What are the different types of contract adjustments?

[Virgil]

One thing I've always been confused about it is the different ways current contract players can adjust their contract to help the team or themselves.

 

In what situation is a team/player allowed to rip up the old contract and make a new one?  Are their any restrictions to this?  Is this in the same fold as players taking a pay cut?  I would also think the NFLPA would intervene if players were taking less to help the team, as they need to protect all players at the position by establishing consistent market value salaries.

 

When a player converts their salary into bonus for the year, I'm pretty sure that total amount becomes prorated over the remainder of their contract.  It frees up money in the moment, but it kicks the can down the road and makes is a guaranteed dead money contract hit.  However, what if a player only has one year left on their deal, can this still be done?  Can you have dead money from a player who's contract is now expired?

 

I feel like my questions got lost in all of that, so let me put it like this:

 

1 - If Josh wanted to rip up his contract and sign a new, one year deal for 5 million dollars, is that even possible? 

2 - When a player takes a pay cut, is that essentially a new contract from scratch that doesn't have any penalties?

[BarleyNY]

1) Sure, it’s theoretically possible.  In such situations all of the money that has been paid but has not hit the cap must be accounted for.  That would hit immediately or in the following season if it is after 6/1.  The other issue with this particular contract is that he has guaranteed money through 2023 so there’s no way he or his agent would rip that contract up for less money. 
 

2) It depends on the structures of the old and new deals.  Also existing contracts can be amended.

 

Some things to know with respect to the term ”restructure”.  It can mean pretty much any change to a contract, but here’s a breakdown:

- A true restructure is conversion of salary and or roster bonus money to a signing bonus so that it can be spread over the remainder of a contract.  The player gets exactly the same amount of money and the team gets immediate cap relief.

- It can be a euphemism for a pay cut. It’s used as a face saving measure for a player that just took less money and often a shortened contract. 
- Addition of performance bonuses to a contract.  This is usually part of a pay cut that allows the player to earn back some or all of his decrease, but it can be added incentives for a player who is outperforming his contract and wants an increase.  It can be for hitting statistical benchmarks, games played, pro bowl, etc.

 

The golden rule of player contracts is that any money paid must be accounted for on the cap.  There is a minor exception for some vet minimum contracts that slightly reduce their hit, but it is a very minimal impact.  Also once paid signing bonuses are nearly impossible for teams to recoup.  Breach of contract lawsuits are really the only way.  If successful (which hasn’t happened yet) then that recouped money would come off of the cap. 
 

Hope that helps. 

[Hapless Bills Fan]

1 hour ago, Virgil said:

One thing I've always been confused about it is the different ways current contract players can adjust their contract to help the team or themselves.

 

In what situation is a team/player allowed to rip up the old contract and make a new one?  Are their any restrictions to this?  Is this in the same fold as players taking a pay cut?  I would also think the NFLPA would intervene if players were taking less to help the team, as they need to protect all players at the position by establishing consistent market value salaries.

 

When a player converts their salary into bonus for the year, I'm pretty sure that total amount becomes prorated over the remainder of their contract.  It frees up money in the moment, but it kicks the can down the road and makes is a guaranteed dead money contract hit.  However, what if a player only has one year left on their deal, can this still be done?  Can you have dead money from a player who's contract is now expired?

 

I feel like my questions got lost in all of that, so let me put it like this:

 

1 - If Josh wanted to rip up his contract and sign a new, one year deal for 5 million dollars, is that even possible? 

2 - When a player takes a pay cut, is that essentially a new contract from scratch that doesn't have any penalties?

 

I'm not sure exactly what you're asking in the two questions above.

 

A player can sign a new contract or revise an existing contract at any time.  There are no penalties for this.  However, provisions of the existing contract that have already been exercised must remain in place.  For example, Josh signed a contract incuding a $16.5M signing bonus which the Bills amortized over 5 years.  That $3.3M/year cap hit from the signing bonus would remain in place for any new contract he signed; the Bills were assigned a $6.7M cap hit in 2021 for Josh's previous amortized rookie signing bonus added to the new amortized signing bonus

 

The only restriction on signing a new contract is players on their first contract.  UDFA can't revise a contract until after their 2nd season, draft choices can't revise until after their 3rd season, and then there is a limit of 25% on salary increase per year.  Russ Wilson got majorly screwed by this.

