Hoops Rumors Glossary

When a team releases a player, he doesn’t immediately become a free agent. Instead, the player is placed on waivers, which serves as a sort of temporary holding ground as the other 29 NBA teams decide if they want to try to add him to their roster.

A player remains on waivers for two full days after he is formally cut by his team. During that time, a team can place a waiver claim in an attempt to acquire the player. If two or more clubs place a claim, the team with the worst record takes priority (before December 1, records from the previous season determine waiver order).

If a team claims a player off waivers, it assumes his current contract and is on the hook for the remainder of his salary. The claiming team also pays a $1,000 fee to the NBA office. If no claims are placed on the player, he clears waivers at 4:00pm CT two days after his release and becomes an unrestricted free agent.

While the waiver format is simple enough, not every team will have the salary cap flexibility to make a claim for any waived player it wants. There are only a handful of instances in which a club is able to claim a player off waivers:

• The team is far enough under the salary cap to fit the player’s entire salary.
• The team has a traded player exception worth at least the player’s salary.
• The team has a disabled player exception worth at least the player’s salary, and he’s in the last year of his contract.
• The player’s contract is for one or two seasons and he’s paid the minimum salary.

For instance, if a player with a $7MM salary is waived tomorrow, only five teams would be eligible to place a waiver claim — the Kings have the cap room available to do so, and the Hornets, Nuggets, Pistons, and Thunder each have traded player exceptions worth at least $7MM.

On the other hand, if the Rockets were to release Carmelo Anthony, almost any team would be eligible to place a claim using the minimum salary exception, since he’s on a one-year, minimum-salary contract.

More often than not, waived players go unclaimed. In that case, the player’s original team remains on the hook for the rest of his salary. Unless the player is in the final year of his contract and is waived after August 31, his club has the option of “stretching” his remaining cap hit(s) over multiple years using the stretch provision, which we explain in a separate glossary entry. A team that waives a player and uses the stretch provision on him cannot re-acquire that player until after his contract would have originally expired.

In the case of any player without a fully guaranteed contract, the non-guaranteed portion of a player’s salary is removed from a club’s cap immediately once the player is waived.

When a player is “bought out” by his club, he’s placed on waivers as part of the agreement. He and his team agree to adjust the guaranteed portion of his contract, reducing the amount owed to the player by the team, assuming he clears waivers.

Here are several more notes related to waiver rules:

• Players can be waived and claimed off waivers during the July moratorium.
• A player waived after March 1 is ineligible for the postseason if he signs with a new team.
• A player claimed off waivers can’t be traded for 30 days. If he’s claimed during the offseason, he can’t be traded until the 30th day of the regular season.
• If a player is traded and then is waived by his new team, he cannot re-sign with his old club until one year after the trade or until the July 1 after his original contract would have expired, whichever is earlier.
• A player who has Early Bird or full Bird rights retains Early Bird rights if he’s claimed off waivers.
• If a team makes a successful waiver claim, it doesn’t lose its spot in the waiver order — the 30th-ranked team at the end of a season remains atop the waiver priority list until December 1 of that year, even if that team makes multiple offseason claims.
• A team with a full roster can submit a waiver claim and wouldn’t have to clear a spot on its roster for a claimed player until it is determined that the claim is successful.

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.

An earlier version of this post was published in 2012.

The NBA’s salary cap primarily serves as a way to restrict the amount a team can invest in player salaries in a given year. However, because the league has a soft cap rather than a hard cap, there’s technically no specific figure that clubs are prohibited from exceeding once they go over the cap to re-sign players.

There is, however, a specific threshold on the lower end that teams must meet in each NBA season. The league’s minimum salary floor requires a club to spend at least 90% of the salary cap on player salaries. For instance, with the 2018/19 cap set at $101,869,000, the salary floor for this season is $91,682,100.

If a team finishes the regular season below the NBA’s salary floor for that league year, the penalties levied against that team aren’t exactly harsh — the franchise is simply required to make up the shortfall by paying the difference to its players. For example, if a team finished this season with a team salary of $88,682,100, that team would be required to distribute that $3MM shortfall among its players.

The players’ union determines how exactly the money is divvied up — most recently, players who spent at least 41 games on a team’s roster have received a full share, while players with between 20-40 games on the roster receive a half share. A player can’t exceed his maximum salary as a result of a shortfall payment.

