Hoops Rumors Glossary

The most common tool that 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 2020/21 league year, four teams – the Mavericks, Pistons, Grizzlies, and Raptors – were ineligible to use the bi-annual exception at all, since they used it in 2019/20.

Three teams used the BAE in ’20/21, with the Bucks signing Bobby Portis, the Nuggets signing Facundo Campazzo, and the Lakers signing Wesley Matthews. Those three clubs won’t have the exception at their disposal during the 2021/22 league year.

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

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

[RELATED: NBA Teams With Hard Caps In 2020/21]

The bi-annual exception allowed for a starting salary of up to $3,623,000 in 2020/21. The starting salary for the BAE in 2021/22 projects to be worth $3,732,000.

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

A player who signs a contract using the bi-annual exception is eligible for a one- or two-year deal, with a 5% raise for the second season. For players who signed using the BAE in 2020/21, the maximum value of a two-year contract was $7,427,150.

Teams also have the option of splitting the bi-annual exception among multiple players, though that happens much less frequently than it does with the mid-level exception, since a split bi-annual deal may not even be worth more than a veteran’s minimum salary.

In a typical league year, 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. Those numbers looked a little different in 2020/21 due to the revamped schedule, but should return to normal for ’21/22.

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.

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

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

For over-the-cap teams:

• Commonly called either the full mid-level exception, the non-taxpayer’s mid-level exception or simply the mid-level exception.
• Contract can cover up to four seasons.
• First-year salary was worth $9,258,000 in 2020/21.
• First-year salary is projected to be worth $9,536,000 in 2021/22.
• 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 was worth $5,718,000 in 2020/21.
• First-year salary is projected to be worth $5,890,000 in 2021/22.

For teams with cap room:

• Commonly called the room exception.
• Contract can cover no more than two seasons.
• First-year salary was worth $4,767,000 in 2020/21.
• First-year salary is projected to be worth $4,910,000 in 2021/22.

Each form of the mid-level allows for annual raises of up to 5% of the value of the first season’s salary. Last offseason, we broke down the maximum total salaries that players signed using the mid-level exception in ’20/21 could earn. Those numbers can be found right here.

Teams can use their entire mid-level exception to sign one player. Several clubs went this route in 2020/21, including the Celtics (Tristan Thompson), Clippers (Serge Ibaka), Lakers (Montrezl Harrell), Trail Blazers (Derrick Jones), Suns (Jae Crowder), and Jazz (Derrick Favors).

However, clubs are also allowed to split the mid-level among multiple players, and that’s a common course of action. For instance, the Kings used their MLE to complete four separate signings in 2020/21, devoting parts of it to Robert Woodard, Jahmi’us Ramsey, and Chimezie Metu (twice). Sacramento signed Metu using the mid-level, waived him, then used the MLE again to re-sign him later in the season.

Players drafted in the second round often sign contracts for part of the mid-level because it allows teams to give them contracts for more years and more money than the minimum salary exception provides. Woodard and Ramsey were both second-round picks in 2020 whom the Kings signed using the MLE.

Without the MLE, Sacramento would have been limited to two-year deals starting at $898,310 for those two rookies. The mid-level allowed the Kings to pay them more, sign them to longer deals, and to ensure they’ll have full Bird rights if they play out their contracts, rather than just the Early Bird rights they’d have after two years.

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

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

Near the end of the 2020/21 season, the Thunder used a portion of their mid-level exception to sign Gabriel Deck to a four-year contract with a salary worth $3.87MM in ’20/21. That oversized first-year salary, made possible by the MLE, gave Oklahoma City the leverage to make the rest of the contract non-guaranteed.

Unlike the bi-annual exception, the mid-level exception can be used every season. So whether or not a team used its mid-level in 2020/21, each club will have the opportunity to use some form of the MLE when the 2021/22 league year begins.

Under the old Collective Bargaining Agreement, the mid-level exception increased annually at a modest, fixed rate. However, under the current CBA, the mid-level increases – or decreases – at the same rate as the salary cap, ensuring that its value relative to cap room remains about the same from year to year. We’ve estimated 2021/22’s MLE figures based on the NBA’s projection of a 3% salary cap increase — a more substantial cap increase would mean next season’s mid-level is worth a little more too.