 

A player can revise an existing contract to take a pay cut.  This happened with Mitch Morse, Vernon Butler, and Mario Addison last season.  The NFLPA has no business to intervene, because NFL salaries are not guaranteed and if the player perceives a benefit to themselves in taking that paycut, it's not in the player's benefit for the NFLPA to play "nanny".  For example, Butler took a $2M paycut last offseason, in exchange for having his $3M remaining salary guaranteed.  If he were cut, there is no guarantee another team would pay him his $1.7M roster bonus plus original $5M salary (and the NFLPA certainly couldn't require this), and if the new team did sign him for that but cut him at the end of August, there goes his $5M salary; there is no guarantee another team would pick him up or pay him more than vet minimum if they did.  So if Butler wants to take $2M less overall salary in exchange for $3M that is guaranteed to be paid, that's between him and the Bills.

 

Mario Addison "bet on himself" when he renegotiated a salary cut, by having the Bills remove his 2022 contract year so that he became a FA

 

Yes, a player can have a "void year" added onto their contract to stretch out the signing bonus.  This was the case for Emmanuel Sanders last season.  His signing bonus was amortized into this year giving the Bills a $1.375M dead cap hit while he's not under contract.

https://www.spotrac.com/nfl/buffalo-bills/cap/

 

 

[Hapless Bills Fan]

39 minutes ago, BarleyNY said:

The golden rule of player contracts is that any money paid must be accounted for on the cap.  There is a minor exception for some vet minimum contracts that slightly reduce their hit, but it is a very minimal impact.  Also once paid signing bonuses are nearly impossible for teams to recoup.  Breach of contract lawsuits are really the only way.  If successful (which hasn’t happened yet) then that recouped money would come off of the cap.

 

I'm pretty sure that several players who have retired, have repaid the portion of their signing bonuses that were amortized into or after the year they retired, as well as forfeiting salary guarantees.  Some examples here:

https://www.si.com/nfl/2019/06/02/calvin-johnson-lions-relationship-returned-signing-bonus

https://www.nfl.com/news/chris-borland-to-give-back-portion-of-signing-bonus-0ap3000000480571

 

Concern about being asked to do this if he 'retired' vs. was released due to injury, was the driver for Eric Wood's farcical "retirement" press conference which Ryan Fitzpatrick mercilessly  lampooned as not using the word "retiring", during the FredEx roast.    If such bonuses were impossible for teams to recoup, it would have been a non-issue for Wood.

[maddenboy]

24 minutes ago, Hapless Bills Fan said:

 

A player can sign a new contract or revise an existing contract at any time.  There are no penalties for this. 

 

Isnt there an exception to freedom-of-contract, where a player is franchise tagged and then he and the team have a time limit, after which they cannot enter into a new contract for that season?

[BarleyNY]

8 minutes ago, Hapless Bills Fan said:

 

I'm pretty sure that several players who have retired, have repaid the portion of their signing bonuses that were amortized into or after the year they retired, as well as forfeiting salary guarantees.  Some examples here:

https://www.si.com/nfl/2019/06/02/calvin-johnson-lions-relationship-returned-signing-bonus

https://www.nfl.com/news/chris-borland-to-give-back-portion-of-signing-bonus-0ap3000000480571

 

Concern about being asked to do this if he 'retired' vs. was released due to injury, was the driver for Eric Wood's farcical "retirement" press conference which Ryan Fitzpatrick mercilessly  lampooned as not using the word "retiring", during the FredEx roast.    If such bonuses were impossible for teams to recoup, it would have been a non-issue for Wood.

It has been a long time since it has happened.  There have been changes to the CBA since Megatron and Sanders had to pay back a portion of their signing bonuses.  The Eric Wood situation shows why it is nearly impossible for teams to recoup that money now.  As long as it’s injury related, the money isn’t recoverable.  Almost any player who’s played the game for any length of time can claim that.  So as long as one doesn’t screw up like Woods almost did it’s not happening.  

6 minutes ago, maddenboy said:

Isnt there an exception to freedom-of-contract, where a player is franchise tagged and then he and the team have a time limit, after which they cannot enter into a new contract for that season?

That is correct. 

