Hoops Rumors Glossary

Hoops Rumors Glossary: Hard Cap

The NBA’s salary cap is a “soft” cap, which is why every single club’s team salary comfortably surpassed $109,141,000 at some point during the 2019/20 season. Once a team uses up all of its cap room, it can use a series of exceptions, including the mid-level, bi-annual, and various forms of Bird rights, to exceed the cap.

Since the NBA’s Collective Bargaining Agreement doesn’t feature a “hard” cap by default, teams can construct rosters that not only exceed the cap but also blow past the luxury tax line ($132,627,000 in ’19/20). While it would be nearly impossible in practical terms, there’s technically no rule restricting a club from having a team salary worth double or triple the salary cap.

However, there are certain scenarios in which a team can be hard-capped. Those scenarios are as follows:

  1. The team uses its bi-annual exception to sign a player.
  2. The team uses more than the taxpayer portion of the mid-level exception to sign a player (or multiple players).
    • Note: In 2019/20, the taxpayer MLE was worth $5,718,000, compared to $9,258,000 for the full non-taxpayer MLE.
  3. The team acquires a player via sign-and-trade.

A team making any of those three roster moves must ensure that its team salary is below the “tax apron” when it finalizes the transaction and stays below the apron for the rest of the league year. The tax apron was set $6MM above the luxury tax line in 2017/18 (the first year of the current Collective Bargaining Agreement) and creeps up a little higher each season as long as the cap keeps increasing.

For the 2019/20 league year, the tax apron – and the hard cap for certain clubs – was set at $138,928,000. Assuming the cap doesn’t change by much for the 2020/21, the apron figures to remain relatively unchanged for next season.

Last offseason, before the Warriors acquired D’Angelo Russell in a sign-and-trade deal, they had to dump Andre Iguodala‘s $17MM+ salary in a trade and waive Shaun Livingston‘s partially guaranteed contract to ensure their team salary was below the apron upon acquiring Russell.

Golden State then had to remain below the apron for the rest of the season, which was why the team spent much of the year carrying fewer than 15 players on standard contracts — even an extra minimum-salary player would’ve compromised the Warriors’ ability to stay below the hard cap. Golden State made some trades at the deadline that created some breathing room below the apron and allowed the club to fill its 15-man roster.

Many other teams technically faced hard caps during the 2020/21 season, but the Warriors were the team most affected by the restrictions imposed upon them. Most of the other teams with hard caps never got close to the $138,928,000 apron.

Once the 2020/21 league year officially gets underway, the Warriors will no longer be subject to the hard cap. And as long as they don’t use their bi-annual exception, acquire a player via sign-and-trade, or use more than the taxpayer portion of the mid-level, they won’t face a hard cap next season. So even though the Dubs already have a projected $142MM+ in guaranteed money on the books for ’20/21, they’ll still be able to make full use of their $17MM+ trade exception and $5.72MM taxpayer MLE if they so choose.

Finally, it’s worth noting that even though the Warriors will likely start the 2020/21 league year above the apron, that doesn’t mean they can’t become hard-capped at some point later in ’20/21. For example, if Golden State kicked off the offseason by trading Andrew Wiggins‘ $29.5MM contract without taking back any salary in return, then subsequently used its full, non-taxpayer mid-level exception, the team would once again be prohibited from surpassing the apron for the rest of the league year.

In other words, the hard cap applies from the moment a team completes one of the three transactions listed above, but isn’t applied retroactively.

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 the Basketball Insiders salary pages were used in the creation of this post.

Photo courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Waivers

When a team releases a player, he doesn’t immediately become a free agent. Instead, the player is placed on waivers, which serves as a sort of temporary holding ground as the other 29 NBA teams decide if they want to try to add him to their roster.

A player remains on waivers for at least 48 hours after he is formally cut by his team. During that time, a team can place a waiver claim in an attempt to acquire the player. If two or more clubs place a claim, the team with the worst record takes priority (before December 1, records from the previous season determine waiver order).

If a team claims a player off waivers, it assumes his current contract and is on the hook for the remainder of his salary. The claiming team also pays a $1,000 fee to the NBA office. If no claims are placed on the player, he clears waivers at 4:00 pm CT two days after his release (or three days later, if he was cut after 4:00 pm CT) and becomes an unrestricted free agent.

While the waiver format is simple enough, not every team will have the salary cap flexibility to make a claim for any waived player it wants. There are only a handful of instances in which a club is able to claim a player off waivers:

  • The team is far enough under the salary cap to fit the player’s entire salary.
  • The team has a traded player exception worth at least the player’s salary.
  • The team has a disabled player exception worth at least the player’s salary, and he’s in the last year of his contract.
  • The player’s contract is for one or two seasons and he’s paid the minimum salary.
  • The player is on a two-way contract.

