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Rookie Contracts And Offset Clauses: A Different Kind Of Battle In The Trenches

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From Mike Florio, Pro Football Talk, June 7, 2013:

"In late April, 254 players were drafted by NFL teams. In early June, 72.8 percent of them are officially under contract. Per a source with knowledge of the information, the NFLPA has received and logged 185 contracts. At least four other players (all Raiders) have agreed to terms, but have not had their information included in the database. Officially, 45 of 48 seventh-rounders have agreed to terms, along with 33 of 38 sixth-rounders and 32 of 35 fifth-round picks. The only round with fewer than 54 percent of the players signed is the first round, where six of 32 players have agreed to terms. The rookie wage scale, launched in 2011, has made the process of negotiating incoming player contracts much easier. For first rounders, there are only two pressure points — whether "offset" language will apply to the fully guaranteed money for the players taken in the top 10, and the specific point at which the round-one contracts will cease being fully guaranteed. Only the Rams have yet to sign a single 2013 draft pick."

Before delving into the issue of rookie contracts and offset clauses, it is interesting to note that the Rams are the ONLY team that has not signed at least one of their 2013 draft picks. These are the reasons I believe the Rams have not signed one of their draft picks as of June 7, 2013:

  1. The yearly Rookie Symposium is to be held from June 23-29 this year. All rookies are required to attend this event. Among the matters discussed at this symposium are management of money and financial matters. The Rams believe it is important for rookies to receive and put into place the advice given at these meetings before giving them large sums of money (like signing bonuses) that their contracts would entitle them to. An article written by Jim Thomas today lends further insight into how the Rams deal with their rookies and money (please click on link).
  2. The Rams want to see how their draft choices perform and adjust in OTA's and mini-camps before determining the amounts of signing bonuses and other guaranteed monies that will be included in their rookie contracts.
  3. The Rams currently have $3,522,704 in available cap space (please click on link), as noted in my salary cap space article on May 28. This amount does not include the reduction in cap space that will occur when the rookies are signed. With such limited resources, it is imperative that the Rams take the time to assess the cap space situation, contracts and possible player additions before determining how to best allocate the remaining cap space.
  4. The Rams are sitting back and waiting to see how the "offset clause" situation develops with other teams and their first round draft picks before determining the appropriate course of action to take regarding offset language in the rookie contracts of Tavon Austin and Alec Ogletree.

The expectation is that the Rams will not encounter any problems related to signing their rookie draft class. The only issue that could arise is if the Rams elect to join the battle regarding "offset clauses" in rookie contracts.

The new Collective Bargaining Agreement, signed in 2011, contains a rookie wage scale that leaves very little room for negotiation with rookie contracts. Each first round pick has a salary floor and ceiling based on their draft position. The contracts of all first round picks are four years in length, with a team option for a fifth year, that must be exercised after the end of the third year of the deal. Most of the rookie contracts in the first 20 selections of the draft are fully guaranteed. With so many of the terms in a rookie contract already established by the CBA, most of the negotiations with first round picks have been relatively quick and painless. That may very well change this year.

Offset clauses/language in rookie contracts

There is much talk and speculation around the NFL that contract negotiations with first round picks (primarily those in the top 15) will be more difficult and prolonged this year, with the possibility of holdouts occurring. The main issue, and potential battleground, with these contracts is whether the guaranteed amounts will have offset clauses. Offset language is what teams are attempting to include in contracts, while no offset language greatly benefits the players. The inclusion of offset language permits a team to realize cap space savings and salary reductions if it releases a player and he signs with another team during the course of his original contract. With an offset clause, if a team releases a player, even with a guaranteed contract, and that player signs with another team, the original team can reduce the money owed to the player by the amount of his new deal. The absence of offset language allows a player to "double dip". The player could be cut, and then sign with another team, collecting his salary from the new team while still receiving the full guaranteed amount from his original team.

The following is an example of an offset clause in practice: A first round pick is entering his fourth year in the league and has turned out to be a disappointment. The team releases him, and the player is due 3 million in guaranteed money that year. The player then agrees to a contract with a new team for the same 3 million. If there is offset language in the rookie contract, the original team would not owe the player any money, for the 3 million from the new team would offset the 3 million owed from the rookie contract. The player would only receive the contracted 3 million with his new team. If there is no offset language in the rookie contract, the player would receive the 3 million from his original team and 3 million from his new team.

History of offset clause contracts since 2011

In 2011, the first year of the new CBA, only the number 1 overall pick in the draft and the number 14 pick negotiated contracts that did not include offset clauses.

In 2012, the first 7 picks in the draft, and the number 9 and 14 picks, managed to negotiate contracts that did not include offset clauses.

Thus far in 2013, only 6 first round picks have been signed to a contract. They are Ezekiel Ansah (#5), D.J. Fluker (#11), Star Lotulelei (#14), Kenny Vaccaro (#15), Jarvis Jones (#17) and Kyle Long (#20). Ansah's contract does not include an offset clause. Both Fluker and Lotulelei have offset language in their contracts. Information regarding offsets is not available as of yet for the other three players signed.

Of interest to Rams fans: The number 14 picks in 2011 and 2012 were Robert Quinn and Michael Brockers, respectively. Both players have contracts that are fully guaranteed and contain no offset language. The Rams have established a team precedent on offsets with these signings; as a result, Tavon Austin should not have too much difficulty in getting guaranteed money without offsets. It is debatable as to whether the same will hold true for Alec Ogletree, who was selected with the number 30 pick in the first round.

It is believed that some teams will be more adamant about putting offset language in the latter years of rookie contracts, reversing the gains made in this area by players and their agents last year. One of the teams to watch as negotiations continue are the Miami Dolphins. It is expected that they will insist on offset language in Dion Jordan's contract (#3 pick), in a manner similar to what the team did last year with their #8 pick (QB Ryan Tannehill). (please click on link).

From the National Football Post:

"It will be interesting to see how the offset issue unfolds in the coming weeks. There could be a domino effect that extends to a majority of the subsequent picks that didn’t have offsets last year if Miami is successful in preserving their precedent with Jordan before the other picks sign. Even though holdouts are largely a thing of the past because of the rookie wage scale, there could be an increase in them if agents are unwilling to give back the ground gained last year regarding offset clauses."

Irrespective of what happens with other top ten picks, Rams fans should expect that Tavon Austin will sign a contract that will be fully guaranteed and contain no offset language or clauses. This is an organization that has supreme confidence in their ability to assess football talent. The Rams have no question about keeping their first round picks for the long term, and expect them to be under contract throughout the duration of their deals.

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