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.

The Cavaliers have a little less than $87MM in guaranteed money committed to player salaries for 2021/22, per Basketball Insiders. However, even though next season’s salary cap will come in at $112MM+, that doesn’t mean the team will begin the 2021 offseason with tens of millions in cap room to spend.

In fact, the Cavaliers technically won’t open the new league year with any cap space at all. Each of Cleveland’s own free agents will be assigned a free agent amount – or “cap hold” – until the player signs a new contract or the Cavaliers renounce his rights.

The general purpose of a cap hold is to prevent teams from using room under the cap to sign free agents before using Bird rights to re-sign their own free agents. If a team wants to take advantage of its cap space, it can renounce the rights to its own free agents, eliminating those cap holds. However, doing so means the team will no longer hold any form of Bird rights for those players — if the team wants to re-sign those free agents, it would have to use its cap room or another kind of cap exception.

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

• First-round pick coming off rookie contract: 300% of the player’s previous salary if prior salary was below league average; 250% of previous salary if prior salary was above league average.
• Bird player: 190% of previous salary (if below league average) or 150% (if above average).
• Early Bird player: 130% of previous salary.
• Non-Bird player: 120% of previous salary.
• Minimum-salary player: Two-year veteran’s minimum salary, unless the free agent only has one year of experience, in which case it’s the one-year veteran’s minimum.
• Two-way player: One-year veteran’s minimum salary.

A cap hold for a restricted free agent can vary based on his contract status. A restricted free agent’s cap hold is either his free agent amount as determined by the criteria mentioned above, or the amount of his qualifying offer, whichever is greater.

No cap hold can exceed the maximum salary for which a player can sign. For instance, the cap hold for a Bird player with a salary above the league average is generally 150% of his previous salary, as noted above. But for someone like Clippers star Kawhi Leonard, who is earning $34,379,100 this season, 150% of his previous salary would be north of $51MM, well beyond the projected maximum salary threshold.

Leonard’s cap hold – assuming he turns down his 2021/22 player option – will be equivalent to the maximum salary for a player with 10+ years of NBA experience. If we assume a cap increase of 3%, that figure works out to about $39.3MM.

One unusual case involves players on rookie contracts whose third- or fourth-year options are declined. The amount of their declined option becomes their cap hold, and if the player’s team wants to re-sign him, his starting salary can’t exceed that amount.

For instance, the Wizards declined Moritz Wagner‘s 2021/22 fourth-year option last December. As a result, they wouldn’t have been able to offer him a starting salary this offseason worth more than $3,893,618, the amount of that option. That rule is in place so a team can’t circumvent the rookie scale and decline its option in an effort to give the player a higher salary.

The rule applies even if the player is traded — Washington, in fact, ended up sending Wagner to the Celtics in March, and the C’s would’ve faced the same limit if they’d wanted to re-sign him. Instead, Boston waived Wagner in April and he caught on with the Magic before season’s end. Because he’s no longer on the contract with the declined option, Orlando doesn’t face the same restriction and Wagner’s cap hold is now based on his minimum-salary contract.

If a team holds the rights to fewer than 12 players, cap holds worth the rookie minimum salary are assigned to fill out the roster. So, even if a front office chooses to renounce its rights to all of its free agents and doesn’t have any players under contract, the team wouldn’t be able to fully clear its cap. In 2020/21, an incomplete roster charge was worth $898,310, meaning a team with 12 of those charges would have had nearly $11MM on its cap even before adding any players.

A player who has been selected in the draft but has not yet officially signed his rookie contract only has a cap hold if he was a first-round selection. A cap hold for a first-round pick is equivalent to 120% of his rookie scale amount, based on his draft position. An unsigned second-round pick doesn’t have a cap hold.