Since most NBA teams go over the cap and sizable TPEs and DPEs are somewhat rare, the majority of players who are claimed off waivers are either on minimum salary contracts or two-way deals. Claiming those players simply requires an open roster slot.

More often than not though, waived players go unclaimed. In that case, the player’s original team remains on the hook for the rest of his salary. Unless the player is in the final year of his contract and is waived after August 31, his club has the option of “stretching” his remaining cap hit(s) over multiple years using the stretch provision, which we explain in a separate glossary entry. A team that waives a player and uses the stretch provision on him cannot re-acquire that player until after his contract would have originally expired.

In the case of any player without a fully guaranteed contract, the non-guaranteed portion of a player’s salary is removed from a club’s cap immediately once the player is waived.

When a player is “bought out” by his club, he’s placed on waivers as part of the agreement. He and his team agree to adjust the guaranteed portion of his contract, reducing the amount owed to the player by the team, assuming he clears waivers.

Here are several more notes related to waiver rules:

  • Players can be waived and claimed off waivers during the July moratorium (or, in 2020, during the October moratorium).
  • A player waived after March 1 is ineligible for the postseason if he signs with a new team.
  • A player on an expiring contract can’t be waived between the end of the regular season and the start of the next league year.
  • A player claimed off waivers can’t be traded for 30 days. If he’s claimed during the offseason, he can’t be traded until the 30th day of the regular season.
  • If a player is traded and then is waived by his new team, he cannot re-sign with his old club until one year after the trade or until the July 1 after his original contract would have expired, whichever is earlier.
  • A player who has Early Bird or full Bird rights retains Early Bird rights if he’s claimed off waivers.
  • If a team makes a successful waiver claim, it doesn’t lose its spot in the waiver order — the 30th-ranked team at the end of a season remains atop the waiver priority list until December 1 of that year, even if that team makes multiple offseason claims.
  • A team with a full roster can submit a waiver claim and wouldn’t have to clear a spot on its roster for a claimed player until it is determined that the claim is successful.

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.

Earlier versions of this post were published in 2012 and 2018.

Hoops Rumors Glossary: NBA Draft Lottery

The NBA’s draft lottery, which takes place annually between the end of the regular season and the draft, is the league’s way of determining the draft order and disincentivizing second-half tanking. The lottery gives each of the 14 non-playoff teams – or whichever clubs hold those teams’ first-round picks – a chance to land one of the top four selections in the draft.

Although the top four picks of each draft are up for grabs via the lottery, the remaining order is determined by record, worst to best. The league’s worst team isn’t guaranteed a top-four spot in the draft, but is tied for the best chance to land the first overall pick and will receive the fifth overall selection at worst.

The first four picks are determined by a draw of ping-pong balls numbered 1 through 14. Four balls are drawn, resulting in a total of 1,001 possible outcomes. 1,000 of those outcomes are assigned to the 14-non playoff teams — for instance, if balls numbered 4, 7, 8, and 13 were chosen, that combination would belong to one of the 14 lottery teams. The 1,001st combination remains unassigned, and a re-draw would occur if it were ever selected.

The team whose combination is drawn first receives the number one overall pick, and the process is repeated to determine picks two, three, and four. The 14 teams involved in the draft lottery are all assigned a specific number of combinations, as follows (worst to best):

  1. 140 combinations, 14.0% chance of receiving the first overall pick
  2. 140 combinations, 14.0%
  3. 140 combinations, 14.0%
  4. 125 combinations, 12.5%
  5. 105 combinations, 10.5%
  6. 90 combinations, 9.0%
  7. 75 combinations, 7.5%
  8. 60 combinations, 6.0%
  9. 45 combinations, 4.5%
  10. 30 combinations, 3.0%
  11. 20 combinations, 2.0%
  12. 15 combinations, 1.5%
  13. 10 combinations, 1.0%
  14. 5 combinations, 0.5%

If two lottery teams finish the season with identical records, each team receives an equal chance at a top-four pick by averaging the total amount of outcomes for their two positions. For instance, if two teams tie for the league’s fourth-worst record, each club would receive 115 combinations and an 11.5% chance at the first overall pick — an average of the 125 and 105 combinations that the fourth- and fifth-worst teams receive.

If the average amount of combinations for two positions isn’t a whole number, a coin flip determines which team receives the extra combination. For example, if two clubs tied for the league’s third-worst record, the team that wins the coin flip would receive 133 of 1,000 chances at the first overall pick, while the loser would receive 132. The coin flip also determines which team will draft higher in the event that neither club earns a top-four pick.