For the purposes of calculating whether a team has reached the minimum salary threshold, cap holds and international buyouts aren’t considered, but players who suffered career-ending injuries or illnesses are included in the count, even if they’ve since been removed from the club’s cap.

Additionally, the NBA made a change in its most recent Collective Bargaining Agreement to prevent teams from circumventing certain rules to reach the salary floor. Under the old CBA, a team that was $8MM below the salary floor could trade a player earning $4MM for a player earning $12MM halfway through the season and be in accordance with minimum team salary rules.

Under the current CBA, only the salary the team actually pays the player counts for minimum team salary purposes. For instance, in the example above, the team would be credited with having paid its original player $2MM for the first half of the season and its new player $6MM for the second half. In that scenario, the club would still be $4MM shy of the salary floor.

For the 2018/19 season, only one team is currently below the salary floor, as the Kings have a team salary of $90,844,422, per Basketball Insiders. If Sacramento’s team salary remains unchanged until the end of the season, the result would be a very modest shortfall of $837,678. That’s an unlikely outcome though — the club is a good bet to reach the floor at some point later in the season via free agent signings and/or trades.

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.

The concept of proration is one used in variety of fields and professions, and isn’t specific to the NBA. The term, which shows up frequently in the league’s Collective Bargaining Agreement, refers to the practice of calculating a figure proportionately.

In the NBA, the most common examples of proration apply to players on non-guaranteed contracts who are waived before their salaries become guaranteed, or players who sign minimum-salary contracts partway through the season. In each instance, the player would receive a prorated portion of his salary based on the number of days he was under contract during the season.

For example, when Tyson Chandler signed with the Lakers on November 6, he received a minimum salary contract. For the 2018/19 season, the minimum salary for a player with Chandler’s experience is $2,393,887, though it would only count against his team’s cap for $1,512,601, as we explain here. However, since Chandler wasn’t with the Lakers since the start of the season, he wouldn’t be entitled to that full minimum salary from the team.

The NBA season is 177 days long and Chandler signed his contract on the 22nd day of the season, meaning his one-year contract will span 156 days. Due to proration, his minimum salary will be worth 156/177th of a full minimum salary. So instead of earning $2,393,887, he’ll make $2,109,867. And instead of counting for $1,512,601 on the Lakers’ books, the cap charge will be 156/177th of that amount: $1,333,140.

If the Lakers had signed Chandler using cap space or a cap exception like the disabled player exception, his salary wouldn’t have been prorated, but the minimum salary exception begins to prorate after the first day of the regular season.

The same principle of proration applies to a player like Ben Moore, who was on a non-guaranteed contract with the Pacers before being waived on November 3. Moore was released on the 19th day of the 2018/19 season, but the NBA also pays players for the two days they spend on waivers, so the young forward was credited with 21 days of service. That means, due to proration, he was entitled to 21/177th of his $1,349,383 salary — that amount worked out to $160,096.

While situations like Chandler’s and Moore’s are the most frequent examples of proration’s impact on NBA finances, there are many more instances where it pops up.

Here’s a quick breakdown of several of those other instances of proration:

• Mid-level and bi-annual exceptions: These exceptions begin to prorate on January 10, declining in value by 1/177th each day until the end of the regular season.
• Trade kickers: If a player with a trade kicker in his contract is traded during the season, the kicker only applies to his remaining salary. Let’s say a player has a 15% trade kicker and an $8MM salary in his contract year and is dealt halfway through the season. His 15% trade kicker would only apply to the $4MM left on his deal, giving him a $600K bonus.
• 10-day contracts: A 10-day salary is prorated based on a full-season salary. Most players on 10-day contracts would earn 10/177th of their minimum salary.
• Two-way contracts: Players on two-way contracts earn a prorated portion of their NBA and two-way salaries depending on how many days they spend in each league. Additionally, if a two-way player is signed during the season, he’ll only be eligible to be with the NBA team for a prorated portion of the typical 45-day limit. For instance, a player who signs a two-way contract at the season’s midway point would be entitled to 23 days at the NBA level.
• Signing bonuses: If a teams gives a player a signing bonus in a free agent contract, that bonus is prorated equally over the guaranteed seasons of the contract for cap purposes. For example, a $4MM signing bonus on a four-year contract would add $1MM to the player’s cap charge for each of the four seasons.
• Salary floor calculations: When calculating a team’s payroll in relation to the league’s minimum salary floor, we count the salary that a team actually pays to a player, rather than the player’s cap hit. For instance, if a team traded for a player on a $12MM contract halfway through the season and kept him the rest of the way, he would count for $6MM toward the salary floor, rather than $12MM.

