…except to the degree that the new rule says it’s the old rule that applies here.
We have our first big signing under the new CBA. Puck Daddy (@wyshynski) declares that the deal “demonstrates contract rules under the new CBA,” and then proceeds to get it all wrong. No fault of theirs, really. They probably aren’t nerdy enough to actually read the documents, like I did.
The other big change is in terms of variance from year to year. The difference between two consecutive years of a deal cannot be more than 35 percent, and the variance of any year in the contract must be within 50 percent of the highest year. Hence, Zajac’s annual payouts are fairly close together: he’ll make $3.5M in the first year, $5M in the second year, $6.5M for the third year through the sixth, and $5.75M in the last two years.
That final number is also the cap hit.
Well, not exactly. Because none of what he just said is true in this case. What the new CBA says is, per the officially-released summary:
For multi-year SPCs that are “Front-Loaded Contracts,” i.e., where the average of the Player Salary and Bonuses in the first one-half of the contract is greater than the AA over the full term of the SPC:
- a) Year-to-year variability in compensation (each year’s Salary and Bonuses) will be limited to 35% of the compensation (Salary and Bonuses) in the first year of the SPC. For example, if a Player earns $10 million in compensation (Salary and Bonuses) in Year 1 of his SPC, his compensation (Salary and Bonuses) cannot increase or decrease by more than $3.5 million in any subsequent year of the SPC.
- b) The lowest year’s compensation (Salary and Bonuses) cannot be less than 50% of the highest year’s compensation (Salary and Bonuses) of the SPC. For example, if in the highest year’s compensation (Salary and Bonuses) of a Player’s SPC, he earns $10 million in total compensation (Salary and Bonuses), he may never earn less than $5 million in any single year during the term of his SPC.
For all other multi-year SPCs (i.e., not Front-Loaded Contracts as defined above), the 100% Rule shall apply.
The numbers quoted by Puck Daddy indicate that the average salary in the first half of the deal is $5.375MM. The average over the full length of the deal is $5.75MM. Since the average in the first half is not greater than the average of all the years, the deal is not a “Front-Loaded Contract” so none of the new rule applies.
It’s the old 100% rule which applies.
This, for the record, is the old 100% Rule, from the 2005 CBA:
50.7 “100 Percent Rule” for Multi-Year SPCs.
The difference between the stated Player Salary and Bonuses in the first two League Years of an SPC cannot exceed the amount of the lower of the two League Years. Thereafter, in all subsequent League Years of the SPC,
(i) any increase in Player Salary and Bonuses from one League Year to another may not exceed the amount of the lower of the first two League Years of the SPC (or, if such amounts are the same, that same amount); and
(ii) any decrease in Player Salary and Bonuses from one League Year to another may not exceed 50 percent of the Player Salary and Bonuses of the lower of the first two League Years of the SPC (or, if such amounts are the same, 50 percent of that same amount).
So, in the case of the Zajac deal:
- The first year is $3.5MM.
- The second year is $5MM.
- The difference between the two years is $1.5MM, which is smaller than the lesser of the first two years ($3.5MM). So far so good.
- Next, (i): year to year, no year can increase more than the lesser of the first two years, which is $3.5MM. Since the biggest jump in the Zajac deal is $1.5MM, the deal complies with regard to (i).
- Next: (ii): year to year, no year can decrease by half of the lesser of the first two years, which is half of $3.5MM, or $1.75MM. Since the biggest decrease is $0.75MM, the deal complies with regard to (ii).