FREE AGENCY
Free agency rules set players’ rights to join teams that want them. These rules are where many of the various CBA concepts come together, particularly for how the salary cap exceptions and a player’s compensation guide what a team can do to change its roster and the choices each player has to make about his future (where, of course, the CBA allows for choice).
Rookie Free Agent
A rookie can be classified for free agency as a Rookie Free Agent in these ways: (1) as a draft rookie that is no longer subject to the exclusive negotiating rights of any team or (2) as a non-draft rookie. Once a rookie becomes a Rookie Free Agent, he is effectively an Unrestricted Free Agent.
VETERAN FREE AGENT
Generally, a Veteran Free Agent is a veteran who has completed his player contract (other than a veteran finishing a 10-day contract). The CBA includes these different classifications for Veteran Free Agents:
Qualifying Veteran Free Agent (“Bird” Rights) — A Qualifying Veteran Free Agent is a veteran who, before he becomes a Veteran Free Agent, either (1) played with the same team for the 3 preceding seasons or (2) if he played for different teams, he was (a) traded (at any time), (b) acquired through the waiver procedures during the first of the 3 prior seasons, or (c) signed by his current team during the first of the 3 prior seasons.
Contract implications —
If the player is signing with his current team (with the team using what the media often refers to this as a team’s “Bird” rights because of the salary cap exception for re-signing its own players):
(i) he may get the maximum player salary;
(ii) his compensation can increase (or decrease) each season by 8% (instead of 5%); and
(iii) the contract can cover 5 years from the date it is signed.
Except for players who will complete their rookie scale contract, only a player that will be a Qualifying Veteran Free Agent at the end of his current contract may extend that contract (recall that one or two-year contracts cannot be extended anyways).
Example — Following the 2018-19 season, the Philadelphia 76ers had full Bird rights for Jimmy Butler (who played for the Chicago Bulls for 3 seasons, then was traded to the Minnesota Timberwolves, and then was traded again to the 76ers). Also following the 2018-19 season, the Golden State Warriors had full Bird rights for Kevin Durant. (Ultimately, neither the 76ers nor the Warriors were able to use the advantages of their Bird rights to keep those players.)
Early Qualifying Veteran Free Agent (“Early Bird” Rights) — An Early Qualifying Veteran Free Agent is a veteran who, before he becomes a Veteran Free Agent, either (1) played with the same team for the 2 preceding seasons or (2) if he played for different teams, he was (a) traded (at any time), (b) waived (at any time), or (c) signed by his current team during the first of the 2 prior seasons
Contract implications —
If the player is signing with his current team (with the team using its “Early Bird” rights because of the salary cap exception for re-signing its own players):
(i) he may get a salary up to the greater of (a) 175% of the player’s salary in the last season of the prior contract, or (b) 105% of the average player salary for the prior season;
(ii) his compensation can increase (or decrease) each season by 8% (instead of 5%); and
(iii) the contract must be for at least 2 seasons, not including any option year (and 4 years is the max length of the contract).
Example — Following the 2018-19 season, the Philadelphia 76ers had Early Bird rights for JJ Redick (who played for the 76ers during all of the 2017-18 and 2018-19 seasons). Note, following the 2017-18 season, the Warriors had Early Bird rights for Kevin Durant. But because Durant wanted to sign a one-year deal with a player option for the second year, the Warriors re-signed him without using their Early Bird rights. (Durant re-signed at a “discount” of $30 million, getting paid just under 30% of the salary cap for that year; he could have signed a “max” contract" of about $35 million, or 35% of the salary cap, given his 10+ years of service).
Non-Qualifying Veteran Free Agent — A Non-Qualifying Veteran Free Agent is a veteran that is not a Qualifying Veteran Free Agent or an Early Qualifying Veteran Free Agent.
Contract implications —
If the player is signing with his current team (with the team using its non-“Bird” rights because of the salary cap exception for re-signing its own players):
(i) he may get a salary up to the greater of (a) 120% of the player’s salary in the last season of the prior contract, (b) 120% of the player’s applicable minimum player salary for the current season, or (c) if the player is a restricted free agent, his qualifying offer amount; and
(ii) his compensation can increase (or decrease) each season by 5%.
If a team renounces a Veteran Free Agent, the player is no longer a Qualifying Veteran Free Agent, an Early Qualifying Veteran Free Agent, or a Non-Qualifying Veteran Free Agent. If renounced, the renouncing team can only re-sign that Veteran Free Agent using room, using the minimum player salary exception or by signing the player to a two-way contract.
unrestricted free agent
An Unrestricted Free Agent is a free agent that can sign with any team of his choice, without any other team being able to prevent the signing. This is because an Unrestricted Free Agent is not subject to a team’s Right of First Refusal (i.e., a team’s right to match another team’s offer to sign one of its players).
