15 & RETAIN its rights SO LONG AS the club immediately tenders the player a 1 Year Player K of AT LEAST 110% of his Paragraph  5 Salary.

     b. 15% Rule:  LTBE Offer Sheet incentives given by the new club can’t exceed 15% of the salary in the Offer Sheet.

       i. Exception: no limit on ULTBE incentives (ONLY LTBE incentives MUST be matched).

    c. Laverneous Coles Rule / Void able Years: voidable years are PRINCIPAL TERMS that must be matched in offer sheets.

   d. Process: no later than two (2) business days after the giving of an offer sheet to the prior club, the New Club shall cause a copy thereof to be given to the NFL which shall notify the NFLPA by telecopy (fax) and then send a confirmation copy by certified/registered mail.

    f. Prior Club:  no later than two (2) business days after the giving of a 1^st Refusal Exercise Notice to the RFA, the Prior Club shall cause a copy thereof to be given to the NFL, which shall notify the NFLPA.

    g. RFA Tendered a K & Does NOT REPORT to Club’s Pre-Season Training Camp: send written notice to player/agent being placed on Roster Exempt List.

  h. When Placed on Roster Exempt List:

-Player shall not be entitled to compensation.

-Roster exemptions shall be for no more than 2 weeks of the Regular Season.

    i. Sign K as RFA then Accrue 6 More Games (if put on Inactive List = Must Stay on Full Pay Active List Status even if have a Split K Salary): After the point in the regular season at which a player with four (4) or more accrued seasons who signed his player K when he was a RFA and during the 1993 league year or thereafter has been placed on the Active List of his club-> he MUST for the BALANCE of that Regular Season be paid his ACTIVE LIST SALARY if he is thereafter placed on the INACTIVE LIST whether or not his player K calls for a salary if he is placed on the inactive list.

j. Criteria to Go After RFAs of Teams in Cap Trouble:

1/ Can they play at a high level?

2/ Were they drafted at a low enough round that the “home” team has to consider a high tender to protect their investment?

3/ Is the home team under enough salary cap stress that they potentially can’t afford to offer a high tender to protect themselves from losing their good RFAs.

4/ Even if they do put a high tender on a RFA, are there ways to structure a contract proposal that could be impossible to match by the home team (guaranteed years, voidable years, big signing bonus plus large roster bonus which raises salary cap charge in the first year, etc…)

5/ If a RFA was an undrafted player, there is no compensation required for him unless he gets an upgraded tender.

Other Factors:

(1) Leader of the team

(2) Production

(3) Age

(4) Health

(5) Premiere Position

(6) Can he be replaced

What constitutes an "accrued season?"
Six or more regular-season games on a club's active/inactive, reserved-injured or "physically unable to perform" lists.

Accrued Season Defined in Article XVIII Section 1 of CBA:  (a) For the purposes of calculating Accrued Seasons under this Agreement, a player shall receive one Accrued Season for each season during which he was on, or should have been on, full pay status for a total of six or more regular season games, but which, irrespective of the player’s pay status, shall not include games for which the player was on: (i) the Exempt Commissioner Permission List, (ii) the Reserve PUP List as a result of a non football injury, or (iii) a Club’s Practice or Development Squad.

(b) For the purposes of calculating Accrued Seasons under this Agreement, for any League Year beginning with the 1993 League Year, a player shall not receive an Accrued Season for any League Year in which the player is under contract to a club and in which he failed to report to such Club at least thirty days prior to the first regular season game of that season, or in which the player thereafter failed to perform his contract services for the Club for a material period of time, unless he demonstrates to the Impartial Arbitrator extreme personal hardship causing such failure to report or perform, such as sever illness or death in the family.  The determination of the Impartial Arbitrator shall be made within thirty days of the application by the player, and shall be based upon all information relating to such hardship submitted by such date.  The determination of the Impartial Arbitrator shall be final and binding upon all parties.

What determines a restricted free agent?

 He has received a "qualifying" offer (a salary level predetermined by the Collective Bargaining Agreement between the league and its players) from his old club. He can negotiate with any club through April 15. If the restricted free agent accepts an offer sheet from a new club, his old club can match the offer and retain him because it has the "right of first refusal." If the old club does not match the offer, it can possibly receive draft-choice compensation depending on the amount of its qualifying offer. If an offer sheet is not executed, the player's rights revert to his old club on April 16.

Restricted FAs (laymen’s terms)

One new twist to free agency this year is with restricted free agents.
In past years, there have been three options for teams with their restricted free agents. 

Teams could place a low tender on a RFA, which meant that if another team signed the player to an offer sheet, the original team could match it or receive a draft pick matching the round in which the player entered the league.

Teams could place a first-round tender on a RFA, which meant that if another team signed the player to an offer sheet, the original team could match it or receive a first-round draft pick.

Teams could place a high tender on a RFA, which meant that if another team signed the player to an offer sheet, the original team could match it or receive a first-round pick and a third-round pick.

This year, as part of the new collective bargaining agreement, a second-round tender has been added. If a team places that tender on a RFA, the original team could match any offer or would receive a second-round pick in return.

The tender amounts are as follows:   

Low tender -- $850,000
Second-round tender -- $1.3 million
First-round tender -- $1.85 million
First- and third-round tender -- $2.35 million

Example of Use of RFA:  The biggest challenge for teams with restricted free agents in 2007 is the selection of the appropriate tender amount.  Given the continued presence of the poison-pill provision, which allows a new team to sign a guy to, for example, a seven-year, $49 million offer sheet that becomes fully guaranteed if he plays five games in the city in which his current team is located, it's easy to come up with a financial package that the original team won't be able to match

The team facing the biggest dilemma in this regard is the Falcons.  If quarterback Matt Schaub is tendered at the $1.8 million level, another team might opt to give up the first-round pick in order to get him.  Thus, the Falcons likely will be forced to pay Schaub $2.35 million in order to keep him around as the backup to running back, I mean quarterback Mike Vick for another season.

Schaub made $425,000 in 2006, the third and final year of his rookie deal. Look for a team that has a strong quarterback need (with Chicago and Minnesota leading the way) to insert poison pill language into an offer sheet similar to what the Vikings did to Seattle in the Steve Hutchinson deal.  IE: Player (Schaub) must be the highest paid QB on the squad.  And who said these “bean counters” were boring???

UNRESTRICTED FREE AGENTS:

A player with four or more accrued seasons whose contract has expired. He is free to sign with any club, with no compensation owed to his old club, through July 22 (or the first scheduled day of the first NFL training camp, whichever is later). On July 23, his rights revert to his old club if it made a "tender" offer (110 percent of last year's salary) to him by June 1. His old club then has until the 10th week of the season to sign him. If he does not sign by the 10th week of the regular season, he must sit out the season. If no tender is offered by June 1, the player can be signed by any club at any time throughout the season.

Unrestricted Free Agent Defined in Article XIX Section 1 of CBA: (a) Subject to the provisions of Article XX (Franchise & Transition Players), any player with five or more accrued seasons, or four or more accrued seasons in any capped year, shall, at the expiration of his player contract, become an unrestricted free agent. Such player shall be completely free to negotiate and sign a player contract with any club, and any club shall be completely free to negotiate and sign a player contract with such player, without penalty or restriction, including, but not limited to, Draft Choice Compensation between Clubs or First Refusal Rights of any kind, subject to the signing period set forth below.

Just a few more terms next time and then on to the player evaluations!!!

Material from personal interviews, wire services, other writers, and league and teams sources was used in this report.