Cap holds aren’t removed from a team’s books until the player signs a new contract or has his rights renounced by the club. For example, the Warriors are still carrying cap holds on their books for retired players David West and Matt Barnes, who never signed new contracts since playing for Golden State. Keeping those cap holds allows teams some degree of cushion to help them remain above the cap and take advantage of the mid-level exception and trade exceptions, among other advantages afforded capped-out teams.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA’s Collective Bargaining Agreement. Larry Coon’s Salary Cap FAQ and the Basketball Insiders salary pages were used in the creation of this post.

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

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

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

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

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

The salary limitations that apply to Non-Bird rights are more severe than those pertaining to Bird rights or Early Bird rights, so in many cases, the Non-Bird exception may not be enough to retain a well-regarded free agent. For instance, the Sixers held Alec Burks‘s Non-Bird rights last summer, but couldn’t have used them to match or exceed the offer the veteran wing received from the Knicks.

Because Burks had been on a minimum-salary contract in 2019/20, Philadelphia’s ability to offer a raise using the Non-Bird exception was extremely limited — the 76ers would have only been able to offer 120% of the veteran’s minimum using his Non-Bird rights, whereas the Knicks’ $6MM offer easily topped that. If they’d badly wanted to retain Burks, the 76ers would have had to use cap room or another exception to make a competitive offer.

The Lakers will be in a similar situation this offseason with Andre Drummond, who will only have Non-Bird rights. If L.A. wants to retain Drummond, the team will have to use cap room or its mid-level exception to make its best offer, since they’ll be limited to a starting salary in the $3MM range via the Non-Bird exception.

Holding Non-Bird rights on a free agent didn’t really help the Sixers with Burks and it won’t help the Lakers with Drummond, but there are cases in which the exception proves useful.

For instance, the Clippers only had Non-Bird rights on Marcus Morris last offseason, but because his ’19/20 salary was $15MM, Los Angeles was able to offer a starting salary worth any amount up to $18MM (120% of his previous salary). That gave the club plenty of flexibility to re-sign Morris without using cap room or another exception — he received a four-year, $64MM contract.

Another deal completed by the Clippers in November provides an example of a team using Non-Bird rights on a minimum-salary player. Patrick Patterson, whose minimum salary would have been $2,564,753 in 2020/21, was eligible to sign for up to 120% of that amount via the Non-Bird exception. As such, his one-year deal with Los Angeles is worth $3,077,704.

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

This happened to James Ennis in 2020, when he agreed to a trade that sent him from Philadelphia to Orlando. Ennis would have had Early Bird rights if he had finished the season with the Sixers, but allowing the trade meant he only had Non-Bird rights during the 2020 offseason. As a result, the Magic had to use a portion of their mid-level exception to re-sign him to a one-year, $3.3MM deal that could’ve otherwise been completed with the Early Bird exception.

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.

Bird rights offer teams the chance to sign their own free agents without regard to the salary cap, but they don’t apply to every player. Other salary cap exceptions are available for teams to keep players who don’t qualify for Bird rights. One such exception is the Early Bird, which applies to players formally known as Early Qualifying Veteran Free Agents.

While the Bird exception is for players who have spent three seasons with one club without changing teams as a free agent, Early Bird rights are earned after just two such seasons. Virtually all of the same rules that apply to Bird rights apply to Early Bird rights, with the requirements condensed to two years rather than three. Players still see their Bird clocks restart by changing teams via free agency, being claimed in an expansion draft, or having their rights renounced.

As is the case with Bird rights, a player’s clock stops when he’s released by a team and clears waivers, but it would pick up where it left off if he re-signs with that same team down the road without joining another club in the interim. For instance, if Glenn Robinson III – released by the Kings earlier this season before the end of his one-year contract – were to sign a new one-year deal with Sacramento during the 2021 offseason, the team would have his Early Bird rights in the 2022 offseason.

The crucial difference between Bird rights and Early Bird rights involves the limitations on contract offers. Bird players can receive maximum-salary deals for up to five years, while the most a team can offer an Early Bird free agent without using cap space is 175% of his previous salary (up to the max) or 105% of the league-average salary in the previous season, whichever is greater.

These offers are also capped at four years rather than five, and the new contracts must run for at least two years — the second year can be non-guaranteed, but can’t be a team or player option.