The table below displays the odds for each lottery team, rounded to one decimal place. Seeds are listed in the left column, while the picks are noted along the top row. For our purposes, the first seed is the NBA’s worst team.

Seed 1 2 3 4 5 6 7 8 9 10 11 12 13 14
1 14 13.4 12.7 12 47.9
2 14 13.4 12.7 12 27.8 20
3 14 13.4 12.7 12 14.8 26 7
4 12.5 12.2 11.9 11.5 7.2 25.7 16.7 2.2
5 10.5 10.5 10.6 10.5 2.2 19.6 26.7 8.7 0.6
6 9 9.2 9.4 9.6 8.6 29.8 20.6 3.7 0.1
7 7.5 7.8 8.1 8.5 19.7 34.1 12.9 1.3 >0
8 6 6.3 6.7 7.2 34.5 32.1 6.7 0.4 >0
9 4.5 4.8 5.2 5.7 50.7 25.9 3 0.1 >0
10 3 3.3 3.6 4 65.9 19 1.2 >0 >0
11 2 2.2 2.4 2.8 77.6 12.6 0.4 >0
12 1.5 1.7 1.9 2.1 86.1 6.7 0.1
13 1 1.1 1.2 1.4 92.9 2.3
14 0.5 0.6 0.6 0.7 97.6

It’s worth noting that the NBA’s lottery format was changed in 2019, with that year’s draft representing the first one that used the new system. Previously, only the top three spots were determined via the lottery and the odds were weighted more in favor of the league’s worst teams.

The odds-smoothing effects of the new system were felt immediately. The Pelicans, Grizzlies, and Lakers – who claimed the Nos. 1, 2, and 4 picks, respectively, in 2019 – each ranked outside of the top six in the initial lottery standings.

In 2020, the lottery format has been tweaked slightly to account for the fact that the NBA was unable to play out its full regular season. The eight teams that were not invited to Orlando to participate in the resumption of the season will receive the top eight spots in the lottery standings. The final six spots will go to the six clubs that don’t make the postseason in Orlando, sorted by their records through March 11.

We previously broke down what the 2020 lottery odds will look like if the Nets, Magic, and Grizzlies all hang onto their playoff spots. This year’s event has been postponed until August 25.

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 Tankathon.com and Wikipedia was used in the creation of this post.

Earlier versions of this post were published in 2012, 2013, and 2019.

Hoops Rumors Glossary: Sign-And-Trades

Each year when the offseason rolls around, a ton of NBA free agents sign new contracts and teams around the league consummate trades. On a few occasions, these two forms of transactions are combined into something called a sign-and-trade deal. Sign-and-trades occur when a team re-signs its own free agent, only to immediately send him to another team in exchange for players, draft picks, and/or cash.

In order for a sign-and-trade deal to be completed, the following criteria must be met:

  • A free agent must be signed-and-traded by the team with whom he finished the season. For instance, the Cavaliers could sign-and-trade Tristan Thompson this offseason, but another team couldn’t sign Thompson and immediately move him.
  • If the free agent is restricted, he can’t be signed-and-traded after he signs an offer sheet with a rival team.
  • A team acquiring a player via sign-and-trade cannot be over the tax apron after the deal, and can’t have used the taxpayer mid-level exception.
  • A free agent can’t be signed-and-traded once the regular season is underway.
  • A free agent can’t be signed using the mid-level exception or any exception that doesn’t allow for a three-year contract.
  • A player receiving a designated veteran contract can’t be signed-and-traded.

Sign-and-trade contracts can be worth any amount up to the player’s maximum salary (with 5% annual raises), and must be for either three or four years. However, only the first year of the deal has to be fully guaranteed.

If a sign-and-trade contract includes a signing bonus, either team can agree to pay it, though if the signing team pays it, it counts toward that club’s limit for cash included in trades for that league year. As for trade bonuses, they would kick in upon any subsequent trades rather than as part of the sign-and-trade transaction itself.

Under some previous Collective Bargaining Agreements, there was more incentive for players to work out sign-and-trade deals, since the contract restrictions weren’t as strict. For example, when Anthony Davis hits free agency this offseason, he’d be eligible for a five-year contract worth up to a projected $200MM if he re-signs with the Lakers, but only four years and approximately $148MM with another team (note: those estimates are based on a $115MM cap projection that now appears unlikely).

