Hoops Rumors Glossary: Renegotiations

Fans often wonder if NBA Team X can renegotiate its contract with Player Y, as is common practice in the National Football League. The answer is almost always no, and it’s a firm no if the follow-up question is whether the sides can renegotiate the value of the contract downward. Unlike NFL teams, an NBA club can’t create extra cap flexibility by renegotiating a contract to push present-day cap hits into future years.

However, renegotiations are allowed to make an NBA contract more lucrative, and they can happen as long as a specific set of circumstances are in place, as the Sixers showed last month. Philadelphia renegotiated its contract with Robert Covington as part of a long-term extension agreement. The move gave Covington a huge raise for 2017/18, increasing his current-year salary from just $1,577,230 to $16,698,103.

Only contracts that cover four or more seasons can be renegotiated, but that rule doesn’t apply to rookie scale deals — even though they run for four years, they can’t be renegotiated. Renegotiations can only occur after the third anniversary of a contract signing, an extension, or a previous renegotiation (assuming the previous renegotiation lifted the salary in any season by 5% or more). That’s why Covington’s new deal was agreed to on November 15, as he initially signed with the Sixers on November 15, 2014.

Perhaps most importantly, teams can’t renegotiate any contracts if they’re over the cap, and they can only increase the salary in the current season by the amount of cap room that they have. In Covington’s case, the Sixers were under the cap by $15,120,873, and put that entire amount toward the forward’s renegotiation.

Another set of rules restricts just how much can change in a renegotiation. The raises for any seasons that follow the first renegotiated season in a contract are limited to 8%. That’s also true of salary decreases, though if a renegotiation happens at the same time as an extension, as was the case with Covington, the player’s salary can drop by as much as 40% from the last season of the existing contract to the first season of the extension.

The 76ers took advantage of that rule with Covington, who will see his salary decrease by over 37% in 2018/19 – from $16,698,103 to $10,464,092 – before he begins to receive 8% annual raises in 2019/20. Structuring the deal in that manner will allow Philadelphia to preserve as much cap room as possible during the summer of 2018.

Here are a few other rules related to contract renegotiations:

  • Teams can’t renegotiate contracts between March 1 and June 30, so the last day of February is always the deadline to complete renegotiations in a given league year.
  • Renegotiations can’t occur as part of a trade, and if a player waives a portion of his trade kicker to facilitate a trade, he’s ineligible to renegotiate his contract for the next six months.
  • In order for a signing bonus to be included in a renegotiation, the contract must be extended as well.
  • Two-way contracts can’t be renegotiated.

Renegotiating a contract to include a significant raise for the current season, like the one Covington received, can be a clever way of incentivizing a long-term extension for a player who would otherwise reach free agency. However, an extensive set of rules limits the appeal of that sort of deal, and teams generally require substantial cap room to pull it off, so contract renegotiations are rare.

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.

An earlier version of this post was published in 2015 by Chuck Myron.

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