Understanding Terms of NBA, NBPA’s Agreement

The NBA and NBPA agreed to a new labor deal on Wednesday that could provide labor peace for the next seven seasons – although both sides have opt-outs prior to the final year (2023-24).

Lawyers will hash out the new Collective Bargaining Agreement (CBA), which needs to be ratified by both sides on or before January 13. In the meantime, Basketball Insiders obtained a copy of the term sheet.

The agreement is subject to change until the actual CBA is written and signed. Most, if not all, of the following will be incorporated in the final deal but nothing is set in stone just yet.

The basic split of Basketball Related Income (BRI) hasn’t changed, remaining a band of 49-51 percent to the players. With the luxury-tax formula also static, the new deal will not contain a one-time amnesty clause (previously used to waive an unwanted contract from the team’s books, although the player would still receive their compensation).

One tax-related change does stand out, for teams that trigger a hard cap, the spending limit will be initially $6 million above the tax threshold (up from $4 million).

The definition of BRI may have expanded, although the details aren’t included in the term sheet. For now, the projection for the 2017-18 salary cap remains $103 million.

For next season, the various Mid-Level Exceptions (MLE) and Bi-Annual Exception (BAE) will increase by 45 percent of what was scheduled in the current CBA. The full MLE will climb to $8.4 million, the taxpayer MLE to $5.2 million and the room MLE to $4.3 million. The BAE jumps to $3.3 million.

Starting with the 2018-19 season, the MLE and BAE will rise or fall at the same rate as the salary cap.

Similarly, veteran minimum salaries will adjust annually based on the salary cap, starting with a set schedule for 2017-18. The rookie minimum, which serves as the amount teams are charged for empty roster spots below 13, climbs to $815,615 (translating to lower cap room than was scheduled under the current deal, to the tune of $254,122 per roster charge).

Minimum salaries ramp up, depending on years of service, to as much as $2.3 million for those 10 or more years in the league. The league reimburses teams for the salary paid to a minimum player (on a one-year deal) over the scale amount of a two-year veteran’s minimum.

For example, an eight-year vet will earn $2.1 million but the team will be responsible for a cap hit of $1.5 million.

Under the current CBA, minimum contracts can be up to two years in length but the new salary scale details up to five years, which may represent a change in the rule.

The rookie scale for first-round picks also climbs for 2017-18 by 15 percent. Salaries also climb in the second year, first by five percent (instead of the previous raise of 4.5 percent) and then by an additional 30 percent. The third year jumps by 45 percent.

For instance, the top overall pick in the 2017 NBA Draft will have a rookie scale of $5.9 million, $6.9 million, $8.1 million and $10.2 million, for a total of $31.2 million.

Additionally, the cap hold for an unsigned first-rounder will be 120 percent of scale, which will further reduce the amount of cap space teams will have each summer.

Under the current CBA, the top-overall pick is scheduled to earn $5.1 million. That will climb to $7 million in the new CBA.

Cap holds for player at the end of rookie-scale contracts will increase from 200 percent to 250 percent for those above the league average – and from 250 percent to 300 percent for those under.

Teams can now send or receive up to $5.1 million in trades over the course of a season. Both rookie scale and cash in trade will also adjust with the salary cap.

Player raises will climb from 4.5 percent and 7.5 percent to five percent and eight percent.

The NBA’s moratorium is now set to end at noon (ET) on July 6 each season. While restricted free agents can now sign an offer sheet during the moratorium, the waiting period (which has generally shrunk from three days to two) doesn’t start until the end of the moratorium.

Teams can still unilaterally withdraw their qualifying offer to their own restricted free agent, but the deadline to do so has been moved up from July 23 to July 13.

In matching their own “Arenas Rule” free agents, teams will now have the choice to take on a cap hit of either the average or the actual salary.

For example, the Miami HEAT owe Tyler Johnson $5.6 million, $5.9 million, $19.2 million and $19.2 million over four seasons. While this won’t apply to Johnson, under the new CBA, Miami would have had the option to apply his salary to their cap at a flat $12.5 million per year.

Teams are no longer permitted to state publicly that they will match any offer sheets on their restricted free agent.

Matching salaries in trade will be easier for teams below the tax. Where it applies, the margin for trades has increased from 150 percent to 175 percent.

Players and teams can also agree to reduce (or even eliminate) a trade bonuses – an issue that could have scuttled trades under the current deal.

Maximum salaries are now based on 25 percent, 30 percent and 35 percent of the cap, a more-straight-forward computation than the current rule.

The “Over-36 Rule” has been changed to “Over-38.”

Basketball Insiders will break down changes to extensions, designated players, the NBA schedule, the concept of two-way contracts and other minutiae of the agreement in future articles.