Free Agent Cap Hold
What is a free agent cap hold in basketball?
What is the objective of a free agent cap hold?
How is the amount of a free agent cap hold determined?
The general purpose of a cap hold is to prevent teams from using room under the cap to sign free agents before using Bird rights to re-sign their own free agents. If a team wants to take advantage of its cap space, it can renounce the rights to its free agents, eliminating those cap holds. However, doing so means the team will no longer hold any form of Bird rights for those players — if the team wants to re-sign those free agents, it would have to use its cap room or another kind of cap exception.
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The following criteria are used for determining the amount of a free agent’s cap hold.
- First-round pick coming off rookie contract: 300% of previous salary if prior salary was below league average; 250% of previous salary if prior salary was above league average.
- Bird player: 190% of previous salary (if below average) or 150% (if above average).
- Early Bird player: 130% of previous salary.
- Non-Bird player: 120% of previous salary.
- Minimum-salary player: Two-year veteran’s minimum salary, unless the free agent only has one year of experience, in which case it’s the one-year veteran’s minimum.
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- Two-way player: One-year veteran’s minimum salary.
A cap hold for a restricted free agent can vary based on their contract status. A restricted free agent’s cap hold is either their free agent amount as determined by the criteria mentioned above, or the amount of their qualifying offer, whichever is greater.
No cap hold can exceed the maximum salary for which a player can sign. For instance, the cap hold for a Bird player with a salary above the league average is generally 150% of their previous salary, as noted above. But for someone, who is earning $30MM, 150% of their previous salary would go far beyond the maximum salary threshold.
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One unusual case involves players on rookie contracts whose third- or fourth-year options are declined. Because that option is declined, a player wouldn’t be able to get paid more than what they would have earned in the option year.
That rule is in place so a team can’t circumvent the rookie scale and decline its option in an effort to give the player a higher salary — the rule applies even if the player is traded, so if a team had acquired a player before this year’s deadline, that team would have faced the same limit.
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If a team holds the rights to fewer than 12 players, cap holds worth the rookie minimum salary are assigned to fill out the roster. So, even if a front office chooses to renounce its rights to all of its free agents and doesn’t have any players under contract, the team wouldn’t be able to fully clear its cap.
Cap holds aren’t removed from a team’s books until the player signs a new contract or has their rights renounced by the club. Keeping those cap holds allows teams some degree of cushion to help them remain above the cap and take advantage of the mid-level exception and trade exceptions, among other advantages afforded capped-out teams.