Likely To Be Earned…Not!

LTBE and NLTBE…they are NFL terms that you likely have never even heard of before.

With the NFL draft coming up, I will most likely start to focus a lot of posts on America’s most prized sport: football.  This year, each NFL team will have a salary cap of $109 million to work with. But why does it seem that no 2 teams actually end up spending the same amount of dollars (the Vikings always seem to be spending tons of money)? Insert terms LTBE and NLTBE.

LTBE – Likely To Be Earned

NLTBE – Not Likely To Be Earned

Salary cap bonuses are categorized under one of the two headings. If such a bonus is labeled LTBE, that bonus will count against the team’s cap. If it is an NLTBE bonus, then the cap will not be affected by the payment. When a team inserts large NLTBE bonuses into its contracts, the salary figures are inflated, but much of the money is never doled out. If the bonuses were to be received, the cap would remain unaffected…for that year. The next year, the cap would be shrunk due to an NLTBE payment. This is somewhat rare; however, due to the fact that the bonus was regarded as “not likely to be earned” in the first place. At the same time, if a LTBE bonus is not granted to a player, that team’s cap may be expanded in the next year. Apparently the Minnesota Vikings are experts at this strategy, trying to label as many NLTBE bonuses as LTBE, so that when they are not granted, their cap for the next year is increased [Projected 2007 Salary Cap Figures].

Any discrepancies about how a bonus should be labeled (either LTBE or NLTBE) are decided by an independent arbitrator. Most of the time, it is easy to tell how a bonus will be labeled. If a player performed in the past well enough to earn a potential future bonus, that bonus will be labeled LTBE. It is likely that such player can repeat the past performance or exceed it. If there was a performance incentive in the past that such player did not meet and the bonus is offered again based on the same specifications, that bonus is likely to be labeled NLTBE.

Sports Agents should take notice that there are some teams who will play around with the LTBE and NLTBE distinction. If you are negotiating a deal with the Vikings, you may want to pay close attention to how the organization attempts to label the salary bonuses presented to your client. If your client is going to be labeled with an LTBE bonus, you better be sure that he really is likely to earn it, or else he is getting ripped off.

-Darren Heitner