Pro Football Talk

NFL CONTRACTS: NEED AN INCENTIVE TO GET THEM DONE?

POSTED APRIL 28, 2002

Since the NFL Draft is now over and the initial negotiations for the contracts of the players selected will start in the next several weeks, most media reports of these contracts will focus primarily on the total monies to be earned by the player over a particular period of time. As the followers of NFL football have learned over the years, the total monetary value of an NFL contract is basically irrelevant due to only a select number of contracts being guaranteed and/or actually being paid in full for their entire term. The promise to pay a player $24 million over 4 years is usually broken by the business realities created by the NFL salary cap, injury to the player and/or the player not living up to management’s expectations. Thus, the NFL fan should pay more attention to the signing bonus that the player receives to enter into the contract, the base salaries and roster bonuses he is to receive in the first several years of the deal and the ability of the player to earn the frequently quoted (but never filly explained) "incentives" of his contract.

Generally, an incentive, per the NFL Collective Bargaining Agreement ("CBA"), is either classified as "likely to be earned" or "not likely to be earned". This distinction is noted for purposes of whether the incentive amount is included in the NFL club’s team salary in a particular year in determining the team’s Salary Cap amount. More specifically, a "likely to be earned" incentive ("LTBE") is included in the current year’s computation of team salary, thereby causing the club’s Salary Cap availability in the current year to be reduced. A "not likely to be earned" incentive ("NLTBE") does not count against this year’s Salary Cap and will be deducted against the team’s Cap in the subsequent year. As in the case in respect to many provisions of the CBA, these general rules are subject to various exceptions.

The definition of a "likely" versus an "unlikely" incentive is found in the CBA. Generally, any incentive within the sole control of the player (i.e., non-guaranteed reporting bonuses, off-season workout bonuses and weight bonuses) is "likely" - LTBE. In addition, the CBA has listed various team and individual incentives that if contained in the player’s contract will generally be "not likely to be earned" - NLTBE - (i.e., amount paid to player will not be used against the current season’s Salary Cap). This week I will discuss the Team Incentives that can be implemented into a draftee or veteran player contract. Next week, individual incentives for both rookies and veterans will be dissected.

The Team Incentives that are "not likely to be earned" include (not all are listed) the following:

OFFENSE DEFENSE SPECIAL TEAMS Points Scored Points Allowed Own Punt Return Avg

TDs Scored TDs Allowed Own K-off Return Avg

Total Off (net yds) Total Def (net yds) Opposition Punt Ret Avg

Avg Net Yds gained Avg Net Yds Given Opposition KO Ret Avg Per Rush Up Per Rush

Avg Net Yds Per Avg Net Yds Given

Pass Up Per Pass

Sacks Allowed Sacks

Passing % Comple. Interceptions

Also, team wins, advancement in playoffs (including conference championship and Super Bowl), touchdowns on interceptions, returns, and fumble recoveries, and net difference (takeaways versus giveaways) are NLTBE Team Incentives.

Note, however, that any Team incentive will be recharacterized as a "likely to be earned incentive" even if it is noted in one of the beforenoted categories if the Team met or exceeded the specified performance during the prior League Year.

Example: Player X, a running back for the Dolphins, will receive in 2002 $50,000 if the Dolphins’ offense scores at least 300 regular season points and $10,000 if the Dolphins score 30 points or more in at least 2 regular season games in 2002 Since the Dolphins’ offense scored 344 points in 2001, the $50,000 incentive related to 300 points would be deemed likely to be earned in 2002 (i.e., Dolphins already satisfied 2002 points "incentive goal" of 300 by scoring 344 points in 2001 – need to have incentive figure in 2002 to be 345 points for incentive to be not likely to be earned) and count $50,000 against the Dolphins’ 2002 Salary Cap. Since the incentive related to 30 plus points in two or more games is not one of the beforenoted NLTBE categories (see preceding chart) cited by the CBA, it is also deemed to be a LTBE incentive and will also count against the 2002 Salary Cap.

Example: Player X, a defensive end, will receive $100,000 in 2002 if the Steelers win 14 regular season games. Since the Steelers won 13 games in 2001, Player X’s incentive is not likely to be earned and will not count against the Steelers’ 2002 Salary Cap.

