Hoops Rumors Glossary

The NBA’s annual free agent frenzy begins each July 1st, but most of the deals that happen as July begins can’t become official until a little more than a week passes. The league office uses this period of time, known as the July Moratorium, to complete its audit, which establishes figures like the salary cap, luxury tax threshold and average salary. Free agents are allowed to negotiate with clubs during the moratorium, and they can agree to terms on new contracts, but they are unable to officially sign new deals until the moratorium ends.

The specific dates vary from season to season, but for 2015, the moratorium will last from July 1st to July 8th. As of July 9th, teams can resume business as usual. Still, it’s an odd time for the league to bar formal moves, as teams cut deals during the moratorium at a faster pace than at any other time during the year, even though they can’t file the paperwork. Most agreements made during the moratorium usually withstand the time that passes before they can be consummated, but the moratorium nonetheless leads to awkward situations in which teams can agree to landmark signings and trades but can’t say much about them until days later.

Usually, a deluge of formal announcements follows the end of the moratorium as teams get caught up, though that wasn’t the case in 2014. Much of the league hung on the free agency of LeBron James, until James finally gave word of his choice to rejoin the Cavaliers on July 11th, after the moratorium had already ended. An unusually languid July quickly descended into the usual chaotic deal-making for the next few days, though in this case, it was unencumbered by the moratorium.

Still, there was some business that teams had already accomplished by that point. A few types of signings and acquisitions are permitted during the moratorium. A first-round draft pick can sign a rookie scale contract with the team that drafted him. A second-round draft pick can accept a required tender, which is a one-year, non-guaranteed contract offer for the minimum salary that allows the team to retain its rights to the player. A restricted free agent can accept a qualifying offer from his team. A free agent can sign a minimum-salary contract for one or two seasons. Also, teams are able to claim players off waivers, providing they were waived during the final two days in June.

When the July moratorium ends, all free agents can officially sign contracts. Additionally, the new salary cap figures for the year take effect, and the seven-day period for using the amnesty clause begins.

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 initially published on May 16th, 2012, May 13th 2013 and June 18th, 2014.

Early termination options were a factor in 2014, when LeBron James, Carmelo Anthony, Chris Bosh and Dwyane Wade all exercised the early termination options in their contracts to hit free agency. In 2015, this sort of option is largely a vestige of rules from previous collective bargaining agreements. Thaddeus Young and Jared Dudley are the only players with early termination options for 2015/16, and only Deron Williams and Carmelo Anthony have contracts that include this type of option for any subsequent season.

Early termination options, or ETOs, are opportunities for players to free themselves from their contracts before they run to term, as the name suggests. They’re essentially player options, but with a few tweaks. They were originally designed to give players a second chance to escape from their deals, since player options can only cover one season. That’s why James, Bosh and Wade all had early termination options for 2014/15 and player options for 2015/16 as part of the contracts that they opted out of in 2014. All three signed under the previous collective bargaining agreement, just like Dudley and Young. The existing collective bargaining agreement prevents deals from running longer than five seasons, and since early termination options may only be included in five-year pacts, a contract can no longer contain both an ETO and a player option.

That ETOs are only allowed in five-year deals also means that most of the players who will hold ETOs from now on will be marquee names, since few others sign deals that cover five seasons. Going forward, ETOs will be exclusively for free agents who re-sign with their teams via Bird rights, since there’s no other way to obtain a five-year contract in the current collective bargaining agreement. That was the case with Anthony when he re-signed with the Knicks in 2014 and with Williams in 2012, when he was the most sought-after free agent on the market before re-upping with the Nets. Both signed their contracts under the current collective bargaining agreement rules.

Perhaps one of the most notorious ETOs belonged to Dwight Howard. Now, he doesn’t have an ETO in his contract with the Rockets, and he couldn’t have received one anyway, since he signed it under the existing collective bargaining agreement and changed teams as he did so. His previous contract contained one, but when the 2012 trade deadline came and rumors swirled about his future with the Magic, he formally agreed not to exercise it, thus giving up the chance to hit free agency that summer. It was an odd move, in part because players with ETOs don’t have to tell the league or their teams that they’re not going to use them. They can simply keep silent on the matter through the option deadline, which is June 29th unless the team and player negotiated an earlier date, and remain under contract. Players with ETOs only have to give notice by the option deadline if they’re using them to opt out. The opposite is true with player options; those who have player options and want to remain under contract have to say so by the option deadline. Otherwise, they become free agents.

