Apr
07

Labor Relations in the NFL: The Impact of the Uncapped Year

Since the 1993 NFL season, the league has had been fortunate enough to maintain stable and successful labor relations, extending the CBA five consecutive times and avoiding a work stoppage since 1987, but will that streak end this year?  NFL owners appear willing to lock out their players in 2011 if an impasse is reached and a collective bargaining agreement cannot be worked out. However, because the owners decided in 2008 to opt out of the 2006 CBA, the 2010 season is now an uncapped year and has many other restrictions.

On March 5th the uncapped NFL season began, causing the list of UFA’s (Unrestricted Free Agents) to dwindle down for prospective teams by 212. The effect of the uncapped year and the collective bargaining agreement’s unsuccessful extension, caused many NFL players to lose millions of dollars and has frustrated agents, athletes and team managers. On the other hand, an uncapped year has the possibility of giving smaller market teams with money a real chance in the free agency market if they are willing to spend money (however, many experts believe this will not happen, and the teams will continue their current free agency trends). The lack of restrictions and modifications to the structure of free agency makes the uncapped year an unpredictable, but exciting one.

Not only are players more restricted and less mobile in free agency, but other important incentives and benefits for teams and players will be missing or are restricted as well. The 2010 uncapped NFL year has an effect on many areas of the game. The issues below highlight some of main changes an uncapped year has on the NFL owners, players and fans of the game.

  1. The biggest and most influential change financially to players is the change in number of years needed to become an Unrestricted Free Agent (UFA). Players who would have been unrestricted free agents in 2010 because they’ve been in the league four years, now have to wait an additional two years to become a UFA. That affects 212 players, who would be unrestricted free agents but are now tagged as restricted free agents (RFA’s), which gives their original team the right of first refusal, allowing their previous team to match another team’s offer before they can accept an offer from another team. This change limits mobility of 212 players in the NFL and may be one of the main reasons Brandon Marshall is still with Denver, and why Jason Campbell hasn’t left the ‘Skins. Some of the 212 players affected by this include: Wide receivers Brandon Marshall, Vincent Jackson, and Miles Austin, running back Ronnie Brown, line backers Barrett Ruud, Sean Merriman, and quarterback Jason Campbell of the Washington Redskins, Chad Pennington, Tarvaris Jackson, Matt Moore of the Panthers, the Jets Kellen Clemens, Brodie Croyle, Joey Harrington, Kyle Boller, and Rex Grossman. Here is a list of the current restricted free agent signings to date.
  2. There will be no salary cap ceiling or floor for the upcoming season. The cap in 2009 was $128 million with a floor of $112 million. Additionally, there is no proration for players signed or no acceleration for players traded/released (no June 1 rule). Without proration in an uncapped year, teams can release players without consequences. This means that NFL organizations can choose to drop a player, and avoid paying any future bonuses and base salaries that team owed him from that day on. Normally, players receive money from a signing bonus immediately upon signing a deal, but teams are allowed to spread the cap hit from a signing bonus across the length of that players contract. Now, that doesn’t matter. For example, a $20 million signing bonus on a five-year deal results in a cap hit of $4 million in each of those five seasons (including a player’s base salary, incentives and other bonuses). When a player is released or traded, the bonus money assigned to the cap in future years is accelerated onto the current year’s cap, forcing the team to devote a portion of its valuable cap space to players who are no longer on the roster. This year, because of the uncapped year, things are very different. Teams can release players with heavy base salaries and large signing bonuses without having to worry about being under the cap. That presents teams with an once-in-a-lifetime opportunity to get out of any contract mistakes they believe they made in the past.  Look out agents!
  3. The final eight 2009 playoff teams are restricted in their ability to sign free agents in this uncapped year.  The final four teams (the Saints, Colts, Jets, and Vikings) have more restrictions than the last four teams (Chargers, Ravens, Cardinals, Dallas), but all eight are more restricted with who they can pick up in free agency versus other years. The rules are very specific for the final four teams, but pretty much states that the teams can only sign: a) a free agent whose prior contract was terminated, b) their own UFA’s, or c) 1 UFA for each of their own UFA’s they lose to another team, that doesn’t fit into categories A or B above. The rule for the final eight teams is very similar but slightly less restrictive.
  4. The league will be able to end the rookie-specific salary cap; however the 25% rule is still in place. This means that all the complaining about enormous rookie wages may come to an end (Emphasis added).  If it doesn’t, the 25% rule is still in play and means that the rookie salaries cannot increase by more than 25% of the amount the player who was drafted in that same position last year earned.
  5. The 30% rule no longer applies to new contracts. Without this rule, teams can offer new contracts with large sums of Paragraph 5[1] salary in future contract years.  This gives teams the option of whether or not they will pay the high P5 salaries they have previously negotiated and ones they will negotiate this season. This will only affect veteran incentives, not rookies.  It is no longer relevant whether incentives are “Likely To Be Earned” LTBE or not (NLTBE). For the same reasons mentioned above, the uncapped year will give the owners the option of paying and working out present and future contract terms for players.
  6. Clubs do not have to pay any player benefits or programs for this season. This includes severance pay, 401K programs…Commissioner Goodell did mention earlier this year, that the league will continue to contribute to disabled player funds however.

The 2011 schedule[2] will not be created until an agreement is reached.  If there is no deal by March 1, 2011, owners can (and will) lock out players. The NFL Management Council and NFL players union have a lot on their plate to discuss over the next year, but the league and the players union are focused on making an agreement and continuing the league’s prosperity.

To keep up to date with current NFL Labor law news check out http://nfllabor.com/. The league does a great job of updating the site daily to keep fans up to date with the latest CBA and NFL info.


[1] P5 usually refers to incentive and bonus money in player contracts.

[2] The game schedule is an issue the two must negotiate this summer, as the league is asking the players to expand the regular season from 16 to 18 games.

  • Darren D.

    Zak,
    Does the 25% rule not apply to the fact that an individual rookies salary may not increase by 25% from one year to the next, not that the increase can not be greater than 25% more than the individual drafted in the same slot during the previous season?

  • Zak Kurtz

    Darren,

    You are correct. The CBA states that no Player Contract signed by a rookie may provide for an annual increase in Salary of more than twenty-five percent (25%) of the contract’s first League Year Salary, unless such Player Contract provides for salary which is equal to the then applicable Minimum Salary for each League Year of the contract.

    I wanted to emphasize that the 25% rule is still in place this season and that rookie salaries will likely be structured the same way, however, with a potential lockout looming in 2011 the way rookie salaries are structured for this draft class be be different that other years.

    Rookie salaries have been governed by the 25% rule, however teams have consistently gone around that rule by giving rookies larges bonuses and incentives in the contract as “Not Likely To Be Earned” when they are actually very likely to be earned. This goes against the public policy reasons for creating the rule and is what a lot of commotion about rookie salaries has been lately.