By: Danielle Blanchard, Ruling Sports Intern (Twitter: Elle087)
Under the new collective bargaining agreement (CBA), NFL rookies and their agents may not negotiate things such as escalators like they could in the past. The new face of the NFL rookie contract is very standard; the financial terms are virtually locked in, and there is very little left to negotiation. All that remains to negotiate is whether first-round picks will get three or four years guaranteed and the extent of that guarantee. Ultimately, this means that the rookie will have a minimum of three to four years at a certain salary, the salary amount usually varying depending on the players draft round and number, which is guaranteed. If these new rookie contracts are so standard why do the top eight draft picks still have unsigned contracts?
The deal breaker for these eight rookies right now is something called offset language. Offset language is a contract term which states that if a team releases a player (per a number of potential reasons, including poor performance), the unpaid money they guaranteed him in the contract is offset by money he will potentially receive from another team when they pick him up. An offset language clause is something that teams optimistically want included in a contract for any player, but especially for rookies who have yet to show their true NFL potential (or lack thereof). To explain in more detail, under a standard contract, since the salary is fully guaranteed for the duration of the contract term, even if a player is not performing at the expected level and is released by the team, the player will still get paid their original guaranteed salary. Additionally, with an absence of offset language in the contract, if a new team picks up the player upon release, the old team will still have to honor the player’s guaranteed salary. This leads to a “double dipping” of sorts, because the player will now receive his original guaranteed salary in addition to the salary offered by the new team. For example, assume a team guarantees a rookie $40 million over three years and they pay the player $30 million of it before the player is released and subsequently picked up by another team who offers the player $50 million over the next 3 years (including a year of the original contract). With the absence of offset language in the contract, the rookie could potentially make $90 million over a five year span. However, with offset language present, the rookie would receive $80 million, $50 million from the new team and $30 million ($40 million – $10 million offset) from the old team.
Teams are eager to get this language into their rookie contracts to avoid paying out large sums of salary money for players who don’t live up to their potential. Vernon Gholston is a prime example of why teams are fighting for offset language in rookie contracts. Gholston was picked sixth in the 2008 draft by the New York Jets and later released for poor performance. Soon after, he was acquired by the Chicago Bears and was being paid by both teams until his original contract with the Jets expired (Gholston has since been released from the Bears also).
An interesting fact that’s key in this year’s top players’ negotiations with their respective teams is that Luke Kuechly, the ninth overall pick by the Carolina Panthers, is the only rookie drafted in the top ten that has a signed contract- his contract has no offset language. This is important primarily because it has now set a precedent for the first eight overall picks in their negotiations with their respective teams. Luke Kuechly has given picks one through eight more leverage in the bargaining process, which will allow them to enter negotiations with the confidence that if the ninth pick didn’t have offset language in his contract, clearly more sought after, top draft picks should not either.
The entire conflict is about setting a precedent, agents want big name athletes as future clients, and these clients want to hear that their agent can get them the best contract –meaning no offset language. On the other hand, the teams want to establish that the players they release cannot double dip, and that if a player does live up to the expectation that landed them their respective (frequently giant) contracts, they should not benefit as a result, especially when another team has acquired the player and is paying them a new salary. Herein lays the dilemma.
Precedent seems to be on the side of the players’ and their respective agents, however. In 2011, there was no offset language in the contracts of the top ten picks. I spoke with Tom Mills of Ascent Sports, who is an agent for various professional football and baseball players, and his sources suggest that the tenth, twelfth, and thirteenth picks do not have offset language in their signed contracts, but that the eleventh pick as well as picks twenty through twenty-five are still unsigned. This means that, even in the contracts for rookies from this year’s draft, the earliest pick who has been subject to offset language in a contract is Michael Brocker, the fourteenth pick. Mills is of the opinion that the players’ and their agents will get their way and the teams will forfeit the use of offset language primarily banking on the leverage of Luke Kuechly’s (ninth pick) contract.
With most training camps just a week away, the contracts need to be signed, both sides are motivated to close the deals, and each have valid reasons regarding the presence of offset language in the contracts. It should be an interesting week.