NBA Salary Cap/Collective Bargaining Agreement FAQ
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Copyright © 1999-2010, Larry Coon

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7/8/2010: Revised #10, 11, 15, 16, 17, 19, 25 with new numbers for the 2010-11 season. New questions #22, 100. Rewrote #5. Minor changes to #4, 9, 19, 26, 30, 42, 43, 47, 52, 65, 78, 87, 101, 103, 106, About, Appendix, Index.

This FAQ is for members of the media and fans of the NBA who want to know more about the salary cap, trade rules, and other aspects of the NBA's 2005 Collective Bargaining Agreement. There is a lot of information here, so there are several ways to navigate this document. You can go to the table of contents to see a list of all the questions, or if you want to know about a particular topic you may be able to find it in the index. You can also go straight to the questions. You can find an overview of the differences between the 2005 and 1999 CBAs in the appendix. If you've been following this FAQ for a while, you can go to the revision history to see if anything has changed. Finally, you can see who wrote this thing or view the copyright notice. Enjoy!

Table of Contents

  1. What is a salary cap? Why have one?
  2. What is a soft cap? What is the difference between a soft cap and a hard cap? Which does the NBA have?
  3. Why have a soft cap?
  4. What is the Collective Bargaining Agreement?
  5. What's the history of the CBA? How long has the current CBA been in effect? When will it expire?
  6. They came to an amicable agreement in 2005. What happened in 1999?
  7. What changes did they make in the 2005 CBA?
  8. What percentage of revenues do the players receive?
  9. Has there always been a salary cap?
  10. How is the salary cap set each year?
  11. What are the players' salary restrictions?
  12. Are there exceptions to the maximum salary?
  13. What is included in Basketball Related Income (BRI)?
  14. Exactly what is included when computing total team salaries?
  15. How does the escrow system work? What is it for?
  16. What is the "luxury tax?" Why does it exist? How is it determined? Who pays it?
  17. Who gets the escrow and luxury tax money?
  18. What is the luxury tax amnesty provision?
  19. What are salary cap exceptions?
  20. How do exceptions count against the cap? Does being under the cap always mean that a team has room to sign free agents? Do teams ever lose their exceptions?
  21. If a team has more than one exception available to sign a particular player, are there any rules regarding which one it has to use?
  22. When a player signs mid-year for the rest of the season, is his salary pro-rated?
  23. Can a team circumvent the salary cap by paying a player less but arranging for an affiliated company to also pay him, perhaps by way of an endorsement contract?
  24. Do players and teams ever have under-the-table agreements? What happens when the league finds out about them? Is this what happened with the Timberwolves and Joe Smith?
  25. How is "average salary" defined?
  26. How long must a player be with one team before the Larry Bird exception can be used?
  27. Why a three-year wait before gaining Bird rights?
  28. Does the Larry Bird exception mean that free agents can be signed and not count against the cap?
  29. I just saw that a team signed a player for more money than it has under the cap. It was another team's free agent, so the Larry Bird exception wasn't used. What gives?
  30. Can a team with cap room sign all the free agents it wants (up to the salary cap) and THEN re-sign its own free agents using the Bird exception?
  31. How much do free agents count against their team's salary cap?
  32. Why do free agents continue to count against a team's cap?
  33. When do free agents stop counting against the team's cap?
  34. What does renouncing a player mean?
  35. Can the renouncement be renounced? In other words, can a team un-renounce a player and then sign him using a Bird exception?
  36. Let's say a team arranges for all of its players to become free agents at the same time. If they renounce everybody, do they then have a salary total of $0 and a full cap under which to work?
  37. What is restricted free agency?
  38. What is the "Gilbert Arenas" provision?
  39. Haven't some restricted free agents gotten away anyway? How did this happen?
  40. What if a restricted free agent has no interest in staying with his original team? Is there any way he can force the issue?
  41. Does a team receive compensation when another team signs their free agent, like in some other sports?
  42. First round draft picks operate under a different set of rules?
  43. What if the team and their drafted player can't agree to a contract? What options does the player have? How long does the team keep his draft rights?
  44. Do draft picks count against the team's salary cap? If so, how much?
  45. What if a team likes its first round pick and wants to sign him, but either feels he isn't worth the scale salary or doesn't want to commit to a long contract?
  46. If a first round draft pick is renounced, is he still bound to the salary scale for a first round pick?
  47. Is there a limit to the length of a contract or the raise a player can receive? Is there a limit to the amount a salary can decrease from year to year?
  48. Are raises compounded? In other words, is each raise a percentage of the previous season's salary?
  49. Are there restrictions based on a player's age?
  50. What is the Over-36 Rule?
  51. What are option clauses? What kind of option clauses are there?
  52. Can existing contracts be extended?
  53. Can existing contracts be renegotiated?
  54. In what other ways can an existing contract be modified?
  55. What are the rules for retired players?
  56. What are waivers?
  57. Do released players count against the cap? What is set-off?
  58. Do injured players count against the cap?
  59. What about suspended players? How do they count against the cap? Can teams suspend players for any reason?
  60. How do players who die count against the cap?
  61. Are player contracts insured?
  62. What is a contract buy-out?
  63. How do buy-outs affect a team's salary cap?
  64. Can incentives be built into a contract? How do they count against the cap?
  65. How about signing bonuses? Are they allowed? How do they count against the cap?
  66. Are teams really competing on a level playing field? Since the tax rate is different in the different states and Canada, don't the teams in a more "tax friendly" state have an advantage over the other teams?
  67. What roster size limits exist? What is the Inactive List? What is Injured Reserve?
  68. What is a 10-day contract?
  69. What is the NBA Developmental League (NBA D-League)?
  70. What are the rules regarding trades?
  71. What is the Traded Player exception?
  72. What is a non-simultaneous trade?
  73. How are minimum-salary players handled in trades?
  74. How are draft picks handled in trades?
  75. Can exceptions be combined when making trades?
  76. What is "Base Year Compensation?" How does base year compensation affect trades? Why does it exist?
  77. How does a base year player's salary count against the team's salary cap?
  78. Whenever I read about prospective trades involving base year players, they say a third team must get involved. Why? Can't a base year player be traded in a two-team trade?
  79. Can a free agent be signed and immediately traded?
  80. Can a team sign a player using the sign-and-trade rule and then say, "Ha ha, we fooled you. We're not trading you!"?
  81. Why would teams or players want to do a sign-and-trade?
  82. Sign-and-trade looks like a win-win proposition. But some players have signed smaller contracts as free agents, rather than do a sign-and-trade. Why?
  83. When can a team trade a free agent it signs? Do they have to keep him forever?
  84. Can a team trade the rights to a free agent, so the other team will inherit his Larry Bird rights?
  85. Can cash be included as part of a trade package?
  86. Can players be given a bonus when they are traded?
  87. How do trade bonuses affect the salary cap and trades?
  88. When can't a player be traded? Can players be given "no-trade" clauses in their contracts?
  89. I keep hearing about teams wanting to acquire "ending contracts" in trades. What are they, and why are they so valuable?
  90. How are teams able to trade players who are out of the league, like Dallas did with Keith Van Horn?
  91. Can teams find loopholes in the CBA and make trades that were never intended to be allowed?
  92. What is the trading deadline?
  93. What is the July Moratorium?
  94. Are contracts always guaranteed?
  95. What is tampering?
  96. How much are players fined for technical fouls and ejections? Where does the money go?
  97. How does it work when the league expands?
  98. How do I find out the salary for a specific player?
  99. The league instituted a dress code for players. Do they have the right to do that?
  100. What does it mean when the players union decertifies? Why would they want to do that? What effect does it have?
  101. Are there other must-read web sites for the budding capologist?
  102. What are the important CBA-related dates each season?
  103. Can I get a copy of the actual Collective Bargaining Agreement?
  104. I see reports in the newspaper or on the Internet that would be impossible if everything you say here is true. Is this FAQ wrong?
  105. What if this FAQ really is wrong? How authoritative is this FAQ?
  106. Can I e-mail you with other CBA-related questions?
  107. Can this FAQ be reproduced or distributed? Can I link my web page to it?
  108. Can you translate this FAQ into (name of language)? I'll even translate it for you!
  109. How should this FAQ be cited?
  110. Where can this FAQ be downloaded?

History of this FAQ, acknowledgements, and about the author

Copyright Notice

Index

Revision History

1. What is a salary cap? Why have one?

A salary cap is a limit on the amount teams can spend on player contracts, which helps to maintain competitive balance in the league. Without a salary cap, teams with deeper pockets can simply outspend the remaining teams for the better free agents. The basic idea is that a team can only sign a free agent if the total payroll for the team will not exceed the salary cap. So a team with deep pockets is playing on a level playing field with every other team.

The evidence bears this out: For the 2001-02 NBA season, the correlation between team payroll and regular season wins was about 0.13. In other words, there is nearly no correlation between salary and wins. By comparison, MLB (with no salary cap) had a much stronger correlation of 0.43 for its 2002 season.

2. What is a soft cap? What is the difference between a soft cap and a hard cap? Which does the NBA have?

The NBA has a soft cap. A hard cap doesn't allow the cap to be exceeded for any reason. A soft cap, which the NBA has, contains exceptions which allow teams to exceed the cap under certain conditions. In practice, very few teams are ever under the cap during a season.

3. Why have a soft cap?

The basic idea is to try to promote players' ability to stay with their current teams. Nobody likes it when a player plays with a team his entire career, the fans love him, he wants to stay and the team wants to keep him, but he has to leave because the team is unable to offer him a large enough contract. The exceptions under a soft cap allow teams to keep players under these kinds of circumstances.

4. What is the Collective Bargaining Agreement?

It's the legal contract between the league and the Players Association that sets up the rules by which they all operate. (It's commonly abbreviated as "CBA," which is not to be confused with the Continental Basketball Association. The abbreviation CBA will be used in the remainder of this document.)

The CBA defines the salary cap, the procedures for determining how it is set, the minimum and maximum salaries, the rules for trades, the procedures for the NBA draft, and hundreds of other things that need to be defined in order for a league like the NBA to function.

Incidentally, the CBA is also what prevents the NBA from being in violation of antitrust laws. Many of the NBA's practices (salary cap, draft, etc.) would violate the Sherman Act were the CBA not arrived at through collective bargaining (see question number 100).

5. What's the history of the CBA? How long has the current CBA been in effect? When will it expire?

Bob Cousy began to organize the NBA players in 1954, although the league refused to recognize the union until 1957. A near strike at the 1964 All-Star game forced the league to adopt a pension plan. The first CBA was established in 1970, and new agreements followed in 1973, 1976 and 1980. The 1976 CBA coincided with the settlement of the "Oscar Robertson" suit, which was filed by the players association in 1970 to block the NBA-ABA merger. The 1976 agreement also provided limited free agency through the elimination of "option" clauses that bound players to teams in perpetuity.

In 1983 the parties agreed to share league revenues. The new agreement also instituted the modern salary cap, which went into effect in 1984. When this agreement expired the players brought an antitrust lawsuit, resulting in the "Bridgeman" agreement which brought unrestricted free agency, reduced the draft to two rounds, and added anti-collusion provisions.

Another antitrust lawsuit ensued in 1994 following the expiration of the 1988 CBA, challenging the salary cap, college draft, and right of first refusal provisions. The parties eventually reached a "no-strike, no-lockout" agreement that allowed the 1994-95 season to be played.

The parties came to terms on a new agreement in 1995, but the players tabled a vote and instead filed for union decertification. The league responded by imposing a lockout. The parties quickly came to an agreement, and the players voted against decertification. A new six year agreement was ratified which lifted the lockout before any games were missed, although the agreement was not actually signed until 1996.

The NBA exercised its option to terminate the 1995 CBA following the 1997-98 season, eventually imposing a lockout which took effect on July 1, 1998 and resulted in the cancellation of the start of the 1998-99 season and the 1999 All-Star weekend. The parties reached agreement on a new six-year agreement in early 1999, just in time to salvage a minimal 50-game season. The new agreement introduced maximum salaries, the mid-level exception, and the escrow and luxury tax systems. The league invoked its option to extend this agreement through the 2004-05 season.

The NBA and NBPA ratified the current agreement in July 2005. It will expire following the 2010-11 season, although the league has the option to extend it through the 2011-12 season. The league must exercise its option to extend the agreement by December 15, 2010 (and has announced that they will not do so).

The CBA may be terminated early under certain conditions:

Here is a summary of the league's collective bargaining agreements:

Start Year End Year Milestones
1970 1973 First CBA. Increased minimum salaries; Playoff pool; Per diem.
1973 1976 Arbitration.
1976 1979 Suit blocking NBA/ABA merger settled; Limited free agency (with team compensation).
1980 1983 No-trade clauses eliminated.
1983 1987 Salary cap; "Bird" rights.
1988 1994 Unrestricted free agency; Length of draft reduced.
1994 1995 Temporary "No-strike, No-lockout" agreement.
1995 2001 Ended 1995 lockout. Rookie scale contracts. Not actually signed until 1996, and re-opened in 1998.
1999 2005 Settled 1998-99 lockout. Maximum salaries; Mid-Level exception; Escrow & luxury tax.
2005 2011 Luxury tax in effect every season; Reductions in contract lengths & raises.

For more information on the history of NBA labor relations, visit the Association for Professional Basketball Research website at www.apbr.org.

6. They came to an amicable agreement in 2005. What happened in 1999?

Although it looked for a while like a lockout would be unavoidable, the two sides agreed on principal terms of the new CBA in late June 2005. The only ramification was that the July moratorium was extended a couple of weeks while the agreement was finalized and ratified. A lockout was avoided, and no games were lost.

The sides were not so fortunate when negotiating the previous agreement. The 1995 CBA allowed the league to terminate the agreement if the players' salaries exceeded 51.8% of projected revenues. In 1997-98 they were 58%, and the league opted out. The league then tried to put more severe salary restrictions in place. The players fought against any salary restrictions. On July 1, 1998 (the start date of the 1998-99 season) the league imposed a lockout, which lasted into the season. The two sides eventually compromised, agreeing to the 1999 CBA just days before their drop-dead date for canceling the season entirely, and a compacted 50-game season was played.

7. What changes did they make in the 2005 CBA?

Please see the appendix for a summary of the differences between the 2005 and 1999 CBAs. The appendix includes links to questions with additional information.

In addition, the final version of this FAQ for the 1999 CBA may be found at http://members.cox.net/lmcoon/salarycap99.htm.

8. What percentage of revenues do the players receive?

Contracts are individually negotiated between players and teams, and several factors control the amount each player can receive. Collectively, the players are guaranteed to receive at least 57% of revenues in salaries & benefits. If it's ever less, the league cuts a check to the Players Association after the season for distribution to the players.

There is also an escrow system that helps to limit the money the players receive to a specific percentage of revenue. See question number 15 for details.

9. Has there always been a salary cap?

It may surprise you to learn that the NBA first had a salary cap in 1946-47, its first season. The cap that season was $55,000, with most players earning between $4,000 and $5,000. Star player Joe Fulks earned $8,000, and Tom King earned a league-highest $16,500 for his combined duties as player, publicity director and business manager for the Detroit Falcons.

The "modern" NBA salary cap began in 1984-85, at $3.6 million. It made steady but gradual increases of around $1-2 million each season until 1994-95, when it was $15.964 million. Armed with a big TV contract from NBC, the salary cap jumped to $23.0 million in 1995-96, and increased to $26.9 million in 1997-98, the last season of the 1995 CBA (a 747% increase in 13 years). The ABC/ESPN TV contract, which took effect with the 2002-03 season, provided $4.6 billion over six years, but less in 2002-03 than NBC paid in 2001-02. As a result, the salary cap went down for the first time ever in 2002-03.

See question number 5 for more information on NBA labor history.

10. How is the salary cap set each year?

Each July the league projects Basketball Related Income (BRI) and benefits for the upcoming season. They take a defined percentage of projected BRI (see the chart below), subtract projected benefits ($112 million in 2005-06), and make adjustments if the previous season's BRI was below projections. They then divide by the number of NBA teams (excluding expansion teams in their first two seasons) to arrive at the cap. The salary cap adjusts each year on the first day following the July Moratorium (see question number 93).

Season Defined percentage of BRI Actual salary cap
2005-06 49.5%* $49.5 million ($37.125 million for the Charlotte Bobcats)
2006-07 51% $53.135 million
2007-08 51% $55.63 million
2008-09 51% $58.68 million
2009-10 51% $57.7 million
2010-11 51% $58.044 million
2011-12 51%

* The league and Players Association agreed to use a figure of $49.5 million for the 2005-06 cap, rather than the calculated figure (which would have resulted in a salary cap of $50.9 million).

At the other end of the spectrum there is a minimum team salary, which is defined as 75% of the salary cap. Any team that doesn't spend at least that much is surcharged at the end of the season, and that money is given to the players. In practice, most teams' salaries will be higher than the salary cap amount.

11. What are the players' salary restrictions?

There are both minimum and maximum salaries, and both are based on how long the player has been in the league. The minimum salaries scale upward each season. Here are the minimum salaries:

Years in NBA** 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
0 $398,762 $412,718 $427,163 $442,114 $457,588 $473,604 $490,180
1 $641,748 $664,209 $687,456 $711,517 $736,420 $762,195 $788,872
2 $719,373 $744,551 $770,610 $797,581 $825,497 $854,389 $884,293
3 $745,248 $771,331 $798,328 $826,269 $855,189 $885,120 $916,100
4 $771,123 $798,112 $826,046 $854,957 $884,881 $915,852 $947,907
5 $835,810 $865,063 $895,341 $926,678 $959,111 $992,680 $1,027,424
6 $900,498 $932,015 $964,636 $998,398 $1,033,342 $1,069,509 $1,106,941
7 $965,185 $998,967 $1,033,930 $1,070,118 $1,107,572 $1,146,337 $1,186,459
8 $1,029,873 $1,065,918 $1,103,225 $1,141,838 $1,181,803 $1,223,166 $1,265,976
9 $1,035,000 $1,071,225 $1,108,718 $1,147,523 $1,187,686 $1,229,255 $1,272,279
10+ $1,138,500 $1,178,348 $1,219,590 $1,262,275 $1,306,455 $1,352,181 $1,399,507

And here are the league-wide maximum salaries:

Years in NBA** Defined maximum salary 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
0 $9,000,000 or 25% of cap* $12,000,000 $12,455,000 $13,041,250 $13,758,000 $13,520,500 $13,603,750
1 $9,000,000 or 25% of cap* $12,000,000 $12,455,000 $13,041,250 $13,758,000 $13,520,500 $13,603,750
2 $9,000,000 or 25% of cap* $12,000,000 $12,455,000 $13,041,250 $13,758,000 $13,520,500 $13,603,750
3 $9,000,000 or 25% of cap* $12,000,000 $12,455,000 $13,041,250 $13,758,000 $13,520,500 $13,603,750
4 $9,000,000 or 25% of cap* $12,000,000 $12,455,000 $13,041,250 $13,758,000 $13,520,500 $13,603,750
5 $9,000,000 or 25% of cap* $12,000,000 $12,455,000 $13,041,250 $13,758,000 $13,520,500 $13,603,750
6 $9,000,000 or 25% of cap* $12,000,000 $12,455,000 $13,041,250 $13,758,000 $13,520,500 $13,603,750
7 $11,000,000 or 30% of cap* $14,400,000 $14,946,000 $15,649,500 $16,509,600 $16,224,600 $16,324,500
8 $11,000,000 or 30% of cap* $14,400,000 $14,946,000 $15,649,500 $16,509,600 $16,224,600 $16,324,500
9 $11,000,000 or 30% of cap* $14,400,000 $14,946,000 $15,649,500 $16,509,600 $16,224,600 $16,324,500
10+ $14,000,000 or 35% of cap* $16,800,000 $17,437,000 $18,257,750 $19,261,200 $18,928,700 $19,045,250

* whichever is greater. They use a different cap calculation to determine the maximum salaries, which is based on 48.04% of projected BRI. For example, even though the actual salary cap for 2005-06 is $49.5 million the 0-6 year maximum salary is $12 million, not $12.375 million. Note that as with the salary cap itself, they appear to have used hard figures for 2005-06, rather than applying their formula.

** A player is credited with a year of service for each season in which he is on a team's active list or inactive list for at least one day during the regular season.

A free agent's maximum salary in the first year of a new contract is never less than 105% of his salary in the last year of his previous contract. For example, a ten-year veteran free agent who most recently earned $20 million has a maximum salary of $21 million, even if that is above the league-wide maximum. A free agent does not need to remain with the same team in order to receive 105% of his previous salary, although the team that signs him is subject to the same salary cap restrictions as with any other free agent.

In addition, up to 30% of a player's compensation can be deferred. Deferred compensation is included in team salary in the season in which it is earned, not the season in which it is paid.

When a player has been in the NBA for three or more seasons, and is playing under a one-year, ten-day or rest-of-season contract, the league actually reimburses the team for part of his salary - any amount above the minimum salary level for a two-year veteran. For example, in 2005-06 the minimum salary for a two-year veteran is $719,373, so for a ten-year veteran, with a minimum salary of $1,138,500, the league would reimburse the team $419,127. Only the two-year minimum salary is included in the team salary, not the player's full salary. They do this so teams won't shy away from signing older veterans simply because they are more expensive when filling out their last few roster spots.

First round draft picks have a more restrictive salary scale, based on their draft position (see question number 42 for more information).

12. Are there exceptions to the maximum salary?

Yes. In multi-year contracts, only the first season's salary is subject to the maximum (but there are restrictions about how big raises can be from year to year).

For players whose contracts were signed prior to the current CBA (i.e., prior to July, 2005) it is possible for a trade bonus (see question number 86) to increase the salary above the maximum.

13. What is included in Basketball Related Income (BRI)?

Basketball Related Income (BRI) essentially includes any income received by the NBA, NBA Properties or NBA Media Ventures. This includes:

Some of the things specifically not included in BRI are proceeds from the grant of expansion teams, fines, and revenue sharing (e.g. luxury tax).

14. Exactly what is included when computing total team salaries?

When determining team salaries (for example, to determine whether a team is over the salary cap), the following are included:

If a team completes a mid-season trade, then the entire season salaries of any players they acquire are included in their team salary, and the entire season salaries of any players they trade away are removed from their books.

The following are not included in team salaries:

The following questions contain additional information describing when and how player salaries are applied to team salary: 16, 28, 31, 32, 33, 34, 36, 38, 44, 55, 57, 58, 59, 63, 64, 65, 77, 87, 97

15. How does the escrow system work? What is it for?

The escrow system tries to ensure that salaries & benefits do not exceed a designated percentage of BRI. The designated percentage is 57% in each season, however:

* BRI was $3.037 billion in 2004-05.

