The NBA’s maximum salary is determined by a player’s years of NBA experience. Players with between zero and six seasons under their belts are eligible for a starting salary worth up to 25% of the salary cap. That figures increases to 30% for players with seven to nine years of NBA experience, and to 35% for players with 10+ years of service.
However, there are certain scenarios in which a player can be entitled to a higher maximum salary than his years of service dictate. When a player who would normally qualify for the 30% max becomes eligible for a starting salary worth up to 35% of the cap before he gains 10+ years of NBA experience, he can sign a Designated Veteran Extension.
A player who has seven or eight years of NBA service with one or two years left on his contract becomes eligible for a Designated Veteran Extension if he meets the required performance criteria.
A Designated Veteran contract can also be signed by a player who is technically a free agent if he has eight or nine years of service and meets the required performance criteria.
However, a player can’t sign a Designated Veteran deal with a new team — only his current team. If he has been traded at any time since his first four years in the NBA, he becomes ineligible for such a deal. That’s why players like DeMarcus Cousins, Paul George, Jimmy Butler, and Kawhi Leonard lost their potential Designated Veteran eligibility within the last couple years. Even if they had met the required performance criteria, being traded would have disqualified them.
Speaking of that performance criteria, here’s what it looks like. At least one of the following must be a true for a player to be eligible for a Designated Veteran Extension:
- He was named to an All-NBA team in the most recent season, or in two of the last three seasons.
- He was named NBA MVP in any of the three most recent seasons.
- He was named NBA Defensive Player of the Year in the most recent season, or in two of the last three seasons.
Given the exclusivity of the MVP and Defensive Player of the Year awards, players typically qualify for the Designated Veteran Extension by earning All-NBA nods. For instance, before the Spurs traded him to Toronto, Leonard was eligible to sign a Designated Veteran Extension with San Antonio since he had been named to the All-NBA teams in 2016 and 2017.
Here are a few other rules related to Designated Veteran Extensions:
- Even if a player qualifies for a Designated Veteran Extension, his team isn’t obligated to start its extension offer at 35% of the cap. The player is eligible for a salary up to that amount, but the exact amount is still a matter for the two sides to negotiate.
- A Designated Veteran Extension can’t exceed six years, including the number of years left on the player’s contract. So if a player signs a Designated Veteran Extension when he has two years left on his current contract, he could tack on four new years to that deal.
- A player signing a Designated Veteran contract as a free agent can’t sign for more than five years.
- A team can carry no more than two players on Designated Veteran contracts at a time, including no more than one who has been acquired in a trade.
- A Designated Veteran Extension can only be signed between the end of the July moratorium and the last day before the start of the regular season.
- If a player signs a Designated Veteran Extension, he is ineligible to be traded for one year.
Here are the players who have signed Designated Veteran Extensions since the rule took effect in 2017:
- Stephen Curry, Warriors (five years, starting in 2017/18; signed as free agent)
- James Harden, Rockets (four years, starting in 2019/20)
- John Wall, Wizards (four years, starting in 2019/20)
- Russell Westbrook, Thunder (five years, starting in 2018/19)
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.