Cap Holds

The Lakers have committed only about $34.1MM in guaranteed money to player salaries for 2014/15, but that doesn’t mean the team will have nearly $30MM to spend on free agents. Each of the Lakers’ own free agents will be assigned a free agent amount or “cap hold” until the player signs a new contract or the Lakers renounce his rights.

The following criteria are used for determining the amount of a free agent’s cap hold:

  • First-round pick coming off rookie contract: 250% of previous salary if prior salary was below league average; 200% of previous salary if prior salary was above league average
  • Bird player: 190% of previous salary (if below average) or 150% (if above average)
  • Early Bird player: 130% of previous salary
  • Non-Bird player: 120% of previous salary
  • Minimum-salary player: Two-year veteran’s minimum salary, unless the free agent only has one year of experience, in which case it’s the one-year veteran’s minimum.

A cap hold for a restricted free agent can vary based on his contract status. A restricted free agent’s cap hold is either his free agent amount as determined by the criteria mentioned above, or the amount of his qualifying offer, whichever is greater. Kent Bazemore and Ryan Kelly are set for restricted free agency this summer. Both earned the minimum salary this year, so if they were unrestricted free agents, their cap holds would only be worth next year’s minimum. Their status as restricted free agents bumps their cap holds to the amount of their qualifying offers — $1,115,243 and $1,016,482, respectively. The Lakers can knock their cap holds down to the minimum if they elect not to tender qualifying offers to them, making them unrestricted free agents.

No cap hold can exceed the maximum salary for which a player can sign. That’s why Pau Gasol‘s cap hold will be less than 150% of his salary this season even though the Lakers hold his Bird rights. Gasol made slightly more than the maximum salary for a veteran of 10 or more years this past season. There’s a decent chance that the maximum salary for 2014/15 could be higher than $20,250,143, which is 105% of what Gasol makes now, but it certainly won’t go high enough to allow for a cap hold worth 150% of Gasol’s pay from this season.

The Lakers have an even more unusual case in MarShon Brooks, who was traded twice this season. They have his Bird rights, but the Celtics declined the fourth year team option on his rookie scale contract before the season, so the Lakers can’t pay him more than what he would have made in the option year. That rule is in place so a team can’t circumvent the rookie scale and decline its option so it can give the player a higher salary, and it applies even if the player is traded after the option is declined, as in the case of Brooks. The Lakers faced a similar dilemma with Jordan Hill two years ago. In these cases, the cap hold is equal to the amount of the fourth-year team option.

If a team holds the rights to fewer than 12 players, cap holds worth the minimum rookie salary ($507,336) are assigned to fill out the roster. So, if Nick Young opts out of his contract and the Lakers choose to renounce their rights to all of their free agents and players on non-guaranteed contracts, the team would have three players and about $34.1MM left under contract. However, nine holds worth $507,336 would be added to the team’s cap, reducing its total cap space by about $4.6MM.

Cap holds aren’t removed from a team’s books until the player signs a new contract or has his rights renounced by the club. For instance, since John Salley never signed elsewhere after reaching free agency after the 1999/00 season, and the Lakers have never renounced him, the Lakers still have a minimum salary hold for Salley on their cap. It’s been so many years since the Lakers have gone under the cap that there’s been no reason for them to renounce their rights to players who retired long ago. Keeping those cap holds allowed the Lakers some degree of cushion to help them remain above the cap and take advantage of the mid-level exception and trade exceptions, among other advantages afforded cap teams. There’s a strong chance that Salley, Mitch Richmond, Brian Shaw, Karl Malone and others will disappear from the Lakers’ list of cap holds this summer with the team finally poised to open cap space.

The general purpose of a cap hold is to prevent teams from using room under the cap to sign free agents before using Bird rights to re-sign their own free agents. If a team wants to take advantage of its cap space, it can renounce its rights to its free agents, eliminating those cap holds. However, doing so means the team will no longer hold any form of Bird rights for those players — if the team wants to re-sign those free agents, it would have to use its cap room or another kind of cap exception.

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 and ShamSports were used in the creation of this post.

A Version of this post was initially published on May 1st, 2012, by Luke Adams.

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