A. Term of Agreement
The new collective bargaining agreement begins with the 2005-06 season and runs through the 2010-11 season. The NBA has the option to extend the CBA for the 2011-12 season.
B. Length of Contracts
The maximum length of a player contract has been decreased from 7 years for Bird players and 6 years for other players to 6 years for Bird players and 5 years for other players.
II. Escrow and Tax System
A. Escrow Level
The escrow level will be 57% (same as the 2004-05 season). This percentage will be guaranteed to the players, so that if total player costs before deducting escrow monies from the players are less than 57% of BRI, the difference will be paid by the league to the players. (In the event BRI for any season is more than 30% above the BRI level for 2004-05, the escrow level will increase to 57½% for that season and subsequent seasons).
The maximum percentage of player salaries and benefits that can be withheld from the players for purposes of meeting the 57% escrow level will be: 10% in year 1; 9% in years 2 – 5; and 8% in year 6 (and 8% in the option year, if exercised). The previous escrow withholding limit was 10%.
A team tax trigger will be set at 61% of BRI (the league-wide tax trigger for 2004-05 was 63.3%). The tax will be in effect each season, and will apply to any team with a payroll that exceeds the tax trigger. The tax trigger for each season will be established before the season based on a projection of BRI. For the 2005-06 season, the tax level is set at $61.7 million.
Each team will be permitted to waive one “amnesty” player on or before August 15, 2005 and to remove that player’s salary from its payroll for purposes of computing its tax payment for the 2005-06 season and any future seasons for which the player was under contract. (The team will still be obligated to pay the player his guaranteed salary, if any.) The team will not be permitted to re-sign or re-acquire the player prior to the end of the term of his terminated contract. Alternatively, a team that previously waived a player whose guaranteed salary is continuing to be included in the team’s payroll for the 2005-06 season and any future seasons will be permitted to designate that player’s salary for removal from its payroll for purposes of computing its tax payment.
The “amnesty rule” will only provide relief with respect to a team’s tax obligation (based on the designated player’s salary for the applicable season or seasons) and will not, for example, enable a team to free up room under the Cap. However, teams under the tax level (or under the Cap) for this season may still waive an amnesty player and receive the possible tax benefit of removing the player’s salary in future years.
III. Salary Cap and Related Rules
A. Salary Cap
The Salary Cap for the 2005-06 season is $49.5 million (which is based on 49.5% of BRI).
In the new deal, the salary cap increases from 48% of BRI currently to 49.5% of BRI in 2005-06 and 51% of BRI for the remainder of the CBA.
B. Annual Increases and Decreases
The permissible year-to-year increases in multi-year player contracts are as follows:
Bird and Early Bird Contracts may increase by up to 10.5% of year-one salary (down from 12.5%).
Other contracts may increase by up to 8% of year-one salary (down from 10%).
C. Rookie Scale Contracts
Rookie scale contracts will provide for two guaranteed seasons with two separate one-year options in favor of the team for seasons 3 and 4. (In the previous agreement, rookie scale contracts provided for three (3) guaranteed seasons with a team option for year four.) The first team option is exercisable following the end of the player’s first season, and the second team option is exercisable following the end of the player’s second season. A team that exercises both options will continue to have first refusal rights following the player’s fourth season.
The rookie scale and 3rd and 4th-year options and 5th-year Qualifying Offer amounts for 2005 first round draft picks (at 100% of their scale amounts) are set forth in Exhibit A attached to this memorandum. Teams will still have the ability to pay 20% more or less than the scale amounts.
D. Maximum Player Salaries
As under the prior CBA, in the first year of a new contract a player may receive the greater of 105% of the player’s prior salary, or:
0-6 years of service: 25% of Salary Cap ($12 million this year).
7-9 years of service: 30% of Salary Cap ($14.4 million this year).
10 or more years of service: 35% of Salary Cap ($16.8 million this year).
