Hoops Rumors Glossary

Hoops Rumors Glossary: Ted Stepien Rule

While a rule like the Gilbert Arenas provision can flatter its namesake, the late Ted Stepien, former owner of the Cavaliers, may have preferred not to go down in history as the reference point for the Ted Stepien rule.

Stepien owned the Cavs in the early 1980s, and made a number of trades that left the franchise without first-round picks for several years. As a result, the NBA eventually instituted a rule that prohibited teams from trading out of the first round for consecutive future seasons. It’s now informally known as the “Stepien rule,” even though the Cavs owner isn’t explicitly mentioned in the league’s Collective Bargaining Agreement.

Because the Stepien rule applies only to future draft picks, teams are still permitted to trade their first-rounders every year if they so choose, but they can’t trade out of the first round for back-to-back future drafts.

For instance, since the Celtics have traded their 2023 first-round pick to Indiana, they aren’t currently permitted to trade their 2024 first-rounder. Following the 2023 draft, the Celtics would regain the right to trade that 2024 first-round pick, since their ’23 first-rounder will no longer be considered a future pick.

The Stepien rule does allow a team to trade consecutive future first-round picks if the team has acquired a separate first-rounder from another team for either of those years. So if Boston were to trade for another team’s 2023 first-rounder, that would give the Celtics the flexibility to move their 2024 pick without having to wait until after the 2023 draft.

Teams are permitted to include protection on draft picks. This can create complications related to the Stepien rule, which prevents teams from trading a first-round pick if there’s any chance at all that it will leave a team without a first-rounder for two straight years.

For example, the Trail Blazers have traded a lottery-protected 2023 first-round pick to Chicago — it will only convey if it falls outside of the top 14. That traded 2023 pick is protected all the way through 2028, and as long as there’s still a chance it won’t convey immediately, the Blazers are prevented from unconditionally trading any of their next few first-round picks.

Portland could trade a conditional 2025 first-round pick, but a team acquiring that pick would have to accept that it would be pushed back one year every time the pick Portland has traded to Chicago doesn’t convey.

[RELATED: Traded first round picks for 2023 NBA draft]

Teams will have to take the Stepien rule into account at this season’s trade deadline as they mull including draft picks in deals. It’s why the Lakers, for instance, don’t currently have a tradable first-round pick prior to 2027.

As part of the Anthony Davis blockbuster, Los Angeles agreed to send its 2024 first-rounder to New Orleans, but the Pelicans have the option to defer that pick until 2025. As a result, the Lakers can’t trade their 2023 or 2026 first-rounder, since moving either one could put them in position to be without first-round picks in consecutive future years.

Here are a few more rules related to trading draft picks:

  • The “Seven Year Rule” prohibits teams from trading draft picks more than seven years in advance. During the 2022/23 season, a 2029 draft pick can be traded, but a 2030 pick cannot be dealt.
  • The Seven Year Rule applies to protections on picks as well. If a team wants to trade a lottery-protected 2029 first-rounder at this year’s deadline, it can’t roll those protections over to 2030. For example, one of the picks the Timberwolves sent to the Jazz in the Rudy Gobert trade is a top-five protected 2029 first-round pick. If that pick falls in its protected range, Utah will instead receive Minnesota’s 2029 second-rounder, since picks in 2030 and beyond were off limits when the two teams negotiated the protections.
  • A team can add protection to a pick it has acquired as long as there wasn’t already protection on the pick. For instance, the Jazz currently control the Timberwolves‘ unprotected 2023 first-round pick. If Utah wants to include that selection in a trade, the team could put, say, top-three protection on it.
  • For salary-matching purposes, a traded draft pick counts as $0 until the player signs a contract.

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 previous years.

Hoops Rumors Glossary: Waivers

When an NBA team cuts 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 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 Central time 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.
  • 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 can’t re-sign with his former club until one year after the trade or until the July 1 after his original contract would have expired, whichever is earlier.
    • Note: If a player is traded twice before being waived, he’s allowed to re-sign with the team that first traded him.
  • 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’s 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, 2018, and 2020.

Hoops Rumors Glossary: Disabled Player Exception

Most salary cap workarounds, such as the mid-level exception, can be used every year — or at least every other year, as in the case of the bi-annual exception. However the disabled player exception is only available under certain circumstances. Like other salary cap exceptions though, the DPE allows a team to sign a player without using cap space.

If a player is seriously injured, his team can apply for the disabled player exception to replace him. In order for the exception to be granted, an NBA-designated physician must determine that the player is “substantially more likely than not” to be sidelined through at least June 15 of that league year.