Richaun Holmes (Kings), Danny Green (Sixers), Derrick Rose (Knicks), T.J. McConnell (Pacers), and Enes Kanter (Trail Blazers) are among the most notable free agents who will have Early Bird rights at the end of the 2020/21 season.

In some instances, teams can benefit from having Early Bird rights instead of full Bird rights if they’re trying to preserve cap space. The cap hold for an Early Bird player is 130% of his previous salary, significantly less than most Bird players, whose cap holds range from 150-300% of their previous salaries.

That could help a team like the Knicks, who project to have cap space in the 2021 offseason. The cap hold for Rose, who is earning $7.68MM this season, will be a shade under $10MM. His starting salary on a new deal could be higher than that.

If the Knicks reach an agreement to re-sign Rose near the start of free agency, they could wait to make it official, keeping his cap hold on the books until they use the rest of their cap room, maximizing that space. Then they could go over the cap to finalize Rose’s deal using the Early Bird exception.

However, having a player’s Early Bird rights instead of his full Bird rights puts a team at a disadvantage in other cases. For instance, when Christian Wood reached free agency last offseason, his Early Bird rights only allowed the Pistons to offer a starting salary of up to about $10.05MM, a figure the Rockets topped in their three-year, $41MM offer.

In order to match or exceed that number, Detroit would have had to use cap room — having Wood’s full Bird rights would’ve allowed the Pistons to make a far more substantial offer without cap space. The Kings could find themselves in a similar dilemma with Holmes this summer.

Meanwhile, some players with limited NBA experience are subject to a special wrinkle involving Early Bird rights, called the Gilbert Arenas Provision, which applies to players who have only been in the league for one or two years. We cover the Arenas Provision in a separate glossary entry, so you can read up on the details there. It would apply this offseason to a player like Lakers wing Talen Horton-Tucker.

Finally, one more distinction between Bird rights and Early Bird rights applies to waivers. Players who are claimed off waivers retain their Early Bird rights, just as they would if they were traded. Those who had Bird rights instead see those reduced to Early Bird rights if they’re claimed off waivers. This rule stems from a 2012 settlement between the league and the union in which J.J. Hickson was given a special exception and retained his full Bird rights for the summer of 2012 even though he had been claimed off waivers that March.

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 by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

The Bird exception, named after Larry Bird, is a rule included in the NBA’s Collective Bargaining Agreement that allows teams to go over the salary cap to re-sign their own players. A player who qualifies for the Bird exception, formally referred to as a Qualifying Veteran Free Agent, is said to have “Bird rights.”

The most basic way for a player to earn Bird rights is to play for the same team for at least three seasons, either on a long-term deal or on separate one- or two-year contracts. Still, there are other criteria. A player retains his Bird rights in the following scenarios:

1. He changes teams via trade. For instance, the Celtics will hold Evan Fournier‘s Bird rights when he reaches free agency this offseason, despite just acquiring him in March. His Bird clock didn’t reset when he was traded from Orlando to Boston.
2. He finishes a third season with a team after having only signed for a partial season with the club in the first year. The Heat signed Kendrick Nunn and Duncan Robinson during the final week of the 2018/19 season. When their contracts expire during the 2021 offseason, they’ll have full Bird rights because those few days they spent with Miami at the end of ’18/19 started their respective Bird clocks.
3. He signed for a full season in year one or two but the team waived him, he cleared waivers, and didn’t sign with another team before re-signing with the club and remaining under contract through a third season. This one’s a little confusing, but let’s use Glenn Robinson III as an example. Partway through his one-year contract with the Kings this season, Robinson was waived. He has yet to join a new team. If the Kings were to re-sign Robinson to a two-year contract in the offseason, without him joining a new team in the interim, they’d have his full Bird rights at the end of that deal.

