Thursday, September 2, 2010

Rams, Redskins, & the 85% Rule: Is Loophole Exploitation Wrong?

On Football Outsiders and here on Inside the Cap, I’ve discussed rules such as the 30% rule and how it has impacted contract extensions, as well as the 25% rule and how it plays a major role in the structuring of rookie contracts. This week the obscure 85% rule came to light when, after trading with the Rams for 5th round linebacker Hall Davis, the Redskins released the linebacker the next day.

On page 54 of the CBA, the 85% rule is explained as such:

“In League Years for which no Salary Cap is in effect, 85% of any amount contracted by a Team to be paid from the Team’s Rookie Allocation to a Rookie, but not actually paid by the Team to that player, either as a rookie, or as a re-signed first year player or practice squad player, which amount was not paid because that player was released, will be distributed to all rookies on such Team promptly after the end of the season on a pro rata basis based upon the number of downs played.”

Before explaining this rule, keep in mind that Rams EVP of Football Operations Kevin Demoff and Redskins GM Bruce Allen were the cap guys in Tampa, and therefore have a great relationship. Moreover, both Allen and Demoff are rightfully & to their credit known for their creativity in pushing the envelope of the CBA and player contracts (ie, their work on Bucs QB Josh Johnson’s rookie contract guarantee; which is another story for another day), so it’s not exactly surprising that the two worked together in this instance.

Applying the above rule to Hall Davis, one would find out that the amount allocated to Davis from the Rams’ rookie pool was $367,220 ($320,000 salary + $67,220 in signing bonus proration) and that 85% of this amount is $312,137. One can assume that the Rams were going to release Davis; given this scenario, $312,137 would then go into a year-end pool that would be divvied amongst the rookies originally drafted & signed by the Rams who end up making the team.

In the rule above, I’ve highlighted “which amount was not paid because that player was released,” it is this language that has been leveraged. Since Davis was traded and not released, the 85% rule is rendered null, thereby providing the Rams a way to avoid an additional $312,137 player payroll expense.

The same rule and mechanics apply to 2010 sixth round tight end Dennis Morris, who the Redskins traded to the Rams in exchange for Davis, amongst draft pick compensation received by both clubs. In the case of Morris, his rookie pool allocation was $349,482. Therefore, the 85% rule calculation and amount avoided by the Redskins is $297,060.

To a certain extent, this is reminiscent of the Poison Pill controversy involving the Seahawks and Vikings a few years back. Interestingly, while not formally breaking any CBA rule regarding restricted free agency, the Poison Pill has never been used since. Similarly, while the Rams and Redskins did not break the 85% rule, they most certainly found a work around.

Teams and agents are always looking for work arounds. The supercede signing bonus used by the 49ers (another team known for their creative contracts & cap management) in the lucrative extension of Pro Bowl linebacker Patrick Willis is a work around of the 30% rule. While the union I’m certain has an eye on the 85% rule work around, since it deprives their constituents of money, the union is not going to complain about a work around that allows its constituents to get paid when they otherwise would not be able to do so.

So work arounds are sought on both sides of the negotiating table. However, it’s debatable whether a creative idea that violates the spirit of a rule without technically violating the rule is wrong, when, again, both agents & teams are seeking and exploiting these work arounds to their respective benefits.

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