If granted, the disabled player exception allows a club to sign a replacement player for 50% of the injured player’s salary or for the amount of the non-taxpayer’s mid-level exception, whichever is lesser.

For instance, if a team is granted a disabled player exception for a player earning $10MM, the exception would be worth $5MM. But if the injured player is earning $30MM, the DPE would be worth the equivalent of the mid-level exception (this season, that’s $10,490,000).

A team must formally apply for a disabled player exception and it requires the approval of the league. The cutoff to apply for a DPE each season is January 15. If a team has a player go down with a season-ending injury after that date, it cannot obtain a DPE to replace him. A team must also use the exception by March 10 of the current season or it will expire.

Unlike mid-level, bi-annual, or trade exceptions, the disabled player exception can only be used on a single player, rather than spread out across multiple players. However, a team can use it in a variety of ways — the DPE can be used to sign a free agent, to claim a player off waivers, or to acquire a player in a trade.

If a team uses its disabled player exception to take on salary in a trade, it can acquire a player making up to 100% of the DPE amount, plus $100K. For example, a $5,000,000 DPE could be used to trade for a player making $5,100,000.

A free agent signed using the DPE can only be offered a rest-of-season deal, while a player acquired via trade using the DPE must be in the final year of his contract. A player claimed off waivers must also be in the final year of his contract, and his salary must fit into the team’s DPE. Essentially, the purpose of the exception is to give the team some flexibility to replace a player following a season-ending injury, but not beyond the current season.

The team must have room on its roster to sign the replacement player — the disabled player exception doesn’t allow the club to carry an extra man.

In the event that a team is granted a disabled player exception, uses it to acquire a player, and then has its injured player return ahead of schedule (ie. before the end of the season), the team is allowed to carry both players.

However, if a team has an unused disabled player exception and then trades its injured player, the team would lose the exception. The same is true if the injured player returns to action before the DPE has expired or been used.

Most disabled player exceptions ultimately go unused, but some come in handy in trades. For example, after being granted a DPE in the wake of Chet Holmgren‘s season-ending foot injury earlier this year, the Thunder used that exception to acquire Maurice Harkless from Atlanta in a deal where Vit Krejci‘s outgoing salary wasn’t sufficient for matching purposes.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts 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 2017.

Hoops Rumors Glossary: Renegotiations

It’s common practice in the National Football League for a team to renegotiate its contract with a player, but we hear far less about the concept in the NBA. So can an NBA team actually renegotiate a contract with one of its players?

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:

  • Only contracts that cover four or more seasons can be renegotiated, though 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 increased the salary in any season by 5% or more).
  • Perhaps most importantly, teams can’t renegotiate any contracts if they’re over the cap, and they can only increase the player’s salary in the current season by the amount of cap room that they have (or to the player’s maximum salary).

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, the player’s salary can decrease by as much as 40% from the last season of the existing contract to the first season of the extension.

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 some or all 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 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.

The last NBA contract to be renegotiated was Robert Covington‘s with the Sixers in November 2017. At the time, Covington was earning a minimum salary of approximately $1.6MM and the 76ers had just over $15MM in cap room available.

Since Covington had outperformed that contract and Philadelphia wanted to lock him up long-term, the team used its remaining cap room to renegotiate his deal, giving him a raise to nearly $16.7MM for the 2017/18 season, then tacking on four more years, the first of which was worth just over $10MM, representing a 40% dip.

Because two NBA teams – San Antonio and Indiana – currently have substantial cap room available, the renegotiation tactic is worth keeping in the back of our minds this season.

Unfortunately for the Spurs, the team’s top extension candidatesJakob Poeltl and Tre Jones – signed three-year contracts during the 2020 offseason. That makes them ineligible for a renegotiation, since only contracts covering four or more seasons can be renegotiated.

The Pacers, on the other hand, have one renegotiation candidate in Myles Turner, who signed a four-year rookie scale extension in 2018. Turner has an $18MM cap hit this season, so veteran extension rules would typically restrict the Pacers from offering more than a 20% raise, which would work out to a $21.6MM starting salary in 2023/24.

However, by renegotiating his contract, the Pacers could get more creative if they want to try to extend Turner, offering him a big raise on this year’s $18MM salary — in theory, they could double that figure and still have a chunk of cap room (approximately $10MM) left over. Doing so would reduce the trade opportunities the Pacers’ cap room affords them at the trade deadline, but they’ll need to spend that money somehow in order to reach this season’s salary floor.

