The Mavericks centered their 2012 offseason strategy on one-year contracts, but owner Mark Cuban has said that won't be the case for 2013. Instead, Cuban pointed to the stretch provision as a tool that will prompt the team to sign free agents to long-term contracts, even if the plan isn't for those players to stick around until the end of their deals.
The stretch provision allows teams to spread the cap hit for a waived player out over several years. Under the previous collective barganing agreement, teams and players could agree to restructure the payment schedule for any money that remained on their contracts when they parted ways. If a team waived a player with two years and a total of $4MM left on his contract, the club might have a hard time convincing the player to agree to spread the payments out over a longer period of time. The player might take less total money if a significant chunk were handed out up front, but that would still leave a team with a heavy cap hit for a player it no longer had on the roster.
The current CBA solves that dilemma for teams. The post-waiver payment schedule is locked in for players who signed deals after the lockout. If a team waives a player in July or August, the team pays his remaining salary over twice the number of seasons left on the deal, plus one. So, for that player who's waived with two years and $4MM left on his deal, the team would pay him $800K each year for five years.
If a team waives a player in any other month, the team pays the salary for the current season as usual, then spreads out the remaining salary over twice the number of seasons left on the deal, plus one. So, if that same player with a two-year deal worth a total of $4MM wasn't waived until September, the team would be stuck paying him $2MM for the coming season, but the remaining $2MM would be spread out in equal payments of $667K over the following three years. This could make August 31st a key date in NBA offseasons going forward, as teams face decisions about the better method of paying off players they intend to let go.
Cuban spoke about signing free agents to four-year contracts, which would allow the payment, and the cap hit that goes with it, to be stretched over as many as nine years (though unless the team signs a player and waives him the same summer, the payment could only stretch across a total of eight years). If the Mavs were to waive Jose Calderon next summer, a year after they came to terms on to a four-year, $29MM deal, he'd only tie up about $3.1MM of next year's cap. That way, the Mavs could clear room to pursue one of the marquee summer of 2014 free agents. The danger would be in having money that lingers on the books for several years. That could add up if Cuban continues to pursue this strategy.
While the stretch provision regulates when money is paid out, it doesn't prevent teams and players from negotiating a reduced salary as part of a buyout. Non-guaranteed money isn't subject to the stretch provision either, since a team isn't obligated to pay any non-guaranteed portion of a contract once it waives a player. If another team claims a player off waivers, it inherits his contract, including the non-guaranteed portion, and his former team doesn't owe him anything.
Note: This is a Hoops Rumors Glossary entry. Our glossary posts will explain specific rules relating to trades, free agency, or other aspects of the NBA's Collective Bargaining Agreement. Larry Coon's Salary Cap FAQ was used in the creation of this post.