ETOs allow teams and players slightly more room for negotiation than standard player options do, since the salary in a player option year can’t be any lower than in the previous season. There’s no such rule with an ETO, so players can have their contracts front loaded, with an ETO season at a reduced salary around as insurance against an injury or decline in play. If the player is still performing at a high level after four seasons, he can exercise the early termination option to hit free agency and seek another lucrative contract. Teams may also benefit from this rule, similarly using the cheaper fifth season as protection against a drop-off in the player’s production. Still, no existing contract with an ETO is structured this way.

A player who signs a deal with a trade kicker stands to benefit if the contract also includes an early termination option. A trade kicker is a bonus that a player receives when he’s traded, and it’s usually equal to a percentage of the money remaining on the deal. Standard player option seasons don’t count toward trade kickers, but seasons covered by ETOs do.

Another difference between player options and ETOs rarely comes into play. If a player opts out using a standard player option, he can still sign an extension before hitting free agency. That’s not the case with ETOs. However, most players make formal decisions on these options not long before becoming free agents, leaving little time to negotiate extensions. Veteran extensions usually aren’t beneficial to players under the current collective bargaining agreement anyway, so there’s little incentive to choose a player option over an ETO just to gain more flexibility in signing an extension.

ETOs probably won’t disappear completely from the NBA landscape, as the deals Williams and Anthony signed proved that there are still circumstances in which they’re desirable in the NBA’s current landscape. Yet unless rules change during the next labor negotiations, don’t expect to see too many of these options.

Here’s a look at the only early termination options in existence as of May 2015:

Thaddeus Young, Nets — $10,221,739 for 2015/16
Jared Dudley, Bucks — $4.25MM for 2015/16
Deron Williams, Nets — $22,331,135 for 2016/17
Carmelo Anthony, Knicks — $27,928,140 for 2018/19

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

An earlier version of this post appeared on March 11, 2014.

The minimum salary exception is something of a last resort for capped-out teams seeking to add players, as well as for players seeking NBA contracts, but it’s the most commonly used cap exception. It allows an over-the-cap team to sign a player to a one- or two-year minimum-salary deal, as the name suggests. Teams can use the exception multiple times, allowing clubs that have spent all of their other exceptions an avenue to add to their rosters. It also allows for the acquisition of minimum-salary players via trade, and players signed via the minimum salary exception don’t count as incoming salary for salary-matching purposes.

Players are entitled to varying minimum salaries based on how long they’ve been in the NBA. In 2014/15, a player with no prior NBA experience was eligible for a $507,336 minimum salary, while a player with 10 or more years of experience was eligible for $1,448,490. Over the course of the current collective bargaining agreement, the minimum salary will increase each season, as Larry Coon’s CBA FAQ outlines. For 2015/16, the breakdown is as follows:

Years of experience — minimum salary
0 — $525,093
1 — $845,059
2 — $947,276
3 — $981,348
4 — $1,015,421
5 — $1,100,602
6 — $1,185,784
7 — $1,270,964
8 — $1,356,146
9 — $1,362,897
10 or more — $1,499,187

The numbers demonstrate the wide disparity between the minimum salary for rookies and for long-tenured players. A minimum-salary veteran of 10 or more seasons will earn almost three times as much as a rookie making the minimum next season. The NBA doesn’t want clubs to shy away from signing qualified veterans, so the league reimburses teams for a portion of a minimum-salary player’s cost if he has two or more years of experience, as long as the contract is a one-year deal. For instance, when the Wizards re-signed 12-year veteran Drew Gooden to a one-year deal for 2014/15 using the minimum salary exception, the contract called for a salary of $1,499,187, but the team’s cap hit was just $947,276. The league reimburses the Wizards for the remaining $551,911.

Most salary cap exceptions can only be used once each season. When a team uses its full mid-level exception to sign one or more players, the club can no longer use that exception until the following season. Unlike the mid-level and other cap exceptions, the minimum salary exception can be used any number of times in a single season. The Nets, for example, used the minimum salary exception to sign five players who ended the 2014/15 season on the team’s roster.

The vast majority of 10-day contracts are for the minimum salary, and often the minimum salary exception is the only way for clubs to accommodate any 10-day deals. Teams used the minimum salary exception to sign 48 players to 10-day contracts during the 2014/15 season.

Many exceptions begin to prorate on January 10th, but the minimum salary exception prorates from the first day of the regular season. Teams often take advantage of this to sign players for cheap at the end of the season primarily so they can use them to help salaries match in a trade over the summer, since minimum-salary players do count as outgoing salary for matching purposes.