Additionally, because a renegotiation in conjunction with an extension allows for a 40% dip in the first year of the extension, the Pacers could still start an extension offer for Turner at $21.6MM even after increasing his current-year salary to $36MM. It’s not as if a big salary bump for this season would force them to keep increasing that cap number in future years — a Turner extension could theoretically look the same beyond this season as it would without a renegotiation.

Keith Smith of Spotrac explores the concept of a possible Turner renegotiation and extension in more detail.

Turner may prefer to test the free agent market next summer; perhaps the Pacers would prefer to trade him before this season’s deadline. But if there’s any mutual interest in a long-term deal, the two sides would be wise to explore the renegotiate-and-extend route, since this could represent a rare instance where it makes sense to take that path.

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 2015 and 2017.

Hoops Rumors Glossary: Veteran Contract Extension

An NBA team that want to re-sign a player before he reaches free agency can do so, but only at certain times and if his contract meets specific criteria.

Rookie scale extensions, which can be completed for former first-round picks between the third and fourth years of their rookie scale contracts, were the NBA’s most common form of extension in the past. But in its 2017 Collective Bargaining Agreement, the league relaxed its criteria for veteran extensions, resulting in a significant increase in those deals in recent years. They’ve now overtaken rookie scale extensions as the league’s most frequently signed extensions.

[RELATED: 2022/23 NBA Contract Extension Tracker]

A veteran extension is any contract extension that tacks additional years onto a contract that wasn’t a rookie scale deal. Even if the player is still on his first NBA contract, he can technically receive a “veteran” extension if he was initially signed as a second-round pick or an undrafted free agent rather than via the league’s rookie scale for first-rounders.

Here’s a full breakdown of how players become eligible to sign veteran extensions, and the limits that come along with them:

When can a player sign a veteran contract extension?

A team that wants to sign a player to a veteran extension wouldn’t be able to simply complete that extension one year after the initial contract was signed. The team must wait a specified period of time before the player becomes extension-eligible, as follows:

  • If the player initially signed a three- or four-year contract: Second anniversary of signing date.
    • Note: The second anniversary date also applies if the player previously signed an extension that lengthened his contract to three or four total seasons.
  • If the player initially signed a five- or six-year contract: Third anniversary of signing date.
    • Note: The third anniversary date also applies if the player previously signed an extension that lengthened his contract to five or six total seasons.
  • If the player previously renegotiated his contract and increased his salary by more than 10%: Third anniversary of renegotiation date.

This set of rules has been complicated in recent years by the COVID-19 pandemic that forced the NBA to adjust its usual calendar during the 2019/20, ’20/21 and ’21/22 league years. For instance, the 2020 free agency period was delayed until November 21 instead of beginning on July 1.

Due to that delay, Pat Connaughton signed a three-year free agent contract on November 23, 2020, which would normally make him ineligible to be extended until November 23, 2022. However, the NBA adjusted that two-year waiting period to better reflect certain stages of the offseason rather than adhering to specific dates on the calendar.

As a result, Connaughton was able to sign a new extension with the Bucks this year on July 18. Similarly, Lakers star LeBron James became extension-eligible on August 4 this year after signing his previous extension on December 3, 2020.

Going forward, the usual two- and three-year waiting periods will once again apply. For instance, after signing a four-year extension on July 6, 2022 that lengthened his contract to six total seasons, Devin Booker will become extension-eligible again on July 6, 2025. Connaughton, whose new three-year extension lengthened his contract to four total seasons, will be eligible to sign another extension on July 18, 2024.

How many years can a player receive on a veteran extension?

A veteran extension can be for up to five years, including the year(s) remaining on the previous contract. The current league year always counts as one of those five years, even if an extension is agreed to as late as June 30.

For instance, when John Konchar signed an extension earlier this summer with the Grizzlies, he had two years left on his current contract, which ran through 2023/24. He added three extra years via the extension, maxing out at five years overall.

If a player signs a “designated” veteran extension, he can receive up to six total years, as we cover in a separate glossary entry. Booker, Karl-Anthony Towns, and Nikola Jokic have all taken this route during the 2022 offseason after meeting the super-max criteria.

How much money can a player receive on a veteran extension?

The first-year salary in a veteran extension can be worth up to 120% of the salary in the final year of the player’s previous contract or 120% of the NBA’s estimated average salary, whichever is greater. Annual raises are limited to 8% of the first-year extension salary.

