While salary cap workarounds like the mid-level exception can be used annually, the disabled player exception is only available under certain circumstances. Like other salary cap exceptions though, the DPE allows a team to sign a player without using cap space.
If a player is injured and ruled out for the rest of the season, his team can apply for the disabled player exception. It allows a club to sign a replacement player for 50% of the injured player’s salary, or for the amount of the non-taxpayer mid-level exception, whichever is lesser. So if the non-taxpayer MLE were worth $5MM, a team could replace a disabled $7MM player for up to $3.5MM (50%) or a disabled $13MM player for up to $5MM (MLE amount).
A team must formally apply for a disabled player exception and it requires the approval of the league. The cutoff to apply for a DPE each season is January 15th. If a team has a player go down with a season-ending injury after that date, it cannot obtain a DPE to replace him. For instance, the Clippers were ineligible for the exception this year when Chauncey Billups was injured in early February.
Unlike the mid-level and bi-annual exceptions, the disabled player exception can only be used on a single player. However, a team can use it to either sign a free agent or acquire a player in a trade. If a team uses its exception to take on salary in a trade, it can acquire a player making up to 100% of the DPE amount, plus $100K. For example, a $4MM DPE could be used to trade for a player making $4.1MM. A free agent signed using the DPE can be offered a maximum of one year, while a player acquired via trade using the DPE must be in the final year of his contract.
The disabled player exception is rarely exercised, but it does give teams a backup plan of sorts, providing the means to replace seriously injured players.
Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ was used in the creation of this post.