The maximum player salaries will continue to be based on a 48.04% of BRI Salary Cap (not on the new, higher Salary Cap).
E. Minimum Player Salaries
Attached as Exhibit B to this memorandum are the minimum player salaries in each year of the new CBA.
Any amounts paid to a player in a one-year minimum contract that exceed the minimum salary applicable to players with two years of service (instead of four under the prior CBA) shall be paid out of a league-wide benefits fund and shall be excluded from Team Salary.
Solely for purposes of computing a team’s Team Salary for tax purposes (and not, for example, for purposes of calculating a team’s room under the Cap), a free agent with zero years of service (i.e., a rookie, but not a second round pick) or one year of service who signs for the minimum player salary will be included in Team Salary based on the minimum applicable to a player with two years of service. For example, if a team signs a rookie (other than a drafted player) in 2005-06 to a minimum contract that pays $398,762, the player will be included in the team’s Team Salary for tax purposes at $719,373 (the 2005-06 minimum for a player with two years of service).
F. Salary Cap Exceptions
Mid-level Exception: For the 2005-06 season, the Mid-level exception will be $5 million. In subsequent years, the Mid-level exception will equal 108% of the average player salary for the prior season.
“Bi-annual” Exception (formerly “Million Dollar” Exception): For the 2005-06 season, the amount of the Bi-annual exception will be $1.670 million. In subsequent years, the amount of the exception will increase by 4.5% annually. The alternating-year rule that applies to this exception has been carried over from the prior CBA. Therefore, teams that used all or part of the exception in 2004-05 will not have the right to use the Bi-annual exception in 2005-06.
Each team is required to carry 12 players on its active list and one player on its inactive list (which will replace the injured list). Teams may have a maximum of three players on their inactive list (subject to hardship rules, which will apply in the event that a team with three injured players on its inactive list has a fourth player that suffers an injury). Players sent to the NBA Development League (see below) will continue to count on a team’s inactive list.
The league has agreed to guarantee that, on a league-wide basis, teams will maintain an average roster size of 14 players over the course of the season.
H. Trade Rules
A traded player may be “simultaneously” replaced (i.e., in the same transaction) by one or more players whose salaries in the aggregate do not exceed 125% of the salary of the players being traded, plus $100,000 (In the previous deal, the figure was 115% of the salary, plus $100,000).
“Sign-and-trade” rules remain unchanged.
If a team trades a player and the player is subsequently waived by the assignee team, the assignor team will not be permitted to sign the player to a new contract (or claim him off of waivers) until at least 30 days have passed following the date the trade was made (or 20 days for trades that occur during the off-season).
A draft rookie may not be traded until 30 days following the date on which his contract is signed. Other players remain subject to the rule providing that they may not be traded before the later of (i) three months following the signing of the contract or (ii) December 15.
A player signed to a one-year contract who would be a Bird or Early Bird player at the conclusion of his contract cannot be traded without the player’s consent. If the player consents and is traded, he will lose whatever “Bird” rights he has acquired (i.e., he will be considered to have moved to the new team as a free agent). (The rule prohibiting such players from being traded has been eliminated.)
Base Year Compensation rules remain unchanged, except that a player’s Base Year Compensation will expire on the later of (i) the June 30 following the date the Base Year goes into effect, or (ii) six months following the date the Base Year goes into effect.
I. Restricted Free Agency
A team must exercise its options for the third and fourth seasons of a Rookie Scale Contract in order to have first refusal rights (following year 4).
Offer Sheets must be for at least two seasons (instead of three), not including any option year, unless the player’s prior team gives the player both a Qualifying Offer and an alternative offer of a “maximum” contract, in which case the Offer Sheet must be for three or more years (not including any option year).
Offer Sheets for players with one or two years of service must comply with the following:
The first year salary may not exceed 108% of the average player salary for the prior year and the second year salary may not increase or decrease by more than 8%.
