NFL

Agent’s Take: Has the NFL been colluding against fully guaranteed contracts? Or is it just an illusion?

The Athletic’s Kalyn Kahler reported last week that NFL general counsel Jeff Pash wrote in an Oct. 20 memo to club owners, presidents, general managers and attorneys that the NFLPA filed a grievance alleging that teams and the league colluded to prevent fully guaranteed contracts from being offered to players. The basis for the NFLPA’s claim is “the fact that no other quarterback or high-profile player has signed a fully guaranteed contract after Browns‘ quarterback Deshaun Watson signed his contract last March.”

The NFLPA contends that fully guaranteed contracts would become the norm for the NFL‘s top players because of the Watson deal. The memo alleges that prior to, during and after an Aug. 9 ownership meeting in which the owners met to approve the Denver Broncos sale, there have been discussions among owners, league and teams executives about agreeing not to sign veteran players to lucrative fully guaranteed contracts.

Pash added that the NFLPA isn’t seeking to terminate the collective bargaining agreement if the claims are proven. Instead, the NFLPA has asked the arbitrator to award damages and allow “certain quarterbacks” adversely affected to terminate their contracts. 

Nobody expected Watson to get a fully guaranteed five-year, $230 million contract in connection with his trade from the Texans to the Browns, especially considering the numerous sexual assault and misconduct allegations he was facing. Watson just finished serving an 11-game suspension for violating the league’s Personal Conduct Policy. He had four years worth $136 million remaining on the four-year contract extension averaging $39 million per year he signed in September 2020 before signing the Browns contract.

The Browns “pulled a rabbit out of hat” with the help of the new contract. Watson had narrowed the teams he was willing to waive his no-trade clause for down to the Falcons and Saints. The Browns had missed the cut prior to a new contract entering the equation. 

Watson had unique circumstances where multiple teams were recruiting him to waive his no-trade clause. In a sense, Watson was more like a free agent than the typical contract-extension candidate where there’s a closed negotiation only with the player’s team. Essentially, David Mulugheta, Watson’s agent, was able to leverage Cleveland’s desperation to get his client into the type of contract that’s routine for NBA superstars.

The “certain quarterbacks” probably means two signals-callers who signed lucrative contracts after the Watson deal: Kyler Murray and Russell Wilson, as well as Lamar Jackson, who is playing under a $23.016 million fifth-year option. 

Raiders quarterback Derek Carr signed a three-year extension averaging nearly $40.5 million per year less than a month after the Watson deal. Carr clearly wasn’t interested in pursuing a fully guaranteed contract. His deal only had $24.9 million fully guaranteed at signing with $65.3 million in overall guarantees. The guarantees in Carr’s current deal are less than in the five-year extension he signed in 2017 that made him the NFL’s first $25 million-per-year player. The 2017 extension had $40 million fully guaranteed at signing and $70.2 million in total guarantees.

Carr acknowledged that he structured his new deal in a manner that would make it easier to keep other core players around. Wide receiver Hunter Renfrow and tight end Darren Waller subsequently signed extensions.

A likely major impediment to Murray getting a fully guaranteed contract was the NFL’s funding rules. The new collective bargaining agreement ratified in 2020 modified the NFL’s archaic funding requirements, which necessitated teams putting into an escrow account the amount of any guarantees in a contract other than those just for injury, including ones in future contract years. The current rules are as follows:

The NFL may require that by a prescribed date certain, each Club must deposit into a segregated account the present value, calculated using the Discount Rate, less $15,000,000 (the “Deductible”), of deferred and guaranteed compensation owed by that Club with respect to Club funding of Player Contracts involving deferred or guaranteed compensation; provided, however, that with respect to guaranteed contracts, the amount of unpaid compensation for past or future services to be included in the funding calculation shall not exceed seventy-five (75%) percent of the total amount of the contract compensation. The present value of any future years’ salary payable to a player pursuant to an injury guarantee provision in his NFL Player Contract(s), shall not be considered owed by a Club under this Section until after the Club has acknowledged that the player’s injury qualifies him to receive the future payments. The $15,000,000 Deductible referenced in the first sentence of this Section 9 shall apply to the 2020-28 League Years only. This Deductible shall increase to $17,000,000 for the 2029-30 League Years.