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.

The poison pill provision isn’t technically a term that is defined in the NBA’s Collective Bargaining Agreement. However, the concept of a “poison pill” has colloquially come to refer to a pair of NBA concepts.

The first of those concepts relates to the Gilbert Arenas Provision, which we’ve explained in a separate glossary entry. When a team uses the Arenas provision to sign an Early Bird restricted free agent to an offer sheet, that team can include a massive third-year raise that is often referred to as a “poison pill.”

Tyler Johnson‘s current deal with the Heat is one contract that fits this bill — the Nets included a third-year raise in their 2016 offer sheet, which Miami matched, so Johnson’s cap hit jumped from $5.88MM in the second year of his contract to $19.45MM in the third year.

However, the concept we’re focusing on today doesn’t involve Johnson, the Arenas provision, or RFA offer sheets. Instead, this second meaning of the “poison pill” relates to players who recently signed rookie scale extensions, something five players did in 2018.

The “poison pill provision” arises if a team extends a player’s rookie scale contract, then trades him before the extension officially takes effect. It’s a rare situation, but it features its own set of rules, since extensions following rookie contracts often create a large gap between a player’s current and future salaries.

For salary-matching purposes, if a player is traded between the time his rookie contract is extended and the following July 1 (when that extension takes effect), the player’s incoming value for the receiving team is the average of his current-year salary and the annual salary in each year of his extension. His current team, on the other hand, simply treats his current-year salary as the outgoing figure for matching purposes.

Let’s use Larry Nance Jr. as an example. Nance signed a four-year, $44.8MM rookie scale extension with the Cavaliers this year, which locks him up through the 2022/23 season. However, he’s only only the books for $2,272,391 in 2018/19.

If the Cavs were to abruptly change course on Nance and decided to trade him this season, the poison pill provision would complicate their efforts. From Cleveland’s perspective, Nance’s current-year cap hit ($2,272,391) would represent his outgoing salary for matching purposes. However, any team acquiring Nance would have to view his incoming value as $9,414,478 — that’s the annual average of the five years and $47,072,391 he has left when accounting for both his new and old contracts.

As we explain in our glossary entry on the traded player exception, NBA rules dictate that over-the-cap teams must send and receive approximately the same amount of salary in any trade. So applying the poison pill provision to a player like Nance and creating a $7MM+ discrepancy between how two trade partners account for him would make salary-matching far more difficult than usual.

Trades involving a player who recently signed a rookie scale extension are already rare. After all, those players are generally young, and a player who signed an extension is promising enough to have warranted a long-term investment. Those aren’t the type of players that teams typically trade. The poison poll provision further disincentivizes a deal involving one of those recently-extended players by complicating salary-matching rules, making those trades even rarer.

In other words, it’s probably a safe bet that we won’t see any of this year’s rookie scale extension recipients – Nance, Devin Booker (Suns), Karl-Anthony Towns (Timberwolves), Justise Winslow (Heat), and Myles Turner (Pacers) – traded before June 30.

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.

An earlier versions of this post was published in 2012 by Luke Adams.

There are a number of ways that teams without salary cap space are able to add players. These players’ salaries still count against the team’s cap figure and are taken into account for tax purposes. However, teams can use these exceptions in lieu of available cap room to acquire players.

When we discuss trades and free agency at Hoops Rumors, we’ll often refer to these salary cap exceptions. In case you’re wondering what we mean when we mention a “Non-Bird exception” or a “bi-annual exception,” we’ve compiled a brief overview for reference. The NBA’s salary cap exceptions under the latest Collective Bargaining Agreement are listed below:

