Under the NBA’s old Collective Bargaining Agreement, which was in effect through the 2016/17 season, a player’s full salary (not including unlikely incentives) was used for trade purposes, whether or not it was guaranteed. If a player had an $10MM salary with a partial guarantee of $1MM, his outgoing salary in a trade was the same as it would have been for a player who had a fully guaranteed $10MM contract.
That’s no longer the case under the league’s new CBA, however. While contracts signed under the old agreement still operate by the old rules, contracts signed after July 1, 2017 will be subject to the rules of the current CBA.
Under the current CBA, only the guaranteed portion of a player’s contract counts for outgoing salary purposes in a trade, limiting the appeal of non-guaranteed salaries as trade chips.
This detail is crucial for determining how much salary a team can acquire in a trade — unless a team is under the cap, the amount of salary it sends out in a trade dictates how much salary it can take back. The amount of salary an over-the-cap team can acquire in a trade ranges from 125% to 175% of its outgoing salary, depending on how much salary the team is sending out and whether or not the team is a taxpayer.
In the old system, it might make sense for a cap-strapped club to trade a player with a guaranteed salary for a player earning an equivalent non-guaranteed salary — the cap-strapped club could then waive that newly-acquired player to cut costs. That’s trickier to do now.
Complicating matters further is that a team can’t simply circumvent the new rules by trading a player before a league year ends on June 30, then having his new team waive him when his non-guaranteed salary goes into effect on July 1. After the end of the regular season, a player’s outgoing salary for trade purposes is the lesser of his current-year salary and the guaranteed portion of his salary for the following season.
Here’s a practical example: Darren Collison‘s deal with the Pacers featured a fully guaranteed $10MM this season, with only $2MM of $10MM guaranteed for 2018/19. Once the regular season ends this year, Collison would only count for $2MM in outgoing salary for trade purposes.
To paint a complete picture of exactly how these new rules work, let’s assume that a free agent signs a two-year, $24MM contract during the summer of 2018. Each year is worth $12MM, but the first season of the contract is guaranteed for $3MM, while the second year is fully non-guaranteed. Here’s how it would count, for trade purposes, as outgoing salary:
- From the date of the signing until the one-quarter mark of the 2018/19 season:
- Note: Due to other CBA rules, the player wouldn’t become trade-eligible until at least December 15, 2018 anyway.
- From the one-quarter mark of the 2018/19 regular season until salaries become guaranteed on January 10, 2019:
- A prorated amount of the salary based on the player’s earnings to date.
- Note: The player would earn 1/177th of his $12MM salary per day; so 60 days into the season, his outgoing salary in a trade would be $4,067,797 (60/177ths of $12MM).
- From January 10, 2019 until the 2019 trade deadline:
- From the day after the 2018/19 regular season ends until the start of the 2019/20 regular season:
- From the start of the 2019/20 regular season until salaries become guaranteed on January 10, 2020:
- A prorated amount of salary based on earnings to date.
- Note: The player would once again earn 1/177th of his $12MM salary per day; so 10 days into the season, his outgoing salary in a trade would be $677,966 (10/177ths of $12MM).
- From January 10, 2020 until the 2020 trade deadline:
This new rule in the league’s Collective Bargaining Agreement won’t stop teams from tacking on non-guaranteed years to the end of certain players’ contracts, since those non-guaranteed salaries still provide flexibility. However, the new CBA rules will ensure that they’re no longer as valuable for trade purposes as they once were.