Restricted free agent
A Restricted Free Agent is a free agent whose current team has a right to match (called a Right of First Refusal) any other team’s offer to sign that player (called an Offer Sheet). Before the current team’s Right of First Refusal kicks in, the current team has to extend the player a specific offer mandated by the CBA (called a Qualifying Offer). Here’s how a player can become a Restricted Free Agent:
First Round Draft Picks — A first round draft pick will become a Restricted Free Agent if following the end of his rookie scale contract (where the team exercised its third and fourth year options) the team extends him a Qualifying Offer.
Other Players — Any other player (except for (i) a first round draft pick whose team did not exercise the third or fourth year option on that player’s rookie scale contract and (ii) a two-way player) will become a Restricted Free Agent if he is finishing a contract that ends after any of the player’s 3 initial seasons in the league and the team extends him a Qualifying Offer.
Two-Way Players — A two-way player (except for a first round draft pick whose team did not exercise the third or fourth year option on that player’s rookie scale contract) will become a Restricted Free Agent if (i) he is finishing his two-way contract, (ii) he was on the team’s active or inactive list for at least 15 days of the regular season in the last season covered by the two-way contract, and (iii) the team extends him a Qualifying Offer.
Qualifying offer
A Qualifying Offer is a team’s offer of a uniform player contract to a current player that makes the player a Restricted Free Agent. There are two types of Qualifying Offers: (1) a regular Qualifying Offer and (2) a Maximum Qualifying Offer. A player can accept one of these offers from its current team, but not both.
Regular Qualifying Offer —
Requirements — A regular Qualifying Offer is an offer (i) of a uniform player contract, (ii) covering 1 season, (iii) that provides the applicable compensation described below, (iv) that provides 100% compensation protection for lack of skill and injury or illness (with no individually negotiated conditions),* and (v) where 100% of that compensation is paid under the uniform player contract’s permitted payment schedule. (*The compensation protection requirement does not apply to players finishing a two-way contract.)
Applicable Compensation —
First Round Pick finishing a rookie scale contract — A first round pick’s salary in a regular Qualifying Offer must (generally) be an amount equal to his fourth year salary increased by the percentage called for in the rookie salary scale. But the CBA includes detailed exceptions to this general salary rule depending upon whether the first round pick meets one of the “starter criteria” in the fourth season of his rookie scale contract or averages one of the starter criteria over his third and fourth seasons. The “starter criteria” are: (i) starting 41 or more regular season games or (ii) playing 2,000 or more minutes in a regular season.
All other players subject to a Right of First Refusal — For all other players (other than two-way players described below), the salary in a regular Qualifying Offer must be the greater of (i) 125% of the player’s prior year’s salary, or (ii) the player’s applicable minimum player salary plus $200,000.
Maximum Qualifying Offer —
Requirements — In addition to making a regular Qualifying Offer, a team can also make a “Maximum” Qualifying Offer to a first round pick after the second option year of his rookie scale contract that (i) covers five seasons, (ii) provides for the applicable maximum annual salary, and (iii) includes annual salary increases of 8%.
Other Compensation Rules — A Maximum Qualifying Offer (i) may only include base compensation (with no bonuses of any kind), (ii) cannot include an option or early termination option, and (iii) must provide 100% compensation protection in each season for lack of skill and injury or illness (with no individually negotiated conditions).
Two-Way Player Qualifying Offers —
If a two-way player is just finishing a one-year deal, then the salary in a regular Qualifying Offer must be the two-way salary for the next salary cap year with $50,000 in compensation protection for lack of skill and injury or illness (with no individually negotiated conditions).
If a two-way player is finishing a two-year deal (or two consecutive one-year deals with the same team) or for players who are not eligible to sign another two-way contract (i.e., because of the player’s years of service), then the salary in a regular Qualifying Offer must be the applicable minimum player salary (with no bonuses of any kind) and compensation protection for lack of skill and injury or illness (with no individually negotiated conditions) equal to the G league portion of the two-way salary for the next salary cap year.
Timing — A team can withdraw a Qualifying Offer (regular or maximum) on or before July 13 without a player’s consent. If it’s not withdrawn by then, the player has until October 1 to accept it and the Qualifying Offer may only be withdrawn with his consent. A player cannot accept a Qualifying Offer after October 1 unless the team (before October 1) extended the time for him to accept it.
offer sheet
An Offer Sheet is an agreement between a Restricted Free Agent and any team that’s not their current team. The Offer Sheet must be completed in the format attached to the CBA as Exhibit G and signed by both the Restricted Free Agent and the new team. The Offer Sheet will (literally) have a uniform player contract attached to it, and separately specify the “principal terms” and the “non-principal terms”. The player’s current team (the “Right of First Refusal” team) does not have to match “non-principal terms.”