• Bird Exception: If a player has been on the same team for three years (not necessarily full seasons), his team can re-sign him for up to the player’s maximum salary. Generally, a player who changes teams via trade retains his Bird rights, but he loses them if he signs with a new team as a free agent. A Bird player can sign for up to five years with maximum annual raises of 8%.
  • For further reference: Hoops Rumors Glossary: Bird Rights
• Early Bird Exception: If a player has been on the same team for two years (not necessarily full seasons), his team can re-sign him for up to 175% of his previous salary or the average player salary, whichever is greater. Early Bird contracts must be for at least two seasons (no more than four), with maximum annual raises of 8%.
  • For further reference: Hoops Rumors Glossary: Early Bird Rights
• Non-Bird Exception: If a player finishes a season with a team without having earned Bird or Early Bird rights, his team can re-sign him for 120% of his previous salary, 120% of the applicable minimum salary, or – if he’s a restricted free agent – the amount of his qualifying offer. A non-Bird player can sign for up to four years with maximum annual raises of 5%.
  • For further reference: Hoops Rumors Glossary: Non-Bird Rights
• Mid-Level Exception: A non-taxpaying team can offer a player a contract for up to four years with maximum annual raises of 5% using the mid-level exception. The MLE amount for 2018/19 is $8,641,000; it will increase annually at the same rate as the salary cap. This exception can be used on one or multiple players.
  • For further reference: Hoops Rumors Glossary: Mid-Level Exception
• Taxpayer Mid-Level Exception: A taxpaying team can offer a player a contract for up to three years with maximum annual raises of 5% using the mid-level exception. The taxpayer MLE amount for 2018/19 is $5,337,000; it will increase annually at the same rate as the salary cap. This exception can be used on one or multiple players.
  • For further reference: Hoops Rumors Glossary: Mid-Level Exception
• Room Exception: If a team uses room under the cap to sign players, it forfeits its mid-level and bi-annual exceptions. In that case, the team receives this exception, which isn’t available to teams above the cap. After using its cap room, a team can offer a player a contract for up to two years with a maximum raise of 5%. The room exception amount for 2018/19 is $4,449,000; it will increase annually at the same rate as the salary cap. This exception can be used on one or multiple players.
  • For further reference: Hoops Rumors Glossary: Mid-Level Exception
• Bi-Annual Exception: A team can offer a player a contract for up to two years with a maximum raise of 5% using the bi-annual exception. However, it’s only available to teams that remain over the cap and below the tax apron. The bi-annual exception amount for 2018/19 is $3,382,000; it will increase annually at the same rate as the salary cap. This exception can be used on one or multiple players.. As its name suggests, this exception, which isn’t available to taxpaying teams, can only be used every other year.
  • For further reference: Hoops Rumors Glossary: Bi-Annual Exception
• Minimum Salary Exception: A team can offer a player a contract for up to two years worth the applicable minimum salary. A team can also use this exception to trade for minimum-salary players. There is no limit to the number of players a team can acquire using this exception.
  • For further reference: Hoops Rumors Glossary: Minimum Salary Exception
• Rookie Exception: A team can sign its first-round draft picks for up to 120% of the rookie salary scale amount.
  • For further reference: Rookie Scale Salaries For 2019 First Round Picks
• Disabled Player Exception: If a player suffers an injury deemed to be season-ending, a team can be granted this exception by the league. It can be used to sign or trade for a replacement player for one year, and is worth 50% of the disabled player’s salary or the amount of the non-taxpayer mid-level exception, whichever is lesser. This exception, which must be applied for between July 1 and January 15, can only be used once and is forfeited if not used by March 10.
  • For further reference: Hoops Rumors Glossary: Disabled Player Exception
• Traded Player Exception: Any team can replace a traded player – or traded players – simultaneously (in the same transaction) with one or more players whose total salaries amount to no more than 125% of the outgoing salary, plus $100K. For non-taxpaying teams, the incoming value can increase to as high as 175% of the outgoing salary, depending on the amount of that salary. Alternately, both non-taxpaying and taxpaying teams can replace a traded player non-simultaneously (within one year) with one or more players whose total salaries amount to no more than 100% of the traded player’s salary, plus $100K.
  • For further reference: Hoops Rumors Glossary: Traded Player Exception

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.

An earlier version of this post was published in 2012 by Luke Adams.

After the NBA’s biggest-name free agents come off the board, many teams shift their focus to filling out their training-camp rosters. Teams can only carry 15 players on NBA contracts (plus two on two-way deals) during the regular season, but their maximum roster size increases to 20 players in the offseason, allowing clubs to bring a few extra players to camp to audition for a place on the regular-season roster or a spot on the team’s G League affiliate.

Many of those players will sign a contract with an Exhibit 10 clause. Introduced in the NBA’s most recent Collective Bargaining Agreement, Exhibit 10 contracts are one-year deals worth the minimum salary. They don’t come with any compensation protection, but can include an optional bonus ranging from $5K to $50K.