Also note that if the Team Incentive involves a statistical performance of the team in the current year that is equal to or lower than that achieved by an NFL team in the previous year finishing 5th from the bottom in the League in the applicable category, the incentive will be deemed "likely to be earned" (i.e., will count against this year’s salary cap).

Example: Player X, a player for the Bengals, has a Team Incentive that pays him $25,000 if the Bengals score one more point on offense in 2002 than they did in 2001 (226 points). Notwithstanding that this Team Incentive initially satisfies the requirement to be a NLTBE incentive (i.e., if the team scores 227 points in 2002 he will get the incentive because this is 1 more point than the 226 points the team scored in 2001), the Bengals would have to score 266 points in 2002 (not 227) in order for the incentive to be "not likely to be earned" since the bottom five teams in the 2001 season scored total points of 226 (Bengals), 246 (Cowboys), 253 (Panthers), 256 (Redskins) and 265 (Bills). In other words, in order for the above "more than the bottom 5 teams" rule not to apply, the Bengals have to score 1 more point than the 5th to last in the League team in 2001 - the Bills with 265 - in order to make the incentive NLTBE and thus not count against the Salary Cap in 2002.

VETERAN INCENTIVES: EXTRA DOUGH FOR EXTRA EFFORT

Posted May 4, 2002 @ 4:44 PM

Last week’s article (see below after this article) discussed the concept of Team Incentives in NFL contracts. Besides a base salary and a signing bonus, contracts for most drafted and veteran players contain the frequently noted (but never fully explained) "incentive" clauses.

Generally, an incentive, per the NFL Collective Bargaining Agreement ("CBA"), is either classified as "likely to be earned" or "not likely to be earned". This distinction is noted for purposes of whether the incentive amount is included in the NFL club’s team Salary Cap amount in a particular year. More specifically, a "likely to be earned" incentive (LTBE) is included in the current year’s Salary Cap amount, thereby causing the club’s ability to sign players in the current year to be reduced. A "not likely to be earned" incentive (NLTBE) does not count against the NFL club’s Salary Cap in the current year but instead will be deducted against the team’s Salary Cap in the subsequent year.

The definition of a "likely" versus an "unlikely" incentive incentive is found in the CBA. Generally, any incentive within the sole control of the player (i.e., non-guaranteed reporting bonuses, off-season workout bonuses and weight bonuses) are LTBE. In addition, the CBA has listed various Team incentives (discussed last week) and Individual incentives that if part of the player’s contract will generally be "not likely to be earned" (i.e., amount paid to player will not be used against the current season’s Salary Cap.

For purposes of the Individual incentives in Veteran contracts, the CBA deems the following categories "not likely to be earned":

RUSHING

Total yards

Average yards

(at least 100 attempts)

Touchdowns

PASSING

Passing rating

(at least 224 attempts)

Completion percentage

at least 224 attempts)

Interception percent

(at least 224 attempts)

Total yards

Yards per pass

(at least 224 attempts)

Touchdown passes

RECEIVING

Total yards

Average yards

(at least 32 receptions)

Touchdowns

DEFENSE

Interceptions

Interception return yards

Touchdowns on interception returns

Opponent fumble recoveries

Opponent fumble return yards

Touchdowns on opponent fum. ret.

Sacks

PLACE KICKING

Total points

Field goals

Field goal percentage

(minimum 16 attempts)

Field goal percentage

0-19 yards (minimum 4 attempts)

Field goal percentage

20-29/30-39/40-49 yards (minimum 4 attempts)

Field goal percentage over 50 yds (min 3 attempts)

OTHERS

Roster bonuses

Reporting bonuses

Playtime bonuses (excluding special teams)

Special teams playtime

Similar to team incentives, any Individual incentive that depends on a player’s performance in any category not identified above will automatically be deemed likely to be earned, causing the incentive amount to be included in the Club’s Salary Cap amount for the present League year. In addition, even if the Individual incentive is one of the beforenoted categories, if the player achieved in the previous League Year the individual performance he must attain to reach (and be paid) the incentive contained in the present year of his contract, incentive will be deemed LTBE.