Offer Sheet’s Principal Terms:
Seasons covered —
General rule — The term of the Offer Sheet must be at least 2 seasons (not including any option year)
Exception — However, if the Right of First Refusal team has made both a regular Qualifying Offer and a Maximum Qualifying Offer to the player, then the term of the Offer Sheet must be at least 3 seasons (not including any option year)
The fixed compensation that the new team will pay as a signing bonus, current base compensation, or deferred base compensation (including specific installments on specific dates)
Bonuses that qualify as likely bonuses and generally recognized league honors (even if not a likely bonus given the player’s prior performance)
Any allowable amendments to a uniform player contract (e.g., compensation protection or a trade bonus)
Offer Sheet’s Non-Principal Terms: Anything that is not listed as a principal term is a non-principal term. While the Right of First Refusal team does not have to match an Offer Sheet’s non-principal terms, these terms will be included in the player’s contract with the new team if the current team does not exercise its Right of First Refusal.
Right of first refusal
A team has the right to “match” any Offer Sheet that another team extends to its Restricted Free Agents that the player wants to accept. This ability to match the other team’s Offer Sheet is called a Right of First Refusal. In order to match an Offer Sheet, the Right of First Refusal team generally must have room, a veteran free agent exception, or a minimum player salary exception.
Timing — A team must exercise its Right of First Refusal by 11:59 P.M. (Eastern Time) on the second day after it receives the other team’s Offer Sheet. Otherwise, its matching rights expire and the player’s agreement with the new team becomes binding. (If the Offer Sheet is signed during the Moratorium Period, the team has until 11:59 P.M. (Eastern Time) on July 8 to match it.)
Trade Limitations — After exercising a Right of First Refusal, the team cannot trade that player for one year without the player’s consent. Even with the player’s consent, he cannot be traded to the team whose Offer Sheet was matched for one year.
Relinquishing — A team can give up its Right of First Refusal at any time, except during the period where the player may accept a Qualifying Offer. If it does give up this right, then the player immediately becomes an Unrestricted Free Agent.
Exception — There are times when a Restricted Free Agent with one or two years of service — meaning, the player is good, but is not finishing a rookie scale contract — receives an Offer Sheet that his current team, somewhat unfairly, could not match using room, a veteran free agent exception, or a minimum player salary exception. The CBA, through what’s known as the “Gilbert Arenas provision,” permits this team to use the non-taxpayer mid-level salary exception to match these Offer Sheets, effectively by limiting the salary that can be offered by new teams to the amount of this exception.
NEGOTIATING RIGHTS WITH DRAFT ROOKIES
Once a team drafts a player, they have exclusive negotiating rights with that draft pick between that draft and the next draft. But a team can lose its exclusive negotiating rights if it (i) fails to timely make a required tender, (ii) withdraws the required tender (which withdrawal requires the player’s consent), (iii) renounces the player, or (iv) fails to sign the player before the next draft.
Subsequent Drafts — If a team makes a required tender to a draft pick, but the player does not sign with the team before the next draft, then the drafting team loses its exclusive negotiating rights and the player is eligible for the next draft.
If the same thing happens in the next draft (the drafting team makes a required tender but the player does not sign with that team), the player becomes a Rookie Free Agent.
Assume the same thing happens in the next draft but the player is not actually drafted in the next draft, then the player becomes a Rookie Free Agent.
Second Round Picks — If a second round pick signs a required tender and then is waived by the team, then the team still retains the exclusive rights to sign or convert that second round pick to a two-way contract.
MORatorium period
The Moratorium Period is a quiet period at the beginning of each salary cap year. The moratorium period begins at 6 pm (eastern) on June 30* and ends at noon (eastern) on July 6. Teams and players can negotiate during the moratorium period, but only the following deals can be entered into during this quiet period:
A player can accept any outstanding (i) required tender, (ii) Qualifying Offer, or (iii) “Maximum” Qualifying Offer.
A player and a team can enter into (i) an Offer Sheet, (ii) a rookie scale contract with a first round draft pick, and (iii) a contract covering 1 or 2 seasons that only provides (for each season covered by the contract) the two-way salary or the applicable minimum player salary.
A team can (i) exercise a two-way contract’s “standard NBA contract conversion option” and (ii) for contracts with an Exhibit 10, exercise that contract’s “two-way player conversion option.”
*The moratorium period used to begin at 12:01 am (eastern) on the next day (July 1), but the NBA and the players association agreed to change that in May of 2019. There was just no good reason to start free agency at midnight.