In order to keep salaries & benefits at or below the designated percentage, money is withheld from players' paychecks and deposited into an escrow account. At the end of each season they compare the league-wide salaries & benefits to the designated percentage of BRI to see if there was an overage. If there was not an overage, then all of the money in escrow (i.e., the full value of their contracts) is given to the players. But if there was an overage, then the overage amount is returned to the owners (which lowers salaries back to the designated percentage), and the players get the remainder (if any). The amount withheld is a designated percentage of salaries:

Season Salary withheld in escrow
2005-06 10%
2006-07 9%
2007-08 9%
2008-09 9%
2009-10 9%
2010-11 8%
2011-12 8%

They deduct the escrow funds based on salaries, and reconcile at the end of the season based on salaries and benefits. It is possible that they find themselves at the end of the season with insufficient escrow funds to cover the overage. If this happens, then the discrepancy is made up by deducting extra money from the players the following season.

Here are some examples to illustrate what could happen in the escrow process. In Example A there is not an overage. In Example B there is an overage, but the escrow withheld is sufficient to reduce salaries to the designated percentage. In Examples C there is an overage, which the escrow withheld is insufficient to cover.

Example A Example B Example C
BRI: $3.000 billion $3.000 billion $3.000 billion
Designated percentage of BRI: 57% 57% 57%
Designated percentage amount: $1.710 billion $1.710 billion $1.710 billion
Salaries: $1.600 billion $1.710 billion $1.810 billion
Benefits: $100 million $100 million $100 million
Salary held in escrow (%): 10% 10% 10%
Amount held in escrow: $160 million $171 million $181 million
Overage (amount salaries & benefits
exceeded designated percentage):
$0 $100 million $200 million
Returned to owners (overage amount): $0 $100 million $191 million
Given to players (remainder of escrow): $160 million $71 million $0

In Example A, salaries & benefits are within the designated percentage, so the escrow money isn't needed and the players get to keep it all. In Example B the escrow system successfully lowers salaries back down to the designated percentage, and the players get to keep what's left. In Example C the escrow money isn't enough to lower salaries back down to the designated percentage. The players can't lose more than 10% of their salary and benefits, so the owners are owed $191 million. However only $181 million was deposited into escrow, so the players still owe $10 million, which represents 10% of benefits. The additional $10 million is deducted from player salaries the following season.

Here is what actually happened in each season:

2005-06 2006-07 2007-08 2008-09 2009-10
BRI: $3.174 billion* $3.384 billion $3.519 billion $3.608 billion $3.643 billion
Designated percentage of BRI: 57% 57% 57% 57% 57%
Designated percentage amount: $1.809 billion* $1.929 billion $2.006 billion $2.057 billion $2.077 billion
Salaries: $1.856 billion* $1.971 billion $2.054 billion $2.146 billion $2.114 billion
Benefits: $104 million* $113 million $115.0 million $130.8 million $132.7 million
Salary held in escrow (%): 10% 9% 9% 9% 9%
Amount held in escrow: $189 million $177 million $184.9 million $194.0 million $191.8 million
Overage (amount salaries & benefits
exceeded designated percentage):
$151 million $155 million $163.4 million $219.8 million $170.2 million
Retained by NBA (overage amount): $151 million $155 million $163.4 million $194.0 million $170.2 million
Given to players (remainder of escrow): $38 million $22 million $21.5 million $0 $21.6 million

* Excludes Charlotte Bobcats.

Question number 17 describes how the escrow money is distributed to the teams.

16. What is the "luxury tax?" Why does it exist? How is it determined? Who pays it?

The luxury tax is a mechanism that helps control team spending. While it is commonly referred to as a "luxury tax," the CBA simply calls it a "tax" or a "team payment." It is paid by high spending teams -- teams whose payroll exceeds a predetermined tax level. These teams pay one dollar for each dollar their payroll (with a few exceptions, see below) exceeds the tax level. The tax level is determined prior to the season, and is computed by taking 61% of projected BRI, subtracting projected benefits ($112 million in 2005-06), and adjusting for whether the previous season's BRI was above or below projections. They then divide by the number of teams (except expansion teams in their first two seasons) to arrive at the tax level. Here are the tax levels in each season, and the teams that paid the tax:

Season Tax Level Taxpaying Teams (amount paid in $millions)
2005-06 $61.7 million* Knicks ($37.2), Mavs ($17.3), Magic ($7.8), Pacers ($4.7), Grizzlies ($3.7), Spurs ($0.9)
2006-07 $65.42 million Knicks ($45.1), Mavs ($7.2), Nuggets ($2.0), T-Wolves ($1.0), Spurs ($0.2)
2007-08 $67.865 million Knicks ($19.7), Mavs ($19.6), Cavs ($14.0), Nuggets ($13.6), Heat ($8.3), Celtics ($8.2), Lakers ($5.1), Suns ($3.9)
2008-09 $71.150 million Knicks ($23.7), Mavs ($23.6), Cavs ($13.7), Celtics ($8.3), Lakers ($7.2), Blazers ($5.9), Suns ($4.9)
2009-10 $69.920 million Lakers ($21.4), Mavs ($17.6), Cavs ($15.9), Celtics ($14.9), Magic ($11.0), Spurs ($8.8), Nuggets ($5.5), Knicks ($5.2), Suns ($5.0), Jazz ($3.1), Heat ($3.0)
2010-11 $70.307 million

* For 2005-06 they used a set amount of $61.7 million rather than applying the formula. Had the formula been used, the tax level would have been approximately $63.7 million.

In the previous CBA, the tax system served as a supplement to the escrow system (see question number 15). The idea was that the tax was triggered when (and only when) payrolls were so high that escrow didn't lower salaries to the designated percentage of BRI. When this happened, the high spending teams (i.e., the teams most responsible for the players' salaries being so high) made up the difference. No team would pay any tax, no matter how high their payroll, if the tax was not triggered league-wide. With the current CBA the escrow and tax systems are disconnected -- the tax is guaranteed in every season, even when escrow is successful in lowering salaries to the designated percentage.

In addition to guaranteeing the tax in every season, the 2005 CBA made an important change to remove the uncertainty which was previously associated with the luxury tax. In the previous CBA the tax level was set after the season based on the actual revenues and expenditures for the just-completed season. This meant that teams needed to make their roster decisions based on their own projections for league-wide revenues and expenditures which wouldn't be determined for another year. The current CBA sets the tax level prior to the season based on league revenue projections. Teams now know ahead of time exactly what the tax level will be, and where their payroll sits in relation to it.

When determining the amount of tax a team owes, the league uses its team salary (see question number 14) on the date of their last regular season game (i.e., if a player is traded away before the end of the season, then none of his salary is taxed), with the following adjustments:

Where does the tax money go? This is described in question number 17.

17. Who gets the escrow and luxury tax money?

As described in question number 15, if the salaries and benefits exceed a designated percentage of revenue for that season, then some of the players' salary is returned to the teams. Also, as described in question number 16, high-spending teams will pay additional money to the league in the form of a "luxury tax." The money collected from escrow and luxury tax may be distributed to teams or used for league purposes, subject to certain rules. Note that in some cases, taxpaying teams receive more than enough money to offset the luxury tax they pay.

The distribution rules are different for escrow money and tax money:

Escrow money:
Tax money:

"League purposes" may include investing in some venture, or it may include distributing money back to teams. If money goes to teams, the distribution must not be based on the teams' team salaries (see question number 14) or whether the teams are taxpayers. In other words, it cannot become a disincentive for teams to spend money on players, which would constitute a secondary form of salary restraint. An example of an acceptable "league purpose" in which money goes to teams would be a revenue assistance plan designed to subsidize teams that lose money, provided that a team's entitlement is based on a profit/loss/expenses computation that assumes all teams have the same team salary, and the assistance payment is limited to the team's actual losses.

Since the previous CBA required teams to project league revenues a year in advance when making their roster decisions, a "cliff smoothing" provision was set up to provide teams a margin of error. Under this provision, for the first few million dollars above the tax level, distributions were phased-out (i.e., teams didn't "fall off a cliff" and lose their distribution for barely exceeding the tax level). Now that the tax level is set in advance, and teams know the tax level before they begin signing contracts, this margin of error is no longer required and so the cliff provision was eliminated. Now there effectively will be a hit (about $1.9 million in 2006-07) as soon as a team crosses the tax level.

To understand the consequence, consider two teams that suffer injuries during the 2005-06 season, each needing to sign a replacement player. Team A is $500,000 above the tax level, and Team B is $500,000 below the tax level. For this example we'll assume the players sign for $719,373 (the minimum salary for a player with two years of service in 2005-06), and the tax distribution for the non-taxpaying teams is $2.4 million. To sign their player, Team A must pay $719,373 in salary and $719,373 in additional tax, for a total of $1,438,746. Team B, on the other hand, now becomes a taxpayer. They pay the same $719,373 in salary plus $219,373 in tax (remember, they were previously $500,000 below the tax level), and they also forfeit their $2.4 million tax distribution, so the total cost to them is $3,338,746. So for Team B, the tax penalty isn't 100%; it's more than 250%. They can't even sign a cheaper player -- for tax purposes, players with fewer than two years of service are taxed at the two-year minimum amount.

Here is what actually happened to the escrow and tax money in each season:

2005-06 2006-07 2007-08 2008-09 2009-10
BRI: $3.174 billion $3.384 billion $3.519 billion $3.608 billion $3.643 billion
Designated percentage: $1.809 billion (57% of BRI) $1.929 billion $2.006 billion $2.057 billion $2.077 billion
Total salaries and benefits: $1.960 billion $2.084 billion $2.169 billion $2.277 billion $2.247 billion
Escrow collected: $189 million $177 million $184.9 million $194.0 million $191.8 million
Overage: $151 million (salaries & benefits minus designated percentage) $155 million $163.4 million $219.8 million $170.2 million
Escrow share per team: $5,039,080 $5,181,997 $5,448,026 $6,467,847 $5,674,732
Tax level: $61.7 million $65.42 million $67.865 million $71.150 million $69.92 million
Total tax collected: $71,642,951 $55,564,006 $92,454,198 $87,352,665 $111,075,358
Tax share per team: $2,388,098 (1/30 total tax, distributed only to non-taxpaying teams) $1,852,134 $3,081,807 $2,911,756 $3,702,512
Undistributed funds: $14,328,590 $9,260,670 $24,654,444 $20,382,277 $40,727,631

In 2005-06, the league used all of the undistributed tax funds and none of its escrow funds to fund their revenue assistance plan. In 2006-07 it used all of the undistributed tax funds and about $20.7 million of the escrow funds for this purpose. In 2007-08 it used all of the undistributed tax funds and $5.3 million of "distributions from League entities." The use of escrow money in 2006-07 reduced each team's escrow share to $4,490,685.

18. What is the luxury tax amnesty provision?

This was a one-time opportunity for teams to waive one player and avoid having that player count in the team's luxury tax computation. Teams had the opportunity to use this provision between August 2nd and 15th, 2005 (right after the CBA went into effect). It could be used only for players signed or acquired prior to June 21, 2005, or for players already waived when the current CBA went into effect. A team could waive only one player using this provision.

Players waived using this provision are not counted in the team's team salary (see question number 14) when computing the amount of luxury tax the team owes (see question number 16). For example, if a team waived a player with a $10 million salary, and ended up $15 million over the tax level, then they would only owe $5 million in luxury tax (saving $10 million). However, the tax savings does not necessarily equal the player's salary -- if the team ended up just $3 million over the tax level then they would only save $3 million (owing no tax at all). If they ended up below the tax level, then there is no tax to be paid so they wouldn't realize any savings at all. On the other hand, it's possible for the net savings to exceed the player's salary. If a team's amnesty cut takes them from above the tax level to below it, then in addition to not owing any tax they will also receive a tax distribution.

The amnesty provision only affects the team's tax obligation. The team must continue to pay the player, his salary continues to count against their salary cap, and all other salary calculations are unaffected. However, the team may not re-sign or re-acquire the player for the length of the terminated contract. In all other respects, the player is treated just like any other waived player (see question number 56 for more information on waivers).

Although the amnesty provision was informally referred to as the "Allan Houston provision," the Knicks chose not to use it on Houston. The actual list of players on whom the amnesty provision was used is (* = players who were previously waived): Derek Anderson (Blazers), Vin Baker* (Celtics), Troy Bell* (Grizzlies), Calvin Booth (Bucks), Doug Christie (Magic), Derrick Coleman* (Pistons), Howard Eisley* (Suns), Michael Finley (Mavericks), Brian Grant (Lakers), Fred Hoiberg (Timberwolves), Aaron McKie (76ers), Ron Mercer (Nets), Reggie Miller* (Pacers), Alonzo Mourning* (Raptors), Wesley Person* (Heat), Eddie Robinson* (Bulls), Clarence Weatherspoon (Rockets), Jerome Williams (Knicks). The Bobcats, Cavs, Clippers, Hawks, Hornets, Jazz, Kings, Nuggets, Sonics, Spurs, Warriors and Wizards did not utilize this provision.

19. What are salary cap exceptions?

The basic rule of the salary cap is that a team's team salary may not be above the cap at any time unless the team is using an exception. In a system with a soft cap, an exception is the mechanism that allows a team to function while above the cap.

LARRY BIRD EXCEPTION -- This is the best known exception. Players who qualify for this exception are called "Qualifying Veteran Free Agents" in the CBA, and this exception is formally a component of the Veteran Free Agent exception. This exception enables teams to exceed the salary cap to re-sign their own free agents, up to the player's maximum salary. To qualify for this exception the player essentially must play for three seasons without being waived or changing teams as a free agent (although there are nuances to this rule, which are explained in question number 26). This means a player can obtain "Bird rights" by playing under three consecutive one-year contracts, a single contract of at least three years, or any equivalent combination. It also means that when a player is traded, his Bird rights are traded with him, and his new team can use the Bird exception to re-sign him. These contracts can be up to six years in length. A player can receive raises up to 10.5% of the salary in the first season of the contract.

The 1983 CBA introduced the modern salary cap, and with it the provision allowing teams to exceed the cap to re-sign their own players. It is commonly believed that this exception acquired its common moniker because Larry Bird was the the first such player to be re-signed. However, this appears to be apocryphal, as Bird signed a seven-year contract in 1983 (before this provision took effect), and did not sign another until 1988.

There is one more limit to the maximum salary that can be given using the Larry Bird exception. If the player was a first round draft pick, just completed the third year of his rookie scale contract, and his team did not invoke its team option for the fourth season (see question number 42), then this exception cannot be used to re-sign him to a salary greater than he would have received had the team exercised its option. In other words, teams can't decline an option year in order to get around the salary scale and give the player more money.

Starting January 10 of each season, this exception begins to reduce in value. See question number 20 for details.

EARLY BIRD EXCEPTION -- This is a weaker form of the Larry Bird exception, and is also a component of the Veteran Free Agent exception. Players who qualify for this exception are called "Early Qualifying Veteran Free Agents" in the CBA. A player qualifies for this exception essentially by playing two seasons without being waived or changing teams as a free agent (see question number 26 for details). A team may use this exception to re-sign its own free agent for up to 175% of his salary the previous season or the average player salary, whichever is greater (see question number 25 for the definition of "average salary." Also note that for 2005-06 they used a defined figure of $5 million). Early Bird contracts at least two seasons in length (which limits this exception's usefulness -- it's often better to take a lower salary for one more season and then have the full Bird exception available the next season) and no longer than five seasons. A player can receive raises up to 10.5% of the salary in the first season of the contract using this exception.

If the player was a first round draft pick and just completed the second year of his rookie scale contract, but his team did not exercise their option to extend the contract for the third season (see question number 42), then this exception cannot be used to give him a salary greater than he would have received had the team exercised their third year option. In other words, teams can't decline the option in order to get around the salary scale and give the player more money.

If the player is a restricted free agent with two years of service and receives an offer sheet from a new team, the player's prior team may use the Early Bird exception to match the offer sheet (see question number 37 for restricted free agency).

Starting January 10 of each season, this exception begins to reduce in value. See question number 20 for details.

NON-BIRD EXCEPTION -- This is also a component of the Veteran Free Agent exception. Its name is somewhat of a misnomer, since Non-Bird really is a form of Bird rights. Players who qualify for this exception are called "Non-Qualifying Veteran Free Agents" in the CBA. They are veteran free agents who are neither Qualifying Veteran Free Agents nor Early Qualifying Veteran Free Agents, either because they haven't met the criteria, or because they are Early Bird free agents following the second season of their rookie scale contract and whose team renounced the Early-Bird exception. This exception allows a team to re-sign its own free agent to a salary starting at up to 120% of the player's salary in the previous season, 120% of the minimum salary, or the amount needed to tender a qualifying offer (if the player is a restricted free agent -- see question number 37), whichever is greater. Raises are limited to 8% of the salary in the first year of the contract, and contracts are limited to five seasons when this exception is used.

A partial season counts as a full season for the tenure calculation related to Bird rights. If a team signs another team's free agent to a rest-of-season contract mid-way through the season, then at the end of that season the player is a non-Bird free agent.

Starting January 10 of each season, this exception begins to reduce in value. See question number 20 for details.

MID-LEVEL SALARY EXCEPTION -- This exception allows a team to sign any free agent up to the average salary (see question number 25 for the definition of "average salary." Also note that for 2005-06 they used a defined figure of $5 million). This exception may be split and given to multiple players. It may be used for contracts of up to five years in length, and raises are limited to up to 8% of the salary in the first year of the contract. Signing a player to a multi-year contract does not affect a team's ability to use this exception every year. For example, a team can sign a player to a five-year contract using this exception and still use the exception the following year to sign another player. Also see question number 20 for more information on the availability and use of this exception.

If the player is a restricted free agent with one or two years of service and receives an offer sheet from a new team, the player's prior team may use the Mid-Level exception to match the offer sheet (see question number 37 for restricted free agency).

Here are the actual values of this exception for each season. Note that since this exception is based on the average player salary, the actual value of this exception is not determined until the start of the free agent signing period.

2005-06 $5 million
2006-07 $5.215 million
2007-08 $5.356 million
2008-09 $5.585 million
2009-10 $5.854 million
2010-11 $5.765 million

BI-ANNUAL EXCEPTION -- This exception was previously named the "$1 Million exception" (perhaps "misnamed" is more appropriate, since it was only valued at $1 million in 1998-99). It may be used to sign any free agent to a contract starting at up to the following amounts:

2005-06 $1.67 million
2006-07 $1.75 million
2007-08 $1.83 million
2008-09 $1.91 million
2009-10 $1.99 million
2010-11 $2.08 million
2011-12 $2.18 million

This exception may not be used two years in a row (and if the $1 Million exception was used in 2004-05, the Bi-Annual exception may not be used in 2005-06). It may be split and given to more than one player, and can be used to sign players for up to two years, with raises limited to 8%. Also see question number 20 for more information on the availability and use of this exception.

ROOKIE EXCEPTION -- Teams may sign their first round draft picks to rookie "scale" contracts even if they will be over the cap as a result (see question number 42).

MINIMUM PLAYER SALARY EXCEPTION -- Teams can offer players minimum salary contracts even if they are over the cap. Contracts can be up to two years in length. For two year contracts, the second season salary is the minimum salary for that season. The contract may not contain a signing bonus. This exception also allows minimum salary players to be acquired via trade. There is no limit to the number of players that can be signed or acquired using this exception.

This exception begins to reduce in value after the first day of the season. For example, if there are 180 days in the season, then this exception reduces in value by 1/180 of its initial value each day. If a team signs a minimum salary player 90 days into the season, it can pay the player only half the minimum salary.

See question number 73 for more information on how minimum salary players are handled in trade.

TRADED PLAYER EXCEPTION -- This exception is used for trades, and cannot be used to sign free agents. It allows teams to acquire more salary in a trade than they send away. It also allows teams to take up to a year to complete some trades, banking a credit in the interim. This exception is discussed in detail in question numbers 71 and 72. Also see question number 20 for more information on the availability and use of this exception.

DISABLED PLAYER EXCEPTION -- This exception allows a team which is over the cap to acquire a replacement for a disabled player who will be out for the remainder of that season (if the player is disabled between July 1 and November 30) or the following season (if the player is disabled after November 30). This exception can also be granted in the event of a player's death. This exception can only be used to acquire one player. The maximum salary for the replacement player is 50% of the injured player's salary, or the average salary, whichever is less (see question number 25 for the definition of "average salary"). Approval from the league (based on a determination by an NBA-designated physician) is required for this exception to be used. This exception can be used to sign a free agent, or to create room to accept a salary in trade. When used for trade, the team may acquire a player whose salary (including any trade bonus) is up to 100% of this exception plus $100,000 (not 125%). Also see question number 20 for more information on the availability and use of this exception.

If a player is disabled between July 1 and November 30, the team must acquire the replacement player within 45 days. If the player is disabled between December 1 and June 30, then the team has until October 1 to sign a replacement. If the disabled player comes back sooner than expected, then he may be activated immediately, and the replacement player is not affected. However, if the disabled player comes back before the exception is used, then the exception is lost.

Teams sometimes have had difficulty getting the NBA to approve an injury exception. For example, Danny Manning tore an ACL toward the end of the 1997-98 season, yet the NBA did not approve the Suns for this exception. More recently, the Magic did not receive this exception in 2003 for Grant Hill. However, this exception was granted in the 1999 offseason to San Antonio, so they could replace Sean Elliott, who was disabled due to kidney problems. This exception was also granted to Charlotte soon after Bobby Phills was killed.

Don't confuse this exception with the salary cap relief teams can apply for a year after losing a player to a career-ending injury or death (see question number 55). This exception allows a team to acquire a replacement player. The salary cap relief removes a contract from the books.

REINSTATEMENT -- If a player was banned from the league for a drug-related offense and later reinstated, his prior team may re-sign him for up to his previous salary.

Summary of Salary Cap Exceptions
Larry Bird Early Bird Non-Bird Mid-Level Bi-Annual Rookie Minimum Disabled Player Reinstatement
Who Qualifies Own free agent, 3 seasons without changing teams as a free agent Own free agent, 2 seasons without changing teams as a free agent Own free agent, if not Larry Bird or Early Bird Any Any Team's first round draft pick(s) Any Any Reinstated players re-signing with their prior team
Minimum Years 1 2 1 1 1 2 plus two team options 1 1 1
Maximum Years 6 5 5 5 2 2 plus two team options 2 5 5
Maximum Salary Maximum salary (see note in text) Greater of 175% of previous salary or average salary Greater of 120% of previous salary or 120% of minimum salary Average salary See text 120% of scale amount Minimum salary Lesser of 50% of injured player's salary or average salary Player's prior salary
Maximum Raises 10.5% 10.5% 8% 8% 8% Defined in salary scale Salary always minimum 8% 8%
Can be split? No No No Yes Yes No No No No
Other Cannot be used in consecutive seasons Restricted free agency following option years Approval from the league required. Can be used for a limited time only.