For example, the Kings signed David Stockton on the fourth day from the end of the 2014/15 regular season. The Kings used the minimum salary exception to sign Stockton to a two-year contract that covered the final four days of the 2014/15 season and all of 2015/16. The 2015/16 portion is non-guaranteed, so the only guaranteed money in the deal was Stockton’s prorated minimum salary, equal to 4/170ths of $507,336. Stockton faces an uphill battle to make the Kings opening-night roster in 2015/16, but if the Kings make a trade over the summer, they can include Stockton’s contract as part of the swap to make the salaries match, allowing the team that acquires Stockton to do the same in another trade or simply waive his non-guaranteed contract at no cost before the 2015/16 season begins. The Kings didn’t necessarily sign Stockton with the idea of trading him, but the minimum salary exception gives the team plenty of flexibility to do so.

Earlier versions of this post appeared on May 7th, 2012, April 28th, 2013 and June 10th, 2014.

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.

The most common method over-the-cap teams use to sign free agents from other teams is the mid-level exception, but it’s not the only tool those clubs can use to squeeze an extra player onto the payroll. The biannual exception is a way to sign a player who commands more than the minimum salary and less than the mid-level.

As its name suggests, the biannual exception can only be used every other year. Even if a team uses only a portion of the exception, it becomes unavailable the following year.

The biannual exception is available only to limited number of clubs, even among those that didn’t use the biannual the season before. Teams with player salaries, cap holds and cap exceptions that add up to less than the salary cap lose their biannual exception, as well as their full mid-level exception and any trade exceptions. Additionally, teams lose access to the biannual exception when they go more than $4MM over the tax threshold, exceeding what’s known as the tax apron. So, only teams over the cap but under the tax apron can use the biannual exception.

If a team uses all or part of the biannual exception, it triggers a hard cap for that season. Clubs that sign a player using the biannual can’t go over the tax apron at any time during the season in which the contract is signed.

The biannual exception provides for a starting salary of $2.139MM in 2014/15. That’s approximately 3% greater than the starting salary in a biannual deal this past season, and the starting salary of the biannual exception will continue to rise by about 3% each year under the collective bargaining agreement. A biannual contract can be for either one or two seasons, with a raise of 4.5% for the second season. Teams also have the option of splitting the exception among multiple players, though that happens much less frequently than it does with the mid-level exception, since a split biannual deal wouldn’t entail much more than the minimum salary. The biannual exception starts to pro-rate on January 10th.

Five teams used the biannual exception in 2014/15, the same number of teams that spent it in 2013/14. The Spurs had the biannual available for use last summer when they gave Aron Baynes a one-year contract equivalent to the value of the starting salary for a biannual deal, but San Antonio used part of its mid-level instead, preserving the chance to use the biannual again this year. Here’s a list of each team that used the biannual for 2014/15 and the players to whom they committed it:

• Rockets — Josh Smith
• Clippers — Jordan Farmar
• Grizzlies — Beno Udrih
• Trail Blazers — Steve Blake
• Kings — Ramon Sessions

Those five teams are ineligible to sign a player via the biannual in 2015/16. That’s true for Houston even though Smith only signed a one-year contract, for Portland even if Blake opts out, for the Clippers and Kings even though Farmar and Sessions are no longer with those respective teams, and Memphis even if it waives Udrih’s partially guaranteed deal.

Earlier versions of this post appeared on April 23rd, 2012, May 1st, 2013 and May 27th, 2014.

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.

The mid-level exception is the most common way for NBA teams that are over the salary cap to sign free agents from other clubs. Teams can make use of the mid-level every season, and they can split it among multiple players. Different mid-level exceptions apply based on a team’s proximity to the cap.

The most valuable kind of mid-level exception is available to teams that are over the cap but less than $4MM above the tax threshold. Still, clubs deep into the tax, and even those under the cap, have access to less lucrative versions of the mid-level. Here’s a glance at how all three forms of the exception are structured:

For teams with cap room:

• Commonly called the room exception
• Contract can cover no more than two seasons
• First-year salary is worth $2,814,000 for 2015/16

For over-the-cap teams:

• Commonly called either the full mid-level exception or the non-taxpayer’s mid-level exception
• Contract can cover up to four seasons
• First-year salary is worth $5,464,000 for 2015/16
• Once used, the team cannot surpass the “tax apron” ($4MM 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 $3,376,000 for 2015/16

Each form of the mid-level allows for annual raises of up to 4.5% of the value of the first season’s salary. So, here are the maximum amounts a free agent could receive this summer under each of the three forms of the mid-level exception:

Room Exception

• 2014/15: $2,814,000
• 2015/16: $2,940,630
• Total: $5,754,630

Non-Taxpayer’s MLE

• $5,464,000
• $5,709,880
• $5,955,760
• $6,201,640
• Total: $23,331,280

Taxpayer’s MLE:

• $3,376,000
• $3,527,920
• $3,679,840
• Total: $10,583,760

Few teams used the mid-level to give out contracts for as much as they could and for as many years as they could to any single player in 2014/15. Spencer Hawes (non-taxpayer’s), Bojan Bogdanovic (taxpayer’s), Kirk Hinrich (room), Mike Miller (room), Jameer Nelson (room) and Udonis Haslem (room) were the only players to sign for the full values of the various mid-level exceptions this past 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 and the Basketball Insiders salary pages were used in the creation of this post.