Example: Player X. a free agent wide receiver, signs a two-year contract in 2002. In 2001, X achieves the following:

• Total receptions = 25

• Total touchdowns = 4

X’s 2002 NFL contract provides for the following Individual

Incentives:

• X has 20 or more receptions = receive $l0,000

• X has 5 or more total touchdowns = receive $5,000

• X has a non guaranteed offseason workout bonus

(at least 85% participation) = $15,000

X’s Likely To Be Earned (LTBE) incentives = $10,000 (caught 25 balls in 2000, so already achieved) and $15,000 (workout bonus not part of CBA Individual incentive category noted earlier) = Total of $25,000 of LTBE

As noted in this article, the incentive rules of the NFL are complex, tedious and have a propensity to induce fits of screaming when being negotiated by Club management and agents. A sure way to impress your friends and family (and eventually put them to sleep) is to initiate a discussion covering "likely" versus "unlikely" incentives; even though they may not be impressed, you are now able to understand the complexity that sometimes enters into the NFL contract that the agent negotiates for his client. The astute Contract Advisor, realizing the added compensation that his client can realize from a contract containing not likely to be earned incentives, will attempt to include such "cookies" in his player’s deal; not all teams, however, are willing to "bite." A further benefit to the Player can be accomplished by attempting to have the NFL club to include in the Player’s contract an increase in the player’s base salary for the next NFL contract year (i.e., "roll-over") if the incentive amounts are actually achieved in the current year.

Hey Rook - Got An Incentive?

POSTED MAY 11, 2002 @ 12:50 AM

In the past several weeks, I have discussed incentives that can be included in NFL contracts. So far, a summary of the incentives based on a team's performance and incentives applicable to veteran NFL contracts have been analyzed (see articles below). Generally, the Collective Bargaining Agreement (CBA) lists various incentives that can be classified as either Likely To Be Earned (LTBE) - therefore causing the amount of the incentive to be included in the team's Salary Cap computation in the present NFL league year (whether actually earned or not) - or as Not Likely To Be Earned (NLTBE) - meaning that the incentive is not included in a team's Salary Cap computation until actually earned. The CBA contains a list of incentive categories and their classification as either LTBE or NLTBE. As noted hereafter, the distinction between likely and not likely is made sometimes between draft and nondrafted players, and, in some instances, as to what round a drafted player is selected. The following are some of the Rookie Incentives listed in he CBA:

ROOKIE “LIKELY TO BE EARNED” INCENTIVES

CATEGORY PERCENT COUNTED

ROSTER BONUSES (regular season)

ALL DRAFTED 100%

UNDRAFTED 30%

ROSTER BONUSES (pre-season)

All Players 100%

PLAYING TIME ROUNDS 1-3

Up to 33% 100%

34% - 75% 75%

76% - 90% 50%

91% - 100% 25%

ROUNDS 4-8

Up to 25% 100%

26% - 33% 75%

34% - 50% 50%

51% - 75% 25%

76% - 100% 10%

UNDRAFTED

Up to 15% 100%

16% - 25% 75%

26% - 50% 50%

51% - 75% 25%

76% - 100% 10%

All percentages will round to the nearest whole percentage (e.g., .05 is rounded to .10).

SPEC TEAMS ROUNDS 1 - 3 100%

PARTIC. ROUNDS 4 - 8 66%

UNDRAFTED 50%

HONORS ROUNDS 1 - 2

(1st or 2nd team) All-Rookie 100%

All NFL, Pro Bowl 5%

All Conference 10%

ALL OTHERS

All-Rookie 15%

All Conference 5%

OFFENSE

RUSHING

Total Yards ROUNDS 1 - 3

Rushing Up to 150 yards 100%

151 - 350 yards 75%

351 - 500 yards 66%

501 - 700 yards 33%

701 yards or more 0%

ALL OTHERS

Up to 100 yards 100%

101 - 350 yards 66%

351 - 650 yards 25%

651 yards or more 0%

Note: also incentives for Average Yards Per Rush and Rushing Touchdowns.