Note: The Traded Player exception is not listed because it cannot be used to sign free agents.

20. How do exceptions count against the cap? Does being under the cap always mean that a team has room to sign free agents? Do teams ever lose their exceptions?

If a team is below the cap, then their Disabled Player, Bi-Annual, Mid-Level and/or Traded Player exceptions are added to their team salary, and the league treats the team as though they are over the cap. This is to prevent a loophole, in a manner similar to free agent amounts (see question numbers 30, 31, 32, 33). A team can't act like they're under the cap and sign free agents using cap room, and then use their Disabled Player, Bi-Annual, Mid-Level and/or Traded Player exceptions. Consequently, the exceptions are added to their team salary (putting the team over the cap) if the team is under the cap and adding the exceptions puts them over the cap. If a team is already over the cap, then the exceptions are not added to their team salary. There would be no point in doing so, since there is no cap room for signing free agents.

So being under the cap does not necessarily mean a team has room to sign free agents. For example, assume the cap is $49.5 million, and a team has $43 million committed to salaries. They also have a Mid-Level exception for $5 million and a Traded Player exception for $5.5 million. Even though their salaries put them $6.5 million under the cap, their exceptions are added to their salaries, putting them at $53.5 million, or $4 million over the cap. So they actually have no cap room to sign free agents, and instead must use their exceptions.

Teams have the option of renouncing their exceptions in order to claim the cap room. So in the example above, if the team renounced their Traded Player and Mid-Level exceptions, then the $10.5 million is taken off their team salary, which then totals $43 million, leaving them with $6.5 million of cap room which can then be used to sign free agent(s).

Starting January 10 of each season, the Mid-Level, Bi-Annual, Larry Bird, Early-Bird and Non-Bird exceptions begin to reduce in value. For example, if there are 180 days in the season, then these exceptions (if they are still unused) reduce by 1/180 of their initial value each day starting January 10. If a team uses their $5 million Mid-Level exception on February 1, then the exception is actually worth $4,361,111.

The Disabled Player, Bi-Annual, Mid-Level and Traded Player exceptions may be lost entirely, or the team may never receive them to begin with. This happens when their team salary is so low that when the exceptions are added to the team salary, the sum is still below the salary cap. If the team salary is below this level when the exception arises, then the team doesn't get the exception. If the team salary ever drops below this level during the year, then any exceptions they had are lost.

For example, with a $49.5 million salary cap, assume it's the offseason, and a team has $41 million committed to salaries, along with a Mid-Level exception for $5 million, a Traded Player exception for $2.5 million, and an unrenounced free agent whose free agent amount is $2 million. Their salaries and exceptions total $50.5 million, or $1 million over the cap. What if their free agent signs with another team? The $2 million free agent amount comes off their cap, so their team salary drops to $48.5 million. This total is below the cap so the team loses its Mid-Level and Traded Player exceptions.

There is logic behind this. The whole idea behind an "exception" is that it is an exception to the rule which says a team has to be below the salary cap. In other words, an exception is a mechanism which allows a team to function above the cap. If a team isn't over the cap, then the concept of an exception is moot. Therefore, if a team's team salary ever drops this far, its exceptions go away. The effect is that a team may have either exceptions or cap room, but they can't have both.

21. If a team has more than one exception available to sign a particular player, are there any rules regarding which one it has to use?

The team has the right to choose which of its available exceptions to use to sign a player. However, teams may not combine exceptions, or combine an exception with cap room, in order to sign a player. For example, a team with a $5 million Mid-Level exception and a $2 million in cap room may not combine them to sign a player for $7 million. This is explained more thoroughly in question number 75.

22. When a player signs mid-year for the rest of the season, is his salary pro-rated?

Even though the exceptions that enable players to be signed pro-rate (see question number 20), salaries themselves are not pro-rated during the season. For example, a team that has not used its Mid Level exception could use it to sign a player on the last day of the regular season. By that day the Mid Level exception will have pro-rated down to about half its original value. However a player could sign a rest-of-season contract for the entire remaining amount on that day, earning it all for just one game.

Raises are based on the acutal salary in the first season of the contract. For example, if a player signs a two-year contract on the last day of the regular season and the salary for the first season is $1 million, then the second season salary may range from $920,000 to $1.08 million.

Minimum salaries are the exception to the above, and do pro-rate during the season. This affects both 10-day (see question number 68) and rest-of-season contracts. The minumum salary on a rest-of-season contract is based on the fraction of the season remaining when the contract is signed. The minimum salary on a 10-day contract is based on the number of days actually covered by the contract (a 10-day contract lasts 10 days or three games, whichever is longer).

If a player signs a multiyear contract starting at the pro-rated minimum salary, then the salary in subsequent seasons is the full minimum salary.

23. Can a team circumvent the salary cap by paying a player less but arranging for an affiliated company to also pay him, perhaps by way of an endorsement contract?

I suppose it could happen, but the NBA will investigate if it suspects that an outside person or organization is paying a player on behalf or at the request of a team. If they find out that such an event has occurred, they will penalize the team. For the first offense by a team, the fine can be up to $2,500,000, forfeiture of a first round draft pick, and/or voiding the player's contract. The penalties increase for subsequent violations.

Incidentally, players are no longer allowed to become player-coaches. This is because it would be possible to circumvent the cap by signing a player as a player-coach, and paying him less as a player but overpaying him as a coach.

24. Do players and teams ever have under-the-table agreements? What happens when the league finds out about them? Is this what happened with the Timberwolves and Joe Smith?

If a team makes a direct agreement with a player that is not reported to the league, the penalties can be even harsher than those described in question number 23. Such a violation is considered by the league to be among the most serious a team can commit. Again, the league will investigate any allegations of wrongdoing. A violation can result in a fine up to $5,000,000, forfeiture of draft picks, voiding the player's contract(s), and/or the suspension for up to one year of any team personnel who were involved. In addition, the player himself can be fined up to $100,000, and prohibited from ever signing with that team.

This is what happened in 2000 with Joe Smith and the Minnesota Timberwolves. Smith left the Philadelphia 76ers in 1999 (following the lockout) to sign with the Minnesota Timberwolves for their $1.75 million Mid-Level exception. They made an under-the-table agreement that Smith would play under three consecutive one-year contracts at below market value, and the Timberwolves would reward him by using their Bird rights to sign him to a huge contract beginning with the 2001-02 season. Unfortunately, they reduced this agreement to writing, and the written agreement eventually found its way into the league's hands.

It had long been rumored that such under-the-table agreements existed, but this was the first time the league had hard evidence in the form of a signed contract. The league responded by fining the team the maximum (at the time) $3.5 million, taking away their next five draft picks (two were later returned), and voiding Smith's then-current contract. Owner Glen Taylor and GM Kevin McHale also agreed to leaves of absence (in lieu of suspensions, at which time the fifth draft pick was returned). Most interestingly, the league also voided Smith's two previous, already-completed contracts. This essentially stripped the Timberwolves of any Bird rights to Smith, preventing them from re-signing Smith for any salary above the minimum (they had already used their other exceptions). Smith left Minnesota and signed with the Detroit Pistons, but returned to Minnesota in 2001.

25. How is "average salary" defined?

The league computes the average salary by taking the total salaries paid during the previous season, dividing by 13.2 times the number of teams (other than expansion teams in their first two seasons) and then adding eight percent. The Bobcats were in their second season in 2005-06, so they did not count in the 2005-06 calculation, and the denominator is 13.2 times 29, or 382.8. In 2006-07 it changed to 13.2 times 30, or 396.

This average salary figure is used when determining the salaries payable using the Early-Bird, Disabled Player and Mid-Level exceptions; when determining an unsigned free agent's effect on team salary, and when determining the maximum salary in an offer sheet to a restricted free agent with one or two years of service. Here are the values in each season:

Season Average salary value
2005-06 $5 million*
2006-07 $5.215 million
2007-08 $5.356 million
2008-09 $5.585 million
2009-10 $5.854 million
2010-11 $5.765 million

* For 2005-06 they used a defined figure of $5 million, rather than applying the formula.

26. How long must a player be with one team before the Larry Bird exception can be used?

The basic idea is that a player must play for the same team for three seasons for his team to gain Bird rights (two seasons for Early Bird rights). It can be a single three-year contract, a series of three one-year contracts, or any combination that adds up to three seasons (two for Early Bird). However there are a number of complications:

27. Why a three-year wait before gaining Bird rights?

It closed a salary cap loophole. There used to be no waiting period, but this was abused by Portland with Chris Dudley and Phoenix with Danny Manning. Both teams signed these players to one-year deals at small salaries. The next year, Bird rights in hand, they signed new contracts far in excess of the cap. The three year rule prevents these types of cap circumventions.

28. Does the Larry Bird exception mean that free agents can be signed and not count against the cap?

All salaries are included in team salary (and count against the cap). The Bird exception simply says a team can exceed the cap to sign certain players. The new salary applies toward the team salary just like the salaries of the team's other players. So if a team is over the cap and uses the Bird exception to re-sign its own free agent, it will end up farther over the cap.

29. I just saw that a team signed a player for more money than it has under the cap. It was another team's free agent, so the Larry Bird exception wasn't used. What gives?

If one of the other exceptions wasn't used, it may just be the way the deal was reported. Only the first season's salary must fit under the cap, but signings are often reported using the total salary for the entire contract. For example, if a team is $10 million under the cap, they can sign a player to, say, a five-year contract for $10 million, $10.5 million, $11 million, $11.5 million and $12 million, respectively, for the five seasons. The deal then gets reported as five years for $55 million. But the first year salary is what counts, and it fits perfectly.

30. Can a team with cap room sign all the free agents it wants (up to the salary cap) and THEN re-sign its own free agents using the Bird exception?

A team's ability to do this is very limited. The team's free agents continue to count against their team salary (against the salary cap). This charge is called the "free agent amount." There may not be enough money available under the cap to sign another team's free agent, because the team's own free agents are taking up all their cap room.

31. How much do free agents count against their team's salary cap?

The free agent amount depends on the player's previous salary and what kind of free agent he is:

Kind of free agent Previous salary Free agent amount
Any Minimum salary Portion of minimum salary not reimbursed by the league (see question number 11)
Larry Bird, except when coming off rookie scale contract At least the average salary 150% of his previous salary*
Larry Bird, except when coming off rookie scale contract Below the average salary 200% of his previous salary*
Larry Bird, following the fourth season of his rookie scale contract At least the average salary 250% of his previous salary*
Larry Bird, following the fourth season of his rookie scale contract Below the average salary 300% of his previous salary*
Larry Bird, following the third season of his rookie scale contract Any The maximum salary the team can pay the player using the Bird exception
Early Bird, following the second season of his rookie scale contract Any The maximum salary the team can pay the player using the Early Bird exception
Early Bird (all others) Any 130% of his previous salary*
Non-Bird Any 120% of his previous salary*

* Not to exceed the player's maximum salary, based on years of service (see question number 11). If the difference in salary between the last two seasons of the player's contract exceeded $4 million, then the percentage is based on the average salary in the last two seasons of the contract.

A restricted free agent counts against his team's salary cap by the greatest of:

Here's an example of how to use this chart: Let's say a player who made $5 million during the previous season becomes an Early-Bird free agent, and is not coming off the second season of his rookie scale contract. According to this chart, the player's free agent amount is 130% of his previous salary. So $6.5 million is included in his team's team salary while he is a free agent.

See question number 42 for more information on rookie "scale" contracts, question number 34 for information on renouncing players, and question number 37 for information on restricted free agency.

32. Why do free agents continue to count against a team's cap?

It closes another loophole. Teams otherwise would be able to sign other teams' free agents using their cap room, and then turn their attention to their own free agents using the Bird exceptions. This rule restricts their ability to do that. It doesn't close this loophole completely -- for example, in 2005 Michael Redd's free agent amount was $6 million, even though the Bucks intended to re-sign him for the maximum salary. By waiting to sign Redd last, the Bucks were able to take advantage of the difference by signing Bobby Simmons. Had they signed Redd first, they would have had no cap room to sign Simmons.

33. When do free agents stop counting against the team's cap?

When any one of the following three things happen:

34. What does renouncing a player mean?

As detailed in question number 31, free agents continue to be included in team salary. By renouncing a player, a team gives up its right to use the Larry Bird, Early Bird, or Non-Bird exceptions (see question number 19) to re-sign that player. A renounced player no longer counts toward team salary, so teams use renouncement to gain additional cap room. After renouncing a player, the team is still permitted to re-sign that player, but must either have enough cap room to fit the salary, or sign the player using the Minimum Salary exception. The exception to this is an Early Bird free agent who is coming off the second season of his rookie scale contract. Such players, when renounced, are treated as Non-Bird free agents.

If the player does not sign with any team (his prior team or any other team) for the entire season, then his renouncement continues. In other words, the team is not permitted to renounce a player, let him lie idle for the year, then re-sign him the following summer using Bird rights. However, if the player re-signs with his prior team, then his renouncement is no longer in effect when his contract ends. For example, if a team renounces their Larry Bird rights to a player, then re-signs that player to a one-year contract using cap room, then the player is once again a Larry Bird free agent the following summer.

After renouncing a player, a team can still trade the player in a sign-and-trade agreement (see question number 79).

35. Can the renouncement be renounced? In other words, can a team un-renounce a player and then sign him using a Bird exception?

Only in one specific circumstance -- when they renounce one or more of their players in order to create enough cap room to sign another team's restricted free agent, but the restricted free agent's original team matches the offer sheet and keeps him. If that happens, the team can rescind the renouncement. There are a couple exceptions to this -- they can't rescind a renouncement if doing so takes them from below the salary cap to above it; or if they are above the cap and rescinding the renouncement takes them farther above the cap than they were before the renouncement.

See question number 37 for more information on restricted free agency.

36. Let's say a team arranges for all of its players to become free agents at the same time. If they renounce everybody, do they then have a salary total of $0 and a full cap under which to work?

No. There are lots of things that are included in team salary besides active contracts -- see question number 14 for a full list. Note especially that there is a roster charge when a team has fewer than 12 players under contract, free agents included in team salary, players given offer sheets, and first round draft picks.

37. What is restricted free agency?

There are two types of free agency: unrestricted and restricted. An unrestricted free agent is free to sign with any other team, and there's nothing the player's original team can do to prevent it. Restricted free agency gives the player's original team the right to keep the player by matching an offer sheet the player signs with another team. This is called the "right of first refusal."

Restricted free agency exists only on a limited basis. It is allowed following the fourth year of rookie "scale" contracts for first round draft picks (see question number 42). It is also allowed for all veteran free agents who have been in the league three or fewer seasons. However, a first round draft pick becomes an unrestricted free agent following his second or third season if his team does not exercise its option to extend the player's rookie scale contract for the next season. All other free agency is limited to unrestricted free agency.

In order to make their free agent a restricted free agent, a team must submit a qualifying offer to the player by June 30. This prevents the team from not offering a contract and waiting to swoop in when the player tries to sign elsewhere. The qualifying offer ensures that the team does not gain the right of first refusal without also offering a contract themselves. The amount of the qualifying offer for players on rookie "scale" contracts is based on the player's draft position (see question number 42). The qualifying offer for all other players must be for 125% of the player's previous salary, or the player's minimum salary (see question number 11) plus $175,000, whichever is greater. The qualifying offer must be for one season. A player can elect to accept his qualifying offer (the qualifying offer must be accepted by March 1) and play the following season under its terms. This is sometimes done in order to become an unrestricted free agent the following summer (see question number 39).

A qualifying offer cannot be accepted after March 1. Teams may place a shorter time limit on their qualifying offer, specifying any date between October 1 and March 1 by which it must be accepted. If the deadline passes and the qualifying offer is neither withdrawn nor accepted, then the player continues to be a restricted free agent. The team and player are also still free to negotiate a new contract after the qualifying offer ends -- the deadline only affects the player's ability to accept the qualifying offer.

Teams may also withdraw an outstanding qualifying offer in which case the player becomes unrestricted. This happened with Toronto and Keon Clark in 2002. The qualifying offer cannot be withdrawn after July 23 without the player's approval.

If the player is coming off the fourth year of his rookie scale contract, then in addition to a qualifying offer, his team can also submit a maximum qualifying offer. A maximum qualifying offer is for six seasons at the maximum salary with 10.5% annual raises. It can contain no options, ETOs or bonuses of any kind, and must be fully guaranteed. When a team submits a maximum qualifying offer (in essence "stepping up" with a maximum contract offer before the player even hits the market), it places a more stringent requirement on other teams' offer sheets (see below).

When another team wants to sign a restricted free agent, it signs the player to an offer sheet, the principal terms of which the original team is given seven days to match. The offer sheet must be for at least two seasons (not including option years). If the player's prior team also submitted a maximum qualifying offer, then the offer sheet must be for at least three seasons (not including option years). If the player's original team exercises its right of first refusal by matching the principal terms of the offer sheet, the player is then under contract to his original team. If the player's original team does not exercise its right of first refusal within seven days, the offer sheet becomes an official contract with the new team.

To summarize, a restricted free agent essentially has four options:

There are additional restrictions placed on offer sheets for players with one or two years in the league. These restrictions are described in question number 38.

There can be no compensation given to a team in return for their not matching an offer to a restricted free agent. For example, Houston could not sign Golden State's restricted free agent, then send Golden State a draft pick in exchange for their not matching the offer and retaining the player.

If the team matches an offer sheet, they cannot trade the player in a sign-and-trade arrangement (see question number 79).

A signed offer sheet can be rescinded within the seven day waiting period if all three parties (the player and the two teams) agree.

38. What is the "Gilbert Arenas" provision?

With the previous CBA it was sometimes possible to sign restricted free agents to offer sheets their original teams couldn't match. This happened when a player was an Early Bird or Non-Bird free agent (see question number 19) and the team didn't have enough cap room to match a sufficiently large offer. For example, Gilbert Arenas was Golden State's second round draft pick in 2001, and became an Early Bird free agent in 2003. Golden State therefore could only match an offer sheet (or sign Arenas themselves) for up to the average salary (see question number 25), which was about $4.9 million. Washington signed Arenas to an offer sheet with a starting salary of about $8.5 million, which Golden State was powerless to match.

This loophole was addressed in the current CBA (although not closed completely -- see below). Teams are now limited in the salary they can offer in an offer sheet to a restricted free agent with one or two years in the league. The first-year salary in the offer sheet cannot be greater than the average salary (see question number 25). Limiting the first year salary in this way guarantees that the player's original team will be able to match the offer sheet by using the Early Bird exception (if applicable -- see question number 19), or Mid-Level exception (provided they haven't used it already).

The second year salary in such an offer sheet is limited to the standard 8% raise. The third year salary can jump considerably -- it is allowed to be as high as it would have been had the first year salary not been limited by this rule to the average salary. Raises (and decreases) after the third season are limited to 6.9% of the salary in the third season. The offer sheet can only contain the large jump in the third season if it provides the maximum salary allowed in the first two seasons. In addition, the offer must be guaranteed and cannot contain bonuses of any kind.

If the raise in the third season exceeds the standard raise (8% of the salary in the first season of the contract), then they place an additional restriction on the team. In order to determine the size of the offer the team can make, they don't fit just the first year salary under the cap. Instead, they must fit the average salary in the entire contract under the cap. So a team $8 million under the cap is limited to offering a total of $24 million over three years, $32 million over four years, or $40 million over five years. If the offer sheet does not contain a third-season raise larger than 8% of the first-season salary, then they only have to fit the first year salary under the cap.

Putting this all together, if a team is $11 million under the cap, wants to submit a five year offer sheet, and wants to provide a large raise in the third season, they can offer a total of $55 million. If the average salary is $5 million, then the second year salary will be $5.4 million (8% raise). This leaves $44.6 million to be distributed over the final three seasons. With 6.9% raises in years four and five, the entire contract looks like this:

Season Salary Notes
1 $5.0 million Average salary amount
2 $5.4 million 8% raise over season 1
3 $13.907 million This is the amount that yields $44.6 million over the final three seasons with 6.9% raises*
4 $14.867 million Raise is 6.9% of season 3 salary
5 $15.826 million Raise is 6.9% of season 3 salary
Total $55 million Average is $11 million, which equals the team's cap room

* If you want to know how I got that exact amount, (for a five year offer) you solve for (5R - 2.08A) / 3.207. R is the room the team has under the cap. A is the average salary amount (e.g., $5 million). The 2.08 represents the salary in the first two seasons (100% of the average, plus 108% of the average). The 3.207 represents the salary in the last three seasons, using 6.9% raises: 1.0 + 1.069 + 1.138 = 3.207. Similarly, for a four year offer you would solve for (4R - 2.08A) / 2.069.

For the team making this offer, this contract would count for $11.0 million (i.e., the average salary in the contract) of team salary in each of the five seasons if they sign the player. If the player's prior team matches the offer and keeps the player, then the actual salary in each season counts as team salary. The player's original team is allowed to use any available exception (e.g., the Mid-Level or the Early-Bird) to match the offer.

Since a team must fit the average salary from the entire contract under the cap in order to offer the large third-season raise, a team must have some amount of cap room above the average salary amount in order to effectively utilize this provision. For example, suppose the average salary amount is $5 million, and a team with $5.1 million of cap room wants to provide a five year offer sheet. If they want to offer a larger-than-normal third-year raise, then their cap room will be determined by the contract's average salary, so the total contract must pay $25.5 million or less. If they offer $5 million and $5.4 million in the first two seasons, then that leaves just $15.1 million for the final three seasons -- so there must be a decrease in salary in the final three seasons. A team in this situation is better off providing the standard 8% raise in the third season, which does not trigger the cap room requirement based on averaging. In this example, a five year offer starting at $5 million with 8% raises would total $29.0 million.

As I said above, the loophole was addressed with this rule, but not closed completely. This is because this provision is primarily intended to protect teams from losing their successful second round picks, who are Early-Bird free agents after two years. There are several situations where a team still might be unable to match an offer sheet:

This provision also ensures that second round picks can't cash in with a maximum salary sooner than first round picks can.

39. Haven't some restricted free agents gotten away anyway? How did this happen?

For one, the team can simply decide not to match the offer sheet. If this happens, the offer sheet becomes an official contract with the new team seven days.

With the previous CBA, it was sometimes possible to sign a restricted free agent with one or two years experience to an offer sheet that the player's original team could not match. This loophole was closed in the current CBA, as described in question number 38.

40. What if a restricted free agent has no interest in staying with his original team? Is there any way he can force the issue?

Most teams are hesitant to sign restricted free agents to offer sheets, because it is often a given that the offer will be matched by the player's original team, and the team's cap room is tied up while the offer sheet is outstanding (however this was assuaged somewhat when the current CBA shortened the deadline from 15 days to seven). If the player really wants to leave, he can accept his original team's qualifying offer, which constitutes a one-year contract at a scale salary. The player must play with his original team for the season, but following that season he will be a free agent again. If he meets the tenure requirement he will be unrestricted, and then can sign with any other team.

