Hoops Rumors Glossary: Two-Way Contracts

The NBA’s Collective Bargaining Agreement didn’t undergo a significant overhaul during the latest round of negotiations between the league and the players’ union, but the NBA’s new two-way contract represents one major change. The two-way contract will allow clubs to retain the NBA rights for a couple extra players, bumping each team’s maximum roster size from 15 to 17, with those two new spots reserved for players on two-way contracts.

Up until now, teams have had the ability to assign certain players on their NBA rosters to the D-League for assignments, but haven’t retained any NBA control over the rest of the players on their NBADL affiliates. Two-way contracts will change that, since they’re essentially D-League contracts that allow a player’s NBA team to call him up for NBA assignments and prevent him from being poached by a rival NBA club.

Salary cap guru Larry Coon recently published a primer for two-way contracts over at ESPN.com, so with the help of his breakdown and the new CBA, we’ll present the key details on how these deals work. Let’s dive in…

Who is eligible to sign a two-way contract?

Players with fewer than four years of NBA experience can sign a two-way contract with a team. However, teams cannot sign a player to a two-way contract for three seasons. The deals are limited to two years, and can’t include options.

Although two-way contracts can be for up to two years, a player who has three years of NBA experience can’t sign such a deal, since he’d have four years of service after the first season. As such, two-way contracts for players with three years of experience are limited to one year.

How do two-way contracts work for the teams signing them?

A team gets up to two roster slots for two-way contracts, and doesn’t need to use salary cap room or a cap exception to finalize those deals. They also don’t count against a team’s salary cap.

However, there are some limitations facing teams when they sign two-way contracts. For one, if a club wants to sign a player on an overseas roster to a two-way contract, the NBA team is not allowed to pay that player’s international buyout. Additionally, NBA teams can’t sign players to two-way contracts after January 15 of each season.

How much are players paid on two-way contracts?

Unlike the usual NBA and D-League contracts, two-way deals will vary in salary depending on whether a player is in the D-League or on an NBA assignment. When a player is in the NBA, he’ll receive the prorated portion of the minimum salary for a player with his years of experience. When a player is in the D-League, he’ll earn a prorated portion of a set D-League salary. For 2017/18, that figure is $75K. It will increase 3% annually, as follows:

Two-way contract salaries

Players on standard NBADL contracts currently earn no more than $26K annually, so two-way contracts will significantly increase the earning potential for some D-Leaguers, despite still falling well short of a full-season NBA minimum salary.

How much time can players on two-way contracts spend on NBA rosters?

If a player is on a two-way contract, he can spend no more than 45 regular-season days on an NBA roster. That doesn’t include time spent with an NBA team in training camp. It also doesn’t include time spent with an NBA team before the D-League season begins or after it ends. Still, it’s somewhat limiting.

Any day that a player on a two-way contract travels with the NBA team (including remaining with the team on the road), participates in workouts or practices, or is on the roster for a game counts toward those 45 days. If a team wants to keep its two-way player on the NBA roster for more than 45 games, it has to convert the player’s two-way deal into a standard NBA contract, after which he’d no longer count as a two-way player.

In a situation where a two-way contract is converted to a regular NBA deal, the typical 15-man roster rules would apply to that player. For instance, he could be assigned back to the D-League, but he’d continue to earn an NBA salary, since he’d no longer be a two-way player.

Additionally, a player on a two-way contract must have his deal converted to a standard NBA contract in order to participate in the postseason. A player on a two-way deal isn’t playoff-eligible.

Can players on two-way contracts be traded? What happens when their deals expire?

Players on two-way contracts can be included in trades. However, they can’t be dealt within 30 days of being signed, and their salaries don’t generate trade exceptions for NBA teams.

Additionally, players on two-way deals accrue Bird rights toward free agency. So, if a player spends two seasons with a team on a two-way contract, that team would have Early Bird rights to re-sign him when his contract expires.

Meanwhile, a two-way player whose contract expires will be eligible for restricted free agency if he spent at least 15 days on NBA assignment in the last season of his two-way contract. Otherwise, he’ll become an unrestricted free agent.

How will two-way contracts affect NBA roster construction?

This remains to be seen, but we can probably make a few predictions about how teams will use two-way contracts. In some cases, clubs may attempt to convince second-round draft picks to sign two-way contracts, though player agents figure to push for NBA deals.

Undrafted free agents figure to be prime candidates for two-way deals. Each fall, many teams will invite a handful of undrafted rookies to training camp even though they don’t have a path to earning an NBA roster spot. Many of those players end up being waived and subsequently joining their team’s D-League affiliate. With two-way contracts, teams will have the opportunity to retain the NBA rights to a couple of those players rather than having to risk losing them in free agency.

For instance, last fall, Okaro White was one of several players waived by the Heat after he didn’t make the team’s regular-season roster. He headed to the Sioux Falls Skyforce, Miami’s D-League squad, but could have been signed by any NBA team, since the Heat no longer held his NBA rights. Eventually, White earned another shot with the Heat, signing a pair of 10-day contracts in January before he was locked up for the rest of the season in February. Under the new CBA, Miami would have the opportunity to secure a player like White at the start of the season with a two-way contract, even if he wasn’t one of the 15 players to make the team’s NBA roster.

Two-way contracts should also be useful for teams that find themselves ravaged by injuries during the season. If a club has two or three rotation players on the shelf, that club could bring its two-way players to the NBA to provide some depth as its regulars get healthy.

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. Information from Larry Coon was used in the creation of this post.

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