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.

Because the Stepien rule applies only to future draft picks, teams are still permitted to trade their first-rounders each 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 Nuggets have traded their 2020 first-round pick to Oklahoma City, they aren’t currently permitted to trade their 2021 first-rounder. Following the 2020 draft, the Nuggets would regain the right to trade that 2021 first-round pick, since their ’20 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 Denver were to trade for another team’s 2020 first-rounder, that would give the Nuggets the flexibility to move their 2021 pick without having to wait until after the 2020 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 Jazz have traded a protected 2020 first-round pick to Memphis — it will only convey if it falls in the 8-14 range. That traded 2020 pick is protected all the way through 2024, and as long as there’s still a chance it won’t convey immediately, the Jazz are prevented from unconditionally trading any of their next few first-round picks.

Utah could trade a conditional 2022 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 Utah has traded to Memphis doesn’t convey.

[RELATED: Traded first round picks for 2020 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. Dallas, for instance, is one of the teams most significantly impacted by the rule at the moment. The Mavericks have committed their 2021 and 2023 first-round picks to New York, limiting their ability to move any other first-rounders up until at least 2025. Additionally, since the 2023 pick has protections, that 2025 first-rounder could only be traded conditionally.

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. For instance, during the 2019/20 season, a 2026 draft pick can be traded, but a 2027 pick cannot be dealt.
  • The Seven Year Rule applies to protections on picks as well. If a team wants to trade a lottery-protected 2026 first-rounder at this year’s deadline, it can’t roll those protections over to 2027. For example, when the Rockets sent the Thunder a top-four protected 2026 first-round pick in the Russell Westbrook trade, they agreed that if the pick falls within that protected range, Oklahoma City would instead receive Houston’s ’26 second-round selection — picks in 2027 and beyond were off-limits.
  • 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 Knicks currently control the Mavericks‘ unprotected 2021 first-round pick. If New York 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 2012, 2018, and 2019 by Luke Adams.

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, have typically been the most common form of extension. But in its 2017 Collective Bargaining Agreement, the NBA relaxed its criteria for veteran extensions, resulting in an increase in those deals in recent years.

[RELATED: 2019/20 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 explains why Joe Ingles, who received a four-year contract with the Jazz on July 21, 2017 became extension-eligible this past offseason, on the second anniversary of signing that deal. He took advantage of his new extension eligibility by tacking on an extra year to his current contract. If Ingles had signed a five-year contract in July 2017, he wouldn’t have become extension-eligible until July 2020.

Ingles signed a one-year extension when he had two years remaining on his contract. Because he still had multiple years left on his deal, he was only eligible to sign an extension up until the last day before the 2019/20 regular season began. A player with one year left on his contract remains eligible to sign an extension all the way up until June 30, the day before he reaches free agency.

In other words, if Ingles hadn’t signed his extension in September, he would’ve become ineligible to sign one as of the first day of the ’19/20 regular season. His eligibility window would’ve opened again during the 2020 offseason and would’ve extended all the way through June 30, 2021.

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 CJ McCollum signed an extension earlier this season with the Trail Blazers, he had two years left on his current contract, which ran through 2020/21. 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 more than just five total years, as we cover in a separate glossary entry.

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.

For instance, Draymond Green signed an extension with the Warriors earlier this season, adding four extra years to the one year and $18,539,130 remaining on his previous deal. Because that $18.5MM+ figure greatly exceeds the estimated average salary, Green was eligible to earn up to 120% of his final-year salary in the first year of his extension. As such, his next contract will begin with a salary of $22,246,956, with 8% annual raises from there.

Spencer Dinwiddie, on the other hand, was only on a minimum-salary deal when he signed an extension with the Nets a year ago. A 20% raise on that amount wouldn’t have been worth Dinwiddie’s while, but he was eligible to receive 120% of the NBA’s estimated average salary, which was $8,838,000 in 2018/19. As a result, Dinwiddie’s three-year extension with Brooklyn began this season at $10,605,600.

In 2019/20, the NBA’s estimated average salary is $9,560,000, so an extension-eligible player earning less than that amount – such as Kings swingman Bogdan Bogdanovic – would be able to sign an extension with a starting salary of up to $11,472,000.