For example, Michael Olowokandi was a restricted free agent in 2002. Rather than entering free agency as a restricted free agent, he accepted the Clippers' qualifying offer for the 2002-03 season, and entered free agency in 2003 as an unrestricted free agent (signing with Minnesota).

This strategy obviously would not be effective for players who would continue to be subject to restricted free agency. For example, if a second round pick completes a two year contract, he will be subject to restricted free agency. If he accepts his qualifying offer and plays an additional season with his previous team, he would be a three year veteran the following summer and still subject to restricted free agency.

41. Does a team receive compensation when another team signs their free agent, like in some other sports?

No. A team that loses a free agent does not receive anything. It used to be the case in the NBA a long time ago, but not any more. The most famous example of this is when Gail Goodrich signed as a free agent with the New Orleans Jazz. The Lakers, Goodrich's previous team, received a draft pick as compensation. That draft pick turned out to be Magic Johnson.

42. First round draft picks operate under a different set of rules?

Yes. There's a strict salary scale for first round draft picks and their first contracts. They do this because it was previously common for rookies to hold out, not signing with their team until they got the contract they wanted. There was also backlash from the veteran players who saw rookies with no NBA experience getting more money than they were. The last year without a salary scale was 1994, when it was rumored that first overall pick Glenn Robinson was going to hold out for $100 million, and he eventually signed a 10-year, $68.15 million contract.*

Beginning in 1995, salaries for first round picks were set according to a strict scale, determined by their exact draft position. The salary scale is determined for all picks in all seasons when the CBA is written. Rookie scale contracts are always for two seasons, with team options for the third and fourth seasons. Here is an example showing the scale salary figures for the #1 overall draft pick in each season from 2005-06 through 2011-12:

Season 1st year salary 2nd year salary 3rd year option salary 4th year option (% raise over 3rd year salary) Qualifying offer (% raise over 4th year salary)
2005-06 $3,617,100 $3,888,300 $4,159,600 26.1% 30.0%
2006-07 $3,751,000 $4,032,400 $4,313,700 26.1% 30.0%
2007-08 $3,885,000 $4,176,400 $4,467,700 26.1% 30.0%
2008-09 $4,019,000 $4,320,400 $4,621,800 26.1% 30.0%
2009-10 $4,152,900 $4,464,400 $4,775,900 26.1% 30.0%
2010-11 $4,286,900 $4,608,400 $4,929,900 26.1% 30.0%
2011-12 $4,420,900 $4,752,400 $5,084,000 26.1% 30.0%

By comparison, the 30th and last pick in the draft has a first-year salary figure of $717,800 in 2005-06 and $877,300 in 2011-12. A listing of the salary figures for all draft picks and all years can be found at the Players Association's web site: http://www.nbpa.org/sites/default/files/EXHIBIT B.pdf

A team may sign a player for as little as 80% or as much as 120% of the scale salary figure. For example, the 1st year salary for the #1 overall pick drafted in 2005 can be as little as $2,893,680 or as much as $4,340,520. In most cases, the contract that is actually signed is for the maximum 120% figure. Teams are able to provide this amount using the Rookie exception, even if they are over the salary cap. Annual raises are limited to 8%, and also can't exceed 120% of the scale amount for that season.

If the player is not signed by January 10th, the scale amount reduces each day for the remainder of the season. For example, if there are 170 days in the season, then the scale amount reduces by 1/170th each day starting January 10th, until the player is signed.

The exact percentage increase for the third and fourth (option) years varies by the player's draft position. For the third year it is 26.1% for the first pick, scaling up (almost evenly) to 80.5% for the 30th pick. For the fourth year it's 30.0% for the first pick, scaling up to 50.0% for the 30th pick.

Teams have until the October 31** preceding the player's second season to exercise their option for the player's third season. Likewise, they have until the October 31** preceding the player's third season to exercise their option for the player's fourth season (see question number 51 for more information on options). If the team invokes both options (keeping the player for all four seasons) then the player becomes a restricted free agents following his fourth season (see question number 37 for more information on restricted free agency). If the team declines either option, then the player enters free agency as an unrestricted free agent.

* Dan Rosenbaum analyzed the effectiveness of the salary scale system and concluded that it has resulted in the annual redirection of $200 million from non-veterans to veterans. Currently Rosenbaum's paper is unavailable online.

** Or the next business day, if October 31 falls on a weekend or holiday.

43. What if the team and their drafted player can't agree to a contract? What options does the player have? How long does the team keep his draft rights?

The player's options are limited. What happens depends on a number of factors:

In any of the above cases, if the team does not sign the player in the allotted time, the player can enter the next draft. If the team that selects the player in the next draft doesn't sign him either, he becomes a rookie free agent.

When a team signs a first round draft pick within three years after he is drafted, they use the salary scale for the year in which he signs (usually the player signs in the same year he is drafted). After three years they have the option of either using the salary scale or signing him like he was a free agent -- using their cap room, the Mid-Level exception, the Bi-Annual exception or the Disabled Player exception, and with standard raises. They can only do the latter if the player did not play intercollegiately in the interim, and such a contract must be for at least three seasons.

Players drafted prior to 2005 (under the previous CBA) may be signed according to the rules for scale contracts set forth in the 1999 CBA, with three guaranteed years plus one option year, at the scale salary for the year in which the player was drafted.

44. Do draft picks count against the team's salary cap? If so, how much?

Unsigned first round picks are included in team salary immediately upon their selection in the draft. They count as 100% of the scale salary for that pick, unless there is a verbal agreement for a higher salary. An incident occurred prior to the 1997-98 season when Vancouver's first round pick, Antonio Daniels, revealed in an interview that he and the team had verbally agreed to a contract starting at the maximum salary (120% of the scale amount). Since verbal agreements apply to the salary cap, the league then changed the team's cap figure from the scale amount to 120% of scale.

Once a first round pick signs a contract, his actual salary is included in the team salary, of course.

If a first round pick signs instead with a non-NBA team, his scale amount is excluded from the team salary on the date he signs his non-NBA contract or the first day of the regular season, whichever is later. The scale amount goes back onto the team salary on the following July 1 or when his non-NBA contract ends, whichever is earlier. In other words, these cap holds are removed for players playing outside the NBA, but only during the regular season.

Unsigned second round picks are not included in team salary. This is a loophole that Houston once tried to use by trading a first round pick for a second round pick in order to clear cap room.

As described in question number 74, the trade value of an unsigned first or second round draft pick is always $0.

45. What if a team likes its first round pick and wants to sign him, but either feels he isn't worth the scale salary or doesn't want to commit to two seasons?

They're stuck. In essence, this makes late first round picks less valuable, because it forces teams to make a two-year commitment to a marginal player. It was worse under the previous CBA, when the minimum commitment was three years. In 1996, rather than give their first round pick Travis Knight (29th overall) a three-year deal, the Bulls renounced him, making him a free agent.

46. If a first round draft pick is renounced, is he still bound to the salary scale for a first round pick?

No. The salary scale only applies to the team that drafts the player or the team to which the player's draft rights are traded. When Chicago renounced first round pick Travis Knight in 1996, he then signed with the Lakers for one year at the league minimum salary.

Note that this might actually work to the player's advantage. If he becomes an outstanding NBA player, then he would be eligible for a non-scale contract (and potentially a big payday), much sooner than if he had played under a scale contract. The same is true for second round draft picks, whose first contracts are usually for two seasons (with the second season at the team's option).

47. Is there a limit to the length of a contract or the raise a player can receive? Is there a limit to the amount a salary can decrease from year to year?

Maximum years and raises depend on the type of contract:

Type of contract Maximum years Maximum raise Notes
Larry Bird exception 6 10.5% See question number 19
Early Bird exception 5 10.5% See question number 19
First round draft pick 2 plus 2 option years Defined in salary scale See question number 42
Certain restricted free agents 5 Can have a substantial raise in year 3 See question number 38
Extensions 6 (including remaining seasons of current contract) 10.5% of the salary in the last season of the contract being extended. See question number 52
Other 5 8% Some exceptions have a shorter maximum length. See question number 19

Incidentally, raises take effect July 1 of each year.

Typically a salary can decrease by the same amount it can increase. For example, since the Larry Bird exception limits raises to 10.5% of the first-year salary, the salary may also decrease by no more than 10.5% of the first-year salary.

48. Are raises compounded? In other words, is each raise a percentage of the previous year's salary?

No. For a normal contract, the raise is limited to a percentage of the first year salary. So if a team signs another team's free agent (8% maximum raises) to a five year contract starting at $10 million, the maximum raise is $800,000 each year. This player's five-year salary would be:

Year 1 $10,000,000
Year 2 $10,800,000
Year 3 $11,600,000
Year 4 $12,400,000
Year 5 $13,200,000

49. Are there restrictions based on a player's age?

There are rules regarding the minimum age for draft eligibility. A player can't play in the NBA unless he's been eligible for at least one draft (he doesn't have to actually be drafted, he just has to have been eligible). A player who is eligible for a draft must be at least 19 during the calendar year of that draft, and if a U.S. player, at least one year removed from high school. In addition, at least one of the following must be true:

An international player is a player who has lived outside the U.S. for at least the three years prior to the draft, played outside the U.S. (as an amateur or pro), did not complete high school in the U.S., and never enrolled at a U.S. college or university.

Note that the current CBA increased the age requirements for draft eligibility, but this did not affect players who had already been drafted. For example, Andrew Bynum, who was 17 when drafted in 2005 (prior to the current CBA taking effect) was eligible to play.

There are also rules which prevent teams from padding extra years onto contracts for older players. The "Over-36" rule is described in question number 50.

50. What is the "Over-36" rule?

Suppose a player is nearing retirement, and he wants to finish his career with a team that can only offer him their Mid-Level exception. If they want to give the player more money than the Mid-Level exception would allow, then there is a potential loophole they could exploit by signing a contract for more years than they expect the player to play.

For example, suppose the Mid-Level exception is $5 million. With 8% raises, a four-year contract would total $22.4 million. But if they added a fifth year to the contract, the total salary would be $29 million. If the player retires after four seasons and continues drawing his salary for the additional season, he will effectively be paid $29 million for four years' work. In essence, they are giving the player a four year contract with additional deferred compensation.

This loophole is closed by the Over-36 rule.

Certain long-term contracts that extend past the player's 36th birthday are deemed Over-36 contracts. In an Over-36 contract, the presumption is that the seasons at the end of the contract are likely to come after the player retires. Therefore, they are classified as deferred compensation as described above. This is significant because deferred compensation is charged to the salary cap in the year it is earned, not the year it is paid.

As with the previous example, suppose the Mid-Level exception is $5 million, and a 34-year-old player signs a contract with 8% raises. Here are the four-year and five-year versions of the contract:

Season Four-year Five-year
1 $5 million $5 million
2 $5.4 million $5.4 million
3 $5.8 million $5.8 million
4 $6.2 million $6.2 million
5 N/A $6.6 million
Total $22.4 million $29 million

The five-year contract is classified as an Over-36 contract. In this contract, salary in the fifth season is classified as deferred compensation earned in the first four seasons. Therefore, the $6.6 million from the fifth season is counted against the salary cap in each of the first four seasons, in proportion to the salary in each of those seasons. The next chart shows the salary paid, the amount reclassified as deferred salary, and the total (paid plus deferred) counted against the cap in each season:

Season Paid Deferred Cap Amount
1 $5,000,000 $1,473,214 $6,473,214
2 $5,400,000 $1,591,071 $6,991,071
3 $5,800,000 $1,708,929 $7,508,929
4 $6,200,000 $1,826,786 $8,026,786
5 $6,600,000 N/A $0
Total $29,000,000 $29,000,000

Some things to note from this chart:

This shifting of salaries creates a problem – the cap amount in the first season ($6,473,214) now exceeds the Mid-Level exception! In order for this contract to fit within the $5 million Mid-Level exception, the salaries need to be reduced:

Season Paid Deferred Cap Amount
1 $3,862,069 $1,137,931 $5,000,000
2 $4,171,034 $1,228,966 $5,400,000
3 $4,480,000 $1,320,000 $5,800,000
4 $4,788,966 $1,411,034 $6,200,000
5 $5,097,932 N/A $0
Total $22,400,000 $22,400,000

As before, the salary from the fifth season is divided up and shifted to the first four seasons, in proportion to the salaries earned in those four seasons. In the first season, the reduced salary and deferred amount now add up to fit exactly within the $5 million Mid-Level exception.

Note the effect the Over-36 rule had on the contract – since the salary had to be reduced, the player earned exactly the same amount ($22.4 million) over five years as he would have earned with a four-year contract that was not subject to the Over-36 rule. In other words, the Over-36 rule completely eliminates the advantage of adding additional years onto the contract, effectively closing the loophole described earlier. It does not matter how many additional years are added on -- as more years are added, more salary is classified as deferred and counted against the cap in the earlier seasons, and the base salary in the earlier seasons has to be reduced further to fit the total within the maximum allowed amount. The player therefore receives no more money in a longer contract than he would receive in a four-year contract, so any incentive for signing a longer deal is eliminated.

The Over-36 rule has an additional component. As the player continues playing, and therefore proves the assumption (that the player will retire before earning all his salary) wrong, the deferred salary stops being classified as deferred, and is shifted back into the zero years of the contract. This begins to happen two seasons before the first zero year, and continues for each remaining year of the contract. In the previous example, the first (and only) zero year was the fifth season of the contract, so beginning with the third season, the salary cap amount is readjusted. Here is the remainder of the contract at that point in time (copied from the previous example):

Season Paid Deferred Cap Amount
3 $4,480,000 $1,320,000 $5,800,000
4 $4,788,966 $1,411,034 $6,200,000
5 $5,097,932 N/A $0

To readjust the salary cap amount, they take that season's cap amount, plus the cap amounts for the following two seasons (or however many remain if there are fewer than two), average them together, and distribute that amount evenly among those seasons. In this case there are three seasons with cap amounts of $5.8 million, $6.2 million and $0. The average of these amounts is $4.0 million. This becomes the cap amount for those three seasons:

Season Paid Cap Amount
3 $4,600,000 $4,000,000
4 $4,983,333 $4,000,000
5 $5,366,667 $4,000,000

Prior to the fourth and fifth seasons they repeat this process, but in this case the cap amount does not change.

So what contracts are classified as Over-36 contracts, and in those contracts, what are the zero years? Like everything else related to this rule, it's complicated -- it depends on the length of the contract, the player's birthdate and age when the contract is signed, whether the player was a full Bird free agent, and whether it was a new contract or an extension. And to make it even more interesting, for contracts signed prior to November 1, 2005 they used the Over-36 rule as it was defined in the 1999 CBA, not what's defined here (this apparently was done to allow the Heat to sign Shaquille O'Neal in 2005 to a new contract that would not be classified as Over-36). See here for a description of the Over-36 rule in the previous CBA.

For contracts signed November 1, 2005 or later, the following charts indicate what free agent contracts are subject to the Over-36 rule, and which years are zero years. For example, if a 33-year-old Qualifying Veteran Free Agent (a player with full Bird rights) re-signs with his prior team for five seasons, then his contract is classified as Over-36, and the fifth season is considered a zero year. An "N/A" indicates that the contract is not Over-36, either because it doesn't reach the player's 36th birthday, or because it is specifically excluded from the Over-36 rule in the CBA. The seasons marked with asterisks might be classified as Over-36 under certain circumstances (see below).

Qualifying Veteran Free Agents (Full Bird Rights)
Age 4 year contract 5 year contract 6 year contract
30 N/A N/A 6*
31 N/A 5* 5* and 6
32 4** 4* and 5 5 and 6
33 N/A 5 5 and 6
34 N/A 5 5 and 6
35+ 4 4 and 5 4, 5 and 6

Other Free Agents
Age 5 year contract
31 5*
32+ 4 & 5

* The seasons marked with asterisks would fall under the Over-36 provision if the player's birthday falls between the July Moratorium and September 30 and he signs his contract prior to his birthday. This is because for the Over-36 rule only, seasons are defined to commence on October 1. If the player's birthday falls between the July Moratorium and September 30, and he signs his contract prior to his birthday, then he will turn a year older just before each season commences. For example, suppose a 32-year-old Qualifying Veteran Free Agent re-signs with his prior team for five seasons. Suppose he signs on August 15, and his birthday is on September 15. When the fourth season of this contract commences, the player will be 36 (not 35), and therefore the Over-36 rule will be triggered on the fourth season. Of course, the player can avoid this situation by waiting until after his birthday to sign his contract.

** For the case of a 32-year-old Qualifying Veteran Free Agent who re-signs to a four-year contract, it is possible the league will grant some leeway. This is because they specifically excluded 33- and 34-year-olds with four-year contracts from being classified as Over 36, but they missed this peculiarity with 32-year-olds. Again, at worst the player can avoid this situation by waiting until after his birthday to sign his contract.

Other notes about Over-36 contracts:

51. What are option clauses? What kind of option clauses are there?

An option clause allows a contract to be extended for one additional season after the date it is scheduled to end. For example, a five-year contract with an option for the sixth year means that if the option is exercised, then the contract extends through the sixth season, but if the option is not exercised, then the contract ends after the fifth season. Once exercised, an option cannot be revoked (for example, a player cannot invoke an option on June 20th and change his mind on June 25th). Conditional options are not allowed -- the availability of the option may not be contingent on some condition, such as the number of games the team wins or the player's points per game.

There are three types of options:

A contract may not contain more than one option in the same season (for example, the last season cannot contain both a player option and a team option). A six year contract may contain an ETO following the fourth season and an option (either player or team) following the fifth season.

Rookie "scale" contracts for first round draft picks contain team options for the third and fourth seasons (team options for the third season exist only for players drafted in 2005 or later). No other options are permitted in rookie scale contracts. See question number 42 for more information.

Here's a summary of the differences between an option and an ETO:

All contracts with player options contain a clause that indicates whether the player receives his salary for the option year in the event he is waived prior to invoking his option.

Options have a window of time during which they may be exercised. The specific opening and closing dates of this window are a matter of individual negotiation, except in the following circumstances:

Interestingly, there is no mechanism to notify the league that an option will NOT be exercised. Teams and players might want to do this in order to make the player tradeable after the season ends but before July 1 (see question number 88), or because the player wants to be traded to a team which does not want the player if he might become a free agent. As described in question number 54, under these circumstances the team and player can mutually amend the contract to remove the option.

Player options were previously used as a way to give the player more money. A long-term deal was agreed upon with a player option after the player obtained Larry Bird rights. The player invoked the option, became a free agent, and then the team & player signed a new contract for more money using the Bird exception. However, since the current CBA prevents ETOs before the end of the fourth year or more than one option year, the usefulness of this tool is now very limited.

* Or the next business day, if October 31 falls on a weekend or holiday.

52. Can existing contracts be extended?

Contracts for fewer than four seasons may not be extended. Longer contracts can be extended under certain circumstances:

Type of contract When signed Can be extended
Six or seven seasons Prior to July 1, 2005 Four years after contract signed
Six seasons On or after July 1, 2005 Three years after contract signed
Four or five seasons Any Three years after contract signed
Extended contracts Any Three years after extension signed
Renegotiated contracts* Any Three years after renegotiation signed
Rookie scale contracts Any From the day following the July moratorium to the October 31 preceding the player's last option season**

* If renegotiation provided a salary increase greater than 10%.

** Provided the team had previously picked up the option for that season. The deadline is the following business day if October 31 falls on a weekend or holiday.

Except for extensions of rookie scale contracts (which must be signed by October 31), extensions may be signed up to June 30, the day before the player would have become a free agent.

Rookie scale contracts may be extended for up to five seasons beyond the player's last option season, bringing the total contract length to six seasons. All other extensions are limited to five seasons, including the seasons remaining on the current contract (even if extended in late June, the current season counts as one full season toward the total). For example, a contract with two seasons remaining may be extended for up to three additional seasons.

The salary in the first year of an extension to a rookie scale contract may be any amount up to the player's maximum. For all other extensions, the salary in the first year of the extension is limited to 110.5% of the salary in the last year of the existing contract. However, it also can't exceed the maximum salary the player can receive if he were to sign a new contract that year as a free agent (see question numbers 11 and 12).

This poses an interesting problem -- if an extension takes effect three years from now, how do they set the salary if the maximum salary (and therefore the maximum amount for the extension) won't be known for three years? What they do is write the extension to include the maximum 10.5% raise (assuming the team agrees to give the player that much). Then when the extension takes effect and the maximum salary for that season is known, the extension salary is amended if necessary.

An example is in order. Shaquille O'Neal's contract was extended prior to the 2000-01 season. His original contract ran through the 2002-03 season, in which he made $23,571,429.20. The first year of his extension, 2003-04, was originally written for (the then-maximum) 112.5% of this amount, or $26,517,857.85. As a 10+ year veteran, O'Neal's salary couldn't exceed 105% of $23,571,429.20, or the 2003-04 maximum salary for a 10+ year veteran (which turned out to be $15,344,000), whichever is greater. That means O'Neal's 2003-04 salary could not exceed $24,750,000.66 (using 105% of his previous salary, since that was the greater of the two). O'Neal's extension was therefore amended downward to the maximum ($24,750,000.66) once the 2003-04 maximum salary was determined.

Raises in each year of an extension to a rookie scale contract are limited to 10.5% of the salary in the first year of the extension. For all other extensions, raises are limited to 10.5% of the salary in the last year of the existing contract. If the salary in the first year of an extension is amended as described above, then all subsequent years of the extension are also amended to accommodate the maximum raise, if necessary.

53. Can existing contracts be renegotiated?

A contract for four or more seasons can be renegotiated after the third anniversary of its signing, extension, or renegotiation that increased any season's salary by more than 8%. Contracts for fewer than four seasons cannot be renegotiated. A contract cannot be renegotiated between March 1 and June 30 of any year. Only teams under the cap can renegotiate a contract, and the salary in the then-current season can be increased only to the extent that the team has room under the cap. Raises in subsequent years are limited to 10.5% of the salary in the first renegotiated season. The renegotiation may not contain a signing bonus. Contracts cannot be renegotiated downward (players can't take a "pay cut" in order to create salary cap room for the team) or to contain fewer seasons.

Again, a team over the salary cap cannot renegotiate a contract. An interesting case of this was Shawn Kemp with the Sonics. Kemp, who was unhappy with his contract and wanted to renegotiate, could not get a larger contract from the Sonics because they were over the cap. Kemp forced a trade to Cleveland, who was far enough under the cap at the time to give him the large contract he wanted. Kemp's contract was renegotiated soon after the trade.