A player sees the clock on his Bird rights reset to zero in the following scenarios:

1. He changes teams via free agency.
2. He is waived and is not claimed on waivers (except as in scenario No. 3 above).
3. His rights are renounced by his team. However, his Bird clock picks up where it left off if he re-signs with that team without having signed with another NBA team. For example, Bismack Biyombo had full Bird rights last offseason, then had those rights renounced by the Hornets as the team attempted to gain extra cap room. Since Biyombo eventually signed a new one-year deal with Charlotte, he’ll regain his full Bird rights this summer — that wouldn’t have been the case if he had signed with a new team.
4. He is selected in an expansion draft.

If a player who would have been in line for Bird rights at the end of the season is waived and claimed off waivers, he would retain only Early Bird rights. Meanwhile, a player with Bird rights who re-signs with his previous team on a one-year contract (or a one-year deal with a second-year option) would lose his Bird rights if he’s traded. As such, he receives the ability to veto trades so he can avoid that scenario.

[RELATED: Players with the ability to veto trades in 2020/21]

When a player earns Bird rights, he’s eligible to re-sign with his team for up to five years and for any price up to his maximum salary (with 8% annual raises) when he becomes a free agent, regardless of how much cap room the team has. The maximum salary varies from player to player depending on how long he has been in the league, but regardless of the precise amount, a team can exceed the salary cap to complete the deal.

A team with a Bird free agent is assigned a “free agent amount” or cap hold worth either 190% of his previous salary (for a player with a below-average salary) or 150% of his previous salary (for an above-average salary), up to the maximum salary amount. For players coming off rookie scale contracts, the amounts of those cap holds are 300% and 250%, respectively.

The Hawks, for instance, will have a cap hold worth $12,411,906 for John Collins on their 2021/22 books — 300% of his $4,137,302 salary for ’20/21. Atlanta could renounce Collins and generate an extra $12MM+ in cap flexibility, but the Hawks would then lose the ability to re-sign him using Bird rights, which would force them to use either cap room or a different cap exception to re-sign him. As such, it’s a safe bet that Atlanta will keep Collins’ cap hold on its books until his free agency is resolved.

Ultimately, the Bird exception was designed to allow teams to keep their best players. The CBA ensures that teams are always able to re-sign them to contracts up to the maximum salary, assuming the player is interested in returning and his team is willing to go over the cap.

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 by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

The poison pill provision isn’t technically a term that is 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 to an offer sheet, that team can include a massive third-year raise that is often referred to as a “poison pill.”

No current NBA contracts fit this bill, but the one Tyler Johnson signed in 2016 did — the Nets included a third-year raise in that four-year offer sheet. After the Heat matched, they had to deal with Johnson’s cap hit jumping from $5.88MM in the second year of his contract to $19.45MM in the third year.

However, the concept we’re focusing on today doesn’t involve Johnson, the Arenas provision, or RFA offer sheets. Instead, this second meaning of the “poison pill” relates to players who recently signed rookie scale extensions, something 10 players did in 2020.

The “poison pill provision” arises if a team extends a player’s rookie scale contract, then trades him before the extension officially takes effect. It’s not a situation that arises often, 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 start of the following league year (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 Kyle Kuzma as an example. Kuzma signed a three-year, $39MM rookie scale extension with the Lakers this year, which locks him up through the 2023/24 season, assuming he picks up his final-year player option. However, he’s only on the books for $3,562,178 in 2018/19.

If the Lakers sought to trade Kuzma this season, the poison pill provision would complicate their efforts. From Los Angeles’ perspective, Kuzma’s current-year cap hit ($3,562,178) would represent his outgoing salary for matching purposes. However, any team acquiring Kuzma would have to view his incoming value as $10,640,545 — that’s the annual average of the four years and $42,562,178 he has left when accounting for both his new and old contracts.

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 Kuzma and creating a $7MM+ discrepancy between how two trade partners account for him would make salary-matching much more difficult than usual, especially since so many teams this season are hovering around the luxury-tax and hard-cap thresholds.

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 the type of players that teams typically move, so it’s not as if guys like Jayson Tatum, Donovan Mitchell, Bam Adebayo, and De’Aaron Fox would be trade candidates this season anyway.