[Hapless Bills Fan]

11 minutes ago, BarleyNY said:

It has been a long time since it has happened.  There have been changes to the CBA since Megatron and Sanders had to pay back a portion of their signing bonuses.  The Eric Wood situation shows why it is nearly impossible for teams to recoup that money now.  As long as it’s injury related, the money isn’t recoverable.  Almost any player who’s played the game for any length of time can claim that.  So as long as one doesn’t screw up like Woods almost did it’s not happening. 

 

Um, all respect, but I think this is a little contradictory. 

 

If Wood "almost screwed up" by having a presser and saying he was retiring, that implies that in fact, if he had screwed up and said he was retiring, Wood would (see what I did there?) have opened himself up to the money being recouped.

 

If it was "nearly impossible for teams to recoup that money", then it wouldn't matter if Wood said "Yo, I'm retiring!" to the press

[Virgil]

4 hours ago, BarleyNY said:

1) Sure, it’s theoretically possible.  In such situations all of the money that has been paid but has not hit the cap must be accounted for.  That would hit immediately or in the following season if it is after 6/1.  The other issue with this particular contract is that he has guaranteed money through 2023 so there’s no way he or his agent would rip that contract up for less money. 
 

2) It depends on the structures of the old and new deals.  Also existing contracts can be amended.

 

Some things to know with respect to the term ”restructure”.  It can mean pretty much any change to a contract, but here’s a breakdown:

- A true restructure is conversion of salary and or roster bonus money to a signing bonus so that it can be spread over the remainder of a contract.  The player gets exactly the same amount of money and the team gets immediate cap relief.

- It can be a euphemism for a pay cut. It’s used as a face saving measure for a player that just took less money and often a shortened contract. 
- Addition of performance bonuses to a contract.  This is usually part of a pay cut that allows the player to earn back some or all of his decrease, but it can be added incentives for a player who is outperforming his contract and wants an increase.  It can be for hitting statistical benchmarks, games played, pro bowl, etc.

 

The golden rule of player contracts is that any money paid must be accounted for on the cap.  There is a minor exception for some vet minimum contracts that slightly reduce their hit, but it is a very minimal impact.  Also once paid signing bonuses are nearly impossible for teams to recoup.  Breach of contract lawsuits are really the only way.  If successful (which hasn’t happened yet) then that recouped money would come off of the cap. 
 

Hope that helps. 

What about a player who has one year left on his deal for 20 mil?  If he restructures to a 18 mil signing bonus, does it all hit the same year or is it 9 this year and 9 next (even though he isn’t on the team or under contract anymore)

 

Also, when do performance incentives hit the cap?  Do they hit for full value?

 

Great answers btw, I appreciate it.  I don’t get lost in the contract weeds often 

[djp14150]

5 hours ago, Virgil said:

One thing I've always been confused about it is the different ways current contract players can adjust their contract to help the team or themselves.

 

In what situation is a team/player allowed to rip up the old contract and make a new one?  Are their any restrictions to this?  Is this in the same fold as players taking a pay cut?  I would also think the NFLPA would intervene if players were taking less to help the team, as they need to protect all players at the position by establishing consistent market value salaries.

 

When a player converts their salary into bonus for the year, I'm pretty sure that total amount becomes prorated over the remainder of their contract.  It frees up money in the moment, but it kicks the can down the road and makes is a guaranteed dead money contract hit.  However, what if a player only has one year left on their deal, can this still be done?  Can you have dead money from a player who's contract is now expired?

 

I feel like my questions got lost in all of that, so let me put it like this:

 

1 - If Josh wanted to rip up his contract and sign a new, one year deal for 5 million dollars, is that even possible? 

2 - When a player takes a pay cut, is that essentially a new contract from scratch that doesn't have any penalties?

you can create a new contract shifting contract amounts each year creating small values but then having a balloon payment due later.

 

In many contracts, only bonus money is guaranteed.  With a contract of another player that was sat 10M cap hit over 2 yrs.  They could restructure it turning salary into bonus money lowering the $10M hit to $5Mbut then pushing years on the contract to spread out the hit.

[BarleyNY]

7 hours ago, Hapless Bills Fan said:

 

Um, all respect, but I think this is a little contradictory. 

 

If Wood "almost screwed up" by having a presser and saying he was retiring, that implies that in fact, if he had screwed up and said he was retiring, Wood would (see what I did there?) have opened himself up to the money being recouped.