Prior to 2011’s CBA agreement, Davis could have received that more lucrative five-year deal even if Los Angeles had signed-and-traded him. But in the unlikely event that the Lakers sign-and-trade Davis this offseason, he’d only be eligible for that four-year, $148MM max.

Under the current CBA, there’s less incentive for teams and players to participate in sign-and-trades. Generally, if a player wants to change teams, it makes more sense for him to sign with the new team outright, rather than making that club give up assets to complete the acquisition. Even the player’s old team may prefer to simply let the free agent walk and claim the resulting cap space, rather than taking back unwanted assets in a sign-and-trade.

There are other roadblocks as well. A team acquiring a player via sign-and-trade subsequently becomes hard-capped for the rest of that league year. Plus, a signed-and-traded player’s salary may be viewed differently than it would be in a standard trade for salary-matching purposes, which can compromise a team’s ability to meet those salary-matching requirements.

However, if a potential suitor is over the cap and under the tax, a sign-and-trade can make sense — especially if that club wants to sign the player for more than the mid-level amount, or if the club can offer the free agent’s prior team something of value.

During the 2019 offseason, sign-and-trades made a comeback in a big way. After just four sign-and-trade deals were completed between 2015-18, a total of 10 players were signed-and-traded last July.

In some cases, those sign-and-trades were a result of teams opting to get something back for restricted free agents who may have signed offer sheets elsewhere (ie. Malcolm Brogdon, Tomas Satoransky, Delon Wright). In other instances, clubs losing maximum-salary free agents turned those deals into sign-and-trades in order to get something back for their departing stars (ie. D’Angelo Russell for Kevin Durant; Terry Rozier for Kemba Walker).

It’s not clear if sign-and-trades will continue to be quite so popular going forward or if a confluence of factors made 2019 an outlier. Still, last summer’s deals provided a blueprint for how sign-and-trade deals can benefit all parties in the right situation.

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.

Earlier version of this post were published in 2013 and 2019 by Luke Adams.

Hoops Rumors Glossary: Qualifying Offers

Players eligible for restricted free agency don’t become restricted free agents by default. In order to make a player a restricted free agent, a team must extend a qualifying offer to him — a player who doesn’t receive one becomes an unrestricted free agent instead.

The qualifying offer, which is essentially just a one-year contract offer, varies in amount depending on a player’s service time and previous contract status.

If a player reaches free agency with three or fewer years of NBA service time under his belt, his qualifying offer is worth 125% of his prior salary, or his minimum salary plus $200K, whichever is greater.

For instance, after earning $1,416,852 this season, Grizzlies guard De’Anthony Melton will be eligible for a qualifying offer worth a projected $1,907,576 this offseason, based on a $115MM cap — that’s calculated by adding $200,000 to his projected minimum salary for 2020/21 ($1,707,576).

The exact value of Melton’s qualifying offer will depend on where exactly the ’20/21 salary cap ends up, since minimum salary increase or decrease at the same rate as the cap. If the cap drops significantly, it’s possible he’d instead receive a QO worth $1,771,065 (125% of his previous salary).

Bogdan Bogdanovic is one example of a player whose qualifying offer will be 125% of his previous salary no matter where the cap lands. Bogdanovic is earning $8,529,386 in 2019/20, far above the minimum, so the Kings guard will receive a qualifying offer worth 125% of that figure: $10,661,733.

The qualifying offer for a former first-round pick coming off his rookie scale contract is determined by his draft position. The qualifying offer for a first overall pick is 130% of his fourth-year salary, while for a 30th overall pick it’s 150% of his previous salary — QOs for the rest of the first-rounders fall somewhere in between. The full first-round scale for the draft class of 2016, whose first-rounders will be hitting free agency this summer, can be found here, courtesy of RealGM.

Here are a pair of examples for this offseason: 2016’s second overall pick, Pelicans forward Brandon Ingram, is coming off a fourth-year salary of $7,265,485, so he must be extended a qualifying offer of $9,481,458 (a 30.5% increase) to become a restricted free agent. Meanwhile, the 19th overall pick, Timberwolves guard Malik Beasley, will be eligible for a qualifying offer of $3,895,424, a 42.6% increase on this season’s $2,731,714 salary.