Let’s say an undrafted rookie signs an Exhibit 10 contract with the Knicks that includes a $50K bonus. He attends camp with the Knicks, but is waived before the regular season begins, with New York designating him an affiliate player in order to retain his G League rights. In that scenario, if the rookie elects to play in the G League for the Westchester Knicks and remains with the club for 60 days, he’d be entitled to his full $50K bonus.

The player wouldn’t receive that bonus if he opts to sign with a team overseas after being waived by the Knicks. Essentially, the Exhibit 10 bonus serves as an incentive for players to stick with their team’s G League affiliate — they must spend at least 60 days with the NBAGL club in order to get their bonus.

There’s another scenario in which that undrafted rookie who signs an Exhibit 10 deal with the Knicks would receive his $50K. Exhibit 10 contracts can be converted into two-way contracts, so if New York opted to do that before the season begins, the $50K bonus would turn into a salary guarantee for the player. As soon as his contract becomes a two-way deal, he’s entitled to that bonus, even if the Knicks waive him a week later.

Only teams with a G League affiliate can include an Exhibit 10 bonus in a contract. In 2018/19, the Wizards will become the 27th NBA team with its own affiliate, leaving only the Pelicans, Trail Blazers, and Nuggets on the outside looking in. Those clubs could technically sign players to Exhibit 10 deals, but wouldn’t be able to include bonus money.

Here are a few more notes relating to Exhibit 10 contracts:

• A team can’t carry more than six Exhibit 10 contracts at a time.
• An Exhibit 10 contract can only be converted to a two-way deal before the regular season begins.
• An Exhibit 10 contract that gets converted to a two-way deal can later be converted into a standard NBA contract.
• An Exhibit 10 bonus earned by a player who ends up in the G League or on a two-way contract isn’t counted toward the NBA team’s total salary.

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.

The Over-38 rule, formerly known as the Over-36 rule under the NBA’s previous Collective Bargaining Agreement, closes a loophole in the CBA, preventing teams from paying older free agents more than their cap room or cap exceptions allow. It also limits the ability of players in their mid- to late-30s to sign long-term contracts.

The original purpose of the Over-38 rule was to block teams from circumventing the salary cap by offering a contract that extends beyond when the club expects a player to end his career. For instance, if a team wanted to offer a 37-year-old free agent a two-year contract worth $35MM but only had the mid-level exception available, the team could have made it a four-year offer in order to fit the average annual salary within the MLE, knowing that the player could collect his third- and fourth-year salaries after retiring. The Over-38 rule prevents that.

The Over-38 rule generally takes effect when a free agent signs a long-term contract that extends beyond his 38th birthday. In these cases, the salary in the year(s) after the player turns 38 is considered deferred compensation, and is applied to the years earlier in the contract, when that salary is actually being earned. In most cases, this prevents the team from completing the contract using the necessary cap room or exception.

The Over-38 rule is a little complicated, so let’s use a real-life example to illustrate it. In the summer of 2017, the Rockets and Nene fell victim to the Over-38 rule when they tried to complete a four-year deal using Nene’s Non-Bird rights. The contract would’ve looked like this:

Unfortunately for Nene and the Rockets, the final year of this deal would have violated the Over-38 rule because the veteran center will turn 38 on September 13, 2020, prior to the start of the fourth season of his contract.

The start of a season is considered to be October 1 for Over-38 purposes, so if Nene’s birthday was on October 13 rather than September 13, he would have been okay. But because a four-year deal for him had to be considered an Over-38 contract, the fourth-year salary needed to be viewed as deferred compensation, which would be spread out in a prorated fashion over the first three years of the deal. It would have looked like this:

Due to the increased cap hits on the new-look deal, the contract would have violated the rules of the Non-Bird exception, which limited Nene’s first-year salary to 120% of his previous salary ($2,898,000). As such, the Rockets couldn’t complete the four-year contract using those Non-Bird rights.

It’s important to note that the Over-38 rule didn’t prevent the Rockets from signing Nene to a four-year, $15MM deal. If the team had wanted to use part of its mid-level exception, it could have given him that same contract the two sides originally negotiated. But Houston had earmarked its MLE for P.J. Tucker, leaving the Non-Bird exception as the team’s only viable means of bringing back Nene. So while Nene technically could have signed a contract that extended beyond his 38th birthday, the Over-38 rule significantly limited the Rockets’ ability to complete such a deal.