54. In what other ways can an existing contract be modified?

Other than extensions (see question number 52) and renegotiations (see question number 53), a team and player can mutually modify an existing contract as follows:

55. What are the rules for retired players?

There's nothing binding about a player announcing his retirement. The player can still sign a new contract and continue playing (if he's not under contract), or return to his team (if he is still under contract) and resume his career.

The only exception to this is when a player is still under contract, wants to quit, and his team doesn't want to let him out of his contract. Under these circumstances the player can file for retirement with the league. The player is placed on the league's Voluntarily Retired list, forgoes his remaining salary, and cannot return to the league for one year. The latter requirement prevents players from using retirement as an underhanded way to change teams, but can be overridden with unanimous approval from all 30 teams.

Any money paid to a player is included in team salary, even if the player is no longer playing or has retired.

There is one exception whereby a player can continue to receive his salary, but the salary is not included in the team's team salary. This is when a player is forced to retire for medical reasons and a league-appointed physician confirms that he is medically unfit to continue playing. There is a waiting period of one year following the injury or illness before a team can apply for this salary cap relief. If the waiting period expires mid-season (on any date prior to the last day of the regular season), then the player's entire salary for that season is removed from the team's team salary. For example, in March 2003 the Knicks were allowed to remove Luc Longley's entire 2002-03 salary from their books (and since the luxury tax is based on the team salary as of the last day of the regular season, the Knicks avoided paying any tax on Longley's salary). This provision can also be used when a player dies while under contract.

If the player "proves the doctors wrong" and resumes his career, then his salary is returned to his team's team salary when he plays in his 10th game in any one season (including pre-season, regular season and playoff games). This allows a player to attempt to resume his career without affecting his team unless his comeback is ultimately successful. A team loses this salary cap relief even if the player later signs and plays 10 games with a different team.

Teams are not allowed to trade for disabled players and then apply for this salary cap relief. Only the team for which the player was playing when he was disabled may request this relief.

If a player retires, even for medical reasons, his team does not receive a salary cap exception to acquire a replacement player.

56. What are waivers?

It's a temporary status for players who are released by their team. A player released between August 15th and the end of the regular season stays on waivers for 48 hours. A player released at any other time stays on waivers for seven days. During the waiver period other teams may claim a waived player. If more than one team tries to claim the player, the team with the worst record gets him. If a player on waivers is claimed, the new team acquires his existing contract and pays the remainder of his salary. There is also a fee of $1,000, payable to the league office, for claiming a waived player.

A team can claim a waived player only if one of the following is true:

If no team claims a waived player, he is said to have "cleared waivers." The player may sign with a new team of his choice, and the player's prior team continues to pay the guaranteed portion of the terminated contract (see question number 94 for more information). The player's salary with his new team is a matter of negotiation. Few players are actually claimed while on waivers, since the team claiming a waived player inherits his entire contract. It is far more common for teams to wait for the player to clear waivers, and then sign him to a much smaller (even minimum salary) contract.

If a player is waived after March 1, he is ineligible to be included in the playoff roster of any team that signs him for the remainder of that season.

If a team trades a player and the player is waived by the receiving team, the player's original team cannot re-sign that player for 30 days (during the season) or 20 days (during the offseason) following the date of the trade.

Once a player has cleared waivers, his prior team cannot trade the player (including sign-and-trade).

57. Do released players count against the cap? What is set-off?

Released (waived) players with guaranteed contracts continue to be included in team salary. Players whose contracts are not guaranteed are included in team salary in the amount they made while they were with the team. Players on non-guaranteed "summer contracts" are not included in team salary unless they make the regular season roster.

The team and player may negotiate a revised payment schedule to be utilized in the event the player is waived. This revised payment schedule may call for the guaranteed portion of the player's contract to be paid over a longer or shorter period of time than originally specified in the contract, or even as a lump sum. This is often referred to as a "spread provision." Also see question numbers 62 and 63. Even if the payment schedule is altered, the team's team salary is charged for the same number of seasons as specified in the original contract.

If another team signs a released player who had a guaranteed contract (as long as the player has cleared waivers -- see question number 56), the player's original team is allowed to reduce the amount of money it still owes the player (and lower their team salary) by a commensurate amount (this is called the right of set-off). This is true if the player signs with any professional team -- it doesn't even have to be an NBA team. The amount the original team gets to set off is limited to one-half the difference between the player's new salary and the minimum salary for a one-year veteran (if the player is a rookie, then the rookie minimum is used instead).

For example, suppose a fifth-year player is waived during the 2005 offseason, with one guaranteed season remaining on his contract. If this player signs a $1 million contract with another NBA team for the 2005-06 season, his original team gets to set off $1 million minus $641,748 (the minimum for a one-year veteran in 2005-06), divided by two, or $179,126. If this player had a $5 million salary with his prior team, then his prior team would be responsible for the remaining $4,820,874. Note that between his prior team and new team the player will earn a combined $5,820,874, which was more than he made prior to being waived.

Teams and players may negotiate a waiver of the team's set-off rights. Typically (but not necessarily) this is done when a contract is altered as part of a buyout (see question number 62), but not at other times.

There was some controversy about what happens to player options if the player is released before the option can be exercised. See question number 51 for details.

58. Do injured players count against the cap?

Injured players are included in team salary. The exception is for players who are forced to retire for medical reasons -- see question number 55 for details.

In certain cases, teams can gain an exception which allows them to exceed the cap to sign a replacement. See question number 19 for more information on the Disabled Player exception.

59. What about suspended players? How do they count against the cap? Can teams suspend players for any reason?

The CBA does not give a complete list of reasons for which a player can be suspended. A few reasons are specified, such as for prohibited substances and disciplinary reasons. Teams sometimes suspend players for other reasons, but those suspensions are often grieved. For example, Toronto once suspended Oliver Miller for being too heavy, and the LA Clippers once suspended Keith Closs for being too light! The CBA does not specify the length of suspensions except in the cases of:

The suspensions for drugs become larger if the player refuses to submit to mandatory treatment and monitoring.

Players are not paid while they are suspended. If a player is suspended by his team, then all of his salary counts as team salary. If the player is suspended by the league, then 50% of the salary lost due to the suspension counts as team salary.

A suspended player can be traded.

By the way, the money from fines and suspensions is put to good use -- it's given to charities of the NBA's and Players Association's choice.

60. How do players who die count against the cap?

Sadly, a number of players have died while they were active, including Jason Collier, Reggie Lewis, Drazen Petrovic, Bobby Phills, Malik Sealy and Nick Vanos.

A player who dies is treated the same as one who has suffered a career-ending injury or illness. See question number 55.

61. Are player contracts insured?

There is a league-wide policy that insures the contracts of around 150 players each season. The five most expensive contracts for each team are included, and teams have the option of submitting additional names for coverage. The carrier has the right to exclude 14 contracts per season, such as when they consider a player with a very large remaining contract to be a medical risk. For example they excluded Luol Deng in 2008-09 because he had $71 million remaining and a history of back injuries. The list of excluded players changes each year, so a player who is not covered one season might be covered the following season.

If an insured player is disabled, then there is a 41 game waiting period, after which the insurance company will pay 80% of the guaranteed portion of the player's base salary. Once a player is covered, the carrier can't exclude the player for the remainder of his current contract.

If the player is traded, his new team receives the beneft -- for example, even though Cuttino Mobley's heart condition was discovered prior to his trade to the Knicks, the Knicks received the insurance payout.

62. What is a contract buy-out?

Sometimes players and teams decide to divorce each other. They do this by mutually agreeing that:

For example, the Celtics did this with Dino Radja prior to the 1997-98 season. They mutually agreed to reduce Radja's compensation protection to 50% of its value, and then the Celtics waived him. When he cleared waivers he was paid the 50% he was owed, and he was then free to return to Europe.

But there's a twist, which needed an arbitrator's ruling during the 1999-00 season to resolve. As detailed in question number 94, on January 10 all contracts become guaranteed for the rest of the season. Compensation protection insures the player against loss of salary after being waived for lack of skill. But if he is waived after January 10, then he doesn't lose his salary, so the compensation protection does not kick in. Even though the team & player can mutually agree to reduce or eliminate the player's compensation protection, he is still owed his full salary if waived after January 10.

This was challenged by John Starks during the 1999-00 season. Starks had been traded to the Bulls, and wanted to sever ties with the team after January 10. The arbitrator ruled that in the last season of a player's contract, the team and player could choose to eliminate the contract guarantee that kicked in on January 10. Starks and the Bulls were therefore free to agree to a divorce (with no money owed to Starks) as described above.

There is one other type of buyout described in the CBA. When a contract contains an option year, a buyout amount for the option year can be written into the contract. The buyout amount may be up to 50% of the salary for the option year, and is payable with the exercise of an ETO or the non-exercise of an option.

63. How do buy-outs affect a team's salary cap?

The agreed-upon buy-out amount (see question number 62) is included in the team salary instead of the salary called for in the contract. If the player had more than one season left on his contract, then the buy-out money is distributed among those seasons in proportion to the original salary. For example, say a player had three seasons remaining on his contract, with salaries of $10 million, $11 million and $12 million. The player and team agree to a buyout of $15 million. The $15 million is therefore charged to the team salary over the three seasons. Since the original contract had $33 million left to be paid, and $10 million is 30.3% of $33 million, 30.3% of the $15 million buyout, or $4.545 million, is included in the team salary in the first season following the buyout. Likewise, 33.33% of $15 million, or $5 million, is included in the team salary in the second season, and 36.36% of $15 million, or $5.455 million, is included in the team salary in the third season.

The distribution of the buy-out money is a matter of individual negotiation. Changing the number of years in which the money is paid does not change the number of years in which the team's team salary is charged. In the above example in which the player's contract is bought out with three seasons remaining, the buyout amount is always charged to the team salary over three seasons. It does not matter if the player is actually paid in a lump sum or over 20 years (a spread provision).

64. Can incentives be built into a contract? How do they count against the cap?

There are three types of allowable incentives: performance incentives, academic/physical achievement incentives, and extra promotional incentives. The latter two types of incentives are always included in team salary. Performance incentives are classified as either "likely to be achieved" or "not likely to be achieved," and are only included in team salary if they are "likely to be achieved." The league office determines what is likely and what is not. Their guideline is whether the criterion was achieved in the previous season. For example, if a player had seven assists per game the previous season, then an incentive based on seven assists per game would probably be classified as "likely to be achieved," but an incentive based on eight assists per game would probably be classified as "not likely to be achieved." Unlikely bonuses in any season are limited to 25% of the player's salary in that season. In the first year of a contract the base salary, likely bonuses and unlikely bonuses must all fit within the salary cap or exception. The league also determines a team's available cap room by adding in the unlikely bonuses for all players who signed that season. This prevents a team from signing multiple players to lower salaries but with lots of unlikely bonuses, and therefore committing to more salary than it has cap room to offer.

Exceptions are reduced by the aggregate of the salary and unlikely bonuses, so if the Mid-Level exception is $5.5 million and a player is signed to a $2 million base salary and $500,000 in incentives, the team's Mid-Level exception is reduced by $2.5 million, leaving $3 million.

Incentives must be structured so that they provide an incentive for positive achievement by the player or team, and are based upon numerical benchmarks (such as points per game or team wins) or generally recognized league honors (such as MVP or all-NBA first team). The numerical benchmarks must be specific -- e.g., a bonus may be based on the player's free throw percentage exceeds 80%, but may not be based on the player's free throw percentage improving over his previous season's percentage. Certain kinds of incentives are not allowed, such as those based on the player being on the team's roster on a specific date, or for a specific length of time. An incentive also cannot be based on the player suiting up for a specific number of games.

All performance incentives are re-evaluated at the start of each season to determine whether they should be classified as likely or unlikely to be achieved. In addition, players' performance incentives may be re-evaluated if they are traded. For example, a bad team may have a player with a performance incentive based on the team winning 41 games, that the league classifies as "not likely to be achieved." If that player is traded to a contending team, the league may reclassify the incentive as "likely to be achieved," and include it in the new team's team salary.

Note that the incentives are classified based on the prior season, not on an assessment of the current season. Suppose Team A won 25 games last season, and Team B (with the league MVP) won 45. Also suppose the MVP had a performance incentive based on his team winning 30 games. This incentive would be classified as "likely to be achieved," since Team B achieved this standard the prior season. Now suppose this player is traded to Team A for draft picks. Even though adding the MVP should easily push Team A's win total above 30, the incentive would still be reclassified as "not likely to be achieved" since the classification is not based on an assessment of the current season, but on the results of the prior season.

65. How about signing bonuses? Are they allowed? How do they count against the cap?

Teams are allowed to offer the players they sign a bonus worth as much as 20% of the total compensation (17.5% in offer sheets to restricted free agents signed after March 1, 2006). A signing bonus is spread among the guaranteed seasons in the contract (but not to option years or years following an ETO), in proportion to the percentage of salary in each of those seasons that is guaranteed*. This can create a problem if the player is signed using an exception or to the maximum salary. For instance, if the Mid-Level exception is $5 million, then a team could sign a player to a five-year contract with 8% raises (but without a signing bonus), as follows:

Without Signing Bonus
Year Salary
1 $5,000,000
2 $5,400,000
3 $5,800,000
4 $6,200,000
5 $6,600,000
Total $29,000,000

The maximum (20%) signing bonus is $5,800,000. It must be allocated to each season of the contract (assume there is no option year or ETO). But in order to fit the first-year salary plus the portion of the signing bonus allocated to the first season within the $5 million exception, the first-year salary must be reduced, and the bonus recalculated:

With Signing Bonus
Year Base salary Portion of signing bonus Total
1 $3,875,969 $1,124,031 $5,000,000
2 $4,186,046 $1,124,031 $5,310,077
3 $4,496,124 $1,124,031 $5,620,155
4 $4,806,202 $1,124,031 $5,930,233
5 $5,116,279 $1,124,031 $6,240,310
Total $22,480,620 $5,620,155 $28,100,775

Note that in order to fit the first-year amount (salary plus bonus) within the $5 million exception, the first year salary had to be reduced to $3,875,969. The net effect is that the player gets more money in the first year (he receives his base pay of $3,875,969 plus his entire signing bonus of $5,620,155, for a total of $9,496,124), but he receives less in the subsequent years. Also note that the total value of the contract ($28,100,775) is lower, because raises are based on the lower base salary in the first year.**

The following are also treated like signing bonuses for the purpose of determining a player's salary:

Also see question number 79 for information on including signing bonuses in sign-and-trade contracts.

* The calculation for allocating the signing bonus to the years of the contract is somewhat confusing. It is not proportionate to the salary, but rather to how much of the salary is guaranteed. If there are five years in the contract, there is no option year or ETO, and each year of the contract is 100% guaranteed, then 20% of the signing bonus is allocated equally to each season of the contract, even though (as in the example above), the salary increases throughout the contract. Using the above example, if the fifth year of the contract was only 50% guaranteed, then $1,248,923 of the bonus would be applied to each of the first four seasons, and $624,462 would be applied to the fifth season.

In the special case of a multi-year contract that is entirely non-guaranteed, the entire signing bonus is applied to the first season of the contract.

** In the example above, note that the signing bonus of $5,620,155 is 20% of the final contract ($28,100,775) and not the original contract ($29,000,000). How are the final values calculated? It's kind of complicated, and I go over the details in a separate (and rather technical) document available at http://members.cox.net/lmcoon/SigningBonus.pdf. I also provide a spreadsheet for calculating a contract (including contracts that contain signing bonuses) at http://members.cox.net/lmcoon/Contracts.xls.

66. Are teams really competing on a level playing field? Since the tax rate is different in the different states and Canada, don't the teams in a more "tax friendly" state have an advantage over the other teams?

Yes they do. For example, since Florida has no state income tax, an offer from Orlando will offer a higher net income than the same offer from Los Angeles. However, the league added a regulation to help neutralize the tax disadvantage of Canadian teams. All teams are permitted to offer a signing bonus of up to 20% (see question number 65). For U.S. residents in Canada, this bonus is taxed at just 15%. Using this bonus, Canadian teams can nearly achieve tax neutrality.

67. What roster size limits exist? What is the Inactive List? What is Injured Reserve?

A team must have 12 players on its active roster, although they can drop to 11 for up to two weeks at a time. They must suit up at least eight players for every game. Any remaining players must be on its Inactive List, and are ineligible to play in games. A team must have a minimum of one and a maximum of three players on its Inactive List, although they can drop to zero for up to two weeks at a time, and can temporarily have four with league approval in the event of a hardship. The composition of the Inactive List can change on a game-by-game basis -- no less than 60 minutes prior to tipoff, the team must present to the official scorer a list of the players who will be active for that game. A player can be inactive for as little as one game. While individual teams are only required to carry 13 players (12 active and one inactive), the NBA also guarantees a league-wide average of at least 14 players per team. The league is surcharged if they do not meet this obligation.

Injured Reserve is the previous name for the Inactive List. It was originally intended for players who were injured and unable to play, however teams often used it as a convenient place to stash extra players. While a medical reason was required for players to be put on Injured Reserve, the league did not insist on an independent physician confirming the diagnosis. Thus it was common for a seemingly healthy player to suddenly develop "back spasms" right before rosters were cut to 12 players, and spend the entire season on Injured Reserve as a result. With the current CBA they gave up the ghost, dropped the medical requirement, and changed "injured" to "inactive." (The cynic will note that marginal NBA players seem to have a lot fewer back spasms nowadays.)

Players assigned to the NBA Developmental League (see question number 69) are automatically placed on their team's Inactive List.

68. What is a 10-day contract?

A 10-day contract is just that, a player contract which lasts ten days (or three games, whichever comes later). A team may sign a player to two 10-day contracts in one season (they may or may not be consecutive). After the second 10-day contract, the team can only retain the player by signing him for the remainder of the season. A team can't have more 10-day contracts than they have players on their Inactive List. Ten-day contracts are available to be used starting January 5 (or the first business day thereafter) each season.

69. What is the NBA Developmental League (NBA D-League)?

The NBA Developmental League (NBA D-League) is a separate league run in affiliation with the NBA. Teams may assign up to two of their players to an NBA D-League team. Only players with fewer than two years' experience may be assigned to an NBA D-League team, and each player can be assigned no more than three times per season. If an active player is assigned, he is automatically placed on the team's Inactive List. There is no minimum or maximum length of an NBA D-League assignment, and players have 48 hours to report to the NBA D-League team once they are assigned. Players continue to receive their NBA salary while assigned to the NBA D-League.

NBA D-League rosters are normally 10 players, but can expand to 12 to accommodate assigned NBA players. In some cases where one team might be overstocked with assignees or players at a particular position, players might be reassigned to a different team. NBA teams do not control the playing time their assignees receive -- that matter is up to the discretion of the NBA D-League coaches.

Further information for the NBA D-League can be found on their website: http://www.nba.com/dleague

70. What are the rules regarding trades?

Teams under the salary cap may make trades as they please, as long as they don't end up more than $100,000 above the salary cap following a trade. But if a team is over the cap, or they are under the cap and a trade would take them more than $100,000 over the cap, then an exception is required. An exception is the mechanism that allows a team to make trades or sign free agents and be over the salary cap. Since teams are usually over the salary cap, trades are usually accomplished using exceptions.

Some exceptions are available only for signing free agents, and those exceptions are covered in question number 19. The exceptions available for making trades are as follows:

Note that there are sometimes multiple ways to configure the same trade. For example, a minimum-salary player might be acquired using either the Traded Player exception or the minimum salary exception, or a two-for-two trade might also work as two separate one-for-one trades. Teams are allowed to choose the configuration that works best for them. See question number 75 for an example of this.

71. What is the Traded Player exception?

As described in question number 70, exceptions are the mechanisms that allow teams to function above the salary cap. Any trade which results in the team ending up over the salary cap requires an exception. This is true even if the team is moving downward in salary. For example, if the salary cap is $50 million, a team has a team salary of $55 million, and they want to trade a $5 million player for a $4 million player, they still have to use an exception. Even though their team salary would be decreasing by $1 million, the fact that they would still be over the salary cap ($54 million) means that an exception is required.

The Traded Player exception is the primary means used by teams over the cap for completing trades. It allows teams to make trades that leave them over the cap, but it places several restrictions on those trades. Trades using the Traded Player exception are classified into two categories: simultaneous and non-simultaneous. As its name suggests, a simultaneous trade takes place all at once. Teams can acquire up to 125% plus $100,000 of the salaries they are trading in a simultaneous trade. For example, a team trading a $5 million player in a simultaneous trade can receive one or more players whose salary is no more than 125% of $5 million, plus $100,000, or $6.35 million in return.

A non-simultaneous trade may take up to a year to complete, but the team can only trade away one player, and can receive no more than $100,000 more than the salary they trade away. Non-simultaneous trades are described in question number 72.

In short:

It is important to view a trade from each team's perspective separately, rather than as a single, unified transaction. This is because the same trade may be organized differently according to each team's needs. For example, a trade might be classified as a simultaneous trade from one team's perspective, but from the other team's perspective it's actually broken into two trades, one simultaneous and the other non-simultaneous (completing a trade they made months earlier).

There are several restrictions on trades (either simultaneous or non-simultaneous) which are described in other questions in this FAQ. These include Base Year Compensation (question numbers 76, 77 and 78), sign-and-trade (question numbers 79, 80, 81 and 82), including cash in trades (question number 83), trading draft picks (question number 74), trade bonuses (question numbers 86 and 87), and no-trade provisions (question number 88). In addition, performance incentives can complicate trades (question number 64).

Also be aware that while the term "Traded Player exception" refers to the entire exception which allows teams to make trades above the salary cap (including simultaneous trades, non-simultaneous trades, and base year compensation), it is also commonly used to refer to the one-year monetary credit teams receive while a non-simultaneous trade is pending completion. Be aware of this potential ambiguity, which was made worse by the current CBA (earlier CBAs used the term "Assigned Player exception" to refer to the entire exception).

72. What is a non-simultaneous trade?

In some cases, teams have up to one year to acquire the replacement player(s) to complete a trade. These trades are considered non-simultaneous trades. In a non-simultaneous trade, a team can only acquire up to 100% plus $100,000 of the salary it gives up (as opposed to 125% plus $100,000 in a simultaneous trade). A trade in which more than one player is traded away can only be simultaneous; non-simultaneous trades are allowed only when a single player is traded away (although teams can sometimes find ways to configure multi-player trades as multiple single-player trades which are non-simultaneous).

Here is an example of a non-simultaneous trade: a team trades away a $2 million player for a $1 million player. Sometime in the next year, they trade a draft pick (with zero trade value itself) for a $1.1 million player to complete the earlier trade. They ended up acquiring $2.1 million in salary for their $2 million player -- they just didn't do it all at once, or even necessarily with the same trading partner.