The poison poll provision further disincentivizes a deal involving one of those recently-extended players by complicating salary-matching rules, making those trades even rarer. In other words, even the players who could theoretically be available just months after signing rookie scale extensions, such as Kuzma or Clippers sharpshooter Luke Kennard, are unlikely to be dealt this season.

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 was published in 2012 and 2018. Photo courtesy of USA Today Sports Images.

Relying on the trade machines at ESPN.com or TradeNBA.com may be the simplest way for NBA fans to verify whether or not a trade will work under league rules, but it’s worth examining the primary tool in the NBA’s Collective Bargaining Agreement that determines a trade’s viability — the traded player exception.

Teams with the cap room necessary to make a trade work don’t need to abide by traded player exception rules. However, if a team makes a deal that will leave its total salary more than $100K above the salary cap, the club can use a traded player exception to ensure the trade is legal under CBA guidelines.

There are two different types of traded player exceptions used in NBA deals. One applies to simultaneous trades, while the other applies to non-simultaneous deals.

In a simultaneous trade, a team can send out one or more players and can acquire more salary than it gives up. In a non-simultaneous trade, only a single player can be dealt, and the team has a year to take back the equivalent of that player’s salary, plus $100K.

Let’s look into each scenario in greater detail….

Simultaneous:

In a simultaneous trade, different rules applies to taxpaying and non-taxpaying clubs. A non-taxpaying team can trade one or more players and take back….

1. 175% of the outgoing salary (plus $100K), for any amount up to $6,533,333.
2. The outgoing salary plus $5MM, for any amount between $6,533,333 and $19,600,000.
3. 125% of the outgoing salary (plus $100K), for any amount above $19,600,000.

Here’s a recent example of these rules in effect:

Read more

Gilbert Arenas hasn’t played in the NBA since 2012, but his legacy lives on in the NBA’s Collective Bargaining Agreement. The NBA introduced the Gilbert Arenas provision in the 2005 CBA as a way to help teams retain their restricted free agents who aren’t coming off standard rookie scale contracts.

While Arenas isn’t specifically named in the CBA, the rule colloquially known as the Arenas provision stems from his own restricted free agency in 2003. At the time, the Warriors only had Early Bird rights on Arenas, who signed an offer sheet with the Wizards starting at about $8.5MM. Because Golden State didn’t have $8.5MM in cap room and could only offer Arenas a first-year salary of about $4.9MM using the Early Bird exception, the Warriors were unable to match the offer sheet and lost Arenas to Washington.

The Arenas provision limits the first-year salary that rival suitors can offer restricted free agents who have only been in the league for one or two years. The starting salary for an offer sheet can’t exceed the amount of the non-taxpayer mid-level exception, which allows the player’s original team to use either the mid-level exception or the Early Bird exception to match it. Otherwise, a team without the necessary cap space would be powerless to keep its player, like the Warriors were with Arenas.

An offer sheet from another team can still have an average annual salary that exceeds the non-taxpayer’s mid-level, however. The annual raises are limited to 5% between years one and two, and 4.5% between years three and four, but a team can include a significant raise between the second and third years of the offer.

As long as the first two years of a team’s offer sheet are for the highest salary possible, the offer is fully guaranteed, and there are no incentives included, the third-year salary of the offer sheet can be worth up to what the player’s third-year maximum salary would have been if not for the Arenas restrictions.

Based on a projected three percent salary cap increase for 2021/22, here’s the maximum offer sheet a first- or second-year RFA could receive this coming summer:

In order to make the sort of offer outlined above, a team must have enough cap room to accommodate the average annual value of the contract. So a team with $21MM in cap space could extend this offer sheet to a first- or second-year RFA. But a team with only $17MM in cap space would have to reduce the third- and fourth-year salaries in its offer sheet to get the overall average salary of the offer down to $17MM per year, despite being able to comfortably accommodate the first-year salary.

The application of the Arenas provision is infrequent, since first- and second-year players who reach free agency rarely warrant such lucrative contract offers. First-round picks sign four-year rookie deals when they enter the NBA, so the Arenas provision generally applies to second-round picks or undrafted free agents whose first NBA contracts were only for one or two years.

