A reader made a thoughtful request for a rundown on the basics of NBA free agency, in case anyone is unfamiliar with the many terms and rules.
First of all, the league has a free-agent negotiating period, which began on July 1. Teams can come to agreements with players, but nothing can be signed until at least July 11. That includes Houston’s reported offer sheet to Omer Asik.
Here are some terms, defined:
UNRESTRICTED FREE AGENT: This is a player whose contract has expired and is free to sign with any team. The Bulls have three of those this summer – Brian Scalabrine, John Lucas and Mike James.
RESTRICTED FREE AGENT: These are guys whose contract has expired, but their current team has the right to match any offer. Bulls center Omer Asik is a restricted free agent.
Restricted free agents are typically fourth-year players coming off their rookie scale contracts, who have not signed extensions with their current clubs. Or, in the case of Asik, they are second-round picks whose contracts have expired.
OFFER SHEET: If a team wants to sign someone else’s restricted free agent, they have him ink an offer sheet. Then the player’s current team has three days to match it. If the team decides not to match, the player changes teams and the old team gets nothing in return. If the team matches, the player stays put and keeps the contract terms in the offer sheet.
GILBERT ARENAS PROVISION: It used to be if a team was over the salary cap, then a team with cap room could sign the first team’s restricted free agent to an offer sheet worth more than $5 million in the first season, and the original team could not match it (unless it cleared out other contracts and got under the cap).
The Bulls used this ploy to get Brad Miller and Eddie Robinson in the early 2000s. When Arenas, a second-round pick of Golden State, grabbed an offer from Washington after spending just two years with the Warriors, the rules were amended.
Now a team always has a chance to match an offer to its restricted free agent, because the first two years of an offer sheet can be no higher than $5 and $5.2 million. That’s why Asik’s three-year offer from the Rockets is for $5, $5.2 and $14.9 million. That third-year balloon payment is there to discourage the Bulls from matching, but they can if they want.
QUALIFYING OFFER: When a player is set to become a restricted free agent, his current team must issue a qualifying offer in order to keep the right to match any offer from another team. The qualifying offer is a set percentage above the player’s previous-year salary.
The player can accept the qualifying offer, play the next season and become an unrestricted free agent the following summer. Ben Gordon did this before jumping to the Pistons in 2009. Teams can also rescind the qualifying offer at a later date.
Sometimes teams decide they don’t think a player is worth the qualifying offer, so they decline to offer one and that player immediately becomes an unrestricted free agent. This has happened a few times already in 2012, to Minnesota’s Michael Beasley and Memphis’ O.J. Mayo (the No. 2 and 3 picks, behind Derrick Rose, in the 2008 draft), among others.
AMNESTY CLAUSE: This rule was included in the latest Collective Bargaining Agreement. During the life of this CBA (seven years), teams will have one opportunity to use the amnesty clause on a player. When “amnestied,” a player’s remaining salary no longer counts toward the salary cap or luxury tax, and he's released. That player still receives his full salary, though.
When a player is amnestied, he can be bid on by teams with cap room. That’s how Chauncey Billups ended up on the Clippers last year. If no team makes an offer, the amnestied player is free to sign with any club.
LUXURY TAX: This is a provision designed to keep salaries down. Once a team’s payroll exceeds the luxury tax threshold, it pays a dollar for dollar penalty on the excessive funds.
Last year’s tax threshold was $70.3 million. So if a team’s payroll was $79.3 million, they’d have to pay $9 million in luxury tax, making their actual payroll expenditures $88.3 million.
The tax money is pooled and divided among the non tax paying teams. So paying the tax comes with an extra penalty. Not only must a team pay more, it also doesn’t share in the tax money split.
And beware, the tax becomes much more restrictive starting with the 2013-14 season. Teams that are 0 to $5 million above the tax threshold must pay $1.50 for every dollar over the line; teams that are $5-10 million pay $1.75 for every dollar, and it continues to increase.
SALARY CAP: Each season, a salary cap is set and teams whose payrolls fall below this line can sign free agents until they reach the cap amount. Last season’s salary cap was $58.044 million.
MID-LEVEL EXCEPTION: Teams that are over the salary cap are able to use this to sign players. It’s typically worth $5 million, but the latest CBA includes a rule that allows tax-paying teams to use only a $3 million mid-level exception, which includes the Bulls this summer.
BIRD RIGHTS: This is a rule, named after Larry Bird, that allows teams to go over the salary cap to re-sign one of its own players. Players have to be under contract for three years for the Bird rights to take effect.
EARLY BIRD: This is another version of Bird rights for players who were not under contract for three years.
A great place to learn everything you could possibly want to know about the NBA’s Collective Bargaining Agreement can be found at Larry Coon’s NBA FAQ website. Just give it a search and you’ll find it.