NFL Rookie Contracts Explained

In the past, contract negotiations for NFL rookies spilled into training camp on a regular basis. Those days have been dead since 2011. Although there are still negotiating points, the new collective bargaining agreement installed something similar to the rookie wage scale in the NBA. Each of the up to 256 draft slots are allotted a specific portion of the league’s Total Rookie Compensation Pool. The contract for every drafted rookie is set at four years. All undrafted players will be signed to three-year terms (Art. 7 Sec 3, (a), 24).

Players drafted in the first round have a 5th-year option (explained below) that is automatically deemed a part of each of their contracts, while picks from rounds three through seven are automatically eligible for the Proven Performance Escalator (explained below). All rookies can receive the minimum Offseason Workout per diems beginning in the player’s second offseason (Sec. 3, (b, i-ii) 25).

A player’s Rookie Salary is composed of each of the following: traditional Signing Bonus, Paragraph 5 (P5) Salary, Offseason Workout per diem, P5 Salary Guarantees, permitted Performance Incentives, Roster Bonuses, and Reporting Bonuses (Sec. 3, (iii), 25).

Rookie Salary can be guaranteed for skill, cap and/or injury. However, in a rookie contract’s third or fourth year, the player’s salary can’t be guaranteed for skill, cap or injury unless all of the player’s previous salary has been guaranteed for similar contract termination purposes. So, if a player’s year two and three salary is fully guaranteed for skill and cap, then player’s fourth year can be guaranteed for skill and cap, just skill, or just cap (Sec. 3, (h), 27).

Cam Newton’s rookie contract has third and fourth years that are fully guaranteed for skill, cap and injury. The team can structure the deal this way only because the first two year of the deal were also guaranteed for all three termination purposes.

Outside of this, rookies can’t receive any other cash or non-cash provisions of any kind. This does not include the max of $5,000 a team can pay a player for up to five promotional or sponsor activities (Sec. 3, (iv), 25). The CBA also prohibits rookies from agreeing to Option Bonuses, Option Exercise Fees, Option Non-Exercise Fees, Voidable Years, Salary Advances (outside of those in (b), (iii), (3), 25).

These deals are also subject to the 25% Rule. Unless a player’s P5 Salary is set at the minimum every year, no team can sign a player to a contract that would give him a raise of more than 25% annually (Sec. 3, (e), 26). So, the second year of the contract can’t provide a salary more than 25% of the first year, and after that, each subsequent year can’t offer an increase of more than 25% of his previous year’s salary.

We can use Cam Newton’s contract as an example for the 25% Rule. Newton has P5 Salaries (2011-14: $375,000, $1,376,159, $2,377,318, and $3,378,477) and a signing bonus ($14.518 million prorated over four season or $3,629,500 per season) that make up his football salary. Though his P5 Salaries do not abide by the 25% Rule, the player’s entire Rookie Salary, which for Newton is P5 Salary plus prorated portion of Signing Bonus, is subject to the increase rules. His cap hits are $4,004,500 in 2011, $5,005,659 in 2012, $6,006,818 in 2013, and $7,007,977 in 2014. These numbers are not permitted to provide an annual increase of more than 25%, which Newton’s do not. His contact, therefore, is in compliance with the rule.

Rookie contracts can contain other terms pertaining to non-compensation aspects of the agreement such as forfeitures of compensation, worker’s compensation issues, insurance policies, and tax implications among others (Sec. 3, (c), 25-26).

All Rookie Salary counts towards the Total Rookie Compensation Pool, the Year-One Rookie Compensation Pool, a Club’s Year-One Rookie Allocation, a Club’s Total Rookie Allocation, and the 25% Rule. The only exceptions are the player’s 5th-year option and the Proven Performance Escalator (Sec.3, (f), 26), along with air travel to team city, ground transportation to team facilities and room and board (up to certain maximum limits) (Sec. 3, 28).

Rookie contracts for draft choices can’t be renegotiated or changed in any way until the regular season finale of the contract’s third year. Undrafted free agents must wait until their conclusion of the regular season in their second season to amend a contract (Sec. 3, (k, i-iii), 28).

In January 2013, Russell Wilson’s agent, Bus Cook, seemed to make or direct a phone call to Seattle Seahawks management “insisting that something be done” about Wilson’s contract. Wilson was selected in the third round in 2012, but instantly made an impact on his team and the NFL, leading his team to an 11-5 record and a WildCard victory. However, per the rule above, Wilson was not yet eligible to renegotiate his deal.

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