PASSING

Passer Rating ROUNDS 1 - 3

(224 attempts) 50 rating or less 100%

51.00 - 75.00 66%

76.00 - 90.00 50%

90.00 - 100.00 33%

100.01 or more 0%

ALL OTHERS

50.00 or less 100%

51.00 - 75.00 66%

76.00 - 90.00 25%

90.01 or more 0%

Note: also incentives for Completion Percentage, TD Passes, Total Yards Passing, Yards Per Pass and Interception Percentage.

RECEIVING

Total Receptions ROUNDS 1 - 3

Up to 20 catches 100%

21 - 30 catches 75%

31 - 35 catches 50%

36 - 40 catches 25%

41 catches or more 0%

ALL OTHERS

Up to 10 catches 100%

11 - 35 catches 50%

36 - 40 catches 25%

41 catches or more 0%

Note: also incentives for Total Yards Receiving, Average Yards Per Reception and Receiving TDs.

DEFENSE

Interceptions ROUNDS 1 - 3

1 - 5 100%

6 - 10 50%

11 or more 0%

ALL OTHERS

1 - 3 100%

4 - 6 33%

7 or more 0%

Note: also incentives for Interception Return Yards and TDs On Interceptions.

Oppponent Fumble ALL

Recoveries 1 - 2 100%

3 - 4 50%

5 or more 0%

Opponent Fumble ROUNDS 1 - 3

Return Yards 0 - 40 100%

41 - 65 66%

66 - 80 33%

81 or more 0%

ALL OTHERS

0 - 30 100%

31 - 55 50%

56 - 75 25%

76 or more 0%

ALL

Touchdowns on 1 100%

Opponent Fumble 2 50%

Returns 3 or more 0%

Sacks ROUNDS 1 - 3

.5 - 4 sacks 100%

4.5 - 6 sacks 50%

6.5 - 8 sacks 25%

8.5 sacks or more 0%

ALL OTHERS

.5 - 3 sacks 100%

3.5 - 6 sacks 50%

6.5 - 8 sacks 25%

8.5 sacks or more 0%

Note: also incentives for PUNT RETURNS/KICKOFF RETURNS (Total Yards, Avg Yards Per Return and TDs), PUNTING (Gross Avg, Net Avg and Inside 20 Yard Line) and PLACEKICKING (Field Goals, Field Goal % and Total Points).

Examples of some of these incentives being used in a Rookie Contract include the following:

EXAMPLE 1: Player X, a running back drafted in Round 3, has the following incentive clause in his Rookie contract:

Total Yds Rushing - up to 150 yds = $10,000, or

- between 151 and 350 yds = $20,000

Amount of Likely To Be Earned incentive per the CBA chart is 75% of $20,000 for a LTBE amount (counts against this year's Salary Cap) of $15,000. Note that this result was due to the incentive being worded such that Player X could only get the higher amount of the 2 incentives listed (since the word "or" was used). If the Player could have earned both the $10,000 and $20,000 amounts (i.e., he rushed for 325 yards and the word "and" was used in the incentive language in the Rookie contract), then the LTBE would have been $10,000 (100% of 10,000 per the CBA chart) and $15,000 (75% of $20,000 per the CBA chart), for a total LTBE incentive of $25,000. Note in all instances that the LTBE designation only affects the team's Salary Cap computation - it does not in any way diminish the incentive amount that the player is to receive.

EXAMPLE 2: Player Y, a defensive tackle, is an undrafted rookie. Y's Rookie contract pays him $10,000 for 3 or more fumble recoveries, $10,000 for 8.5 or more sacks, and $2,500 if Y has 15 or less penalty yards in his first season.

Y's LTBE incentive amount: $5,000 (CBA chart says all rookie contracts - whether drafted or undrafted - have a 50% LTBE incentive hit on amounts paid for 3 or 4 fumble recoveries - so 50% of $10,000 = $5,000) and $2,500 for the penalty yards incentive since that category is not listed in the CBA chart so it is LTBE. No LTBE amount for the Sacks incentive since 8.5 or more sacks count 0% per the CBA chart. Total LTBE amount = $7,500.

Ron Del Duca is a sports attorney and NFL agent who represents various NFL, NHL and professional tennis players.