A wrinkle in the Collective Bargaining Agreement complicates matters for some RFAs-to-be, since a player’s previous usage can impact the amount of his qualifying offer. Certain players who meet – or fail to meet – the “starter criteria,” which we break down in a separate glossary entry, become eligible for higher or lower qualifying offers. Here’s how the starter criteria affects QOs:

  • A top-14 pick who does not meet the starter criteria will receive a same qualifying offer equal to 120% of the amount applicable to the 15th overall pick.
    • Note: For the summer of 2020, the value of this QO will be $4,642,800.
  • A player picked between 10th and 30th who meets the starter criteria will receive a qualifying offer equal to 120% of the amount applicable to the ninth overall pick.
    • Note: For the summer of 2020, the value of this QO will be $5,087,871.
  • A second-round pick or undrafted player who meets the starter criteria will receive a qualifying offer equal to 100% of the amount applicable to the 21st overall pick.
    • Note: For the summer of 2020, the value of this QO will be $3,752,338.

Spurs big man Jakob Poeltl is one example of a player who falls into the first group, since he didn’t meet the starter criteria this year. The No. 9 overall pick in 2016, Poeltl will be eligible this offseason for a QO worth $4,642,800 instead of $5,087,871. Conversely, Suns forward Dario Saric (a former No. 12 overall pick) met the starter criteria and will be eligible for a QO worth $5,087,871 instead of $4,791,213.

A qualifying offer is designed to give a player’s team the right of first refusal. Because the qualifying offer acts as the first formal contract offer a free agent receives, his team then receives the option to match any offer sheet the player signs with another club.

A player can also accept his qualifying offer, if he so chooses. He then plays the following season on a one-year contract worth the amount of the QO, and becomes an unrestricted free agent at season’s end if he has at least four years of NBA experience. A player can go this route if he wants to hit unrestricted free agency as early as possible, or if he feels like the QO is the best offer he’ll receive. Accepting the qualifying offer also gives a player the right to veto trades for the season.

No restricted free agents accepted their qualifying offers during the 2019 offseason, but Rodney Hood did so with the Cavaliers in 2018. When Cleveland agreed to send him to the Trail Blazers prior to the 2019 trade deadline, Hood had to give his consent to be dealt, which he did.

Finally, while the details outlined above apply to players on standard NBA contracts who are eligible for restricted free agency, a different set of rules applies to players coming off two-way contracts. For most of those players, the qualifying offer would be equivalent to a one-year, two-way salary, with $50K guaranteed.

If a player coming off a two-way contract is ineligible to sign another one – either because he’s coming off a two-year, two-way deal, he has already been on two-way deals with his current team for at least two seasons, or he has four years of NBA service – his qualifying offer would be a standard, minimum-salary NBA contract. The guarantee on that QO would have to match or exceed what a two-way player would earn in the G League.

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 salary information from Basketball Insiders was used in the creation of this post.

Earlier versions of this post were published in previous years. Photo courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Maximum Salary

There are many NBA players technically on maximum salary contracts, but most of those players aren’t earning identical salaries this season, making the league’s “maximum salary” something of a misnomer. While each NBA player has a maximum salary that he can earn in a given season, that number varies from player to player, with a handful of factors playing a part in determining the exact figure.

The primary factor in determining a player’s maximum salary is his years of service. If a player has been in the NBA for no more than six years, he can earn up to 25% of the salary cap in the first year of his deal. Players with seven to nine years of experience can earn up to 30%, while veterans with 10 or more years in the NBA are eligible for up to 35% of the cap. In 2019/20, the salary cap is $109,140,000, meaning the maximum salaries are as follows:

Years in NBA Salary
0-6 $27,285,000
7-9 $32,742,000
10+ $38,199,000

The figures above help explain why nine-year veteran Kemba Walker, who signed a maximum salary contract as part of a sign-and-trade to the Celtics last July, is earning a salary of $32,742,000 this season. But they don’t explain why Lakers star Anthony Davis, who is also in that 7-9 year window and is on a max contract of his own, is earning just $27,093,018.

The reason Davis’ maximum salary is a few million shy of Walker’s is that those league-wide maximum salary figures only apply to the first year of a multiyear contract. When a player signs a maximum contract, he can receive annual raises of up to either 8% or 5%, depending on whether he signs with his previous team or a new team. So by the third, fourth, or fifth year of his contract, he could be earning significantly more or less than the updated max for that season.

Davis signed his maximum salary contract extension in 2015 and it went into effect in 2016/17, when he had fewer than six years of NBA experience. Although he has received annual 8% raises since then, those raises haven’t been enough to keep up with the annual cap growth and with his move into the 7-9 year window. As a result, he’s earning about $5.65MM less than his actual max in 2019/20, despite being on a “max contract.”

Davis will get to start over on a new max deal in ’20/21, assuming he turns down his player option this offseason. If he wants to maximize his earnings going forward, he’ll likely opt for a shorter-term deal that gives him the opportunity to sign a new contract in 2022 when he gains 10 years of NBA experience and qualifies for a starting salary of up to 35% of the cap.

