CBA 101: Rookie Scale Contract Extensions

Hey all. Welcome to the fifth in a series of posts where I'll be outlining the basic rules of the NBA Collective Bargaining Agreement.

Again, useful sources for more information on the salary cap include the CBA itself and of course Larry Coon's CBAfaq.com.

In the last post, I talked about veteran contract extensions. In this post, we'll continue with extensions, but for players on rookie scale contracts.

Rookie Scale Contract

First we should discuss what exactly a rookie scale contract is. When a player is selected in the first round of the NBA draft, they are required to sign a rookie scale contract. You cannot offer them any other kind of contract. Second round draft picks are free of this requirement - if you drafted them, you can offer them any contract you like, so long as you have cap room or an exception to offer it with.

The rookie scale is just what it sounds like - a sliding scale of salaries assigned to each draft slot. The first overall pick gets the highest assigned salary, and the 30th the lowest. This past draft, the rookie scale salary ranged from $4.6 million for Andrew Wiggins to $911,400 for Kyle Anderson.

There is also a set structure for these contracts, not just starting salary. A rookie scale contract is four years in length, with the final two years being team options (which must be exercised a season in advance). The salary is pre-set for all four years, with established raises in each year. And after the fourth year, the player hits free agency as a restricted free agent.

Restricted Free Agency

When a rookie scale player comes off his fourth season, he is a free agent. But he is what is called a restricted free agent. The player is free to take offers from other teams (and his own team), but if he signs a contract with another team, his team has the right of first refusal - they can choose to match the offer and the player will play for them instead of the new team. The player has no say in this. So even if a player does not sign an extension, a team still has the ability to keep the player when they hit free agency. But there is a risk that other teams will overpay or build in nasty player options into a contract offer to make matching the offer unpleasant for the player's prior team.

The 120 Percent Rule

The above is all true for rookie contracts, with an exception. Teams are actually allowed to negotiate somewhat with their rookies. The first 80 percent of the rookie scale salary is mandatory. The team is free to offer more than that, with or without incentives, up to 120 percent of the rookie scale salary. So for example, Andrew Wiggins was guaranteed a salary of at least $3.7 million in his first year. But he could sign for up to $5.5 million. Those extra $1.8 million could just be guaranteed salary, or tied to an incentive.

Occasionally, a team will push rookies to sign for less than the 120 percent, or try to tie difficult-to-achieve incentives to the extra 40 percent. This is very much frowned upon, and agents tend to get very upset when a team tries this. It is very much the norm to either give the full 120 percent guaranteed, or tie the extra to softball incentives like community appearances.

Point being, rookie scale players are almost always earning 120 percent of their rookie scale salary. That 120 percent applies to every year of the contract as well, not just the first year.

Rookie Scale Contract Extensions

Just like the final two team option years of a rookie scale contract, extensions of a rookie scale deal must be done ahead of time. If you'll recall, veteran extensions can happen right up to the day the current contract expires - June 30th of the last year of the contract.

Rookie scale extensions need to be signed by October 31st of the last year of their deal. And can be signed no earlier than the off-season prior. So, for example, Jonas Valanciunas and Terrence Ross will be up for extension negotiations starting next July, and the Raptors will have until next October 31st to finalize the extension (since next season will be the last of their four year rookie scale deals). Once that October 31st date passes, the player is going to restricted free agency come July.

Now let's give some consideration to what the team can offer. You may recall that veteran contract extensions were very limited by the status of the current contract. A very limited raise could be offered over the current salary, and a very limited number of years.

Not so with rookie scale extensions. Teams can offer up to the player's maximum salary (about 23 percent of the cap for players of that experience level) for four years, with maximum 7.5 percent raises each year. They can offer a lot less as well, but that's the upper limit. Note that I say four years, but similar to veteran extensions, it is technically a five year extension, with the current year included in the count.

Designated Player Extensions

There is one exception to the above rules for rookie scale extensions. Teams can designate a player to receive a longer maximum extension. A fifth year can be added (making the actual length of the extension 6 years - the only remaining contract type of that length allowed in the NBA), so long as the player is receiving their maximum salary in the extension.

Teams can only offer this sort of extension to a player if they do not have another player with a Designated Player Extension contract on the team. If they already have such a contract on the roster, they are stuck with the typical four year extension.

Teams are also restricted in acquiring these sorts of contracts. If you have a designated player contract on your roster, you can trade for one, but only one, additional player who is on a designated player contract.

So there you have it. Those are the basic rules that apply to rookie scale contract extensions. That's it for the basics. Any further posts will be in response to specific requests, or explaining something the team (or another team) did that is beyond the scope of the first few posts in this series.

As we go along with this, I'll try to answer any specific questions related to the post in the comments, but if there are any larger topics you want covered, sound off in the comments as well, and I'll dedicate a future post to covering it in-depth.