In the above example, after the initial trade of the $2 million player for the $1 million player, it was like the team had a "credit" for one year, with which they could acquire up to $1.1 million in salaries without having to send out salaries to match. This credit is often referred to as a Traded Player exception or a trade exception, but be aware that the CBA uses the name "Traded Player exception" to refer to the entire exception which allows teams to make trades above the salary cap (including simultaneous trades, non-simultaneous trades, and base year compensation).

There are some common misconceptions about non-simultaneous trades. For one, teams cannot use a Traded Player exception to sign free agents; it can be used only to acquire existing contracts from other teams. For another, teams cannot combine a Traded Player exception with other exceptions (such as the Mid-Level exception or the 125% plus $100,000 margin from another trade) in order to trade for a more expensive player. For example, a team with a $1 million Traded Player exception cannot combine it with their $2 million player to trade for a $3 million player (see question number 75 for more information on combining exceptions).

Here is a more complicated example of a legal non-simultaneous trade: a team has a $4 million Traded Player exception from an earlier trade, and a $10 million player it currently wants to trade. Another team has three players making $4 million, $5 million and $7 million, and the teams want to do a three-for-one trade with these players. This is legal -- the $5 million and $7 million players together make less than the 125% plus $100,000 allowed for the $10 million player ($12,600,000), and the $4 million player exactly fits within the $4 million Traded Player exception. So the $4 million player actually completes the previous trade, leaving the two teams trading a $10 million player for a $5 million and a $7 million player. From the other team's perspective it's all just one big simultaneous trade: their $4 million, $5 million and $7 million players for the $10 million player.

Again, non-simultaneous trades are not available when a team trades away multiple players (aggregates). Let's say a team has a $4 million player and a $5 million player, and uses the Traded Player exception to trade for an $8 million player. Even though they trade away more salary ($9 million) than they receive ($8 million), the fact that they aggregated the two players means they do not gain a Traded Player exception. However, it is sometimes possible to reorganize these trades so that players technically are not aggregated. A good example of this occurred in 2004 when Houston traded Steve Francis, Cuttino Mobley and Kelvin Cato to Orlando for Tracy McGrady, Juwan Howard, Tyronn Lue and Reece Gaines. As a single trade, it could only be simultaneous since multiple players were moving each way. However, Houston was able to reorganize the trade into three separate trades. In one trade, they acquired McGrady and Gaines for Mobley and Cato. In another trade, they acquired Howard and Lue using an existing Traded Player exception from their earlier Glen Rice trade. That left them trading Francis essentially by himself for nothing, which generated a new Traded Player exception in the amount of Francis' base year value. From Orlando's perspective, it was a single, simultaneous three-for-four trade.

Teams can consume only part of a Traded Player exception, in which case they can still use the remainder in a future trade. For example, if a team trades a $4 million player for a $2 million player, they gain a $2.1 million Traded Player exception. If they later trade a draft pick for a $1 million player, they still have $1.1 million remaining to acquire more players and complete the trade (until one year from the date of the original trade).

Also see question number 20 for more information on the availability and use of this exception.

73. How are minimum-salary players handled in trades?

The "Minimum Player Salary exception" allows teams to acquire minimum-salary players without regard to salary matching under the Traded Player exception (see question number 71). For example, a team over the cap can trade a second round draft pick to another team in exchange for a minimum-salary player, even a 10-year veteran earning over $1 million. To qualify, the player can be signed for no more than two seasons, can be paid no more than the then-minimum salary in any season, and can have no bonuses.

When a team acquires multiple players in the same trade, it essentially ignores the incoming salary for all minimum-salary players, as they fall under the Minimum Salary exception. For example, a team is over the cap and trades a $5 million player, receiving in return a $6 million player and two players earning $1 million each on minimum-salary contracts. The team trading the $5 million player can accept only $6.35 million in return (125% plus $100,000 of $5 million), and the three incoming players combine for $8 million in salary. However, the two $1 million players are covered by the Minimum Salary exception, so only the $6 million player is traded with the Traded Player exception. Since $6 million is within the team's $6.35 million limit using the Traded Player exception, the trade is allowed.

Teams trading away minimum-salary players do count their salaries (the portion not paid by the league -- see question number 11) as outgoing salary when comparing salaries for trade.

74. How are draft picks handled in trades?

Draft picks (both first and second round) count $0 for salary matching purposes. This is true both before and after the draft, until the player signs a contract. This can make it very difficult to construct a trade that is equitable in both trade value and basketball talent. For example, Vancouver selected Steve Francis with the #2 pick in the 1999 draft, and traded his draft rights to Houston. When the trade was finally engineered, it included three teams (Orlando was also involved), 11 players (including Francis) and two future draft picks.

Once the draft pick signs a contract, his actual salary becomes his trade value.

Note that even though a draft pick's trade value (for salary matching purposes) is $0, a first round pick is included in his team's team salary at 100% of his scale amount once he is selected in the draft, unless he signs with a non-NBA team (see question number 42). If an unsigned first round draft pick is traded, then 100% of his scale amount is included in the acquiring team's team salary as soon as the trade is completed. An unsigned second round pick does not count toward team salary.

The "Seven Year Rule" allows teams to trade draft picks up to seven years into the future (for example, if this is the 2008-09 season, then a 2015 pick can be traded, but a 2016 pick cannot). It is common to "protect" picks depending on their position (e.g. "we keep it if it's in the lottery, otherwise you get it"). This helps to avoid a repeat of some unfortunate past trades, such as the trade between the Cavs and Lakers where LA received what turned out to be the first overall pick in the 1982 draft, with which they selected James Worthy. It is common for these protections to relax over several years. For example, a team might convey its own pick in the first draft in which such pick is not a "Protected Pick," where a Protected Pick is defined as picks 1-14 in 2008; 1-10 in 2009; 1-6 in 2010; and unprotected in 2011. If the team owns one of the protected picks in 2008, 2009 or 2010, then they keep it; otherwise it is conveyed to the other team. If they make it to 2011 without having conveyed a pick, then the other team gets their 2011 pick unconditionally.

Teams are restricted from trading away future first round draft picks in consecutive years. This is known as the "Ted Stepien Rule." Stepien owned the Cavs from 1980-83, and made a series of bad trades (such as the above-mentioned 1982 trade) that cost the Cavs several years' first round picks. As a result of Stepien's ineptitude, teams are now prevented from making trades which might leave them without a first round pick in consecutive future years.

The Stepien rule applies only to future first round picks. For example, if this is the 2005-06 season, then a team can trade its 2006 first round pick without regard to whether they had traded their 2005 pick, since their 2005 pick is no longer a future pick. But they can't trade away both their 2006 and 2007 picks, since both are future picks. Teams sometimes work around this rule by trading first round picks in alternate years.

These rules often combine to make trade terms very complicated. For example, if a team owes another team two future first round picks, and both picks are protected, then the first pick would be conveyed in the first draft in which it is not a Protected Pick (as described above), and the second pick would be conveyed in the "First Allowable Draft" (per the Stepien rule) or subsequent draft, in which that pick is not a Protected Pick. But since both picks must be conveyed within seven years, the protection on the first pick cannot last more than four years (i.e., the first pick must be conveyed by the fifth year).

Other rules that pertain to trading draft picks:

75. Can exceptions be combined when making trades?

Only to a very limited extent. Teams can use different exceptions to acquire multiple players in the same trade if those players could also have been acquired individually using those exceptions. For example, a team may trade a $5 million player for a $5.5 million player and two 10-year veterans earning $1 million each on minimum-salary contracts. The minimum salary exception is used for the two minimum-salary players, and the $5.5 million player is acquired using the Traded Player exception ($5.5 million is within 125% plus $100,000 of $5 million). This is allowed, since those players could have been acquired separately using those same exceptions.

What is not allowed is using two different exceptions for the same player. Here is something that is not allowed: A team has a $5 million player and a $1 million Traded Player exception from a previous trade, and wants to add the Traded Player exception to the 125% plus $100,000 margin from their $5 million player ($6,350,000), in order to trade for a player making $7,000,000. This cannot be done.

If a team has Traded Player exceptions from two previous non-simultaneous trades, then they can't combine them into one big Traded Player exception. For example, suppose in the last year a team traded a $5 million player for a $4 million player (generating a $1.1 million Traded Player exception) and separately traded a $3 million player for a $1 million player (generating a $2.1 million Traded Player exception). They cannot now combine the two into a $3.2 million Traded Player exception).

(See question numbers 71 and 72 for more information on the Traded Player exception and non-simultaneous trades. See question number 73 for more information on the minimum salary exception.)

The legal combining of exceptions sometimes creates the appearance of teams getting away with illegal trades. For example, as detailed in question number 88, when a team is over the cap and acquires a player in trade, they cannot re-trade that player in combination with other players for two months. Technically, however, this applies only to players traded together where the salaries are aggregated to acquire a more expensive player. For example, New Orleans acquired Jerryd Bayless from Portland on October 23, 2010, and traded him with Peja Stojakovic to Toronto on November 20, 2010. This trade did not violate the two-month rule because New Orleans did not aggregate -- add together the salaries of -- Bayless and Stojakovic to acquire any of the Toronto players.

76. What is "Base Year Compensation?" How does base year compensation affect trades? Why does it exist?

Base year compensation (BYC) prevents another salary cap loophole. Without BYC, a team over the salary cap that wants to trade a player, but can't because of the Traded Player exception (which says teams can't take back more than 125% of the salary they trade away), could just sign the player to a new contract that fits within the desired range, then do the trade. BYC says "if you re-sign a player and give him a big raise, then for a period of time his trade value will be lower than his actual salary."

BYC defines the salary that's used to compare players for compliance under the Traded Player exception (see question number 71 for more information about the Traded Player exception). Usually the salary used for comparison is the player's actual salary. But under either of the following circumstances, a different salary is used when comparing salaries for trading purposes:

If either of the above apply, then the player is considered a base year player. A player remains a base year player for six months, or until June 30, whichever comes later. When trading a base year player, the salary used for comparison is the player's previous salary, or 50% of the first-year salary in his new contract, whichever is greater.

Here is an example of a BYC calculation: A player earned $2 million in 2004-05, after which he became a free agent. He then signs a new contract (re-signing with his previous team, which is over the salary cap) starting at $9 million. This player qualifies for BYC, so his trade value is the greater of his previous salary ($2 million) or 50% of his new salary ($4.5 million), or $4.5 million. So this player, who actually earns $9 million, is worth $4.5 million for trading purposes.

When comparing salaries for trade, teams use their own player's BYC value and the other player's full salary, even if the other player is also BYC. Here is a simple example -- two $5 million players, both of whom are re-signed (by teams over the cap) for $10 million. Both players become base year players whose base year amount is $5 million (50% of the new salary). If the teams want to trade these players for each other they compare their player's base year amount to the other player's full salary. So each team can take back a maximum of 125% plus $100,000 of their player's $5 million base year amount, or $6.35 million. They compare $6.35 million to the other player's full $10 million. $10 million is way too high, so this trade can't be done, even though the players' actual salaries match exactly.

If one of the teams in the above example was below the cap, the trade still couldn't be done. For the team under the cap, their player would not be BYC, so they would be comparing $10 million to $10 million. But since the other team is over the cap, their player is BYC, and they'd still be comparing $5.85 million to $10 million, which prevents the trade from working. (See question number 78 for more information about trading BYC players.)

For Larry Bird or Early Bird players, the player's BYC begins on the date he signs his contract. For extended rookie scale contracts, the player's BYC begins on the day after the July Moratorium which precedes the first season of the extension. For example, if an extension of a rookie scale contract is signed on 10/30/05, his BYC begins on 7/12/06, because the first season of the extension is 2006-07. A player's BYC goes away if the team falls below the salary cap, the player signs with a different team, or the player is traded.

If a team trades an extended rookie between the date his extension is signed and the date it takes effect, his "trade value" for the receiving team is the average of the salaries in the last year of the scale contract and each year of the extension. This is called the poison pill provision. The sending team uses the player's actual salary when calculating their outgoing salary. They use the current-year maximum salary in place of the (unknown) maximum salary for a future season, if necessary.

Here is an example of a poison pill calculation: Carmelo Anthony earns $4,694,041 in 2006-07, the final year of his rookie scale contract. Prior to October 31, 2006 he signed a five year extension (bringing the total seasons to six) for the maximum salary, with the maximum 10.5% raises. Anthony's actual salary will not be determined until July 2007, when the maximum salary amounts for 2007-08 are set. During the 2006-07 season the 2006-07 maximum is assumed for the 2007-08 season ($13,762,775), and the salary in subsequent seasons is based on this amount ($15,070,550, $16,378,325 and $17,686,100, respectively). If Anthony is traded during the 2006-07 season, then his outgoing salary from the Nuggets' perspective is his actual salary of $4,694,041. His incoming salary from the other team's perspective would be $13,518,358 -- the average of his 2006-07 salary and the assumed salaries in the extension.

77. How does a base year player's salary count against the team's salary cap?

His actual salary is included in the team salary. BYC is used only when comparing salaries for trades.

78. Whenever I read about prospective trades involving base year players, they say a third team must get involved. Why? Can't a base year player be traded in a two-team trade?

There's no specific rule that prohibits trading base year players in a two-team deal. But the way the numbers work, it's not always possible unless one of the teams dumps additional salary onto a third team.

As an example, let's say Player A plays for Washington. He earned $3 million last season and re-signed as a free agent for $10 million. That makes him a base year player whose BYC value is $5 million (see question number 76). Player B plays for Oklahoma City and also earns $10 million, but is not a base year player. Both Seattle and Washington are over the salary cap.

Now suppose Oklahoma City and Washington want to trade Player A and Player B for each other. Oklahoma City can take back 125% plus $100,000 of Player B's $10 million salary, or $12.6 million. Player A's $10 million salary easily fits within that limit. But Washington can only take back as much as 125% plus $100,000 of Player A's $5 million BYC value, or $6.35 million. Player B's $10 million salary is too high.

If the two teams want to complete this trade, then Washington must rid itself of an additional $2.92 million in salary (because Washington's total outgoing amount would then be $7.92 million, and 125% plus $100,000 of $7.92 million is $10 million, which is the amount of incoming salary Washington is trying to absorb in this example). Let's say that Player C plays for Washington, is not a base year player, and earns $3 million. What happens if they want to trade Player A plus Player C for Player B? Player A plus Player C total $13 million, which is greater than Oklahoma City's $12.6 million maximum. So Washington can't give the additional $2.92 million to Oklahoma City.

This is where a third team gets involved. This team must be far enough under the cap, or have a Traded Player exception (see question number 72) to absorb the additional $2.92 million in salary. Let's say Chicago is way under the salary cap. Here is an example three-team trade:

Here's how the numbers work:

Washington trades $5 million BYC plus $3 million salary, or $8 million. They can receive 125% plus $100,000, or $10.1 million, in return. Washington receives Player B's $10 million salary, along with a draft pick that has zero trade value (see question number 74) for a total of $10 million.

Oklahoma City trades $10 million in salary, and receives $10 million in salary, so they're fine.

Chicago trades $0 and receives $3 million, but since they're more than $3 million under the salary cap, they can absorb the increase.

So the numbers work for all teams involved.

Not all trades involving base year players require a third team. This is especially true now that the current CBA has relaxed the Traded Player exception from 115% to 125%. Let's say Player D plays for Washington. He earned $8 million last season and re-signed as a free agent for $10 million, so his BYC amount is $8 million (see question number 76). Washington can take back as much as 125% plus $100,000 of $8 million in trade, or $10.1 million. Player E plays for Oklahoma City, is not a base year player, and earns $9 million. So Oklahoma City can take back as much as 125% plus $100,000 of $9 million, or $11.35 million.

Player D and Player E can be traded for each other directly, even though Player D is a base year player. Player E's $9 million salary is less than Washington's $10.1 million maximum, and Player D's $10 million salary is less than Oklahoma City's $11.35 million maximum.

Teams may have even more flexibility if one or both have a Traded Player exception (see question number 72) or Disabled Player exception (see question number 19). This happens when the team with the BYC player is receiving multiple players in trade. For example, if Washington has a player with a $10 million salary and a $5 million BYC amount, and they have a Disabled Player exception for $5 million, then they can accept two $5 million players in trade for their player. One of the incoming players fits within the $5 million Disabled Player exception; the other fits within the $6.35 million margin created by the Traded Player exception.

79. Can a free agent be signed and immediately traded?

Under no circumstances can a team sign and then trade another team's free agent. But there is a rule that allows teams to re-sign their own free agents for trading purposes, called the sign-and-trade rule. Under the sign-and-trade rule, the player is re-signed and immediately traded to another team. This is done by adding a clause to the contract which stipulates that the contract is invalid if the player's rights are not traded to the specific team within 48 hours.

A sign-and-trade deal can be made even with players who have been renounced, but cannot be made when the player is signed using the Mid-Level, Bi-Annual or Disabled Player exceptions. Sign-and-trade contracts must be for three years or longer, but only the first season of the contract must be guaranteed. The three year minimum (even though the last two seasons may be non-guaranteed) ensures that the new team will not acquire Bird rights to the player any sooner than if they had signed him directly, because they would have to waive him, after which they wouldn't be able to use Bird rights (see question number 26).

One complication with sign-and-trade deals is that the signed player can immediately become a BYC player (see question number 76 for more information on BYC), so the player's BYC value must be used when determining whether the trade is allowed.

If a sign-and-trade contract contains a signing bonus, then either team can pay it. By default the team that signs the player pays the signing bonus (as with any other contract), but since a sign-and-trade is in essence a contract with the receiving team, the teams can agree that the receiving team will pay it. However, any portion that is paid by the signing team counts toward the $3 million limit for cash included in a trade (which in effect limits the portion of a signing bonus that can be paid by the signing team to $3 million).

If a sign-and-trade contract contains a trade bonus, then the bonus is not earned upon the trade that accompanies the signing, but rather on the first subsequent trade.

See question number 83 for more information on how long a team must wait after signing a contract before they can trade a player.

80. Can a team sign a player using the sign-and-trade rule and then say, "Ha ha, we fooled you. We're not trading you!"?

No. A sign-and-trade is treated like a single, atomic transaction, not two separate transactions between which one party can change its mind. The sign-and-trade clause makes the contract invalid if a trade to the specified team does not take place within 48 hours.

81. Why would teams or players want to do a sign-and-trade?

Teams benefit because it allows them to get something in return for players they would otherwise lose to free agency. Players benefit because they can get a richer contract, and/or play for a team that is over the salary cap and otherwise wouldn't be able to afford them. Unlike the new team, the player's original team can use the various Bird exceptions (as long as the player qualifies) to sign the player without regard to the cap. Also, if the player's original team has full Bird rights, they can offer the player larger raises (10.5%, as opposed to 8%) and more seasons (six, as opposed to five -- see question number 47 for more information).

So sign-and-trade is a useful tool for teams that are capped-out and unable to offer players large contracts.

82. Sign-and-trade looks like a win-win proposition. But some players have signed smaller contracts as free agents, rather than do a sign-and-trade. Why?

Yes, it's happened. Both Antonio McDyess with Denver and Tom Gugliotta with Phoenix signed free agent contracts and lost a significant amount of money that they could have earned had a sign-and-trade been done. This is because they could not reach a satisfactory agreement with their original teams (Phoenix and Minnesota, respectively). It takes two to tango, or in the case of a sign-and-trade, three.

83. When can a team trade a free agent it signs? Do they have to keep him forever?

Generally, a player cannot be traded until three months after signing a contract or December 15th of that season, whichever is later. This does not apply to draft picks, who can be traded 30 days after signing their contract. In addition, if the player is playing under a one-year contract and will have Larry Bird or Early Bird rights at the end of the contract, he can't be traded without his consent. If consent is granted and the player is traded, then he loses his Larry Bird or Early Bird rights, and enters free agency as a Non-Bird free agent. For example, Seattle signed Vladimir Radmanovic to a one-year qualifying offer on September 21, 2005. Therefore, Radmanovic could not be traded at all until December 21, 2005. After December 21, 2005, he could only be traded if he consented to the trade (he did consent and was traded to the Clippers). He became a Non-Bird free agent with the Clippers in the summer of 2006 (and signed instead with the Lakers).

For sign-and-trade transactions, the initial trade which completes the transaction is obviously allowed, even though it occurs right after the player is signed. What's not clear is whether the player's new team can subsequently trade him prior to three months or December 15. While a literal reading of the CBA might suggest that such players cannot be subsequently traded, the league actually considers this situation to be undefined, and won't resolve the matter until a team actually tries to make such a trade.

84. Can a team trade the rights to a free agent, so the other team will inherit his Larry Bird rights?

Once a player becomes a free agent he cannot be traded, except in a sign-and-trade deal.

85. Can cash be included as part of a trade package?

Players can be traded for cash, and cash can be included in trade packages. The amount of cash is limited to $3 million. The cash is NOT considered when matching salaries under the Traded Player exception.

In a sign-and-trade arrangement, if the contract contains a signing bonus, then any amount of this bonus paid by the signing team counts toward the $3 million limit (see question number 79).

86. Can players be given a bonus when they are traded?

Teams are permitted to write a bonus called a "trade bonus" (sometimes referred to as a "trade kicker") into contracts. This bonus is paid to the player when he is traded, but only upon his first trade and not upon any subsequent trades (in the case of a sign-and-trade, they don't count the initial trade when the contract is signed). The trade bonus can be defined as a specific dollar amount, a specific percentage of the remaining value of the contract, or some combination (e.g., "$1 million or 10% of the remaining value of the contract, whichever is less"). In either case, the actual amount cannot exceed 15% of the remaining value of the contract. For example, suppose a player has a six-year contract that pays $1 million per year. This player also has a $500,000 trade bonus. Since the trade bonus is limited to 15% of the remaining value of the contract, the actual value of the bonus varies from year to year, as follows (the bonus pro-rates during the season, so these amounts are exact only at the start of each season):

Year Remaining value of the contract 15% of the remaining value of the contract Actual value of $500,000 trade bonus
1 $6,000,000 $900,000 $500,000
2 $5,000,000 $750,000 $500,000
3 $4,000,000 $600,000 $500,000
4 $3,000,000 $450,000 $450,000
5 $2,000,000 $300,000 $300,000
6 $1,000,000 $150,000 $150,000

Notes on trade bonuses:

87. How do trade bonuses affect the salary cap and trades?

The value of a trade bonus is applied to the team salary among the remaining years of the contract (excluding non-guaranteed years -- see question number 94, and years following an Option or ETO -- see question number 51), in proportion to the percentage of salary in each of those seasons that is guaranteed. For example, suppose the player from question number 86 is traded at the start of the fifth season of his contract. Per the chart in that question, the actual value of his trade bonus that season is $300,000. If every season of the contract is guaranteed, and there is no Early Termination Option, then $150,000 is charged to each of the final two seasons of the player's contract, so a total of $1,150,000 is included in the team salary in each of those seasons. (Note that the allocation is not proportionate to the salary, but rather to how much of the salary is guaranteed. If the player from question number 86 had a higher salary in the sixth season than in the fifth season, his bonus would still be allocated equally to those seasons. However, if the sixth season was only 50% guaranteed, then two-thirds of the bonus would be allocated to the fifth seasons, and one-third to the sixth season.)