Here are a couple more ways a player’s usual maximum salary can fluctuate:

  • A free agent’s maximum salary is always at least 105% of his previous salary. For example, Warriors star Stephen Curry is earning $40,231,758 this season. He’s under contract for two more years after 2019/20, but if he were eligible for free agency this offseason, he’d be able to sign for a starting salary of up to $42,243,346 (105% of this year’s salary), even if that figure exceeds 35% of the 2020/21 cap.
  • In certain situations, players eligible for new contracts can earn the maximum salary for the level above the one they’d typically fall into. For instance, a player receiving a designated rookie extension can earn up to 30% of the cap instead of 25% if he meets certain criteria. A veteran can become eligible to earn up to 35% of the cap instead of 30% if he meets the same criteria, which are related to MVP, Defensive Player of the Year, or All-NBA honors.

A player who signs a maximum salary contract can receive a trade kicker as part of his deal, but he can’t cash in on that bonus for any amount beyond his maximum salary in a given league year. For instance, Karl-Anthony Towns‘ max salary contract with the Timberwolves features a 5% trade kicker, but if he had been traded this season, he wouldn’t have been eligible to receive that bonus, since he’s already earning his maximum salary of $27,285,000.

Similarly, a maximum salary player whose team finishes the season below the minimum salary floor isn’t eligible to receive a share when the team distributes that money to its players, since his max salary for that year can’t be exceeded.

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.

Earlier versions of this post were previously published by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Bi-Annual Exception

The most common tool over-the-cap teams use to sign free agents from other teams is the mid-level exception, but that’s not the only exception those clubs have to squeeze an extra player onto the payroll. The bi-annual exception is a way for a team to sign a player who may command more than the minimum salary, but less than the mid-level.

As its name suggests, the bi-annual exception can only be used every other season. Even if a team uses only a portion of the exception, it’s off-limits during the following league year.

During the 2019/20 league year, four teams – the Bucks, Pelicans, Knicks, and Spurs – were ineligible to use the bi-annual exception at all, since they used it in 2018/19. Four teams have used the BAE this season, with the Mavericks signing Boban Marjanovic, the Pistons signing Markieff Morris, the Grizzlies signing Marko Guduric, and the Raptors signing Stanley Johnson. Those four clubs won’t have the exception at their disposal during the 2020/21 league year.

The bi-annual exception is available only to a limited number of clubs, even among those that didn’t use the exception during the previous season. Teams that create and use cap space forfeit the BAE, along with all but the smallest version of the mid-level (the room exception). Additionally, teams lose access to the bi-annual exception when they go over the “tax apron,” a figure approximately $6MM+ above the tax line. So, only teams over the cap and under the tax apron can use the BAE.

If a team uses all or part of the bi-annual exception, the tax apron becomes the club’s hard cap for that season. Teams that sign a player using the BAE can later go under the cap, but can’t go over the tax apron at any time during the season once the contract is signed.

[RELATED: NBA Teams With Hard Caps For 2019/20]

The bi-annual exception allowed for a starting salary of up to $3,623,000 in 2019/20. Under the NBA’s previous Collective Bargaining Agreement, the value of each season’s bi-annual exception was determined in advance. However, under the current CBA, the value of the BAE in future league years is tied to salary cap increases or decreases. If the cap goes up by 5%, the value of the bi-annual exception will also increase by 5%.

A player who signs a contract using the bi-annual exception is eligible for a one- or two-year deal, with a raise of 5% for the second season. For players who signed using the BAE in 2019/20, the maximum value of a two-year contract was $7,427,150. Teams also have the option of splitting the bi-annual exception among multiple players, though that happens much less frequently than it does with the mid-level exception, since a split bi-annual deal may not even be worth more than a veteran’s minimum salary.

The bi-annual exception starts to prorate on January 10, decreasing in value by 1/177th each day until the end of the regular season.

When the NBA went on hiatus last month, several teams remained eligible to use the bi-annual exception in 2019/20. However, it seems extremely unlikely that any will actually do so, even if the league is able to resume its season later in the spring. Assuming those BAEs go unused, they’ll be available to those teams in 2020/21.

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.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Mid-Level Exception

The mid-level exception is the most common way for over-the-cap NBA teams to sign free agents from other clubs for more than the minimum salary. It ensures that each team heads into the offseason with a little spending flexibility, even if that franchise is deep into luxury-tax territory.

