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The Structure of NFL Rookie Contracts
As a result of last year’s NFL lockout, which resulted in a new collective bargaining agreement between the NFL and NFLPA, changes have been made to the structure of rookie NFL contracts. With the first round of the 2012 NFL Draft set to kick-off on Thursday, April 26, RulingSports.com reached out to NFL agent Mark Slough of Ascent Sports to learn more about how NFL rookie contracts are structured. This year, Ascent Sports has 22 clients in the NFL Draft.
The first thing Slough noted about rookie contracts under the new CBA, is that “They’re all very similar.” Under the new CBA, changes were made to the structure of NFL rookie contracts. These changes largely favor the NFL clubs, as one of the big factors during negotiation of the new CBA, was suppressing rookie salaries. Under the new CBA, rookies that are drafted receive four-year contracts. If a rookie is drafted in the first round, clubs can exercise a fifth-year option for the player’s rights. According to Slough, “In all likelihood, unless [the player] flames out, it will be a five-year deal for first rounders.” If a rookie is undrafted, he will receive a three-year contract.
As for the type of salary NFL rookies can expect to earn under their contracts, Slough noted that rookies receive “minimum salaries under the CBA.” This season, the minimum salary is $390,000.00. In 2013, this year’s rookies can expect to earn $480,000.00 in salary. In 2014, they’ll earn $570,000.00 in salary.
As for first round draft picks, the amount of salary they’ll receive in their fifth year of play if their option is picked up by their respective team, depends upon where they were selected in the first round. According to Slough, “If a player is picked 1-10, then the 5th year option is going to be the average of the top-10 players at the respective player’s position. So, if you’re quarterback and go number-two in the Draft, then your fifth year option salary will be the average of the top-ten quarterbacks. The option is exercised after the third season, so it would be based upon the top-ten quarterback salaries at that time. If you’re picked 11-32, then the 5th year club option is the average salary of the top 3rd through 25th player in that position.”
While salaries for rookies are standard in NFL contracts, certain items present in a rookie’s contract can make his earnings higher than other rookies’ earnings. According to Slough, “The general rule, is that the majority of these contracts are going to look pretty identical, except for the amount of a signing bonus a player receives.” The size of a rookie’s signing bonus depends upon where he is drafted and this is one area in which an agent can successfully negotiate higher earnings for his client. “The amount of the signing bonus is negotiable. We operate under an unofficial sliding scale system,” Slough said. Thus, the number-one NFL Draft pick will receive a higher bonus than the second pick, and so on.
One area in which agents no longer can negotiate higher earnings for their clients under the new CBA, is escalators. Under previous CBAs, “agents used to be able to negotiate all kinds of escalators into the contracts,” according to Slough. For instance, if the player played a certain percentage of the time, his agent could negotiate contract terms so that he would be paid more for his playing time. However, under the new CBA, escalators are standardized. According to Slough, players drafted in rounds three through seven receive a “proven performance” escalator, that goes into effect during their fourth season of play. The escalator these players receive, is based upon them playing 35 percent of the time during two of their first three seasons, or an average of 35 percent of the time during their first three years. If a player hits either of these benchmarks, then in their fourth season of play, their salary will escalate to the right of first refusal amount.
The role of an agent in terms of negotiating rookie contracts has greatly changed as a result of the new NFL CBA. “Truthfully, there’s not a lot of negotiation in rookie contracts anymore for agents. Your job really becomes focusing on the time leading up to the draft and getting through the draft process. Then, your job becomes everything that comes post-draft. There’s a lot of other things that agents can do and be an asset to our clients beyond contract negotiation,” noted Slough.