Earlier versions of this post appeared on April 24th, 2012, May 10th, 2013 and May 11, 2014.

Players and teams have to meet certain criteria to earn Bird rights and Early Bird rights, but Non-Bird rights are something of a given. They apply to players who’ve spent a single season or less with their teams, as long as they end the season on an NBA roster. Teams can also claim Non-Bird rights on Early Bird free agents if they renounce them. The primary utility in doing so would be so that the team could sign the free agent to a one-year contract, a move that’s not permitted via Early Bird rights.

Teams are permitted to sign their own free agents using the Non-Bird exception for a salary starting at 120% of the player’s previous salary or 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 4.5% 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, which in 2015/16 is $947,276.

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 isn’t enough to retain a well-regarded free agent. For instance, the Pacers have Non-Bird rights with Rodney Stuckey, who signed a one-year, minimum salary contract with the team in the summer of 2014 after having spent several years with the Pistons. Indiana can only use Non-Bird rights to sign him for 120% of the 2015/16 minimum salary without dipping into cap space or another exception. Stuckey was the third-leading per-game scorer for the Pacers this season, so it’s reasonable to suspect that he’s in line for a heftier raise than his Non-Bird rights can provide.

Non-Bird rights might not be of help to the Pacers and Stuckey, but there are cases in which the exception proves useful. Josh Smith signed a $2.077MM deal for the rest of the season to join the Rockets in December after the Pistons waived him. Houston can offer up to $2,492,400 for 2015/16, 120% of his 2014/15 salary, without using cap space or another exception. Smith will already be raking in more than $5MM from his stretched Pistons contract and he and the Rockets have mutual interest in a new deal. A Non-Bird signing would probably come in below market value for Smith, but the forward would still see a healthy NBA income and allow the Rockets to preserve other mechanisms for adding players in their quest for a title.

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 appeared on April 20th, 2012, April 26, 2013 and June 16th, 2014.

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. Still, there are other salary cap exceptions available for teams to keep players who don’t qualify for Bird rights. One such exception is the Early Bird, available for players formally known as Early Qualifying Veteran Free Agents.

The Bird exception is for players who’ve spent three seasons with one club without changing teams as a free agent, but 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.

The crucial difference between Bird rights and Early Bird rights involves the limits 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 is 175% of his previous salary or 104.5% 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.

Another 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’d been claimed off waivers that March.

Teams can benefit from having Early Bird rights instead of full Bird rights when 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, who take up either 150% or 190% of their previous salaries.

One example of a player who will have Early Bird rights this summer is DeMarre Carroll of the Hawks. Carroll is coming off the second season of a two-year deal with Atlanta after having finished the season before with Utah. The Hawks can use the Early Bird exception this summer to re-sign him, and it’s likely that this season’s average salary, which will probably come close to $6MM based on the average salary in the past few years, will exceed 175% of his salary of a little more than $2.442MM from this year. The Hawks will have to weigh retaining his Early Bird rights against the chance to renounce them if they open up cap space this summer, since they have only about $39MM in guaranteed salary against a projected $67.1MM cap for next season.

A special wrinkle involving Early Bird rights, called the Gilbert Arenas Provision, applies to players who’ve only been in the league for one or two years. We covered the Gilbert Arenas Provision in another glossary entry.

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 appeared on April 19th, 2012, April 24th, 2013 and June 3rd, 2014.

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 multiyear deal or separate one-year contracts. Still, there are other, more complicated criteria. A player retains his Bird rights in the following scenarios:

1. He changes teams via trade. For instance, Alexey Shved is in the third year of his contract. He has been traded three times since August, from the Timberwolves to the Sixers, the Sixers to the Rockets and the Rockets to the Knicks, but he still has his Bird rights because he hasn’t been waived.
2. He finishes a third season with a team after having only signed for a partial season with the club in the first year. If Chris Andersen‘s contract were expiring at season’s end, he would have Bird rights this summer, even though he joined the Heat on a 10-day contract in 2012/13.
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 for a third year and remaining under contract through the season. If the Hornets re-sign Jannero Pargo this summer and he remains with the team for all of 2015/16, he’ll have Bird rights even though he cleared waivers from the team earlier this season.