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 example, Stephen Curry will become eligible to sign a new contract next July, but his final-year cap hit is $45,780,966. A full 120% raise on that figure would be $54,937,159, which will certainly exceed his maximum possible salary for 2022/23. If Curry were to sign a maximum-salary extension, his salaries on that new deal would be amended downward once that season’s max salaries were defined.

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. That’s why players like Bradley Beal, Eric Gordon, and Cedi Osman can’t be traded before the 2020 deadline. 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.

Kyle Lowry‘s one-year extension with the Raptors is worth just $30,500,000, which is less than his $34,996,296 cap hit for 2019/20. That deal didn’t exceed the extend-and-trade limits, so Lowry doesn’t face any trade restrictions this season, though Toronto is unlikely to move him.

An extension-eligible player can’t be extended-and-traded after the season 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.

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

Photos courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Affiliate Players

Throughout the offseason and preseason, NBA teams are permitted to carry 20 players, but that total must be cut down to 15 (plus a pair of two-way players) in advance of opening night. However, up to four players waived by a team prior to the season can be designated as “affiliate players” and assigned to that team’s G League squad.

The players have a say in this decision. If they’d prefer to sign with a team overseas, or if they get an opportunity with another NBA club, they’re under no obligation to become affiliate players. But if the player’s NBA team has designated him as an affiliate player and he signs a G League contract, he is automatically assigned to that team’s NBAGL roster.

Since most NBA and international teams aren’t looking to bring in extra players by late October, the opportunity to continue playing in the same system appeals to many of those preseason cuts — especially since many of them will be in line for bonuses worth up to $50K after having signed Exhibit 10 contracts. Plus, they’ll continue to be NBA free agents while they play in the G League.

There are a few other rules related to G League affiliate players. A player whose returning rights are held by a G League team can’t become an affiliate player for another club, which is why undrafted rookies typically make up a substantial portion of the annual league-wide list of affiliate players.

Additionally, an affiliate player must have signed with his team during the current league year, which explains why we often see players signed and quickly waived in the days leading up to the regular season. He also can’t have had a partial guarantee worth more than $50K on his standard contract — a larger guarantee would make him ineligible to join his club’s NBAGL affiliate for the rest of that league year.

Finally, not every NBA team has a G League affiliate, so there are two teams – the Nuggets and Trail Blazers – with no place to send affiliate players.

In 2018/19, a total of 26 NBA teams designated 77 affiliate players. That number could easily be matched or exceeded this season.

An earlier version of this post was published in 2015 by Chuck Myron. Photo courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Rookie Scale

When a star player like Zion Williamson enters the NBA, his new team – in this case, the Pelicans – can rest assured that there will be little to no chance of him holding out for a larger contract. That’s because a first-round NBA draft pick is only eligible to sign a rookie scale contract, which limits his leverage and ensures that his draft slot will dictate how much he gets paid.

A rookie scale contract for first-rounders is always for two guaranteed seasons, with team options for the third and fourth seasons of the deal. The scale amount is strictly set by draft position for the first three years of the contract, with the amount of the fourth year determined by a percentage raise on the third-year salary, as RealGM’s rookie scale chart for 2019 picks shows.

Players are eligible to sign for as little as 80% or as much as 120% of the scale amount, though almost every player signs for the full 120%. Cavaliers first-round pick Kevin Porter Jr. became the first player in several years to sign for just 80% of his rookie scale amount this year, and even that rate only applies to his rookie season — he’ll get the full 120% in years two through four.

[RELATED: Rookie Scale Salaries For 2019 First-Round Picks]

Under the NBA’s current Collective Bargaining Agreement, the rookie scale will eventually increase annually at the same rate as the salary cap. In that scenario, a 5% salary cap increase would mean a 5% increase to rookie scale salaries.

However, the league has been gradually phasing in a 45% overall increase to rookie salaries over the last three seasons (15% per year), complicating that formula. For instance, while the cap only increased by about 7.1% from 2018/19 to 2019/20, the rookie scale amounts for each pick increased by approximately 19.5%.