When Terry Rozier signed an extension with the Hornets a year ago, he added four extra years to the one year and $17,905,263 remaining on his previous deal. Because that $17.9MM cap hit greatly exceeds the league’s estimated average salary, Rozier was eligible to earn up to 120% of his final-year salary in the first year of his extension. As such, his new contract begins this season with a salary of $21,486,316, with 8% annual raises from there.

Dorian Finney-Smith, on the other hand, was only earning $4,000,000 when he signed an extension with the Mavericks in February. A 20% raise on that amount wouldn’t have been worth Finney-Smith’s while, but he was eligible to receive 120% of the NBA’s estimated average salary, which was $10,335,000 in 2021/22. As a result, Finney-Smith’s four-year extension with Dallas begins this season at $12,402,000.

In 2022/23, the NBA’s estimated average salary is $10,792,000, so an extension-eligible player earning less than that amount – such as Pelicans big man Larry Nance Jr. – would be able to sign an extension with a starting salary of up to $12,950,400.

A contract extension can’t exceed the maximum salary that a player is eligible to earn, so there are some instances in which a player won’t be able to get a full 20% raise on a new extension.

For instance, James’ new two-year extension is technically a maximum-salary contract, but his cap hit is this season is $44,474,988, which already exceeds the standard league-wide max. A full 120% raise on that figure would be $53,369,986, which will almost certainly exceed his maximum possible salary for 2023/24. The salary cap would have to increase to approximately $152.5MM for a raise of that size to be permitted, and currently the cap is only projected for $133MM.

Because a player’s own personal maximum salary on an extension is always at least 5% of his previous salary, James is assured of at least a 5% raise to $46,698,737 in the first year of his new deal. If the cap lands beyond its current $133MM projection, James’ raise could end up between 5% and 20%, since he’d be eligible for a starting salary worth 35% of next season’s cap.

Designated veteran extensions and renegotiated contracts have slightly different rules for salaries and raises than standard veteran extensions. You can read about those differences in our glossary entries on those subjects.

Can a player sign a veteran extension as part of a trade?

The NBA’s Collective Bargaining Agreement does allow for extend-and-trade transactions, but the rules governing them are more limiting than for standard veteran extensions.

A player eligible for an extension can sign one in conjunction with a trade, but he would be limited to three overall years and a starting salary worth 105% of the final-year salary on his previous deal. Subsequent annual raises are limited to 5% as well.

A player who receives an extension that exceeds those extend-and-trade limits becomes ineligible to be traded for six months. Conversely, a player who is involved in a trade becomes ineligible to sign an extension for six months if the extension would exceed the extend-and-trade limits.

Thaddeus Young‘s two-year extension with the Raptors is an example of a recent extension that didn’t exceed the extend-and-trade limits — he took a pay cut from $14,190,000 to $8,000,000 and the deal lengthened his contract to three total years. Because that extension fell within the extend-and-trade parameters, Young could be dealt this month if Toronto wanted to do so.

Conversely, even though James’ new extension only covers three total years and will only start at 105% of his previous salary (assuming the current cap projection of $133MM is accurate), it exceeds the extend-and-trade limits by virtue of the 8% raise he’ll receive between the 2023/24 and ’24/25 seasons. As a result, he’s ineligible to be traded until February 18, which will almost certainly be after the 2023 trade deadline has passed.

An extension-eligible player can’t be extended-and-traded between the end of the season and June 30 if there’s a chance he could become a free agent that July. That rule applies to both veterans on expiring contracts and veterans with team or player options that have yet to be exercised.

For example, while Young is eligible to be traded now by the Raptors, he couldn’t have been dealt in conjunction with his extension in June.

What are the other rules related to veteran extensions?

There are many more minor rules and guidelines related to veteran extensions, including several involving bonuses and option years. A full breakdown can be found in Larry Coon’s CBA FAQ, but here are some of the notable ones most likely to come into play:

  • A contract with an option can be extended if the player opts in or the team picks up the option.
  • A contract with an option can also be extended if the option is declined, as long as the extension adds at least two new years to the deal and the first-year salary isn’t worth less than the option would have been. The only exception to this rule involves an early termination option — a contract with an ETO can’t be extended if the ETO is exercised, ending the contract early.
  • A newly-signed extension can contain a player or team option, but not an early termination option.
  • If a contract contains incentive bonuses, a veteran extension must contain the same bonuses. The bonus amounts can be increased or decreased by up to 8%, but they must still be part of the deal. An extension also can’t contain bonuses that weren’t part of the original contract.
  • If a contract includes an unearned trade bonus, it doesn’t necessarily have to be applied to the extension. If the team and player elect not to carry over the trade bonus to the extension and the player is dealt before the extension takes effect, the application of the bonus would ignore the extension.

