Rookie Contract Structures

This is the first post in our CBA Basics Series. Each CBA Basics Series post will introduce a topic from the CBA and distill it down to its essential elements. Today we will discuss Rookie Contract Structures.

Under the old CBA (prior to the current CBA which took effect for the 2011 league year), highly drafted rookies were signing contracts for tremendous amounts of money as agents and executives learned to exploit the loopholes of the CBA.

In the last year of the old CBA, the first overall pick in the 2010 NFL Draft was Sam Bradford. Bradford signed a record rookie contract totaling $78 million over six years with $50 million guaranteed, all prior to ever playing a snap in the NFL.

It wasn’t just that the first overall picks were being paid outrageous amounts, but across the board, high draft picks were making significantly more than quality NFL veterans.

The rookie salary system was broken. The NFL and the NFL Players Association were both determined to change the system in the 2011 CBA. And they did.

The first pick in the 2011 NFL Draft was Cam Newton. His total rookie contract was for four years and $22 million, all of which was guaranteed. While still life changing money for the player, this was quite a drop from the $50 million guaranteed that Bradford received. Even now, Baker Mayfield, the top player selected in the 2018 draft, is making less guaranteed money ($32.68 million) over the course of his rookie contract than Bradford made in his contract signed eight drafts ago.

The then new CBA restructured the entire rookie salary system to reduce the total payouts to rookies and close the loopholes of the old CBA. Let’s dig in.

First Round Picks

• All contracts are four year contracts.
• All salaries are slotted, with a higher pick contracting for slightly higher compensation than the next pick.
• The player and team can renegotiate the contract after three years.
• These contracts include a 5th year team option.
  • The team must exercise its option in early May in the offseason prior to the player’s fourth NFL season. The contract value depends on where in the 1st round the player was selected.
    • For a top 10 draft selection, the option will equal the transition tag tender for that player’s position in place during the fourth year of the player’s contract.
    • For all other first round draft picks (11th thru 32nd), the option will equal the average of the 3rd thru 25th highest salaries at the player’s position during the fourth year of the player’s contract.
  • If the team does not exercise the option, the player will become an unrestricted free agent after their fourth season.
  • The option year is guaranteed for injury only initially and becomes fully guaranteed (for skill, injury and cap) on the first day of the league year during which the option year would be played.

Second Round Picks

• All contracts are four year contracts.
• All salaries are slotted, with a higher pick contracting for slightly higher compensation than the next pick.
• The player and team can renegotiate the contract after three years.

Notice that the structure of these contracts are identical to those of first round picks, except that there is no fifth year team option included in these contracts. As you will see below, there is an additional benefit provided to players picked in the 3rd thru 7th round, called the Proven Performance Escalator (PPE), for which picks in the second round (and first round) are also not eligible.

Third Thru Seventh Round Picks

• All contracts are four year contracts.
• All salaries are slotted, with a higher pick contracting for slightly higher compensation than the next pick.
• The player and team can renegotiate the contract after three years.
• Players are eligible for the Proven Performance Escalator (PPE), a fourth year salary escalator that is earned by:
  • participating in at least 35% of a team’s offensive or defensive snaps in two out of his first three seasons; OR
  • participating in at least 35% of a team’s cumulative offensive or defensive snaps during the first three season
  • The PPE is equal to the lowest free agent tender, and the new fourth year salary will be the PPE amount minus any yearly bonuses or incentives contained in that players contract, with any prorated money not having any impact on this calculation.
  • The PPE cannot be guaranteed.

Undrafted Free Agents

Undrafted free agents are not selected in the NFL Draft, but approximately 30% of all NFL players initially come into the league as undrafted free agents.

• These players may sign immediately after the draft as an undrafted rookie free agent.
• These contracts are for three years with the ability for the team and the player to renegotiate after two years.
• After three years, these players become restricted free agents if their agreement is not renegotiated.
• Teams are restricted to a certain amount of bonus money that they can pay all of the rookie free agents on their team, though there is no limit on the signing bonus that can be paid to a single player up to the total amount allocated to the teams.
• All players signed are subject to minimum salaries but not maximum salaries, as long as they fit within the salary cap. These salaries need not be guaranteed.

In a future post we will explore additional details relating to rookie contracts, including what is negotiable, who gets guaranteed money, what happens if the player holds out, is the player free to sign with any team if he gets cut, etc.?

For more info regarding this topic and other CBA topics, please see my 2011 CBA Summary.