For the 2019/20 season, the first-year rookie scale amount for the first overall pick is $8,131,200. That number increases to $8,537,900 in year two and $8,944,500 in year three, with a 26.1% raise for year four and a 30% raise for a fifth-year qualifying offer. Williamson signed with the Pelicans for 120% of that amount, meaning his contract looks like this:

Season Salary
2019/20 $9,757,440
2020/21 $10,245,480
2021/22 $10,733,400
2022/23 $13,534,817
2023/24 $17,595,262
  • Team option in green
  • Qualifying offer in blue

The scale amounts and fourth- and fifth-year raises vary depending on draft position. Top picks earn the highest salaries, while late first-round picks get the most substantial bumps at the end of their contracts. For instance, the 30th overall pick gets an 80.5% raise between years three and four, with a qualifying offer increase of 50%.

Here are several more details relating to rookie scale contracts:

  • Only first-round picks are eligible for rookie scale contracts. Second-rounders must be signed using cap room or exceptions.
  • A team does not have to be under the cap to sign rookie scale contracts. Any team can give a first-rounder a full 120% rookie contract, regardless of its cap status.
  • Because 120% contracts are so common, the cap hold for a first-round pick is also 120% of the player’s rookie scale amount.
  • If a player hasn’t signed by January 10, his rookie scale amount becomes prorated each day for the remainder of the season until he signs.
  • Teams have until October 31 each year to make decisions on the team-option seasons in rookie scale contracts. By October 31, 2019, teams will have to decide on the options for the 2020/21 season.
  • Players coming off rookie-scale contracts may be eligible for larger or smaller qualifying offers in their fifth year, based on whether or not they meet the “starter criteria.” I explained this in greater detail here.
  • If a team signs a first-round pick within three years of drafting him, the rookie scale for the year in which he signs is used. For instance, the Sixers acquired 12th overall pick Dario Saric in a draft-night deal in 2014. When Saric arrived stateside two years later, he signed a contract based on the rookie scale salary for the No. 12 pick in 2016.

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.

An earlier version of this post was published in 2012. Photo courtesy of USA Today Sports Images.

Hoops Rumors Glossary: Exhibit 10 Contract

After the NBA’s biggest-name free agents come off the board, many teams shift their focus to filling out their training-camp rosters. Teams can only carry 15 players on NBA contracts (plus two on two-way deals) during the regular season, but their maximum roster size increases to 20 players in the offseason, allowing clubs to bring a few extra players to camp to audition for a place on the regular-season roster or a spot on the team’s G League affiliate.

Many of those players will sign a contract with an Exhibit 10 clause. Introduced in the NBA’s most recent Collective Bargaining Agreement, Exhibit 10 contracts are one-year deals worth the minimum salary. They don’t come with any compensation protection, but can include an optional bonus ranging from $5K to $50K.

Let’s say an undrafted rookie signs an Exhibit 10 contract with the Knicks that includes a $50K bonus. He attends camp with the Knicks, but is waived before the regular season begins, with New York designating him an affiliate player in order to retain his G League rights. In that scenario, if the rookie elects to play in the G League for the Westchester Knicks and remains with the club for 60 days, he’d be entitled to his full $50K bonus.

The player wouldn’t receive that bonus if he opts to sign with a team overseas after being waived by the Knicks. Essentially, the Exhibit 10 bonus serves as an incentive for players to stick with their team’s G League affiliate — they must spend at least 60 days with the NBAGL club in order to get their bonus.

There’s another scenario in which that undrafted rookie who signs an Exhibit 10 deal with the Knicks would receive his $50K. Exhibit 10 contracts can be converted into two-way contracts, so if New York opted to do that before the season begins, the $50K bonus would turn into a salary guarantee for the player. As soon as his contract becomes a two-way deal, he’s entitled to that bonus, even if the Knicks waive him a week later.

Only teams with a G League affiliate can include an Exhibit 10 bonus in a contract. In 2019/20, the Pelicans will become the 28th NBA team with its own affiliate, leaving only the Trail Blazers and Nuggets on the outside looking in. Those clubs could technically sign players to Exhibit 10 deals, but wouldn’t be able to include bonus money.

The Heat have been one of the most active teams so far this offseason when it comes to signing Exhibit 10 contracts. Jeremiah Martin, Chris Silva, and Kyle Alexander have all received those deals, which benefit Miami in one important way — they don’t count against team salary during the offseason. That’s crucial for the hard-capped Heat, who are less than $1MM away from the tax apron and otherwise wouldn’t be able to add free agents to their roster without shedding salary elsewhere.