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 CBA FAQ was used in the creation of this post.

A previous version of this post was published in 2019.

Hoops Rumors Glossary: Poison Pill Provision

The poison pill provision isn’t technically a term defined in the NBA’s Collective Bargaining Agreement. However, the concept of a “poison pill” has colloquially come to refer to a pair of NBA concepts.

The first of those concepts relates to the Gilbert Arenas Provision, which we’ve explained in a separate glossary entry. When a team uses the Arenas provision to sign a restricted free agent with one or two years of NBA experience to an offer sheet, that team can include a massive third-year raise that’s often referred to as a “poison pill,” since it makes it more difficult for the original team to match the offer.

The second meaning of the “poison poll” is the one that has become more common – and more frequently relevant – in recent years. It relates to players who recently signed rookie scale extensions.

The “poison pill provision” applies when a team extends a player’s rookie scale contract, then trades him before the extension officially takes effect. It’s a rare situation, but it features its own set of rules, since extensions following rookie contracts often create a large gap between a player’s current and future salaries.

For salary-matching purposes, if a player is traded between the time his rookie contract is extended and the following July 1 (when that extension takes effect), the player’s incoming value for the receiving team is the average of his current-year salary and the annual salary in each year of his extension.

His current team, on the other hand, simply treats his current-year salary as the outgoing figure for matching purposes.

Let’s use Heat guard Tyler Herro as an example. Herro, who is currently viewed as both a trade candidate and an extension candidate, is set to earn $5,722,116 in 2022/23, the final year of his rookie scale contract. Any extension he signs would be significantly more lucrative. To illustrate our point, let’s assume he and the Heat agree to a four-year, $120MM rookie scale extension that would begin in ’23/24.

If the Heat decide after signing Herro to that extension that they want to trade him, the poison pill provision would complicate their efforts. From Miami’s perspective, Herro’s current-year cap hit ($5,722,116) would represent his outgoing salary for matching purposes. However, any team acquiring Herro would have to view his incoming value as $25,144,423 — that’s the annual average of the five years and $125,722,116 he has left when accounting for both his current contract and his (hypothetical) new extension.

As we explain in our glossary entry on the traded player exception, NBA rules dictate that over-the-cap teams must send and receive approximately the same amount of salary in any trade. So applying the poison pill provision to a player like Herro and creating a difference of nearly $20MM between how two trade partners account for him would make salary-matching far more difficult than usual.

The poison pill provision is one key reason why the Heat are unlikely to extend Herro until they’re fairly certain they won’t use him in a blockbuster trade. Without an extension in place, his current-year salary of $5,722,116 is both his outgoing and incoming cap hit for matching purposes.

Trades involving a player who recently signed a rookie scale extension are already rare. After all, those players are generally young, and a player who signed an extension is promising enough to have warranted a long-term investment. Those aren’t players that teams often trade. The poison poll provision further disincentivizes a deal involving one of those recently extended players by complicating salary-matching rules, making those trades that much more 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.

Earlier versions of this post were published in 2012, 2018, and 2021.

Hoops Rumors Glossary: Minimum Salary Exception

The minimum salary exception is something of a last resort for capped-out teams looking to add players, as well as for players seeking NBA contracts, but it’s one of the most commonly used cap exceptions.

As its name suggests, the minimum salary exception allows an over-the-cap team to sign a player to a minimum-salary deal. A contract signed using the minimum salary exception can be a one- or two-year deal, but can’t cover more than two seasons.

Teams can use the exception multiple times in a league year, giving clubs that have used all of their cap room and other exceptions an avenue to fill out their rosters. The exception also accommodates teams’ acquisitions of minimum-salary players via trade, as players signed via the minimum salary exception don’t count as incoming salary for salary-matching purposes.

Players are entitled to varying minimum salaries based on how long they’ve been in the NBA. In 2022/23, a player with no prior NBA experience is eligible for a $1,017,781 minimum salary, while a player with 10 or more years of experience is eligible for $2,905,851.

[RELATED: NBA Minimum Salaries For 2022/23]

During the current Collective Bargaining Agreement, the minimum salary is adjusted each season to reflect the year-to-year salary cap change. If the cap increases by 5%, so will minimum salaries. If the cap doesn’t change from one season to the next, neither will minimum salaries.