However, 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 rights are restored if he re-signs with that team without having signed with another NBA team. The Hornets renounced Pargo’s rights in 2013 and 2014, but he’d still be in line to become a Bird player in the summer of 2016.
4. He is selected in an expansion draft.

If a player is waived and claimed off waivers, and he would have been in line for Bird rights at the end of the season, he would retain only Early Bird rights, unless he was waived via the amnesty provision.

When players earn Bird rights, they’re eligible to sign maximum-salary contracts for up to five years with 7.5% annual raises when they become free agents. The maximum salary will vary for each player depending on how long he’s been in the league, but regardless of the amount, a team can exceed the salary cap to complete the deal.

Although the Bird exception allows teams to exceed the cap, a team cannot necessarily use free cap room to sign free agents and then re-sign its own players via Bird rights. 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 250% and 200%, respectively.

The Trail Blazers, for instance, will have a cap hold of nearly $10.868MM for Wesley Matthews on their 2015/16 books — 150% of his more than $8.775MM salary this season. Portland could renounce Matthews and clear that $10.868MM in cap space, but the Blazers would lose his Bird rights if they did that. That would force them to use either cap room or a different cap exception to re-sign him.

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 was used in the creation of this post.

Versions of this post were initially published on April 17th, 2012, and May 2, 2013, and April 24th, 2014.

The Spurs have committed only about $34.2MM in guaranteed money to player salaries for 2014/15, but that doesn’t mean the team will have more than $30MM to spend on free agents against the projected $67.1MM salary cap. Each of San Antonio’s own free agents will be assigned a free agent amount or “cap hold” until the player signs a new contract or the Spurs renounce his rights.

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

• First-round pick coming off rookie contract: 250% of previous salary if prior salary was below league average; 200% of previous salary if prior salary was above league average
• Bird player: 190% of previous salary (if below 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.

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. Kawhi Leonard, Aron Baynes and Cory Joseph are the Spurs who are set for restricted free agency this summer. Leonard and Joseph are former first-round picks coming to the end of their rookie scale contracts, and their salaries this year are below the league average. (The average salary isn’t known until the season is complete, but the average has come between $5MM and $6MM the past several years, and neither Leonard nor Joseph makes as much as $3MM this year.) Their qualifying offers aren’t greater than 250% of their salaries, so their cap holds are about $7.235MM for Leonard and about $5.085MM for Joseph. Baynes, who makes $2.077MM, is a Bird free agent, and his qualifying offer isn’t more than 190% of his salary, so his cap hold will be a little more than $3.946MM.

Still, for a player like Leonard in line for a significant raise, the cap hold actually gives his team a greater measure of flexibility than a lucrative new contract would, since the hold is based on his previous salary and not what he’ll be making next. That’s reportedly why the Spurs turned away Leonard’s extension push, as San Antonio sought to preserve its ability to offer the max to other top-level free agents, like Marc Gasol and LaMarcus Aldridge.

No cap hold can exceed the maximum salary for which a player can sign. That’s why Aldridge’s cap hold will be less than 150% of his salary for the Blazers this season even though the Blazers hold his Bird rights. The maximum salary for a player with Aldridge’s experience is projected to come in at about $18.96MM, not much more than his current salary of $16.256MM.

The Clippers have an even more unusual case in Austin Rivers, who was traded twice this season. The Clips have his Bird rights, but the Pelicans declined the fourth year team option on his rookie scale contract before the season, so the Clippers can’t pay him more than what he would have made in the option year. That rule is in place so a team can’t circumvent the rookie scale and decline its option so it can give the player a higher salary, and it applies even if the player is traded after the option is declined, as in the case of Rivers.

If a team holds the rights to fewer than 12 players, cap holds worth the minimum rookie salary ($525,093) are assigned to fill out the roster. So, if a team chose to renounce its rights to all of its free agents and didn’t have anyone under contract, the team would have 12 holds worth $525,093 on the cap, reducing its total cap space by about $6.3MM.

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 instance, since Roshown McLeod never signed elsewhere after reaching free agency after the 2001/02 season, and the Celtics have never renounced him, Boston still has a minimum salary hold for McLeod on its cap. It’s been so many years since the Celtics have gone under the cap that there’s been no reason for them to renounce their rights to players who retired long ago. Keeping those cap holds allows the Celtics 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 cap teams.

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 its rights to its 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.

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.

Versions of this post were initially published on May 1st, 2012 and May 1st, 2014.