Contracts Part I: Holdouts? That’s so 2010!
Chicago Bears rookie linebacker Roquan Smith continues to miss practice, and is officially a hold out. After a rookie salary slotting system pre-arranged the salaries for new players, the NFL thought that this was largely behind them, but here it is again. What is going on, and why now?
This article is not about Roquan Smith’s holdout, at least not directly. In fact, you could call it more of a case study than an article. The NFL and the NFLPA thought that they had dealt with the issue of holdouts one and for all after the 2010 season. That is when they put in place a rookie wage scale that was supposed to end all of the hand wringing that was the top of the NFL draft.
The Mega-Rookie Contract Years:
Some will remember the 1990’s drafts. During that decade, 2 of the top five picks in every year were traded. Teams at the top, and throughout the first round, were almost always desperate to trade down and were selling the top draft picks for veteran players because it was seen as a better investment to have a player who had a proven track record than to pay a king’s ransom to a rookie who had a 50-50 or worse chance of busting entirely.
The 2000’s saw much less movement in the top five (1 out of 5), but saw generally more movement in the rest of the first rounds as teams attempted to get rid of first round draft picks for proven players instead of taking rookies that were as expensive as their veteran counterparts, but who hadn’t yet proved anything.
The Holdouts Solution:
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The league then, at the request and with the help of the NFLPA and the veteran players, instituted a rookie wage scale to prevent a rookie with no experience from negotiating a contract within the top five of the league as was happening repeatedly throughout those two decades. The idea was that doing this would create a stability for the veteran players, as well as create value for the teams who had high draft picks allowing them to once again build through the draft.
It worked, in large part. Trades for players started to become rarer and rarer. In fact, most trades today are picks for picks which is the opposite of what it was in the previous years. This has really allowed teams to bring in rookies and has created genuine value again for the picks at the top of the first round. It was everything that the league as a whole could have wanted… except the rookies.
The Rookies Strike Back:
The first couple of seasons after the wage scale was instituted, there weren’t many holdouts at all. It all seemed to be going well and everyone thought that the issue was dead. Yet a new phenomenon began to happen in 2013 and following, holdouts came back, and then began to rise.
It started with the third round picks. Most people said it was an anomaly and that it was really the only place in the draft where there was wiggle room on the contracts; but as these contracts became more detailed and the solutions became more creative, picks from other rounds started to see that they could fight some of the clauses that were causing them agita. So the holdout numbers continued to grow, and this year it’s almost as bad as it was in the height of the 1990’s, but just over different details.
What Are They Fighting About:
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The number one cause of these holdouts is the offset language. NFL teams see a player getting paid by two teams as double dipping, players however see it as their hedge against lost wages (we’ll deal with that in part two). When a team cuts a player, for health or performance, it feels that it shouldn’t have to keep paying them. Yet due to the contractual nature of the league, they do. So they look to offset their loss by holding back a portion of the pay equivalent to the pay that the player receives from a new team.
The number two cause of holdouts is the bonus structure. Players like to have the majority of the bonus money (or hard money) at the end of the contract (especially if they don’t absolutely need it right now). Having this kind of guaranteed, or Hard, money means that they are far less likely to be cut, traded, or waived. Teams on the other hand like to get all of the guaranteed money off of the books as quickly as possible. This offers them the maximum amount of flexibility in case of a talent drop off or injury issue. This is almost always a source of friction between the sides rookie or not, and can push both rookies and veterans into holdouts.
Another cause of rookie hold outs is injury clauses and injury insurance. Injury settlements aren’t in every contract, and if they are, they have to be agreed to as part of a contract. Often the player will attempt to maximize their monetary retention in an injury situation. Some will even attempt to have teams pay their injury insurance premiums as part of their pay package. Teams are often unwilling to shoulder all of the injury burden, and this conflict can cause issues with the contract negotiations.
There are others. Some NFL contracts have individual clauses that players or their agents balk at. You can find a list of some of the more outlandish ones here.
Guaranteed Contracts:
There is also the recent push from the NFLPA to make all contracts fully guaranteed. We’ll discuss this more in depth in Part II, but it’s worth putting out that the rookies are part of the one two punch that the players association is using to try to get what they want.
It is likely to end in disaster for both sides, but this issue isn’t going away, and will continue to contribute to player hold outs in the future, particularly those who play the quarterback position.
The Bottom Line:
Each contract negotiation is different, and each player responds differently to the different clauses involved. That said, it is still their decision to hold out, and it is their call even if their agent pushes them. It is unfair and borderline impossible to compare negotiations, but in the end both sides often have to give to get past the impasse.
As fans, we are stuck in the limbo of not knowing the who, what, when, where, why, and how. This creates animosity within the fan base with some blaming the team and others blaming the player. The truth is that often both are to blame to one degree or another. The only thing we can really know is when a player signs, until then, we just have to let the negotiations play out and hope that the details can be worked out sooner rather than later.
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