How NBA Early Contract Extensions Work

http://www.sbnation.com/nba/2014/9/29/6152821/nba-rookie-contract-extension-explainer



How NBA early contract extensions work
By Kevin Zimmerman  @offensivelyfoul on Sep 29 2014, 11:27a +







Don't know how a rookie contract in the NBA works or how they dictate contract extensions? We're here to help.




Over the next month, you'll hear about several young players eligible to sign an "early contract extension" with and only with their current NBA teams. You'll hear negotiating through the media, reports of proposed terms and the two sides struggling to come to terms, all the way until the Oct. 31 deadline.

But what is a rookie contract extension? Why is there this exclusive negotiating window? We answer your frequently-asked questions below.


What are the basics of an NBA contract?

NBA contracts are signed by players to play for a team for one to five years in length. Depending on the number of years a player has played in the NBA, contracts have minimum and maximum annual amounts.

Contracts can include player or team options and the money owed can also be non-guaranteed or partially guaranteed, though most key players are on largely guaranteed deals. Major terms of contracts (years or any big change in annual salary) cannot be renegotiated during the contract's duration.

Players can be traded to other teams that are under the NBA salary cap or for a player or players who make a similar combined amount of money. The only players with no-trade clauses are six longtime stars -- Tim Duncan, Dirk Nowitzki, Dwyane Wade, Carmelo Anthony, Kobe Bryant and Kevin Garnett -- and anyone on a one-year contract due to a little-known salary-cap quirk.


How long are rookie contracts to begin with?

Rookie contracts for first-round draft picks are all four years long, but the third and fourth season have team options. None of the following rules apply to second-round picks and unsigned rookies.


How much do rookie contracts pay?

First-round rookie contracts increase each year, but pay depending on the position a player was selected in the draft. The No. 1 pick earns the highest salary, the No. 2 pick follows and so on. For example, the No. 1 pick in 2014-15 could make $4,592,900 -- the scale amount -- in his first season. They'll each make proportionally more in the next three seasons of their rookie contract.

Teams can offer rookies a minimum of 80 percent of the scale amount or as much as 120 percent. Usually it's the latter.


When does an extension kick in?

Extensions begin the year following a rookie deal, not the year after which they are signed. For example, Kyrie Irving signed a five-year extension as the Cavaliers' designated maximum player this summer, but he will play under a rookie deal this season, making $7.1 million. Next year, his extension will begin paying $14.7 million.

Thus, the extension window begins after a rookie's third year and kick in after their fourth if signed.


How long do a team and a player have to agree to an extension?

Players coming off their third NBA season can agree to extensions from July 1 through Oct. 31.


Why sign a player to an extension if you're an NBA team?

If he's good, it's best to lock him up for the long haul rather than risk him eventually leaving.

That risk is minimal mechanically. All players signed to the fourth year of their rookie deals are restricted free agents following the season and have three options: sign a long-term contract with their current team, accept an offer with a new team and give their old team a chance to match or take the one-year qualifying offer with their current team. A qualifying offer is an increase in salary over the fourth year of the rookie deal, but allows the player to become an unrestricted free agent after playing out one more season with a team. The percent increase depends on the player's draft position.

However, there's a school of thought that not signing a worthy player to an extension engenders angry feelings from players that could prove costly down the line. That scenario played out with the Phoenix Suns and Eric Bledsoe, though the two sides eventually agreed on a five-year, $70 million contract right before training camp.


Why sign an extension if you're a player?

Security. A player who is happy with his team will guarantee his money made. Playing out a fourth year and hitting restricted free agency is often fruitful because the young player will likely improve, but can be risky if injury or poor performance happens. There's also the risk that the player is stuck taking the one-year qualifying offer the next summer because he can't agree on an extension with his current team and also can't find another team to give an offer sheet. That's the scenario currently playing out with Detroit's Greg Monroe.


How long can an extension be for and how much can a player earn with an extension?

An extension can be for up to four additional years for any player. However, starting after the 2011 lockout was resolved, teams are permitted to sign one and only one of their own rookie-contract players to a five-year extension (again, on top of the final rookie scale year) by labeling them as their "designated player." This is a list of designated players signed since:

Chicago: Derrick Rose
Cleveland: Kyrie Irving
Houston: James Harden
Indiana: Paul George
LA Clippers: Blake Griffin
Oklahoma City: Russell Westbrook
Washington: John Wall


Wait. What does a "designated player" get?

Contract extensions for rookie scale contracts allow for players to receive a maximum of 25 percent of the team salary cap, which is the case for all players in the league from zero to six seasons. However, designated players can earn extensions that pay 30 percent of the salary cap per year if they perform any one of the following:

Twice named to the All-NBA First, Second or Third team.
A two-time starter in the All-Star game.
Named the league MVP.

Of the seven designated players, four signed for the full 30 percent. George, Westbrook and Wall all agreed to discounts that ranged between 25 and 30 percent.

This is commonly known as the "Derrick Rose rule" because Rose was the player that was most commonly used by the NBA Players Association when negotiating this provision during the 2011 lockout.


Who is up for an extension this year?

These are the draft class of 2011 members that'll generate the most discussion.

Klay Thompson: Golden State reportedly wouldn't include Thompson in a deal for Kevin Love, so it seems like they will work hard to lock him into a contract extension before the season. But it'll prove costly.

Kawhi Leonard: The NBA Finals MVP is seen as the perfect player to carry out the Spurs' next era, but San Antonio will be hoping to get a bargain extension signed. That could be tough.

Kenneth Faried: A successful summer with Team USA could make Faried a lot of money, but it might have made it harder for the Nuggets to get a reasonable deal done with him.

Jimmy Butler: The Bulls could lock a defensive stalwart in for the long run, but may elect to see if Butler's offense can improve.

Markieff Morris: The Suns agreed to a four-year, $32 million extension with Markieff and a four-year, $20 million extension with his brother Marcus.

Brandon Knight: He's only 22 and showed some dynamic abilities as a combo guard, but it remains to be seen if the Bucks will give him a deal he's worth. He could make a lot more with a strong year and in restricted free agency.

Nikola Vucevic: The Magic center averaged a double-double last year and is versatile as an offensive player.

Ricky Rubio: He is reportedly seeking max money and a five-year extension, which most likely not going to happen.

Kemba Walker: The Bobcats took a big step forward last year with Walker helping Al Jefferson to lead the way.

Reggie Jackson: The Thunder's sparkplug could hit the restricted free agent market hoping to be paid big, and Oklahoma City is limited in how much it can offer him in an extension.




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