The New Age of Rookie Contract Negotiations
It is a new day when it comes to rookie contracts in the NFL. The compensation system implemented by the 2011 CBA has created ready-made deals requiring little to no negotiations. These prefabricated contracts have eliminated any guesswork about compensation, leaving players without any leverage, and caused a sea change in the pace of rookie signings.
That was then
During my nine years with the Packers, from 1999 to 2008, negotiating rookie contracts at this time of year was largely an exercise in futility. Without predetermined rates, agents preferred to wait and let someone else set the market, fearful they would come in lower than other contracts around the league. I would shake my head at how the primary motivation for many agents was to not look bad rather than doing what was best for the client. It was frustrating, but as a former agent, I understood how cutthroat the world of recruiting players had become.
Before the new CBA, the NFL allotted teams a designated amount of salary cap room for its rookies, known as its “pool.” It was then up to the teams to determine how much of the pool went to the first-round pick, the second-rounder, and so on. The practical effect was that first-round picks leveraged a disproportionate amount of the pool, often as much as 60%. And that was just the start of what first-rounders were able to leverage.
Agents for top picks invented a “second pool” through creative player-friendly contract clauses: option bonuses, guaranteed salary advances, player voids, buybacks, exploding escalators, etc. These worked to construct substantial sums for top picks beyond the pool. Were these clauses legal? Technically, yes, as they did not affect the team’s salary cap number for Year 1 of these contracts, but they were clearly circumventing the spirit of the system.
Top rookies walloped NFL teams, coming and going. On the front end, tens of millions of guaranteed dollars flowed in, culminating in $50 million for the last bonus baby, Sam Bradford. More destructive, however, were easily earned escalators and contract accelerators that made the backend of the contracts unworkable for teams. Teams would then approach players with hat in hand begging for salary cap relief, resulting in even more startling player-friendly contracts. Players such as Larry Fitzgerald, Matthew Stafford and Calvin Johnson took full advantage of the continuing leverage from their rookie contracts, with similar player contract control ahead for players like Bradford and Ndamukong Suh.
This is now
Rookies had no voice in the 2011 CBA negotiation. The owners, embarrassed by the riches given to busts such as JaMarcus Russell and Ryan Leaf, were determined to change the system. And the NFLPA negotiating team, led by veterans who were frustrated with rookies entering the league and making more than proven players, was only too happy to shift funds to established guys. Of the myriad issues that were part of the negotiations, the rookie compensation system was the easiest to resolve.
Now, instead of each team having an allotment, each pick has a predetermined amount. In other words, a player and his agent know the exact dollar figures the moment he is drafted. They also know the length; every contract is for four years, with first-round picks subject to a team option for a fifth year, also at predetermined rates. As for salaries, the vast majority of drafted players have four years of non-guaranteed minimum salaries, accompanied by a signing bonus that’s not negotiated by the agent, but predetermined by the CBA.
Bonus amounts have not changed during the four years since the new CBA: Jadeveon Clowney will receive the same bonus in 2014 that Cam Newton received in 2011. According to the NFLPA, the stagnation is due to the fact that the $15,000 per player rise in minimum salaries—the 2014 minimum is $420,000, up from $405,000 last year—has left no room for bonus increases, something the union predicts will finally change next year.
With no opportunity for negotiating, many players are questioning why they need to have an agent to handle rookie contracts.
With no opportunity for negotiating, many players are questioning why they need to have an agent to handle rookie contracts. Indeed, one first-rounder in 2013, the Ravens’ Matt Elam, opted not to use (ahem, pay) an agent because there would be no difference in the numbers. Unable to affect the bonus or overall contract, agents are now mining other ways to prove their worth. Here’s what and how they’re negotiating under the new CBA:
Payment terms for signing bonus amounts. While smaller bonuses are paid upon execution, larger amounts are usually paid in installments, with agents pushing for earlier payouts and teams wanting deferrals.
Guaranteed salary. The first half of the first round has been able to secure fully guaranteed four-year contracts. The fourth-year guarantee negotiations are integral further down the round. Second-round contracts usually have guarantees for the first and second year, and so on.
Offsets. Offset language allows teams to recapture guaranteed money if the player is released and signs with another team, preventing “double-dipping.” Teams are typically insistent on having this language, and they’ve been largely successful in getting it, trading better payment terms and/or cash flow to maintain their precedent.
Early roster bonuses. Agents try to separate out early roster bonuses from salary, payable in March, to force teams to make decisions on players during a month when they would enter a more open marketplace as opposed to later in the offseason.
While negotiating these items are important, especially during later years of the contract, they affect structure and administration of the numbers, but not the numbers themselves.
Preset contract numbers have made the pace of rookie signings in mid-May mimic the pace of rookie signings in mid-July in the NFL’s old way of doing business. The Bears, led by longtime contract negotiator Cliff Stein, signed their entire 2014 class of rookies in four days. The Raiders have already secured the fifth pick in the draft, Khalil Mack—a remarkably swift resolution for such a high pick. (I once negotiated the fifth pick of the draft, A.J. Hawk, in a three-month back-and-forth that resulted in a 63-page contract.) Indeed, where teams used to point to the start of training camp as a target date for having their picks signed, some teams are now targeting that date at the start of minicamp.
At 5 p.m. EDT on Wednesday, a mere 11 days since the 2014 draft concluded, more than half of the 256 selections were signed. The numbers, by rounds:
Rookie holdouts are now relics of a bygone era. While some negotiations will not resolve until the eve of training camp, the holdups will be about structure, not compensation. As a top union official told me, a “highly-trained monkey could negotiate these numbers.”
Welcome to the new age of rookie contract negotiations in the NFL. Don’t blink or you may miss all the signings.