There’s a wide disparity between the minimum salary for rookies and for long-tenured players, with a minimum-salary veteran of 10+ seasons earning nearly three times as much as a rookie making the minimum next season. The NBA doesn’t want those pricier deals to discourage clubs from signing veterans, however, so the league reimburses teams for a portion of a minimum-salary player’s cost if he has three or more years of experience, as long as the contract is a one-year deal.

For example, when the Nuggets signed 14-year veteran DeAndre Jordan to a one-year pact for 2022/23 using the minimum salary exception, he locked in a salary of $2,905,851, but the team’s cap hit is just $1,836,090, equivalent to the minimum salary for a player with two years of NBA experience. The league will reimburse the Nuggets for the difference between Jordan’s salary and cap hit ($1,069,761).

Most salary cap exceptions can only be used once each season. For instance, when a team uses its full mid-level exception to sign one or more players, the club can no longer use that exception until the following season. Unlike the mid-level and other cap exceptions though, the minimum salary exception can be used any number of times in a single season.

The Suns, for example, have used the minimum salary exception to sign Bismack Biyombo, Damion Lee, Josh Okogie this season. They also used it to acquire Jock Landale in a trade, since he was entering the second year of a two-year, minimum-salary contract he signed in 2021.

While many exceptions begin to prorate on January 10, the minimum salary exception prorates from the first day of the regular season. If a season is 174 days long and a player signs a minimum-salary deal after 25 days have passed, he would only be paid for 149 days.

An extreme example of a prorated minimum salary occurred when the Nets converted Kessler Edwards to a minimum-salary contract on the final day of the 2022/23 season. Last year’s rookie minimum was $925,258, so Edwards received 1/174th of that amount: $5,318.

When a veteran player signs a one-year contract using the minimum salary exception midway through a season, his cap hit is prorated in the same way that his salary is.

For instance, when Goran Dragic signed with the Nets on February 22, 2022, there were 48 days left in the ’21/22 season. He earned a rest-of-season salary of $728,742 (48/174ths of his full-season minimum of $2,641,691), while his cap hit was $460,464 (48/174ths of $1,669,178, the minimum salary for a player with two years of experience).

Finally, it’s worth noting that the minimum salary exception can be used to claim a player off waivers in the same way that it can be used to trade for a player. However, in both cases, a minimum-salary player can’t be acquired in a trade using the minimum salary exception if his contract is for more than two years or if his salary exceeded the minimum in any previous year of the contract.

For example, when the Thunder waived Isaiah Roby in early July, he was earning a minimum salary for 2022/23 ($1,930,681). But Roby was entering the fourth year of his contract and had earned more than the minimum in his first season of that deal ($1.5MM in ’19/20) — both of those factors made him ineligible to be claimed using the minimum salary exception, so the Spurs had to use cap room to place a claim on him.

Here are a few more notes on the minimum salary exception:

  • Players signed using the minimum salary exception are eligible for trade bonuses, but not incentive bonuses. A minimum-salary player with a trade bonus cannot be acquired in a trade using the minimum salary exception unless he waives that bonus.
  • When a minimum-salary player is traded during the season, any reimbursement from the NBA is split between his two teams. It’s prorated based on the number of days he spends with each club.
  • If a minimum-salary player with a non-guaranteed salary is waived before he exceeds the minimum for a two-year veteran, his team won’t be reimbursed for any portion of his salary.
  • Virtually every 10-day contract is for the minimum salary — often the minimum salary exception is the only way for clubs to accommodate any 10-day deals. The NBA also reimburses teams for a portion of the 10-day minimum salary for veterans with three or more years of experience.

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.

Hoops Rumors Glossary: July Moratorium

NBA free agents begin coming off the board in rapid succession as soon as the negotiating period opens on June 30 at 6:00 pm Eastern time. However, most of those deals can’t become official right away, due to what’s known in the league’s Collective Bargaining Agreement as the “moratorium period.” We know it colloquially as the July moratorium.

The July moratorium – which lasts from 12:01 am Eastern time on July 1 until 12:00 pm on July 6 – essentially puts a freeze on most transactions for several days at the start of the new league year. NBA free agents are allowed to negotiate with clubs during the moratorium, and they can agree to terms on new contracts, but they are unable to officially sign new deals until the moratorium ends. The same goes for trades — two teams can agree to terms on a deal, but can’t formally put it through until at least July 6.

While nearly every agreement reached during the July moratorium eventually gets finalized, the unofficial nature of those initial deals can occasionally wreak havoc on the league’s free agent market.

