Behind the Scenes with Cliff Stein, Salary Cap Guru and Player’s Contract Negotiator
Ever wonder exactly what the salary cap is and how that affects teams in signing players? We asked Cliff Stein – Chicago Bears Senior Director of Football Administration and General Counsel, to help explain how it all works.
Cliff Stein is in his eighth season with the Chicago Bears and has been in his current role since May, 2007. He is their lead contract negotiator for all player contracts. He will also assist the general manager in managing and the strategic planning of the team’s salary cap and handles all legal issues within their football operations department.
In a nutshell, can you explain the salary cap and how it goes into play when negotiating a player’s contract?
The salary cap is the maximum amount of money that NFL teams can spend on player salaries in any given year. It is a collectively bargained budgeting system that gives teams and players predictability in how money will be spent on player salaries each year. The NFL has a revenue sharing system between the players and the NFL Clubs where the players are guaranteed an agreed upon percentage of total revenues earned by the NFL and all 32 NFL Clubs. The salary cap is calculated on a league-wide basis as a percentage of total revenue. In 2009, the salary cap, $123 Million, was calculated as roughly 60% of total revenue (divided by 32 teams). The salary cap, otherwise known as Team Salary, is governed by a complex set of accounting rules set forth in the collective bargaining agreement. Every contract that is negotiated and submitted to the NFL for approval must comply with the rules governing the salary cap. Therefore, during the negotiation process, every contract has to be structured to ensure compliance with the salary cap accounting rules as well as each team’s individual salary cap philosophy. It is important that the contract negotiators for the club and player are well versed in the salary cap rules.
Why are some teams able to pay such high signing bonuses?
A team’s ability, decision and/or willingness to pay large signing bonuses could be product of several factors. These could include any of the following (or a combination thereof) (1) Committed Cash budgets – the team’s ability to spend a pre-determined/ budgeted amount of committed cash in any given year and how much cash has already been allocated to other players; (2) The Salary Cap – how much cap room a team has and how much of the cap has already been allocated to other players; (3) Cash flow and liquidity – what is the team’s cash flow budget and how much actual non-deferred cash is available to be paid to players in signing bonuses in any given year; (4) Team economics – this includes the team’s home market, team revenues, profitability of the team, and value of the franchise; (5) Demand and Position – the demand for a specific player on the given marketplace, and/or the value of the players position. All of these factors could go into determining how much a team is willing and/or able to spend in signing bonus or guaranteed compensation on any given player.
What is the penalty if a team goes over the cap?
It is difficult for a team to actually exceed the salary cap because the NFL will disapprove any contract that would cause a team to go over the cap. However, if an NFL team intentionally circumvents the salary cap or enters into undisclosed agreements with players outside the salary cap, a team could be fined a maximum of $5.25 million and forfeiture of up to two draft choices.
What are some clauses in a players’ contract? For example, do they have to make so many appearances at events? What is the definition of an event?
There are various clauses that teams put in players contracts limited only by the salary cap compliance rules, club philosophy and creativity of the mind. This could include, as you suggest, mandatory appearances on behalf of the club. These appearances typically include Bears sponsored events such as the Bears Fan Expo or the Bears Care Gala, or appearances at a variety of community relations events, such as speaking engagements at schools, hospitals, and/or homeless shelters. In addition, some players have clauses in their contracts that require them to autograph a specified number of items on behalf of the Club each year. Some players have clauses in their contracts that pay them a bonus in the off-season if they participate in a specific percentage (for example 85%) of the club’s off-season program. Some players that have weight issues may have weight clauses in their contracts wherein they are paid a bonus for weighing in at a specified weight upon reporting to training camp. There are numerous other types of clauses including but not limited to incentive bonuses for achieving playtime, statistical, and/or club improvement thresholds.
How are players paid?
For signing and/or roster bonuses, players are typically paid via check or wire transfer within 14 to 21 days after signing their contract. Sometimes player who receive very large bonuses are asked to defer a portion of the bonus payment into the subsequent year. Payment terms of bonuses are typically part of the negotiation process and could be different for each player. During the regular season, players are paid a base salary set forth in Paragraph 5 of the NFL Player Contract, in 17 equal installments during the regular season.