Suppose the player has an Early Termination Option following the fifth season of his contract. In this event, the entire trade bonus will be allocated to the fifth season of the contract. The player will therefore count $1,300,000 against the team salary during that season.

In the special case of a contract where all additional years are non-guaranteed, the entire trade bonus is applied to the cap in the season in which the trade occurred.

Trade bonuses can be a nuisance. When a team trades for a player with a trade bonus, it must count the portion of the bonus that applies to team salary in that season as incoming salary. Let's say a team wants to trade their $800,000 player for the player used in the example above, in the fifth season of that player's contract. Assuming there is no Early Termination Option or non-guaranteed season, the bonus counts $150,000 in the current season, so the trade cannot be made. The team trading the $800,000 player can accept up to $1,100,000 in return (see question number 71), but the player with the trade bonus counts as $1,150,000 in incoming salary.

The CBA allows the player to waive part of his trade bonus, if necessary to allow a trade to fit within the 125% plus $100,000 margin. To make the above trade work, the player would need to waive $100,000 of his $300,000 trade bonus. The bonus would then be worth $200,000, and $100,000 of that would be allocated to the current season. The player would therefore count $1,100,000 as incoming salary, which exactly matches the maximum the other team can accept in return for their $800,000 player. The player is not allowed to waive more than the amount necessary to make the trade legal.

Another potential difficulty is that a team trading a player with a trade bonus uses the player's pre-trade salary (without the bonus), when comparing salaries for trade. Here is another example, using the same player as before. This time, let's assume our player has an Early Termination Option following the fifth season of his contract, so if he is traded during the fifth season, the entire bonus is allocated to that season. This means that following a trade, $1,300,000 is included in his new team's team salary. Suppose a team wants to trade their $1,400,000 player for this player. The other team can accept $1,850,000 for their player, and since our player counts $1,300,000 as incoming salary, there's no problem on their end. But our player counts $1 million as outgoing salary, so the most we can accept in return is $1,350,000. This means the trade doesn't work from our end. And in this case, waiving a portion of the trade bonus will not help.

For contracts and extensions signed after the current CBA went into effect, the player's salary added to his trade bonus cannot exceed the maximum salary for that year (based on years of service). For example, in 2005-06 the maximum salary for a player with 7-9 years of service is $14,400,000. If such a player has a $14 million salary and a $1 million trade bonus, then his trade bonus is pared down to $400,000 when he is traded. This happens automatically -- the player has no say in the matter. For contracts and extensions signed before the current CBA went into effect, the player receives his entire trade bonus, even if it causes the player's salary to exceed the maximum.

There is no recomputation of the allocation of a trade bonus based on whether the player does or does not invoke an option or ETO. For example, if a player with a five-year contract and an ETO following the fourth season is traded during the fourth season of his contract, then his entire trade bonus is charged to the team salary that season. If the player does not invoke his ETO that summer (locking in the fifth season), the allocation of the trade bonus does not change -- none of the bonus is charged to the fifth season. In other words, the allocation of a trade bonus is based on the state of the contract at the time of the trade, and does not change.

88. When can't a player be traded? Can players be given "no-trade" clauses in their contracts?

A "no-trade" clause can be negotiated into an individual contract if the player has been in the NBA for at least eight seasons, and has played for the team with which he is signing for at least four seasons. They don't have to be the immediately prior four seasons -- for example, Horace Grant got a no-trade clause from Orlando when he signed with them in 2001. He had played for Orlando for four seasons, but had played for Seattle and Los Angeles in the interim. Very few players actually have one of these no-trade provisions. Otherwise, individually negotiated contracts may not contain no-trade clauses. The no-trade clause prevents the team from making a trade involving the player without the player's consent.

In addition, teams cannot trade players under the following circumstances:

89. I keep hearing about teams wanting to acquire "ending contracts" in trades. What are they, and why are they so valuable?

Sometimes teams get locked into long-term financial commitments from which they later want to extricate themselves. Typically this is when they have high-priced and long-term contracts, but have no real hope of competing for a title before those contracts run out. These teams are usually left without any hope of having cap room with which to sign free agents, and may be facing large luxury tax payments as well (see question number 16). But if such a team were to trade a high-salaried player for a player with a similar salary but in the last year of his contract, then they would be able to rid themselves of that financial obligation the following summer. This could get the team below the luxury tax level, or possibly create enough cap room with which to sign a productive free agent.

This means that some players who aren't necessarily trade-worthy from a basketball standpoint become valuable trade commodities from a financial standpoint. A competing team might be able to parlay mediocre players with ending contracts into a much better basketball player, as long as they are willing to assume a long-term financial obligation. One such trade occurred in 2004-05 when Golden State traded Speedy Claxton, Dale Davis and cash to New Orleans for Baron Davis. With this trade Golden State was able to upgrade its roster, while New Orleans was able to unload Baron Davis' contract, which had four years and $63 million remaining.

Note that players with ending contracts (including players whose contracts might end due to an option or ETO) cannot be traded after the trading deadline (players whose contracts are not ending can be traded after the last day of the team's season and before July 1). See question numbers 88 and 92.

The value of ending contracts was lessened slightly in the 2005 offseason (only) by the creation of the amnesty provision (see question number 18). Under this provision, teams were able to rid themselves of some of their financial obligation (luxury tax only, not salary or cap space) for one player.

90. How are teams able to trade players who are out of the league, like Dallas did with Keith Van Horn?

There are usually a number players who are neither actively playing nor officially retired. Sometimes the player is still looking to catch on with a team (or hasn't yet decided whether he's ready to hang 'em up). These players often have Bird or Early-Bird rights, which are held by the team for which the player last played. It can be useful for teams to retain the rights to these semi-retired players, because they might be used in a sign-and-trade (see question number 79) to provide enough salary ballast to make a trade legal under the Traded Player Exception (see question number 71).

A sign-and-trade requires a three year contract, but only the first season needs to be guaranteed. So for the team receiving the player, it's like receiving an expiring contract (see question number 89). This kind of deal occurred twice during the 2007-08 season. Dallas re-signed Keith Van Horn (who had been out of the league since 2006) and sent him to New Jersey as part of a package to acquire Jason Kidd, and the LA Lakers re-signed Aaron McKie (who was volunteer coaching in Philadelphia at the time), and sent him to Memphis as part of a package to acquire Pau Gasol. The latter transaction may be the first time a team ever managed to trade another team's coach.

In both of these cases, the former players signed contracts with starting salaries high enough to enable their prior teams to acquire a much more expensive player.

Even with full Bird rights, teams may be limited in this situation by Base Year Compensation (see question number 76).

The league will not automatically approve such trades. This situation is not specifically addressed in the CBA, and the league evaluates such trades on a case-by-case basis. If the player actually intends to report to his new team and resume his career (as happened with both Van Horn and McKie), then the trade would likely be approved. If the player simply intends to keep cashing checks in retirement, then the league would likely view it as circumvention and disallow it.

91. Can teams find loopholes in the CBA and make trades that were never intended to be allowed?

The CBA has a general prohibition on circumvention which states that the rules exist to preserve the benefit derived by the teams and players, and that nobody shall do anything to defeat or circumvent the intent of the agreement. The league can use this prohibition to disallow a trade that they feel circumvents the CBA, even though that trade is not specifically prohibited by the agreement.

92. What is the trading deadline?

It is the date during the season after which trades are prohibited. It is defined as the 16th Thursday of the season. The prohibition on trades lasts until the day following the team's final game of the season (see question number 88).

93. What is the July Moratorium?

It is a period during the month of July in which teams may not sign most free agents or make trades. Free agents become free on July 1, but the salary cap is not set until the audit report is completed later in the month. Teams and players must wait for the salary cap to be set before trades and most free agent signings can commence. Teams may negotiate with free agents beginning July 1, but they have to wait until the moratorium ends before signing a contract. The dates for the July Moratorium are as follows:

Season July Moratorium Players may be signed beginning
2005-06 July 1, 2005 through August 1, 2005* August 2, 2005
2006-07 July 1, 2006 through July 11, 2006 July 12, 2006
2007-08 July 1, 2007 through July 10, 2007 July 11, 2007
2008-09 July 1, 2008 through July 8, 2008 July 9, 2008
2009-10 July 1, 2009 through July 7, 2009 July 8, 2009
2010-11 July 1, 2010 through July 7, 2010 July 8, 2010
2011-12 July 1, 2011 through July 7, 2011 July 8, 2011

* Additional time was required in 2005 for the CBA to be agreed upon, finalized, ratified and distributed.

There are a few types of signings that are allowed to take place during the July Moratorium. Generally, these are the contracts that do not depend in any way on the specific value of the salary cap:

All other contacts must wait until the moratorium ends to be signed.

94. Are contracts always guaranteed?

Not necessarily. There are a few specific types of contracts that must be guaranteed. All other guarantees are a matter of individual negotiation between the player and team when the contract is signed. Only a player's base salary can be guaranteed -- not bonuses or incentives. The percentage of base salary that is guaranteed cannot increase from one year to the next (e.g., if 50% of a player's salary is guaranteed one season, then no more than 50% of his salary can be guaranteed in any subsequent season of the contract).

There are actually several types of guarantees: lack of skill, death (insured or non-insured), injury/illness (insured or non-insured), mental disability (insured or non-insured), and non-insured basketball-related injury. So, for example, a contract might be fully guaranteed for any injury or illness, but not for lack of skill. Some guarantees are for a partial amount of the player's salary, and the amount can change on specified dates. For example, $2 million of Vlade Divac's $5.94 million 2005-06 salary with the Lakers was guaranteed through September 30, 2005. Had he remained on the Lakers' roster after that date, his entire salary would have become guaranteed. Since he was waived prior to that date, he was only owed $2 million.

The required guarantees are as follows:

In addition, on January 10 the base salary in all contracts becomes guaranteed for the remainder of that season (except for one case -- see question 62). A player must clear waivers by this date, so teams will waive players a couple days before in order to have them off their rosters before January 10. Also, if a player is waived prior to January 10 but is injured as a direct result of playing basketball with his team, then his salary is guaranteed until he is ready to play again or until the end of the season, whichever comes first.

95. What is tampering?

Tampering is when a player or team directly or indirectly entices, induces or persuades anybody (player, general manager, etc.) who is under contract with another team to negotiate for their services. The NBA may impose stiff penalties if tampering is discovered, however the league's practice has been to wait until a team lodges a complaint before investigating (but that's not to say they don't continue to monitor the leauge and won't take action independently if they discover that tampering has occurred). Here are some examples:

You may have noticed that when general managers and other team personnel talk to the press, they are careful to avoid talking about specific players who play for other teams. They do this in order to avoid tampering.

96. How much are players fined for technical fouls and ejections? Where does the money go?

These amounts apply to both players and coaches.

Technical fouls (regular season):

Technical fouls (playoffs):

Ejections:

When a player receives a technical foul, ejection, suspension (1/90th of his annual salary per game) or other fine, the money is split evenly between the league and Players Association. Each then donates its share to a charity or charities of their choosing.

97. How does it work when the league expands?

To supply an expansion team with its initial complement of players, the league holds an expansion draft prior to that year's NBA draft. Existing teams are allowed to protect up to eight players (including restricted free agents) from being selected in the expansion draft, but every team must expose at least one player who can't possibly become a free agent as the result of the exercise or non-exercise of an option or ETO. Unrestricted free agents can neither be protected from nor selected in the expansion draft, and are essentially ignored. Restricted free agents (see question number 37) may be selected, but become unrestricted free agents upon selection (with the caveat that they cannot then re-sign with the team from which they came). No team may lose more than one player in an expansion draft.

Some players may become unrestricted free agents due to the invocation or non-invocation of an option or ETO (see question number 51). The league uses their status on the day of the expansion draft -- i.e., if a player has invoked his option or ETO by the day of the expansion draft, then he is treated as a free agent. If a player has not invoked an option or ETO by the day of the expansion draft, then he is treated as being under contract (so it is possible for an expansion team to select a player in the expansion draft who then invokes his option, becomes an unrestricted free agent, and signs elsewhere).

If a team is over the cap and loses a contracted player (not a restricted free agent) to an expansion team, they receive a Traded Player exception (see question number 72) equivalent to the selected player's salary.

Existing teams are allowed to compensate expansion teams (usually with draft picks), in exchange for selecting or not selecting particular players in the expansion draft. For example, in the 1995 expansion draft (when Vancouver and Toronto entered the league), Orlando left Darrell Armstrong, Anthony Avent, Rodney Dent and Geert Hammink unprotected, but did not want to lose either Armstrong or Hammink. They gave Vancouver their 1996 second round pick in exchange for Vancouver selecting Dent with the second pick in the expansion draft. With Dent claimed by Vancouver, Armstrong and Hammink became ineligible to be selected.

It is also common to see teams leave a desirable player unprotected, hoping that the player's age and/or high salary will dissuade the expansion team from selecting him. This allows those teams to protect an additional player whom they might have been more likely to lose. Or in some cases, they might dangle a high-priced player hoping the expansion team takes him off their hands.

Expansion teams have a lower salary cap for the first two years of their existence. In their first year, their salary cap is 2/3 the salary cap for the rest of the league. In their second year, it's 3/4 the salary cap for the rest of the league. Beginning with their third season, they have the same salary cap as the other teams. Their minimum salary is lower as well -- in all cases the minimum salary is 75% of the team's salary cap, so expansion teams (with a lower salary cap) therefore have a lower minimum salary. For example, if the salary cap is $48 million, a second-year expansion team will have a salary cap of $36 million (75%). The minimum salaries will be $27 million for the expansion team, and $36 million for the rest of the league.

Expansion teams often have restrictions placed on their draft position in their first few seasons. For example, Charlotte was assigned the #4 pick in the 2004 NBA draft, and Vancouver & Toronto could not receive the #1 pick in the NBA draft for their first four seasons in the league.

If an expansion team drafts a player in the expansion draft and waives him prior to the first day of the season, then that player's salary does not count against their salary cap (although they still have to pay him). This provides some protection against bad decisions made in the expansion draft -- an expansion team could select a player, later decide they don't really want him, and waive him without their cap being negatively affected.

Most league calculations (average salary, total benefits, total salaries, BRI, salary cap) simply ignore expansion teams (and the players on those teams) for two years. For example, the league calculates the average salary by adding up the team salaries for every team, and dividing by an amount equal to the number of teams times 13.2. In an expansion team's first two seasons, for this calculation, the total team salaries does not include the expansion team, and nor does the number of teams.

Basketball Related Income (BRI) does not include the fee expansion teams pay to join the league.

98. How do I find out the salary for a specific player?

The NBA does not publish player salaries. However, there are a number of unofficial sources for salaries. One of the best is Patricia Bender's:

http://www.eskimo.com/~pbender/index.html

Patricia maintains salary information for every season back through 1993-94.

Another site with salary info is ShamSports:

http://www.shamsports.com/content/pages/teams/index.jsp

99. The league instituted a dress code for players. Do they have the right to do that?

The league has broad powers which enable them to institute a dress code (and the NBPA has always acknowledged the league's right to do so). For example, every player's contract contains a provision which states that the player agrees to be "neatly and fully attired in public." In addition, the Commissioner has the general power to penalize players for conduct (which would include dress) detrimental to the league's best interests.

100. What does it mean when the players union decertifies? Why would they want to do that? What effect does it have?

Decertification is a tactic sometimes employed (or at least threatened) by player unions in the event of a difficult labor situation. Antitrust and labor laws are at odds with each other -- while antitrust laws prohibit cooperation among competitors and agreements that are anticompetitive, labor laws encourage cooperation among competitors -- such as forming unions and bargaining collectively. This tension is resolved with the "non-statutory labor exemption," which exempts collective bargaining agreements from the antitrust provisions. The draft and restrictions on salaries and free agency are immune from the antitrust laws so long as they are part of the CBA.

Courts have ruled (with the NFL) that the non-statutory labor exemption shield continues even after the CBA expires, so long as a "labor relationship" still exists. But if the players decertify the union -- abandoning their collective bargaining rights and turning the players association into a non-union trade association -- it would end this continuing labor relationship and open the league to an antitrust suit.

The downside for the players is that they abandon their rights to the labor laws and their ability to bargain collectively. They must then negotiate their contracts with teams individually, and sacrifice their rights to pensions, benefits, minimum salaries, etc. It would be every man for himself.

NFL players decertified and brought a successful antitrust suit against the NFL in the early 1990s. The NBA players associaion threatened to decertify in both 1995 and 1998, but ultimately voted against it both times. Should a decertification occur in 2011 it is possible that the players association will have reached a "point of no return" and will go through with an antitrust suit. At that point a settlement will remain a possibility, although not necessarily a likely result.

101. Are there other must-read web sites for the budding capologist?

In the last few years a number of web sites have sprung up which deal with the business side of the NBA. Here are a few of them:

In addition to her salary information, Patricia Bender maintains information on player contracts and lots of other NBA-related data. http://www.eskimo.com/~pbender/index.html
RealGM provides an abundance of news and resources, including a discussion forum dedicated specifically to CBA and business matters. http://www.realgm.com (main site) http://www.realgm.com/boards/viewforum.php?f=4 (discussion forum)
An excellent archive of NBA transactions maintained by Frank Marousek. http://www.prosportstransactions.com/basketball/
The Association for Professional Basketball Research contains a wealth of information on league history. http://www.apbr.org (APBR site), The Compendium of Professional Basketball (book by Robert Bradley).
Mark Cuban is the only NBA owner (of which I'm aware) who blogs. He frequently discusses NBA-related matters. http://blogmaverick.com
The Sports Law Blog frequently discusses NBA labor issues. http://sports-law.blogspot.com/
Dan Rosenbaum blogged about NBA business matters from an economist's perspective, and has written a number of NBA related academic papers. Unfortunately, Dan's academic papers are currently unavailable online (I have been told they will make their way to 82games.com), and he stopped updating his blog when he was hired by an NBA team. http://danrosenbaum.blogspot.com (inactive blog)
This FAQ has a Facebook page where I also answer questions. http://www.facebook.com/pages/NBA-Salary-CapCollective-Bargaining-Agreement-FAQ/53461764029

102. What are the important CBA-related dates each season?

The following dates are referenced in the CBA:

January 5 Ten-day contracts can be signed (see question number 65)
January 10 Contracts guaranteed for rest of season (see question number 91). Players who do no clear waivers prior to this date are guaranteed.
Scale salary amounts and unused exceptions begin to reduce in value (see question number 20)
February 28/29 Last day contracts can be renegotiated (see question number 52)
March 1 Players waived after this date are ineligible for the playoffs
Last day for a restricted free agent to accept a qualifying offer or offer sheet (see question number 36).
June 25 Last day to exercise player option if player will be a restricted free agent (see question number 50).
June 30 Option years (except scale contracts) and ETOs must be exercised (see question number 50)
Deadline for qualifying offers (see question number 36)
July 1 Salary cap year begins
July moratorium begins (see question number 90)
Raises take effect
Free agents become free
Base year compensation for extended scale contracts begins (see question number 73)
July X (actual date varies) July moratorium ends (see question number 90)
Free agent contracts can be signed
Salary cap adjusts (see question number 10)
Contracts can be renegotiated (see question number 52)
Contracts can be extended (see questions number 51)
Free agents and draft picks can be renounced (see question numbers 20, 33)
July 16 First round draft picks become free agents if not given a required tender (see question number 41)
July 23 Last day to withdraw a qualifying offer to a restricted free agent without the player's consent (see question number 36).
August 15 Players waived on or after this date remain on waivers for 48 hours (see question number 54)
September 6 Second round draft picks become free agents if not given a required tender
October 1 Last day to sign replacement player with Disabled Player exception if the player was injured December 1 - June 30 and will be out for the season (see question number 19)
October 31* Last day to exercise option years on scale contracts (see question number 41)
Last day contracts can be extended (see question number 51)
December 15 Players who signed a contract on or before September 15 can be traded (see question number 80)

* Or the next business day, if October 31 falls on a weekend or holiday.

103. Can I get a copy of the actual Collective Bargaining Agreement?

The Collective Bargaining Agreement is a very long legal contract between the league and the Players Association, and is written in dense legalese. It is my hope that this FAQ answers all your questions. However, if you really want the CBA, it is available from the Players Association's web site at http://www.nbpa.org/cba/2005. Bound copies of the CBA are not available from the league office.

Unfortunately, the CBA doesn't answer every question. The NBA, like most organizations, has by-laws, which are separate and apart from whatever contracts it may make with other entities such as the Players Association. Many of the rules are contained in the NBA By-Laws, and in a third document, the NBA Constitution. While it is possible for the public to obtain the CBA, the league office says the By-Laws and Constitution are absolutely off-limits.

104. I see reports in the newspaper or on the Internet that would be impossible if everything you say here is true. Is this FAQ wrong?

The media often gets it wrong. Some members of the media simply don't pay enough attention to the rules (they -are- pretty complicated, after all). Sadly, this is especially true of columnists who like to write about rumors. Many of the rumors they write about are simply not possible. Note: This has improved tremendously since this FAQ was originally released (draw your own conclusions about whether I had anything to do with it). It used to be easy to separate the legitimate rumors from the made-up ones -- the made-up ones were often impossible under the CBA. Today it's much harder to separate the good rumors from the bad.

105. What if this FAQ really is wrong? How authoritative is this FAQ?

This FAQ has been fact-checked against the actual CBA, and I'm pretty confident about its accuracy. Still, this FAQ isn't necessarily 100% accurate. If you find any errors, please contact me at lmcoon@cox.net (please include the source of your information, if possible). You may also contact me if there are additional questions you would like to see added to this FAQ, or if you find any of the answers confusing and in need of clarification.

The author of this FAQ is not connected to the NBA, any of its teams or the Players Association.

106. Can I e-mail you with other CBA-related questions?

Absolutely! Just don't rely on a prompt answer -- this isn't my job, it's a hobby, and I'm only able to answer e-mail as time permits (after career, family and other personal obligations have been met). I get a *lot* of e-mail, and sometimes people's mail gets backed up. In addition, some responses are delayed until I can verify facts with others, or batched together so I can answer a set of related messages all at once. Unfortunately, questions that are longer and involve a lot of thought, research and/or detail on my part tend to be delayed more than simple ones that I can answer off the top of my head. I do ask that you make a reasonable effort to make sure the information you're looking for isn't already covered in the FAQ before e-mailing me.