The Arenas provision hasn’t been used for the last several offseasons. Based on our data, it was last relevant during the 2016 offseason, when multiple teams made use of the Arenas provision as they attempted to pry restricted free agents from rival teams.

One relevant example from that summer was Tyler Johnson‘s restricted free agency with Miami. The Heat had Early Bird rights on Johnson, who had only been in the NBA for two seasons. The Nets attempted to pry him away with an aggressive offer sheet that featured salaries of $5,628,000, $5,881,260, $19,245,370, and $19,245,370. It wasn’t the maximum that Brooklyn could have offered Johnson, but the massive third-year raise was a tough pill for Miami to swallow.

Overall, the deal was worth $50MM for four years. If the Heat had declined to match it, the Nets would have flattened out those annual cap hits to $12.5MM per year, the average annual value of the deal. However, due to the Arenas provision, Miami was able to match Brooklyn’s offer sheet with the Early Bird exception, even though the Heat wouldn’t have been able to directly offer Johnson a four-year, $50MM contract using the Early Bird exception.

When a team matches an Arenas-provision offer sheet, it also has the option of flattening those cap charges. However, that option is only available if the team has the cap room necessary to accommodate the average annual value of the deal. Otherwise, the club has to keep the unbalanced cap charges on its books. When Johnson’s cap hit for the Heat jumped from $5,881,260 to an eye-popping $19,245,370 in 2018/19, it became an albatross — the team eventually sent him to Phoenix in a salary-dump deal at the 2019 deadline.

This coming offseason, there aren’t many restricted free agents who will be candidates for an Arenas-provision offer sheet. A handful of intriguing RFAs-to-be, including Duncan Robinson, Devonte’ Graham, and Gary Trent Jr., were former second-round picks or undrafted free agents, but they’ll all have three years of NBA experience when they hit the open market, so the Arenas rule won’t apply to them.

The best candidate for an Arenas-provision offer sheet may be Lakers wing Talen Horton-Tucker, who turned heads during a strong preseason in December. However, Horton-Tucker’s regular season playing time has been limited and his production has been modest. Teams may be tempted to put pressure on the Lakers by presenting THT with an aggressive offer sheet, but unless he takes another major step forward, it’d be surprising to see him get a three- or four-year free agent offer worth more than the standard non-taxpayer’s MLE.

Finally, just because a club is given the opportunity to use the Arenas provision to keep its restricted free agent doesn’t mean it will necessarily have the means. Here are a few situations in which the Arenas provision wouldn’t help a team keep its restricted free agent:

• If a team only has the taxpayer mid-level exception or room exception available, it would be unable to match an offer sheet for a Non-Bird free agent if the starting salary exceeds the taxpayer mid-level or room exception amount.
• A team would be unable to match an offer sheet for a Non-Bird free agent if it uses its mid-level exception on another player, including another one of its own Non-Bird free agents. A team could use Early Bird rights to match if those rights are available, however.
• If the player is a Non-Bird or Early Bird free agent with three years of NBA experience, the Arenas provision would not apply — only players with one or two years in the league are eligible.

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, 2015, and 2018 by Luke Adams and Chuck Myron. Photo courtesy of USA Today Sports Images.

Gilbert Arenas hasn’t played in the NBA since 2012, but his legacy lives on in the NBA’s Collective Bargaining Agreement. The NBA first introduced the Gilbert Arenas provision in the 2005 CBA as a way to help teams retain their restricted free agents who aren’t coming off standard rookie scale contracts.

While Arenas isn’t specifically named in the CBA, the rule colloquially known as the Arenas provision stems from his own restricted free agency in 2003. At the time, the Warriors only had Early Bird rights on Arenas, who signed an offer sheet with the Wizards starting at about $8.5MM. Because Golden State didn’t have $8.5MM in cap room and could only offer Arenas a first-year salary of about $4.9MM using the Early Bird exception, the Warriors were unable to match the offer sheet and lost Arenas to Washington.

