CONTRACT NEGOTIATION 101
by
Eugene T. Lee, Esq.
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Maximizing Guaranteed Money Under Your First NFL Contract
Although the signing bonus encompasses a majority of the guaranteed money paid under the player’s contract, there are other lesser known methods for squeezing guaranteed money out of the player’s initial contract. The easiest way to achieve this objective is to front load large base salaries in the first two or three years of the contract. The theory behind this strategy is that a team would be extremely hesitant to release the player in the first few contractual years after having made such a large financial investment (i.e., signing bonus) in the player.
Since any base salaries paid to the player during the first two or three years of the contract essentially would be “guaranteed” (the player would not be released and would almost certainly earn the base salaries), it makes perfect sense to negotiate large base salaries in those initial contractual years.
Another interrelated method for uncovering guaranteed money under the player’s initial contract would be to insert a large roster bonus after the third contractual year. Payment of a large roster bonus to the player virtually ensures an additional year under the player’s existing contract (in essence, “guaranteeing” base salary in year four) while releasing the player to test the open market as a free agent allows the player to receive a new market-driven signing bonus (i.e., new guaranteed money) from his new team, and more importantly, payment of the new signing bonus basically “guarantees” base salaries during the first two years of the player’s contract with his new team. Either way, it’s a win-win situation for the player.
Protecting Your Signing Bonus:
The Importance of Default Provision Language
The singular importance of negotiating favorable default provision language with a team cannot be overlooked. Without paying meticulous attention to default provision language in the signing bonus addendum, an agent could potentially jeopardize and put at risk his client’s hard-earned and well-deserved signing bonus money.
There are several ways that an agent can minimize the potential risk of default provision language. Negotiating the insertion of “carve outs” in the actual default language represents the most effective method for reducing the risk of signing bonus default. Some examples of “carve outs” would include insertion of the word “voluntary” in any failure or refusal provision (to report, practice or play), inclusion of an injury or death exception for any failure or refusal provision (along with the explicit designation of “injury” to include both football and non-football related injuries), inclusion of a termination of contract by team exception for any failure or refusal provision and inclusion of a force majeure, or “act of God,” (i.e., hurricane, tornado, war, flood, massive power outage, airline strike) exception to any failure or refusal provision.
Another method for lessening the risk of signing bonus default would be to insist on a very specific list of actionable offenses by the team such as “repeated violations of the NFL Policy and Program for Substances of Abuse” and “violation of the NFL Personal Conduct Policy for conviction of a felony offense” rather than general language relating to “conduct detrimental to the team.”
Voidable Years: A Primer
In contract negotiations for higher round draft picks, “voidable years” represents an invaluable tool for maximizing upfront guaranteed signing bonus money for your client (through maximum signing bonus proration) without locking your client into a long-term deal.
Under the NFL Collective Bargaining Agreement, signing bonuses can be prorated over the life of a player’s contract up to a maximum of six years. For purposes of a team’s salary cap and rookie pool, the longer the player’s contract, the larger the signing bonus that a team can offer the player and carry under its annual cap.
Voidable years is a mechanism for stretching signing bonus proration over a longer period of time, while simultaneously offering your client the benefit of standard eligibility for unrestricted free agency. Under a typical voidable years provision, the final years of a contract will void if the player reaches certain performance levels in any one of the first few years under the contract. Under a voidable years provision, the player will receive the benefit of a longer contract for purposes of signing bonus proration (which means more upfront signing bonus money) while retaining the benefits of unrestricted free agency after the minimum number of years if certain performance levels are achieved.