The Sports Esquires Putting Sports on Trial
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When former Patriots’ tight end Aaron Hernandez was arrested for murder in July 2013, the shear horror of his alleged off-field transgressions sent shock waves through NFL front offices. There is no question that the real world impact of these murders far outweighs the on-field effects. That said, team owners and front office members, who are both blessed and burdened with the responsibility of running lucrative businesses, were introduced to a skin-crawlingly cold reminder to choose their players wisely. When a high-caliber athlete finds himself in trouble for off-field actions, the trickle down effect can be readily seen in the team’s win-loss record, its merchandise sales, and loss of good will in the community, among other considerations.
Just as a company is more likely to give second and third chances at continued employment to talented, marketable employees in a number of other professional contexts, the same is true of NFL teams. If a player possesses the rare ability to move its employer’s bottom line northward, a certain degree of patience can be expected in the event that player has a lapse in personal judgment.
Aldon Smith of the San Francisco 49er’s is a complete terror pass rushing off the edge, but seems to have a knack for similarly terrorizing police departments across the state of California. 49er’s officials have kept Smith’s roster spot intact, and have arranged for the NFL’s second-leading sack artist in 2012 to seek the help he needs. A lesser player would likely have been shown the door, but this does not mean the 49er’s are asleep at the wheel when planning for their financial future.
Beginning with the 2011 NFL Draft, Article 7, Section 7 of the CBA provides that players selected in the first ten (10) picks (Smith was the 7th overall selection) can be retained for a 5th year, at the team’s option, at a base salary equal to the Transition Tender. This results in the player’s compensation being set to the average of the ten (10) highest paid players at his position.
Facing a May 3rd deadline, Smith is one of very few players from the first round of the 2011 Draft whose team is unlikely to exercise its 5th year team option on the player, which would guarantee Smith $9.75M if he’s on the roster to open the 2015 league year.
While teams will gauge the risk of employing individuals with off-field concerns differently, it is readily apparent that players stand to miss out on millions if faced with legal issues. From a front office’s perspective, the rope offered to a supreme talent may not lengthen so drastically as to make long-term guaranteed commitments to troubled stars like Smith. Perhaps an ominous and fascinating theme to keep an eye on as the team navigates the risk infested waters associated with a multi-year commitment to quarterback Colin Kaepernick.
So what is a team to do to accurately determine its risk? What can it do?
Is a more vigilant approach, resembling FBI-like investigation into the personal lives and history of athletes, the future of professional sports? With so many dollars on the line, an increased effort to avoid employing players with off-field risks seems far from frivolous. The Dallas Cowboys, for example, deploy a three-man rotating security team to watch over the affairs of star wide receiver Dez Bryant at all times.[i]Recently, the Philadelphia Eagles released star wide receiver DeSean Jackson, amid speculation that Jackson harbored relationships with suspected members of the famed L.A. street gang, the Crips. Whether there was genuine concern from the organization, or how much that concern played a role in his release, is up for debate.
For those who are wondering, the Eagles had extremely broad latitude in their stated reasoning for Jackson’s release. Section 11 of the standard NFL Player Contract provides that a player may be released if, in the sole judgment of a team, his (1) “skill or performance has been unsatisfactory as compared with that of other players competing for positions on Club’s roster”, or (2) “engaged in personal conduct reasonably judged by the Club to adversely affect or reflect on the Club.”4
It would appear at first glance that the Eagles had no reason or incentive to persuade the public of their rationale. However, a look into the NFL’s CBA goes a long way towards unveiling the team’s possible risk mitigation strategy in citing Jackson’s off-field behavior and associations.
NFL CBA Protects Teams Against Off-Field Incidents
Article 4, Section 9 of the NFL CBA provides teams with sanctuary, via “Forfeitable Breach.” This provision allows teams financial relief when a player “is unavailable to the team due to conduct by him that results in his incarceration.” In such a situation, the player may be required to forfeit bonus money “for each League Year in which a Forfeitable Breach occurs.” Translation: if a player life-blunders himself into prison, the team can recover the appropriate portion of any bonus, unless the bonus had already been paid out in a year prior to the incident. However, the team cannot recover any portion of a player’s “P5” Salary (i.e., Paragraph 5 of the NFL Player Contract), which is the player’s base salary, or “game check” amount since it is paid out in seventeen (17) weekly installments during the season, as opposed to any lump sum bonus money.
Following Hernandez’s arrest, the Patriots called into question their supposed inability to recover the incarcerated tight end’s guaranteed base salary. Article 4, Section 9(g) of the CBA is entitled “Voiding of Guarantees,” and reveals that players and teams may negotiate the circumstances under which guaranteed salaries and bonuses may be voided. When a condition for the voiding of a guarantee is triggered, only the “guarantee” voids; not the possibility that the player nevertheless earns such amount.
For example, if a player has a base salary of $1M guaranteed in 2015, and the guarantee voids due to the player’s breach of an agreed upon condition, that player will still earn the $1M in the event he remains on the team’s 2015 roster. However, the team gains financial flexibility and protection absent the guarantee, since releasing the player prior to the 2015 league year vaporizes their $1M commitment, both in real dollars and against the salary cap.
In contrast, when teams release a player who has guaranteed money upcoming on their deal, that guaranteed portion survives from a salary cap perspective, and is counted against “the cap” in future years (i.e., “dead cap space”). When the guarantee falls by the wayside via the “Voiding of Guarantees,” provision, so too does the possibility of negative salary cap effects in future years after the player’s release. In our example, the ability to release a player without incurring the $1M salary cap hit in 2015 is a “win” for the team.
How Should Teams Utilize CBA Protections?
NFL teams have reasonable opportunity to take advantage of CBA protections when signing a player they feel may pose an off-field risk. The Washington Redskins, who signed DeSean Jackson despite the previously discussed allegations of gang affiliations, could have mitigated the risk by minimizing Jackson’s P-5 salaries in favor of signing bonus dollars. The greater the proportion of signing bonus versus total contract value, the less base salary is earned and becomes unrecoverable in the event of a Forfeitable Breach. The Redskins would have also been advised to push hard for stipulations to all guaranteed amounts in the contract. This way, as discussed above, if a stipulation went unmet by Jackson at any point during the contract’s lifespan, the team would have the option to release the player without the unpaid amount counting against its salary cap as “dead money” in the future.
The post-Hernandez NFL faces renewed realities and challenges to protect itself against the risk of player illegalities. Player behavior and life-style choices have team and community impacts that go far beyond the balance sheet, but the reality is that the NFL is a multi-billion dollar business, and business considerations are therefore a central theme of front office decision-making. To a substantial degree, teams are able to wave their magic wand and make portions of a non-law abiding player’s contract vanish. It’s regrettable that the NFL CBA contains no provision that can similarly put the toothpaste back in the tube in the context of restoring lives lost when tragedy strikes at the hands of one of its own.
[i] Many teams retain personnel for “player development,” who work closely with certain at-risk players to ensure their continued safety and good behavior. The Dallas Cowboys, for instance, employ former running back Calvin Hill to serve as a consultant to work closely with certain players such as CB Pac Man Jones and WR Dez Bryant. In 2012, the Cowboys and Bryant signed a behavioral contract whereby Bryant agreed to refrain from attending strip clubs and adhere to a midnight curfew, among other stipulations. Player development consultants and behavioral contracts are some of the ways teams are attempting to ensure the integrity of their investments.