Here are a few more notes relating to Exhibit 10 contracts:

  • A team can’t carry more than six Exhibit 10 contracts at a time.
  • An Exhibit 10 contract can only be converted to a two-way deal before the regular season begins.
  • An Exhibit 10 contract that gets converted to a two-way deal can later be converted into a standard NBA contract.
  • An Exhibit 10 bonus earned by a player who ends up in the G League or on a two-way contract isn’t counted toward the NBA team’s total 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 was used in the creation of this post.

An earlier version of this post was published in 2018.

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 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’s a specific example to help make things a little clearer: Let’s say the Celtics want to sign-and-trade Kyrie Irving this offseason. He’s a Bird free agent, his new salary will be well above the minimum, and the Celtics project to be an over-the-cap team. Having made $20,099,189 in 2018/19, Irving will also receive a raise significantly higher than 20% if he inks a maximum salary contract, which is projected to start at $32,700,000. So he meets the BYC criteria.

In that scenario, Irving’s salary for matching purposes from the Celtics’ perspective would be $20,099,189, since his previous salary is greater than 50% of his new salary. From his new team’s perspective, Irving’s incoming figure would be his actual salary, $32,700,000.

Typically, 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 often required, and is complicated by base year compensation rules.

In this example, the Celtics wouldn’t be able to take back more than $25,223,986 in exchange for Irving, due to the league’s salary-matching rules. However, in order to take on $32,700,000 in salary, Boston’s trade partner would have to send out at least $26,080,000 in order to account for those salary-matching rules themselves. The discrepancy between those two figures would complicate sign-and-trade talks, likely requiring both teams to include additional pieces to make the deal work.

The base year compensation concept doesn’t surface frequently, as there have only been four sign-and-trades completed around the NBA in the last four offseasons. However, it looms large over most sign-and-trade attempts, reducing the likelihood of teams finding a deal that can be legally completed.

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.

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.

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 seasons.

For instance, since the Raptors have traded their 2019 first-round pick to San Antonio, they aren’t currently permitted to trade their 2020 first-rounder. Following the 2019 draft though, the Raptors will regain the right to trade that 2020 first-round pick, since their ’19 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 Toronto were to trade for a new 2019 first-rounder, that would give the Raptors the flexibility to move their 2020 pick without having to wait until after the 2019 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 Mavericks have traded a top-five protected 2019 first-round pick to Atlanta. That traded 2019 pick is protected through 2022, and as long as there’s still a chance it won’t convey immediately, the Mavs are prevented from unconditionally trading any of their next few first-round picks. That’s why when Dallas agreed to send two future first-round picks to New York in the Kristaps Porzingis trade, those picks came with conditions attached — the Knicks won’t receive the first of those selections until two years after the Mavs’ pick to Atlanta conveys.

[RELATED: Traded first round picks for 2019 NBA draft]

Teams will have to take the Stepien rule into account this offseason as they mull including draft picks in deals. Oklahoma City, for instance, is one of the teams most significantly impacted by the rule at the moment. The Thunder have committed their 2020 first-round pick to Philadelphia and their 2022 selection to Atlanta, limiting OKC’s ability to move any other first-rounders up until at least 2024.

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

  • For salary-matching purposes, a traded draft pick counts as $0 until the player signs a contract.
  • The “Seven Year Rule” prohibits teams from trading draft picks more than seven years in advance. For instance, during the 2018/19 season, a 2025 draft pick could have been traded, but a 2026 pick could not have been dealt.
  • A team can add protection to a pick it has acquired as long as there wasn’t already protection on the pick. For example, when the Sixers flipped the Kings’ 2019 first-round pick to the Celtics, Philadelphia included top-one protection on the pick. Boston will get that selection this year unless the 76ers beat the odds and land the No. 1 overall pick.