The Arenas provision, created to help avoid similar situations, limits the first-year salary that rival suitors can offer restricted free agents who have only been in the league for one or two years. The starting salary for an offer sheet can’t exceed the amount of the non-taxpayer’s mid-level exception, which allows the player’s original team to use either the mid-level exception or the Early Bird exception to match it. Otherwise, a team without the necessary cap space would be powerless to keep its player, like the Warriors were with Arenas.

An offer sheet from another team can still have an average annual salary that exceeds the non-taxpayer’s mid-level, however. The annual raises are limited to 5% between years one and two, and 4.5% between years three and four, but a team can include a significant raise between the second and third years of the offer.

As long as the first two years of a team’s offer sheet are for the highest salary possible, the offer is fully guaranteed, and there are no incentives included, the third-year salary of the offer sheet can be worth up to what the player’s third-year maximum salary would have been if not for the Arenas restrictions.

If we assume the salary cap for 2020/21 will remain unchanged ($109.141MM), the maximum offer sheet a first- or second-year RFA could receive this offseason would look like this:

In order to make the sort of offer outlined above, a team must have enough cap room to accommodate the average annual value of the contract. So a team with $21MM in cap space could extend this offer sheet to a first- or second-year RFA. But a team with only $17MM in cap space would have to reduce the third- and fourth-year salaries in its offer sheet to get the overall average salary of the offer down to $17MM per year.

The application of the Arenas provision is infrequent, since first- and second-year players who reach free agency rarely warrant such lucrative contract offers. First-round picks sign four-year rookie deals when they enter the NBA, so the Arenas provision generally applies to second-round picks or undrafted free agents whose first NBA contracts were only for one or two years.

One noteworthy example of the Arenas provision at work was Tyler Johnson‘s restricted free agency in 2016. The Heat had Early Bird rights on Johnson, who had only been in the NBA for two seasons. The Nets attempted to pry him away with an aggressive offer sheet that featured salaries of $5,628,000, $5,881,260, $19,245,370, and $19,245,370. It wasn’t the maximum that Brooklyn could have offered Johnson, but the massive third-year raise was a tough pill for Miami to swallow.

Overall, the deal was worth $50MM for four years. If the Heat had declined to match it, the Nets would have flattened out those annual cap hits to $12.5MM per year, the average annual value of the deal. However, due to the Arenas provision, Miami was able to match Brooklyn’s offer sheet with the Early Bird exception, even though the Heat wouldn’t have been able to offer Johnson a four-year, $50MM contract using the Early Bird exception outright.

When a team matches an Arenas-provision offer sheet, it also has the option of flattening those cap charges. However, that option is only available if the team has the cap room necessary to accommodate the average annual value of the deal. Otherwise, the club has to keep the unbalanced cap charges on its books. That’s why Johnson’s cap hit for the Heat jumped from $5,881,260 in 2017/18 to an eye-popping $19,245,370 in 2018/19, essentially turning the young guard from a good value to a salary-dump candidate overnight.

In 2020, there aren’t many restricted free agents who will be candidates for an Arenas-provision offer sheet. Top RFAs like Brandon Ingram and Bogdan Bogdanovic have four years of experience, so the rule won’t apply to them. The best candidate for an Arenas-provision offer sheet may be Grizzlies guard De’Anthony Melton, who emerged as an important rotation player in his second NBA season. But I’d be pretty surprised if Melton gets an offer worth more than the standard non-taxpayer’s MLE.

Finally, just because a club is given the opportunity to use the Arenas provision to keep its restricted free agent doesn’t mean it will necessarily have the means. Here are a few situations in which the Arenas provision wouldn’t help a team keep its restricted free agent:

• If the team only had the taxpayer mid-level exception or room exception available, it would be unable to match an offer sheet for a Non-Bird free agent if the starting salary exceeded the taxpayer mid-level or room exception amount.
• A team would be unable to match an offer sheet for a Non-Bird free agent if it used its mid-level exception on another player, including another one of its own Non-Bird free agents. A team could use Early Bird rights to match if those rights are available, however.
• If the player is a Non-Bird or Early Bird free agent with three years of NBA experience, the Arenas provision would not apply — only players with one or two years in the league are eligible.

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. Photos courtesy of USA Today Sports Images.