DeAndre Jordan‘s 2015 free agency isn’t the only example of this, but it’s certainly the most memorable one from the last decade. Jordan initially agreed to terms with the Mavericks during the July moratorium, but before the moratorium ended and the two sides could make it official, the Clippers changed Jordan’s mind and convinced him to re-sign with L.A.

Because Jordan and the Mavs had only reached an informal verbal agreement, there was nothing Dallas could do to stop him from reversing course during the moratorium. Still, this sort of about-face is rare, as it can result in fractured relationships between players, agents, and teams.

While most NBA transactions can’t be completed during the moratorium, there are a handful of exceptions to that rule. The following moves are permitted between July 1 and July 6:

  • A team can sign a first-round pick to his rookie scale contract.
  • A team can sign a player to a one- or two-year minimum salary contract.
  • A restricted free agent can sign a qualifying offer from his current team.
  • A restricted free agent can sign a five-year, fully guaranteed maximum-salary contract with his current team.
  • A restricted free agent can sign an offer sheet with a new team; the 48-hour matching period would begin once the moratorium ends.
  • A team can sign a player to a two-way contract, convert a two-way contract into a standard NBA deal, or convert an Exhibit 10 deal into a two-way contract.
  • A team can waive a player or claim a player off waivers.
  • A second-round pick can accept a required tender (a one-year contract offer) from his current team.

Under the old Collective Bargaining Agreement, the NBA finalized the salary cap at some point during the July moratorium, and the new cap would take effect once the moratorium ended. However, the current CBA calls for the salary cap for the new league year to be set before the start of July, with the new figure going into effect immediately on July 1. This gives teams more clarity on exactly how much room they have available as they negotiate with free agents during the moratorium.

In recent years, the NBA moved the start of its free agency negotiating period forward by six hours, opening that window at 6:00 pm ET on June 30 instead of at 12:01 am ET on July 1. Although the July moratorium still doesn’t technically begin until July 1, free agents who reach agreements quickly can’t officially sign on June 30, since their old contracts haven’t technically expired yet.

However, if an extension-eligible veteran agrees to a new deal with his former team, he can officially complete that extension on the evening of June 30, before the moratorium goes into effect — Thaddeus Young (Raptors) and Gary Harris (Magic) took this route this year, formally finalizing their new contracts last Thursday before the moratorium period began.

Finally, it’s worth noting that while we refer to this period at the start of free agency as the “July” moratorium, it doesn’t always take place in July. In recent years, due to the COVID-19 pandemic, the moratorium period has instead occurred in November (2020) and August (2021).

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.

Hoops Rumors Glossary: Base Year Compensation

As Larry Coon explains in his invaluable CBA FAQ, the term “base year compensation” technically no longer shows up in the NBA’s Collective Bargaining Agreement, and hasn’t since 2011. A relic of past agreements, the base year compensation rule was intended to prevent teams from signing free agents to new contracts that were specifically intended to facilitate salary-matching in trades.

While the base year compensation rules have mostly been adjusted and/or removed from the CBA in recent years, there’s still one situation where they apply. Teams have to take them into account when completing sign-and-trade deals.

The BYC rules apply to a player who meets all of the following criteria in a sign-and-trade:

  • He is a Bird or Early Bird free agent.
  • His new salary is worth more than the minimum.
  • He receives a raise greater than 20%.
  • His team is at or above the cap immediately after the signing.

If the player meets those criteria and is included in a sign-and-trade deal, his outgoing salary for matching purposes is considered to be his previous salary or 50% of his new salary, whichever is greater. For the team he is being signed-and-traded to, his incoming figure for matching purposes is his full new salary.

Here are a couple specific examples to help make things a little clearer:

Let’s say the Suns want to sign-and-trade Deandre Ayton this offseason. He’s a Bird free agent, his new salary will be well above the minimum, and the Suns project to be an over-the-cap team. Having made $12,632,950 in 2018/19, Ayton figures to receive a raise significantly higher than 20% — if he signs a maximum salary contract, it’s projected to start at $30,500,000. So he meets the BYC criteria.

In a scenario where he signs a max deal as part of a sign-and-trade, Ayton’s salary for matching purposes from the Suns’ perspective would be $15,250,000, which is 50% of his new salary (that amount is greater than his previous salary). From his new team’s perspective, Ayton’s incoming figure would be his actual salary, $30,500,000.