Each team is eligible to use a specific type of mid-level exception depending on its proximity to the salary cap. The most lucrative form of mid-level is available to teams that are over the cap but below the tax apron. Still, clubs deep into the tax, and even those under the cap, have access to lesser versions of the MLE. Here’s a breakdown of how all three forms of the exception are structured:

For over-the-cap teams:

  • Commonly called either the full mid-level exception, the non-taxpayer’s mid-level exception or simply the mid-level exception.
  • Contract can cover up to four seasons.
  • First-year salary is worth $9,258,000 in 2019/20.
  • Once used, the team cannot surpass the “tax apron” (approximately $6MM+ above tax line) for the remainder of the season.

For teams above the cap and the tax apron:

  • Commonly called the taxpayer’s mid-level exception.
  • Contract can cover up to three seasons.
  • First-year salary is worth $5,718,000 in 2019/20.

For teams with cap room:

  • Commonly called the room exception.
  • Contract can cover no more than two seasons.
  • First-year salary is worth $4,767,000 in 2019/20.

Each form of the mid-level allows for annual raises of up to 5% of the value of the first season’s salary. Last offseason, we broke down the maximum total salaries that players signed using the mid-level exception in ’19/20 could earn. Those numbers can be found right here.

While teams can use their entire mid-level exception to sign one player, as the Magic did this season with Al-Farouq Aminu, clubs are also allowed to split the mid-level among multiple players, and that’s a common course of action. For instance, the Raptors have used their MLE to complete four separate signings, devoting parts of it to Patrick McCaw, Rondae Hollis-Jefferson, Matt Thomas, and Dewan Hernandez)

Players drafted in the second round often sign contracts for part of the mid-level because it allows teams to give them contracts for more years and more money than the minimum salary exception provides. For example, the Mavericks used their mid-level to sign Isaiah Roby to a four-year contract that starts at $1,500,000.

Without the MLE, the Mavs would have been limited to a two-year deal starting at $898,310 for Roby, who was later traded to Oklahoma City. Plus, if Roby plays out his full four-year contract, he’ll have full Bird rights rather than just the Early Bird rights he’d have following a two-year deal.

Some front offices prefer to leave all or part of their mid-level exception unused in the offseason so it’s still available near the end of the regular season. At that point, a contender could use its MLE to try to sign an impact veteran on the buyout market.

A non-contending club, on the other hand, could use its MLE to lock up an intriguing developmental player to a long-term contract, like the Heat did at the end of the 2018/19 campaign with Duncan Robinson and Kendrick Nunn. Both players, who signed in the season’s final week, would be restricted free agents in 2020 if Miami had used the minimum salary exception to sign them to two-year contracts instead of using the MLE to negotiate three-year deals.

Unlike the bi-annual exception, the mid-level exception can be used every season. So whether or not a team has used its mid-level in 2019/20, each club will have the opportunity to use some form of the MLE when the 2020/21 league year begins.

Under the old Collective Bargaining Agreement, the mid-level exception increased annually at a modest, fixed rate. However, under the current CBA, the mid-level increases – or decreases – at the same rate as the salary cap, ensuring that its value relative to cap room remains about the same from year to year. We estimated 2020/21’s MLE figures in February, based on the NBA’s $115MM salary cap projection, but that projection is now very much up in the air due to the coronavirus pandemic.

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 the Basketball Insiders salary pages were used in the creation of this post.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Cap Holds

The Lakers only have about $68MM in guaranteed money committed to player salaries for 2020/21, per Basketball Insiders. However, that doesn’t mean the team will begin the 2020 offseason with tens of millions in cap room to spend, even if the five veterans who hold player options turn them down.

In fact, the Lakers won’t open the new league year with any cap space at all. Each of Los Angeles’ 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 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 the rights to its own 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.

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

  • First-round pick coming off rookie contract: 300% of the player’s previous salary if prior salary was below league average; 250% of previous salary if prior salary was above league average.
  • Bird player: 190% of previous salary (if below league 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.
  • Two-way player: One-year veteran’s minimum salary.

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.

No cap hold can exceed the maximum salary for which a player can sign. For instance, the cap hold for a Bird player with a salary above the league average is generally 150% of his previous salary, as noted above. But for someone like Anthony Davis, who is earning $27,093,018 this season, 150% of his previous salary would be over $40MM, well beyond the projected maximum salary threshold.

Davis’ cap hold – assuming he turns down his 2020/21 player option – will be equivalent to the maximum salary for a player with between 7-9 years of NBA experience. That figure was projected to be $34.5MM based on a $115MM salary cap, but it won’t be that high if lost revenue further reduces the projected ’20/21 cap.

One unusual case involves players on rookie contracts whose third- or fourth-year options are declined, such as Harry Giles, who had his fourth-year option for ’20/21 turned down by Sacramento. Because they declined that option, the Kings wouldn’t be able to pay Giles a starting salary higher than what he would have earned in the option year ($3,976,510).

