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Veteran Contract Extensions Under The New CBA

Addressing Dwight Howard's upcoming contract options, Steve Kyler and Larry Coon of HoopsWorld did a good job breaking down the reasons why we won't see many big in-season contract extensions for veterans under the new Collective Bargaining Agreement.

Fourth-year players like Russell Westbrook and Kevin Love still have incentive to sign long-term deals, since they'd only be eligible for restricted free agency if they played out the season. While those two players agreed to sign for less money than they may have qualified for, signing in-season extensions didn't restrict the years or raises they could receive.

However, for players no longer on their rookie contracts, signing an extension before the season ends will limit their earning potential. Under the new CBA, a player can extend for only four total years (with 7.5% annual raises), which includes the years remaining on his current deal. So a player in the last year of his contract could extend his deal by three additional seasons.

By comparison, veterans with Bird rights are eligible to sign free agent contracts for up to five years. As such, players like Howard and Deron Williams, who expect to sign max deals, have no reason to sign before they hit free agency, even if they intend to stay with their current teams.

Further restrictions are placed on recently-traded players, which could come into effect for Howard in the coming weeks. During the six-month period after being traded (or until June 30th, whichever comes first), a player can sign an extension for three total years, with 4.5% raises — the same restrictions that apply to extend-and-trade transactions.

For a practical example of the CBA's rules, let's examine the case of Chris Paul, who is under contract through next season after committing to his 2012/13 player option. While we don't know whether Paul will want to remain in Los Angeles long-term, let's assume he wants to be a Clipper for the rest of his career. Here are his options for a max contract extension:

  • He could sign an extension before June 15th (six months after his trade) for three total years and 4.5% annual raises, which would add only a single year to his current contract.
  • He could sign an extension after June 15th for four total years and 7.5% annual raises. Assuming he waited until the new season begins on July 1st, he could add as many as three extra years to his current deal.
  • He could wait until his contract expires at the end of the 2012/13 season, then sign for five new years with 7.5% annual raises.

The limits placed on extensions mean superstars expecting max contracts have little reason not to play out their deals and hit free agency. So don't expect to see Paul, Howard, or Williams signing an extension anytime soon.

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