Zach LaVine is another top free agent who would meet the BYC criteria if he’s signed-and-traded by the Bulls this offseason. If he gets a maximum salary contract – projected to be worth $36,600,000 for a player with his NBA experience – his outgoing salary for matching purposes would be $19,500,000, the amount he made in 2021/22 — that figure would be a little higher than 50% of his new salary ($18,300,000).

Often, a team acquiring a player via sign-and-trade doesn’t have the cap room to sign the player outright, or else there would be little need to negotiate a sign-and-trade. That means salary-matching is required, and is complicated by base year compensation rules.

In these examples, the Suns wouldn’t be able to take back more than $20,250,000 in salary in exchange for Ayton due to the league’s matching rules, while the Bulls wouldn’t be able to take back more than $24,500,000 for LaVine.

However, in order to take on $30,500,000 in incoming salary, Phoenix’s hypothetical trade partner would have to send out at least $24,320,000 in order to account for those salary-matching rules themselves. An over-the-cap team acquiring LaVine would have to send out at least $29,200,000 in order to match his incoming $36,600,000 salary.

The gap between the salary-matching figures from the two teams’ perspectives complicates sign-and-trade talks, requiring both clubs to include additional pieces to make the deal work. A third team could even be necessary to make the numbers line up.

The base year compensation concept doesn’t surface all that often, due to the specific criteria that must be met. However, it looms large over many sign-and-trade attempts, reducing the likelihood of teams finding a deal that can be legally completed. And it could affect a number of potential sign-and-trade candidates during the 2022 offseason.

Rival teams hoping to land players like Ayton, LaVine, Jalen Brunson, Mitchell Robinson, Miles Bridges, or Collin Sexton via sign-and-trade this summer would almost certainly have to navigate base year compensation complications to make it happen.

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.

A previous version of this post was published in 2019.

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 $1,782,621 this season, Hornets wing Cody Martin projects to have a minimum salary worth $1,876,674 in 2022/23. Adding $200K to that figure works out to $2,076,674, whereas 125% of his prior salary is $2,228,276. His qualifying offer will be worth the higher amount ($2,228,276).

On the other hand, a player like Wizards forward Anthony Gill earned a $1,517,981 salary in 2021/22. Calculating 125% of that amount works out to $1,897,476, whereas his projected minimum salary ($1,811,516) plus $200K would be $2,011,516.

The precise value of Gill’s qualifying offer will depend on where exactly the ’21/22 salary cap ends up, since minimum salaries increase or decrease at the same rate as the cap, but it’s a safe bet his QO will be worth his minimum salary plus $200K.

For a player earning the minimum or something close to it, it’s not always immediately apparent which formula will render the higher qualifying offer. However, it’s more obvious for players earning well above the minimum, such as Nuggets guard Facundo Campazzo. He’ll be eligible for restricted free agency this offseason after earning $3.2MM in 2021/22, and his qualifying offer will be worth 125% of his previous salary: $4MM.

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 2018, 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: 2018’s first overall pick, Suns center Deandre Ayton, is coming off a fourth-year salary of $12,632,950, so he must be extended a qualifying offer of $16,422,835 (a 30% increase) to become a restricted free agent. Meanwhile, the 24th overall pick, Trail Blazers guard Anfernee Simons, will be eligible for a qualifying offer of $5,758,552, a 46.2% increase on this season’s $3,938,818 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: In 2022, the value of this QO will be $7,228,448.
  • 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: In 2022, the value of this QO will be $7,921,300.
  • 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: In 2022, the value of this QO will be $4,869,012.

Cavaliers guard Collin Sexton is one example of a player who falls into the first group, since he didn’t meet the starter criteria this year. The No. 8 overall pick in 2018, Sexton will be eligible this offseason for a QO worth $7,228,448 instead of $8,559,357.

Conversely, Hornets forward Miles Bridges (a former No. 12 overall pick) met the starter criteria and will now be eligible for a QO worth $7,921,300 instead of $7,459,974.

[RELATED: Potential 2022 RFAs Whose Qualifying Offers Will Be Impacted By Starter Criteria]

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, assuming 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.

Nets guard Bruce Brown was the only noteworthy restricted free agent to accept his qualifying offer during the 2021 offseason. As a result, he’ll be an unrestricted free agent in 2022.

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.

A player who is coming off a two-year, two-way deal, has already been on two-way deals with his current team for at least two seasons, or has accumulated four years of NBA service would be eligible for a qualifying offer equivalent to a standard, minimum-salary NBA contract. The guarantee on that QO would have to match or exceed a two-way salary.

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.