That rule is in place so a team can’t circumvent the rookie scale and decline its option in an effort to give the player a higher salary — the rule applies even if the player is traded, so if a team had acquired Giles before this year’s deadline, that team would have faced the same limit. Rather than coming in at 300% of this year’s salary (as would be the case with most players coming off rookie scale contracts) or at 190%, (the usual figure for unrestricted free agents with Bird rights), Giles’ 2020 cap hold will equal the amount of his option: $3,976,510.

If a team holds the rights to fewer than 12 players, cap holds worth the rookie minimum salary are assigned to fill out the roster. So, even if a front office chooses to renounce its rights to all of its free agents and doesn’t have any players under contract, the team wouldn’t be able to fully clear its cap. In 2019/20, an incomplete roster charge was worth $898,310, meaning a team with 12 of those charges would have had nearly $11MM on its cap even before adding any players.

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 example, the Warriors are still carrying cap holds on their books for retired players David West and Matt Barnes, who never signed new contracts since playing for Golden State. Keeping those cap holds allows teams 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 capped-out teams.

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 the Basketball Insiders salary pages were used in the creation of this post.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Non-Bird Rights

Players and teams have to meet certain criteria to earn Bird rights and Early Bird rights, but Non-Bird rights are practically a given. They apply to a player who has spent a single season or less with his team, as long as he finishes the season on an NBA roster. Even a player who signs on the last day of the regular season and spends just one day with his club would have Non-Bird rights in the offseason.

Teams can also claim Non-Bird rights on Early Bird free agents if they renounce them. The primary motivator to do so would be to allow the team to sign the free agent to a one-year contract, a move that’s not permitted via Early Bird rights.

Teams are eligible to sign their own free agents using the Non-Bird exception for a salary starting at 120% of the player’s previous salary, 120% of the minimum salary, or the amount of a qualifying offer (if the player is a restricted free agent), whichever is greatest. Contracts can be for up to four years, with 5% annual raises.

The cap hold for a Non-Bird player is 120% of his previous salary, unless the previous salary was the minimum. In that case, the cap hold is equivalent to the two-year veteran’s minimum salary. If a Non-Bird free agent only has one year of NBA experience, his cap hold is equivalent to the one-year veteran’s minimum salary.

The salary limitations that apply to Non-Bird rights are more severe than those pertaining to Bird rights or Early Bird rights, so in many cases, the Non-Bird exception may not be enough to retain a well-regarded free agent. For instance, the Bucks held Brook Lopez‘s Non-Bird rights last summer, but were unable to realistically use them to re-sign the free agent center.

Because Lopez’s 2018/19 salary was only $3,382,000, the club’s ability to offer a raise using the Non-Bird exception was extremely limited — 120% of Lopez’s previous salary worked out to just $4,058,400, which wouldn’t have been a competitive starting point for an offer.

In order to bring back Lopez, who ultimately signed a new four-year, $52MM deal with Milwaukee, the team had to use cap room or another exception. The Bucks ended up making a series of moves that allowed them to carve out the cap space necessary to pay Lopez $13MM annually.

Holding Non-Bird rights on a free agent didn’t really help the Bucks in that scenario, but there are cases in which the exception proves useful. For instance, the Clippers will only have Non-Bird rights on Marcus Morris this offseason, but because his ’19/20 salary is $15MM, Los Angeles would be able to offer a starting salary worth up to $18MM. That should give the club plenty of flexibility to re-sign Morris without using cap room or another exception, if there’s mutual interest in a new deal.

Although no contracts signed during the 2019 offseason fit the bill, Luke Kornet‘s 2018 contract with the Knicks provides an example of a team using Non-Bird rights on a minimum salary player. Kornet, whose minimum salary would have been $1,349,383 in ’18/19, was eligible to sign for up to 120% of that amount via the Non-Bird exception. As such, his one-year deal with New York was worth $1,619,260.

Finally, it’s worth noting that a player who re-signs with his previous team on a one-year deal and will have Early Bird or Bird rights at the end of that contract would surrender those rights if he consents to a trade. In that scenario, he’d only finish the season with Non-Bird rights.

This happened to Rodney Hood in 2019, when he agreed to a trade that sent him from Cleveland to Portland. Because he lost his Bird rights by consenting to the deal, Hood only had Non-Bird rights during the 2019 offseason, so the Trail Blazers had to use their taxpayer mid-level exception to re-sign him.

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.

Earlier versions of this post were published in previous years by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.