 

If it was "nearly impossible for teams to recoup that money", then it wouldn't matter if Wood said "Yo, I'm retiring!" to the press

My point is that players now have an easy out with the football related injury angle.  They still have to say the right things go through the proper process.  

[BarleyNY]

4 hours ago, Virgil said:

What about a player who has one year left on his deal for 20 mil?  If he restructures to a 18 mil signing bonus, does it all hit the same year or is it 9 this year and 9 next (even though he isn’t on the team or under contract anymore)

 

Also, when do performance incentives hit the cap?  Do they hit for full value?

 

Great answers btw, I appreciate it.  I don’t get lost in the contract weeds often 

This is where voidable years come into play.  Converting salary to a signing bonus in the last season of a contract would not change the cap hit - unless voidable years are added.  Then the prorated portion would be pushed out.  Some examples:

 

Player A signs a 1 year, $12M contract.  Typically the whole $12M cap hit stays in that season regardless of structure. Now let’s change the structure.  Add one voidable season and structure the contract with a $10M signing bonus and a $2M salary.  Now the cap hits are $7M in year 1 and $5M in year 2 (after the player is no longer on the team).

 

Now let’s look at this.  We add 3 voidable seasons to the contract.  $10M SB plus $2M salary.  Now the hits are $4.5M in Y1 and $7.5M in Y2.  This is because the $10M signing bonus is divided by 4 seasons at a rate of $2.5M/yr.  Y1 cap hit is $2.5M + $2M salary.  The next 3 seasons at $2.5M each accelerate to Y2.  An interesting thing about this is that if the player is extended before the league year ends then the prorated cap hits do not accelerate.  That only happens when the player is no longer under contract.

 

Keep asking questions if you have them.  I’m happy to help if anyone has more. 

[Kwai San]

I say @BarleyNY should be working in the Bills FO!

 

Thanks dude for the exceptional clarification!!!

[GunnerBill]

Golden Rule #1 - The Salary Cap is not a salary cap. It is an accounting cap. 

 

@BarleyNY has done a great job of explaining the ways it can be manipulated. 

[ProcessTruster]

Paying out the giant SB is what can change a great player into a fat, satisfied player.   Beane has been wise to minimize this.  

[Saxum]

22 hours ago, BarleyNY said:

The golden rule of player contracts is that any money paid must be accounted for on the cap.  There is a minor exception for some vet minimum contracts that slightly reduce their hit, but it is a very minimal impact.  Also once paid signing bonuses are nearly impossible for teams to recoup.  Breach of contract lawsuits are really the only way.  If successful (which hasn’t happened yet) then that recouped money would come off of the cap.

 

Not true but unfortunately teams do not want to deal with "bad press" initiate by agent leaks to shrills in media.

 

Barry Sanders was given at that time a large bonus for a new contract and before end of contract he decided to retire.

He did not want to repay back money to Lions so each year he would pay back portion of bonus back saying "I might unretire next year".

This allowed him to invest the money still owed to team.

Ironically given Buffalo News' paygate article is available.

https://buffalonews.com/news/sanders-must-repay-lions-sooner-instead-of-later/article_1a186417-00e8-5341-a6cb-e31d296dc86b.html

Quote

Sanders got an $11 million signing bonus when he signed a six-year contract with the Lions in 1997. He played just two years before startling the NFL by leaving football on the eve of last summer's training camp, just 1,458 yards shy of breaking Walter Payton's NFL career record of 16,726.

 

Kagel ruled in February that if Sanders stayed retired, Sanders must pay back one-sixth of the signing bonus for each year he fails to play under the contract's terms.

 

[BarleyNY]

57 minutes ago, Limeaid said:

 

Not true but unfortunately teams do not want to deal with "bad press" initiate by agent leaks to shrills in media.

 

Barry Sanders was given at that time a large bonus for a new contract and before end of contract he decided to retire.

He did not want to repay back money to Lions so each year he would pay back portion of bonus back saying "I might unretire next year".

This allowed him to invest the money still owed to team.

Ironically given Buffalo News' paygate article is available.

https://buffalonews.com/news/sanders-must-repay-lions-sooner-instead-of-later/article_1a186417-00e8-5341-a6cb-e31d296dc86b.html

 

I already addressed the Sanders situation.  Different CBA rules now.