The funding issue is most problematic for NFL teams with the poorest owners (among a group of the super wealthy). Under the funding rules, the Browns will be required to put $169 million in escrow by March 31, 2023 because of Watson’s contract. In hindsight, the NFLPA probably should have made the elimination of the funding requirements more of priority in collective bargaining since owner solvency is not a legitimate concern like it was when the rules were instituted.

The Cardinals aren’t considered a cash rich team. The signing bonus in Murray’s rookie contract when he was 2019’s first-overall pick wasn’t paid in a lump like 2019 second-overall pick Nick Bosa got from the 49ers. $6,839,924 of Murray’s $23,589,924 signing bonus was deferred until March 1, 2020.

Murray signed a five-year, $230.5 million extension worth up to $238 million through salary escalators in the latter days of July when training camp started. There’s $160 million in overall guarantees where $103.3 million was fully guaranteed at signing. An additional $29.5 million in latter years of Murray’s contract, which isn’t guaranteed for injury at signing, can also become completely secure to bring the total amount that can be guaranteed to $189.5 million.

Murray’s contract originally contained an unprecedented clause requiring four hours of independent film study during each week of the regular season to prevent his guarantees from voiding. The controversial clause was removed from Murray’s contract a few days later because of the distraction it was causing. The insistence on such clause would seem to suggest that the Cardinals were adamantly opposed to giving Murray a fully guaranteed contract.

The conditions appeared to be favorable for Wilson to follow in Watson’s footsteps with a fully guaranteed contract. Wilson, who had two years left on his contract worth $51 million, should have had considerable negotiating leverage because of his acquisition cost. The Broncos gave the Seahawks multiple players (tight end Noah Fant, defensive lineman Shelby Harris and quarterback Drew Lock), 2022 and 2023 first-round picks, 2022 and 2023 second-round picks and a 2022 fifth-round pick for Wilson and 2022 fourth-round pick. 

The NFL’s funding rules weren’t an issue for the new Broncos ownership group led by Walmart heir Rob Walton. He is easily the NFL’s richest owner. Walton has an estimated net worth of $63.2 billion, which makes him the 17th richest person in the world, according to Forbes.

Wilson signed a five-year, $245 million extension shortly before the start of the regular season. His deal contains $165 million in guarantees with $124 million fully guaranteed at signing, which is the second most ever in an NFL contract.

Any chance Jackson, who represents himself, had to get a fully guaranteed contract this year went out the window after Murray’s and Wilson’s deals. The Ravens and Jackson ended contracts talks right before the regular season started in accordance with his self-imposed deadline for a new deal.

It was reported that Jackson wants his deal fully guaranteed. Jackson reportedly turned down a five-year offer worth $250 million with $133 million fully guaranteed. The offer had the second highest average yearly salary and money fully guaranteed ever in an NFL contract.

Ravens owner Steve Bisciotti was critical of Watson’s deal shortly after he signed during the NFL owners meetings at the end of March. “I wish they hadn’t guaranteed the whole contract,” Bisciotti said. “I don’t know that he should’ve been the first guy to get a full guaranteed contract. To me, that’s something that’s groundbreaking, and it’ll make negotiations harder with others.” He also added, “But it doesn’t necessarily mean that we have to play that game, you know? We shall see.”

Negotiations are expected to resume in January after the regular season ends. Jackson is destined to start playing the franchise tag game if both parties remain firmly entrenched in their positions on a fully guaranteed contract. The exclusive franchise designation will be most likely. Four of the last five times quarterbacks have been designated as franchise players the exclusive tag has been used. Jackson would be prohibited from soliciting an offer sheet from other teams with the exclusive version.

The 2023 exclusive quarterback franchise number will be the average of the top-five 2023 quarterback salaries (salary cap numbers with some minor adjustments) at the end of next year’s restricted free agent signing period on April 21. It currently projects to $45.248 million. This number is subject to change depending on new quarterback deals, contract restructures, pay cuts and/or releases between now and then. 

Collusion is hard to prove. The NFLPA is probably going to need some sort of “smoking gun” to prevail in their claim and get the desired relief. Obtaining electronic communications (texts and/or emails) of NFL owners and/or team executives discussing not doing fully guaranteed contracts, if they exist, would surely qualify. It would be interesting to see whether the initial contract proposals Murray and Wilson’s agents made to the Cardinals and Broncos were for fully guaranteed contracts.



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