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 2012 and 2018 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 $1,378,242 this season, Jordan Bell will be eligible for a qualifying offer worth a projected $1,818,486 this offseason — that’s calculated by adding $200,000 to his projected minimum salary for 2019/20 ($1,618,486). Tomas Satoransky‘s 2018/19 salary, on the other hand, was $3,129,187, so his qualifying offer will be worth 125% of that figure: $3,911,484

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 2015, 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, based on RealGM’s chart: 2015’s second overall pick D’Angelo Russell, coming off a fourth-year salary of $7,019,698, must be extended a qualifying offer of $9,160,706 (a 30.5% increase) to become a restricted free agent. Meanwhile, 20th overall pick Delon Wright will be eligible for a qualifying offer of $3,635,375, a 43.3% increase on this season’s $2,536,898 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 2019, the value of this QO will be $4,485,665. Kristaps Porzingis is one example of a player who falls into this group.
  • 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 2019, the value of this QO will be $4,915,726. Kelly Oubre is one example of a player who falls into this group.
  • A second-round pick or undrafted player who meets the criteria will receive a qualifying offer equal to 100% of the amount applicable to the 21st overall pick.
    • Note: For the summer of 2019, the value of this QO will be $3,021,354. Thomas Bryant is one example of a player who falls into this group.

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.

During the 2018 offseason, for instance, Rodney Hood signed his qualifying offer after failing to secure a longer-term deal with the Cavaliers. When Cleveland agreed to send him to the Trail Blazers prior to the 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 has already been on two-way deals with his current team for two seasons or because 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: 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 2018/19 league year, three teams – the Pistons, Grizzlies, and Rockets – were ineligible to use the bi-annual exception at all, since they used it in 2017/18. Four teams have used the BAE this season, with the Bucks signing Brook Lopez, the Pelicans signing Elfrid Payton, the Knicks signing Allonzo Trier, and the Spurs signing Dante Cunningham. Those four clubs won’t have the exception at their disposal during the 2019/20 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, it triggers a hard cap for that season. Clubs 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.

The bi-annual exception allowed for a starting salary of up to $3,382,000 in 2018/19. 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. If the cap goes up by 5%, the value of the bi-annual exception will also increase by 5%. Based on a $109MM cap estimate for 2019/20, the BAE is projected to start at $3,619,000.

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 2018/19, the maximum value of a two-year contract was $6,933,100. 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.

Several teams – including the Jazz, Clippers, and Magic – remain eligible to use the bi-annual exception this season, but they’re unlikely to take advantage of that opportunity at this point. Assuming those BAEs go unused, they’ll be available to those teams in 2019/20.

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 club heads into the offseason with a little spending flexibility, even if that team 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 kind 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 glance at 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 $8,641,000 in 2018/19.
    • Note: Projected first-year salary for 2019/20 is $9,246,000.
  • 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 $5,337,000 in 2018/19.
    • Note: Projected first-year salary for 2019/20 is $5,711,000.

For teams with cap room:

  • Commonly called the room exception.
  • Contract can cover no more than two seasons.
  • First-year salary is worth $4,449,000 in 2018/19.
    • Note: Projected first-year salary for 2019/20 is $4,760,000.

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 could earn. Those numbers can be found right here.

While teams can use their entire mid-level exception to sign one player, as the Grizzlies did this year with Kyle Anderson, clubs are also allowed to split the mid-level among multiple players, and that’s a common course of action. For instance, the Pistons have used their MLE to complete four separate signings, devoting parts of it to Glenn Robinson, Bruce Brown, Khyri Thomas, and Wayne Ellington.

Players drafted near the top of 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 Knicks used their mid-level to sign Mitchell Robinson to a four-year contract that starts at $1,485,440. Without the MLE, the Knicks would have been limited to a two-year deal for Robinson, and would have only had his Early Bird rights when his contract expires, rather than his full Bird rights.

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, as the Pistons did with Ellington. A rebuilding club, on the other hand, could use its MLE to lock up an intriguing developmental player to a long-term contract, like the Timberwolves recently did with Cameron Reynolds.

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 2018/19, each club will have the opportunity to use some form of the MLE when the new league year begins on July 1, 2019.

Under the old Collective Bargaining Agreement, the mid-level exception increased annually at a modest, fixed rate, which limited its value as the salary cap spiked. However, under the new CBA, the mid-level will increase at the same rate as the salary cap, ensuring that its value relative to cap room remains about the same from year to year. Our estimates for 2019/20’s figures, based on the NBA’s current $109MM salary cap projection, can be found here.

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.