If the Offer Sheet provides for 108% of the average player salary for the first year with an 8% increase for the second year, then the Offer Sheet may provide for salary in the third year up to the amount that the player would have been eligible to receive in that year had his salary in the first year been for any amount up to the “maximum” salary allowable for that player (e.g., first year at the player’s maximum allowable salary with annual increases of 8% of the first-year salary). The player’s salary after the third year may increase or decrease by no more than 6.9% of the third-year salary.
In order to determine whether a team has room to extend such an Offer Sheet, the first year salary will be deemed to equal the average of the aggregate salaries for each year covered by the Offer Sheet.
If the player’s prior team doesn’t exercise its Right of First Refusal, the averaged salary amount will be included in the new team’s Team Salary for each year of the contract. However, if the player’s prior team does exercise its Right of First Refusal, the amount included in Team Salary for each year shall be the salary set forth in the contract.
A team now has seven (7) days (instead of 15) to match an offer sheet tendered to a player that is subject to such team’s Right of First Refusal.
J. NBA Development League
During an NBA player’s first two seasons in the league (regardless of his age when he entered the league), his team will be permitted to assign him to a team in the NBA Development League. A player can be assigned to the NBADL up to three times per season. The player will continue to be paid his NBA salary and will continue to be included on his NBA team’s roster (on the inactive list) while playing in the NBADL.
K. Training Camp
The training camp reporting timetable shall be the same as it was for the 2004-05 season, except that teams can require veteran players to report on the first day by 11:00 A.M. (local time) instead of 2:00 P.M. (local time).
L. Draft Entry Age
Beginning in 2006, the age limit for entering the Draft will increase from 18 to 19 years of age. U.S. players must be at least one year removed from high school and 19 years of age (by the end of that calendar year) before entering the draft. An international player must turn 19 during the calendar year of the draft.
M. International Player Buyouts
The limit on payments to international teams and players that will be excluded from Team Salary has been increased from $350,000 to $500,000.
N. Moratorium Period
The moratorium period on free agent signings, etc. under the new CBA in 2006, 2007, 2008, 2009, 2010, 2011 and (if the NBA exercises its option to extend the CBA) 2012, respectively, will be as follows:
July 1, 2006 through July 11, 2006
July 1, 2007 through July 10, 2007
July 1, 2008 through July 8, 2008
July 1, 2009 through July 7, 2009
July 1, 2010 through July 7, 2010
July 1, 2011 through July 7, 2011
IV. Anti-Drug Program/Conduct Discipline
All players will be subject to four random drug tests each season (during the period from October 1 through June 30). These tests will be for both recreational drugs prohibited under the Anti-Drug Program and performance-enhancing drugs. (Under the prior CBA, rookies were subject to four random tests per season while veterans were subject to random testing only once and only during training camp.)
The penalties for testing positive for performance-enhancing drugs will be increased from suspensions of 5, 10, and 25 games for the first, second and any subsequent violation, respectively, to 10 and 25 game suspensions for the first two violations, a one-year suspension for the third violation and disqualification from the league for a fourth violation. Penalties for testing positive for marijuana will be increased from a $15,000 fine for a second violation to a $25,000 fine and, for each subsequent violation, incremental 5 game suspensions. The first violation of the marijuana program will continue to result in the player being placed in a counseling program, with no financial penalties.
The list of performance-enhancing drugs has been substantially broadened. Players will be tested for these new substances commencing with the 2006-07 season.
A player’s failure to report for a trade has been deemed “conduct detrimental to the NBA,” which (in addition to any discipline imposed by the team) will subject the player to fines and suspensions by the Commissioner.
Suspensions by the Commissioner in excess of 12 games for on-court misconduct are subject to review by an independent arbitrator. For this purpose, “on court” generally includes anything that occurs anywhere in the arena during, before, or after a game.
A. Pension Increase
The NBA has agreed to increase player pensions, subject to government approval.