Salary Cap Nuggets - No. 7: Qualifying Contracts

This series is called Salary Cap Nuggets because ‘nuggets’ is such an interesting word in English. It calls to mind chicken nuggets - tasty, bite sized and easy to eat. But it also calls to mind gold nuggets - small, but valuable.

The salary cap is a product of the Collective Bargaining Agreement (CBA), which is a 301-page contract between the NFL Owners and the NFL Players Association. In these articles, I try to explore just one or two small parts of the NFL salary cap defined in the massive CBA. Hence, Salary Cap Nuggets - small, bite-sized, easy to digest, yet valuable information for NFL fans.

The goal is to, one bite at a time, get a clear understanding of the salary cap.

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Click this link for handy access to all the Salary Cap Nuggets

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I’ve been aware of Qualifying Contracts for a few years now, though I’m not sure if the rules for these types of contracts are commonly known among most NFL fans or not.

The purpose of this type of contract is to allow veteran players a stronger chance to remain in the NFL by keeping the salary cap charge at the same level as a younger player. while still paying the player the full dollar amount of his minimum salary contract, which will be significantly higher.

The authors of Crunching Numbers discuss Qualifying Contracts on pages 29 & 30 of the book.

Qualifying contracts, known to many as minimum salary benefit (MSB) contracts, are special contracts that only veteran players (players with four-plus accrued seasons) are eligible to sign.

According to Article 27 in the 2011 CBA, what makes these contracts unique is that the players are paid in cash at the minimum level but their salary cap charge is equal to that of a player with two credited seasons.

That’s it, really. The concept is pretty simple.

It only applies to veteran players with at least 4 accrued seasons signed on vet minimum contracts. They get their full cash salary, but the salary cap charge is the same as that of a player with only two credited seasons.

The authors of the book used a 2016 example. I will use it here, updated with more current numbers (and a link to three of the Nuggets in this series).

For example, a veteran player with ten years of experience and a P5 base salary of $1,030,000 will have a salary cap charge of just $645,000, provided his contract meets all the criteria of a qualifying contract. The difference of $385,000 will count as a player benefit (Nuggets 3 & 2).

You can see that this salary cap benefit is not huge, but might be the difference between signing an aging veteran player, or going with a younger, less experienced guy.

The criteria are as follows: Criteria for Minimum Salary Benefit Contracts:

1.​ The contract must be no longer than one season; and

2. ​The contract P5 base salary cannot be more than the applicable minimum salary; and

3.​ Additional earnings can be no more than $90,000

The additional earnings mentioned in #3 include things like signing or workout bonuses.

A good example of a 2019 Redskins Qualifying Contract is the one signed by Dominique Rodgers-Cromarie:

Note that he meets all the requirements. DRC is a player with 10 accrued seasons, whose base salary is set at the relevant minimum ($1.03m) and whose “additional earnings” — comprising a roster bonus of $45,000 — do not exceed the $90,000 limit.

You can see from the chart that, despite his expected cash earnings of $1.075m for 17 games on the Redskins roster, his cap hit would be at a reduced rate of just $690,000 (the Qualifying Contract amount of $645,000 + roster bonus of $45,000).

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Here are some more notes on Qualifying Contracts from the Crunching Numbers book:

• It is also important to note that if a player is signed to a qualifying (MSB) contract, he is ineligible to sign a contract extension until that regular season is complete.
• A player may sign an extension with his current team before the start of free agency, but the extension may only be another qualifying (MSB) contract.
• If the player outperforms the minimum salary contract (meaning that he qualifies for Perfomance-based pay, one of the league’s Player Benefits), he must enter free agency in order to sign a higher value contract. Due to this rule, teams will occasionally avoid having a contract classified as a qualifying contract by paying the player one dollar more than the minimum salary. The added dollar violates the second criteria listed above, which forces the contract to be valued at the full amount but also allows a player to be extended prior to free agency. This is a classic strategic move by a team.
• Contracts signed during the season will have the salary cap figure prorated for the number of weeks remaining in the season.
• If a player is moved from active to a reserve list and his contract has a split, the salary cap value will represent the number of weeks on each list.
• Similarly, a contract extension where the P5 base salary changes will see the salary cap value weighted accordingly.

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I’ll add one other ‘note’ of my own

When I updated the example used in the book and the article from 2016 dollars to 2019 dollars, the resulting cap savings of $385,000 was exactly the same for both years.

At first, I thought I’d made some silly mistake, and went back and checked myself. I quickly realized that my update was correct. Because the minimum salaries ALL go up by exactly $15,000 per season, the savings in any given example doesn’t change from 2011 to 2020.

With a rising salary cap, the net effect is that the benefit of this rule relative to the cap decreases every year.

To me, this is just one more example of why most salary-connected provisions in the CBA - but especially anything connected to minimum salaries — should be indexed to increases in the cap, rather than being fixed or growing by fixed dollar amounts.