You will probably find that your question will be answered more quickly if it is posted in the CBA/Business discussion forum at RealGM.com: http://www.realgm.com/boards/viewforum.php?f=4, simply because more people will see it. A number of CBA-knowledgeable people, including me, frequent that discussion forum.

Another excellent venue for questions is Twitter. Follow me at http://www.twitter.com/LarryCoon. Quesions posted to Twitter are usually answered quickly, although the Twitter format precludes lengthy, detailed answers.

There is also a Facebook page for this FAQ, where I also answer questions.

Finally, I occasionally host online chats at ESPN.com and Hoopsworld.com where I field questions from readers.

I also recognize that some of you (members of the media, etc.) need this information as part of your job, and not simply because you're curious. I try to give these questions the highest priority. Apologies in advance to anybody who gets put on the back burner as a result.

I have occasionally lost some incoming e-mails as a result of overly aggressive spam filtering. Apologies to those of you who sent me an e-mail and didn't receive a reply.

107. Can this FAQ be reproduced or distributed? Can I link my web page to it?

This FAQ is copyrighted, and the copyright notice appears at the end. The intent of the copyright is only to restrict the following:

Any use of this FAQ not specifically allowed in the copyright notice requires written consent. Such consent is generally granted to any request that does not violate the provisions listed above.

108. Can you translate this FAQ into (name of language)? I'll even translate it for you!

I appreciate the fact that the NBA receives worldwide attention, that there are fans around the world interested in CBA-related matters, and that this has created a demand for this FAQ in languages other than English. I have received requests for translations in over a dozen different languages, usually accompanied by kind offers to provide the translation (which would be necessary, since I speak none of those languages).

I had previously turned down all such requests because I had no way to ensure that a translation would be faithful and accurate, and because I had no way to ensure that translations would be kept up to date. However, these issues are not unique to this FAQ, and many others have successfully found ways to balance the needs of others with the need for accuracy. As a result, I have revised my translation policy, as follows:

109. How should this FAQ be cited?

If you are citing this FAQ in an academic or scholarly context, the following is a suggested citation. Note that you should replace the "last visited" date with the date you actually retrieved this FAQ.

Coon, Larry (2005); "NBA Salary Cap/Collective Bargaining Agreement FAQ"

http://members.cox.net/lmcoon/salarycap.htm, last visited December 1, 2005

110. Where can this FAQ be downloaded?

The latest version of this FAQ can be found at http://members.cox.net/lmcoon/salarycap.htm or http://www.cbafaq.com.

The previous version of this FAQ (covering the 1999 CBA) can be found at: http://members.cox.net/lmcoon/salarycap99.htm.

History of this FAQ, acknowledgements, and about the author:

An original NBA Salary Cap FAQ was written by Tony Minkoff and covered the 1995 CBA. This FAQ was based on Tony's original, and on several articles written by Garret Okamoto for totk.com (Top of the Key), all of which are no longer available online.

The first version of this FAQ was written in 1999, covering the 1999 CBA. An archive copy can be found at http://members.cox.net/lmcoon/salarycap99.htm. Tony and Garret participated with me on the research and draft review process, along with Patricia Bender, Josh Frankel, Jon Hamm, Jonathan Richards and Gary S. Simon. The suggestions and contributions of a number of people are also acknowledged in the revision history. I'd like to collectively thank everybody whose contributions found their way into this FAQ.

Many thanks also go to the members of the media who have been so kind as to inform the public of this FAQ's existence, and for the kind words they have written about the work I have done here.

Please note that I will not accept advertisements, and I will not carry a link to your site unless it is directly related to the material in this FAQ. If you have a site you feel should be mentioned here then you can try asking, but if it belongs here then chances are I already know about it.


About the author:

Larry Coon is a computer scientist by both education and trade. He works as an IT Director at University of California, Irvine, and occasionally teaches university Computer Science courses, specializing in database theory. A lifelong NBA fan, he assimilated a working knowledge of the league’s salary cap and trade rules, eventually organizing this knowledge into the Salary Cap FAQ to provide “the kind of reference I was looking for when I was trying to figure it all out.”

Larry has been featured in the New York Times, and he makes regular media appearances including television (ESPN’s “Outside the Lines”) and radio. He is a regular contributor to ESPN.com, the New York Times Off the Dribble blog and to Hoopsworld.com. He is often quoted and cited, both online and in print, by local and national media venues. His work also appears on RealGM.com.

Larry lives in Orange County, California with his wife and 11 year old daughter, about whom he brags at every possible opportunity.

Appendix: Differences between 2005 and 1999 CBAs

2005 1999 See
The salary cap is set based on 49.5% of BRI in 2005-06, and 51% of BRI thereafter. The salary cap is set based on 48.04% of BRI. 10
A roster charge applies during the offseason if a team has fewer than 12 players (including cap holds for free agents, first round draft picks and offer sheets). A roster charge applies during the offseason if a team has fewer than 11 players (including cap holds for free agents, first round draft picks and offer sheets). 14
Teams are able to use the Bi-Annual Exception every other season. Teams are able to use the $1 Million exception every other season. 19
The Mid-Level, Bi-Annual, Larry Bird, Early-Bird and Non-Bird exceptions begin to reduce in value starting January 10. N/A 20
Contracts may be six years for Larry Bird free agents, five years for other free agents. Contracts may be seven years for Larry Bird free agents, six years for other free agents. 47
Contracts for Larry Bird and Early-Bird free agents may contain 10.5% raises. Contracts for other free agents may contain 8% raises. Contracts for Larry Bird and Early-Bird free agents may contain 12.5% raises. Contracts for other free agents may contain 10% raises. 19
Maximum salaries are set based on a percentage of the salary cap. However, they use an alternate salary cap formula, which is based on 48.04% of BRI. Maximum salaries are based on a percentage of the salary cap. 11
The Over-36 rule applies to Larry Bird free agents who are 33 or 34 and re-sign with their prior team for five or more seasons. The Over-36 rule applies to Larry Bird free agents who are 33 or 34 and re-sign with their prior team for six or more seasons. 50
The Over-36 rule applies to players other than Larry Bird free agents who are 32-35 and sign a four year contract. The Over-36 rule applies to players other than Larry Bird free agents who are 32-35 and sign a five year contract. 50
Player options must be exercised by June 25 if the player will become a restricted free agent. All options must be exercised by June 30. 51
Early Termination Options (ETOs) can be exercised following the fourth year of the player's contract. ETOs can be exercised following the fifth year of the player's contract. 51
Signing bonuses may be for up to 20% of the player's contract. Signing bonuses may be for up to 25% of the player's contract. 65
Signing bonuses in offer sheets may be for up to 17.5% of the player's contract (starting in 2006-07). Signing bonuses in offer sheets may be for up to 25% of the player's contract. 65
Signing bonuses are applied to team salary in proportion to the guaranteed salary in each season of the contract. Signing bonuses are applied to team salary evenly across all guaranteed seasons of the contract. 65
Minimum salary contracts may not contain signing bonuses. N/A 19
Incentives cannot be provided for the player being on the team's roster as of a specific date, or for a specific length of time, or for the player suiting up for a specified number of games. N/A 64
The only allowable form of compensation is cash. Some forms of non-cash compensation are allowed.
Rookie scale contracts for first round draft picks are two years, plus two team option years. Rookie scale contracts are three years, plus one team option year. 42
League pays salary above the two-year minimum for players on minimum salary contracts. League pays salary above the four-year minimum for players on minimum salary contracts. 11
Teams have seven days to match offer sheets to restricted free agents. Teams have 15 days to match offer sheets to restricted free agents. 37
Offer sheets to restricted free agents must be for at least two seasons. If the player has received a maximum qualifying offer, then offer sheets must be for at least three seasons. Offer sheets to restricted free agents must be for at least three seasons. 37
Offer sheets to restricted free agents with one or two years of service are constrained to the average salary in the first season, with further constraints on raises and the salary cap room necessary to provide an offer. No special provision for offer sheets to free agents with one or two years of service. Teams have limited right of first refusal, and sometimes lose these restricted free agents. 38
Teams can provide a maximum qualifying offer to their restricted free agent, which allows them to sign their player to a maximum contract during the July Moratorium. N/A 37
At least 20% of a player's salary must be paid on regular league paydays. At least 30% of a player's salary must be paid on regular league paydays.
Players have 9% (10% in 2005-06, 8% in 2010-11 and 2011-12) of their salary withheld in escrow. Players have projected overage, not to exceed 10% of their salary, withheld in escrow.
Escrow money is used to reduce salaries & benefits to 57% of BRI (can increase to 57.5% or 58% if BRI is sufficiently high). Escrow money is used to reduce salaries & benefits to 55% of BRI (57% in 2004-05). 15
The players are guaranteed to receive at least 57% of BRI. N/A 8
The luxury tax is in effect in every season. The luxury tax is in effect only in seasons in which league-wide salaries exceed 61.111% of BRI (63.333% in 04-05). 16
The tax level is based on 61.0% of projected BRI. The tax threshold is based on 61.1% of BRI. 16
The tax level is set prior to the season, and is based on projected BRI. The tax threshold is set after the season, based on actual BRI. A cliff smoothing provision phases in penalties for teams slightly over the tax threshold. 16
If a player was not a second round draft pick and makes less than the two-year minimum, then his taxable amount will equal the two-year minimum salary. The taxable amounts for these players equals their actual salaries. 16
All teams receive an equal distribution of escrow money. Teams over the cliff threshold receive a minimal share of escrow money (70% in 02-03, 40% in 03-04, 0% in 04-05). 17
Excess escrow & tax money redistributed to teams cannot constitute a secondary form of salary restraint. The redistribution of escrow & tax money is at the league's sole discretion. 17
Permanently disabled players can be removed from the books one year after they are disabled. Permanently disabled players can be removed from the books two years after they are disabled. 55
Teams can only apply for salary cap relief for disabled players who were disabled when they were with that team. N/A 55
Teams have a one-time opportunity to waive one player and exclude his salary from the luxury tax. N/A 18
Waivers during the offseason last seven days. Waivers during the offseason last 10 days. 56
U.S. players are eligible for the NBA draft if they are 19 and one year removed from high school. U.S. players are eligible for the draft if they are 18 and their high school class has graduated. 49
International players are eligible for the draft if they are at least 19 in the calendar year of the draft. International players are eligible for the draft if they are at least 18 in the calendar year of the draft. 49
Up to two players with less than two years of service can be sent to an NBA D-League team. N/A 69
Teams must have at least 13 players on their roster. The league guarantees a league-wide average of 14 players per team. Teams must have at least 12 players on their roster. 68
Any players beyond 12 are on the team's Inactive List. Teams must have at least one inactive player. A team may have up to three players on Injured Reserve. A medical reason is required to put a player on Injured Reserve. 68
Teams determine their active roster on game day. There is no minimum stay on the Inactive List. The minimum stay on Injured Reserve is five games. 68
Teams are not allowed to have more 10-Day contracts than they have players on their inactive list. A 10-Day contract is available solely to replace an injured player. 68
Teams may pay up to $500,000 to buy out a player from a foreign team without cutting into the player's salary. Teams may pay up to $350,000 to buy out a player from a foreign team without cutting into the player's salary. 65
A team over the salary cap may acquire 125% plus $100,000 of the salaries they trade away. A team over the salary cap may acquire 115% plus $100,000 of the salaries they trade away. 71
Players who are traded and then waived by their new team cannot be re-signed by their original team for 30 days (during the season) or 20 days (in the offseason) following the trade. N/A 56
A draft rookie may be traded starting 30 days after he signs his contract. A draft rookie may be traded three months after signing his contract, or December 15, whichever comes later. 88
A player on a one-year contract who will be a Larry Bird or Early-Bird free agent cannot be traded without his consent. If he consents and is traded, he loses his Bird rights, and is considered a Non-Bird free agent. A player on a one-year contract who will be a Larry Bird or Early-Bird free agent cannot be traded. 88
Base Year compensation expires six months after it goes into effect, or on June 30, whichever comes later. Base Year Compensation expires one year after it goes into effect. 76
If a trade bonus causes the player's salary in the year of the trade to exceed the maximum salary for that year, the trade bonus is automatically reduced or eliminated (applies to new contracts & extensions only). Player's consent required to reduce or eliminate a trade bonus that causes the player's salary in the year of the trade to exceed the maximum salary. 87
The player receives his entire trade bonus, even if it causes the player's salary in the year of the trade to exceed the maximum salary for that year (applies to pre-existing contracts & extensions only). Player's consent required to reduce or eliminate a trade bonus that causes the player's salary in the year of the trade to exceed the maximum salary. 87
If a player holds out following a trade it will be deemed "conduct detrimental to the NBA" and subject to fines and suspensions by the league. N/A
Players are subject to up to four random drug tests during the season. Rookies are subject to four random tests per season. Veterans are subject to one random drug test during training camp.
The penalties for testing positive for performance enhancing drugs are 10 games (first violation), 25 games (second violation), one year (third violation), and disqualification from the league (fourth violation). The penalties for testing positive for performance enhancing drugs are five games (first violation), 10 games (second violation), and 25 games (third and subsequent violations). 59
The penalties for testing positive for marijuana include a $25,000 fine (second violation), and incremental (5, 10, 15, etc.) five game suspensions (third and subsequent violations). The penalties for testing positive for marijuana include a $15,000 fine (second violation), and five game suspensions (third and subsequent violations). 59
Suspensions resulting from on-court incidents in excess of 12 games can be arbitrated. The Commissioner has the final word on suspensions resulting from on-court incidents.
Lump-sum payments for such things as local media contracts are applied to BRI evenly across all years covered by the contract. Lump-sum payments for such things as local media contracts are applied to BRI fully in the year in which they are received. 10
The league can terminate the CBA early if national TV revenue drops significantly, or if certain "force majeure" events occur. The Players Association may terminate the CBA early if the average NBA salary is less than the average MLB, NFL or NHL salary. 5
A player is credited with a year of service for each season in which he is on a team's active list or inactive list for at least one day during the regular season. A player is not credited with a year of service if he is cut prior to the season, or is only signed to 10-day contracts. 11

Index:

10-Day contract 26, 68, 22
Age-based restrictions 49, 50
Aggregation (of players in trade) 72, 73, 75, 88
Amnesty Provision 18
Average salary 19, 25, 31, 38
Base Year Compensation (BYC) 76, 77, 78
Basketball Related Income (BRI) 10, 13, 15, 97
Bi-Annual exception 19, 20, 79
Bird (exception) see "Larry Bird exception"
Bonuses (performance) see "Incentives"
Bonuses (signing) see "Signing bonuses"
Bonuses (trade) see "Trade bonus"
BRI see "Basketball Related Income"
Buy-out 54, 62, 63
Cash (as part of a trade) 85
CBA see "Collective Bargaining Agreement"
Changes (in 2005 CBA) 7
Circumvention 22, 24, 91
Cliff provision 17
Collective Bargaining Agreement (CBA) 4, 5, 6, 7, 103, 105
Combining exceptions 21, 72, 75
Combining players in trade see "Aggregation (of players in trade)"
Compensation protection see "Guaranteed contracts"
Contract length 19, 37, 42, 45, 47, 50, 52, 53, 68, 79, 89
Death of players 60
Deferred compensation 11, 50
Disabled Player exception 19, 20, 25, 56, 78, 79
Draft (NBA) 49
Draft picks 14, 36, 42, 43, 44, 45, 46, 74, 83, 88, 93, 102
Early Entry player 49
Early Bird exception 19, 31, 34, 38, 47, 76, 83, 88
Early qualifying veteran free agent see "Early Bird exception"
Early Termination Option (ETO) see "Option year(s)"
Ending contracts 88, 89
Escrow 15, 17
Exceptions (losing/renouncing) 14, 19, 20, 26, 34, 35, 83, 88
Exceptions (player salary) 12
Exceptions (salary cap) 2, 19, 20, 21, 26, 28, 29, 30, 31, 47
Exceptions (trade) 19, 70, 71, 72, 73, 75
Expansion 97
Extensions 47, 50, 51, 52
Fines 13, 23, 24, 59, 96
First round draft pick 14, 19, 42, 43, 44, 45, 46, 47, 52, 74, 83, 88, 93
Free agent amount 31, 32, 33, 34
Guaranteed contracts 37, 38, 54, 56, 57, 62, 79, 94
Hard cap 2
Inactive List (IL) 68, 68, 69
Incentives 64, 94
Injured players 19, 55, 58, 68, 94
Injured Reserve (IR) 68
Injury exception see "Disabled Player exception"
Insurance 61
July moratorium 6, 93
Larry Bird exception 19, 20, 26, 27, 28, 34, 47, 84
Length (of contract) see "Contract length"
Luxury tax 16, 17, 18, 59
Maximum Qualifying Offer 37, 93
Maximum salary (player) 11, 12, 19
Mid-Level exception 19, 20, 21, 79
Minimum Salary exception 19, 34, 73
Minimum salary (player) 11
Minimum salary (team) 10
Modification (of existing contract) 52, 53, 54, 56, 62
NBA Developmental League (NBA D-League) 69
NCAA 43, 49
No-trade 37, 79, 83, 84, 88
Non-Bird exception 19, 20, 31, 34
Non-qualifying veteran free agent see "Non-Bird exception"
Non-simultaneous trades 71, 72
Offer sheet 37, 38, 39, 65
Option year(s) 42, 51,54, 62
Over-36 rule 50
Player option see "Option year(s)"
Poison pill 76
Qualifying offer 37, 93
Qualifying veteran free agent see "Larry Bird exception"
Raises 19, 37, 38, 42, 47, 48, 52, 53
Reinstatement 19
Released players see "Waivers"
Renegotiations 50, 53
Renouncing a draft pick 44, 46
Renouncing a player 26, 33, 34, 35, 36, 79
Renouncing an exception see "Exceptions (losing/renouncing)"
Required tender 93, 102
Rest-of-season contract 11, 19, 22
Restricted free agency 19, 31, 35, 37, 38, 39, 40, 42, 47, 65, 88, 93, 97
Retired players 50, 55, 90
Rookie exception 19, 42
Rookie "scale" salary 42, 43, 44, 46, 51, 52, 94. Also see http://www.nbpa.org/sites/default/files/EXHIBIT B.pdf
Roster size 68
Roster spot charge 14, 36
Salary (average) see "Average salary"
Salary (player) 11, 12, 19, 23, 29, 31, 37, 38, 42, 46, 47, 48, 50, 51, 52, 53, 55, 56, 59, 62, 65, 69, 86, 94, 98
Salary cap 1, 9, 10, 19, 20, 23, 28, 70, 97 (also see "Team salary")
Salary cap exception see "Exception (salary cap)"
Scale salary see "Rookie 'scale' salary"
Set-off 54, 57
Sign-and-trade 79, 80, 81, 82, 90
Signing bonuses 65, 66, 79
Smith (Joe) See "Circumvention"
Soft cap 2, 3
Spread provision 57
Statistics, gratuitous use of 1
Stepien (Ted) see "Ted Stepien rule"
Summer contract 57
Suspended players 14, 59, 96
Tampering 95
Tax (luxury) see "Luxury tax"
Tax level 16
Team option see "Option year(s)"
Team salary 14, 16, 20, 28, 31, 32, 33, 34, 36, 38, 43, 44, 55, 57, 58, 59, 63, 64, 65, 77, 87, 97
Ted Stepien rule 74
Ten-Day contract see "10-Day contract"
Termination (of CBA) 5, 6
Trade bonus 54, 86, 87
Trade rules 70, 71, 72, 73, 74, 75, 76, 78, 79, 80, 83, 84, 85, 87, 88, 90, 91, 92
Trade value 44, 74, 76
Traded Player exception 19, 20, 71, 72, 75, 97
Trading deadline 88, 92
Translations (of this FAQ) 108
Undisclosed agreements see "Circumvention"
Unrenouncing (a renounced player) 35
Veteran Free Agent exception see "Larry Bird exception"
Waivers 18, 56, 57, 62, 94
Years of service 11

Revision History:

There were 41 revisions to the first version of this FAQ. These revisions have been consolidated into the 11/16/2005 item here.

8/30/1999 Initial release.
11/16/2005 Final revision covering the 1999 CBA. Thanks Patricia Bender, Robert Bradley, Steve Durrett, Tony Farr, Jon Hamm, Ron Haneberg, Ryan Hoak, Frank Hughes, Leon Jackson, Don Jones, Leaf, David Lord, Wes McDaniel, Dan Rosenbaum, Andy Stein, Ralph Wallace and Kevin Wilcutts for your contributions.
11/25/2005 Extensive revision for the 2005 CBA. Thanks Ryan Hoak, Dan Hoelzl, Zev Iosupovici, Eric Pincus, Dan Rosenbaum & Andy Stein.
12/1/2005 Minor fixes to #11, 82, 101, 102, Appendix. Thanks Patricia Bender, Nick Silva.
1/2/2006 FAQ is now available via www.cbafaq.com. Minor fix to #31. Thanks Dan Hoelzl.
3/8/2006 Minor fix to #11, 38. Thanks Andy Stein, David Lord.
7/11/2006 Revised #10, 11, 15. 16, 17, 19, 25 with new numbers for the 2006-07 season. Also minor revisions to #50, 52, 68, 82.
8/14/2006 Revised #52, 63, 75.
10/1/2006 Revised #82, 87.
7/11/2007 Revised #10, 11, 15, 16, 17, 19, 25 with new numbers for the 2007-08 season, and minor corrections/clarifications to the escrow information in #15, 17.
7/9/2008 Revised #10, 11, 15, 16, 17, 19, 25 with new numbers for the 2008-09 season.
7/22/2008 Revised #34.
7/29/2008 New question #89 (trading players who are no longer playing). Minor revision to #37, 56.
8/4/2008 Revised #34, 37, 63
10/15/2008 Document rewritten to be fully XHTML/CSS compliant.
1/8/2009 Revised #55.
3/20/2009 Revised #14, 44, 73, 87.
3/31/2009 Revised #26.
5/22/2009 Fixed IE incompatibility with CSS counters, which prevented question numbers from showing.
7/7/2009 Revised #10, 11, 15, 16, 17, 19, 25 with new numbers for the 2009-10 season.
8/24/2009 Clarified #40.
1/2/2010 New question #54. Revised #10, 51, 55, 64, 70, 97, Acknowledgements. Minor changes to #11, 15, 17, 43, 73, 89, 99, 105. Thanks Albert Nahmad, Marc Stein.
1/6/2010 New question #61.
7/8/2010 Revised #10, 11, 15, 16, 17, 19, 25 with new numbers for the 2010-11 season. New questions #22, 100. Rewrote #5. Minor changes to #4, 9, 19, 26, 30, 42, 43, 47, 52, 65, 78, 87, 101, 103, 106, About, Appendix, Index. Thanks Robert Bradley, Gabe Feldman, Andy Stein.