In Nene’s case, that fourth year was referred to as a “zero year,” reflecting the adjusted cap charge. Determining what seasons are considered “zero years” is tricky, since a variety of factors relating to the length of the contract, the player’s age, and the player’s Bird rights are taken into account. Here are some of those factors:

• The Over-38 rule only applies to four- or five-year contracts, or extensions that keep a player under contract for a total of four or five years.
• The first “zero year” is either the fourth season of the contract or the first season after the player’s 38th birthday, whichever comes later.
• Players who re-sign with their previous teams prior to October 1 using full Bird rights get some extra leeway. If a player who is 35 or 36 years old signs a four-year contract with his previous team using Bird rights, the Over-38 rule wouldn’t apply. If that player signs a five-year contract, only the fifth season would be considered a zero year. In other words, if Nene had full Bird rights last summer, his four-year deal wouldn’t have been subject to the Over-38 rule.
• These special exceptions for players with Bird rights don’t apply to players who change teams via a sign-and-trade.

If the Over-38 rule doesn’t already sound complicated enough, there’s an additional aspect of the rule that affects what happens when a veteran on an Over-38 contract plays out most or all of his deal. In that scenario, his deferred compensation gradually stops being considered deferred, and his cap hits are adjusted accordingly over the course of his contract. You can check out Larry Coon’s CBA FAQ for more details on that component of the rule if you’re interested.

Finally, it’s worth noting that LeBron James and Chris Paul reportedly played major roles during the last CBA negotiations in having this rule changed from the Over-36 rule to the Over-38 rule. It’s probably no coincidence that both James and Paul head into the 2018 offseason at age 33 with the opportunity to sign five-year deals that would have been considered Over-36 contracts — the new Over-38 rule won’t interfere with those deals.

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.

Photo courtesy of USA Today Sports Images.

The NBA’s annual free agent frenzy begins each July 1, and the league’s top available players rarely take more than three or four days to reach agreements with teams once the calendar turns to July. However, most of those deals can’t become official right away, due to a Collective Bargaining Agreement rule known as the July moratorium.

The July moratorium – which lasts from 12:01am eastern time on July 1 until 12:00pm on July 6 – essentially puts a freeze on most transactions for several days at the start of the new league year. NBA free agents are allowed to negotiate with clubs during the moratorium, and they can agree to terms on new contracts, but they are unable to officially sign new deals until the moratorium ends. The same goes for trades — two teams can agree to terms on a deal, but can’t formally put it through until at least July 6.

While nearly every agreement reached during the July moratorium eventually gets finalized, the unofficial nature of those initial deals can occasionally wreak havoc on the league’s free agent market. DeAndre Jordan‘s 2015 free agency was a perfect example of this. Jordan initially agreed to terms with the Mavericks during the July moratorium, but before the moratorium ended and the two sides could make it official, the Clippers changed Jordan’s mind and convinced him to re-sign with L.A.

Because Jordan and the Mavs had only reached an informal verbal agreement, there was nothing Dallas could do to stop him from reversing course during the moratorium. Still, this sort of about-face is rare, since it can result in fractured relationships between players, agents, and teams.

While most NBA transactions can’t be completed during the moratorium, there are a handful of exceptions to that rule. The following moves are allowed between July 1 and July 6:

• A team can sign a first-round pick to his rookie scale contract.
• A team can sign a player to a one- or two-year minimum salary contract.
• A restricted free agent can sign a qualifying offer from his current team.
• A restricted free agent can sign a maximum-salary contract with his current team.
• A restricted free agent can sign an offer sheet with a new team; the 48-hour matching period would begin after the moratorium ends.
• A team can sign a player to a two-way contract, convert a two-way contract into a standard NBA deal, or convert an Exhibit 10 deal into a two-way contract.
• A team can waive a player or claim a player off waivers.
• A second-round pick can accept a required tender (a one-year contract offer) from his current team.

Under the old Collective Bargaining Agreement, the NBA finalized the salary cap at some point during the July moratorium, and the new cap would take effect once the moratorium ended. However, the current CBA calls for the salary cap for the new league year to be set by the start of July, with the new figure going into effect immediately on July 1. This gives teams more clarity on exactly how much room they have available as they negotiate with free agents during the moratorium.

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.

Earlier versions of this post were published in 2012, 2013, 2014, and 2015 by Luke Adams and Chuck Myron.

Players eligible for restricted free agency don’t become restricted free agents by default. In order to make a player a restricted free agent, a team must extend a qualifying offer to him — a player who doesn’t receive one becomes an unrestricted free agent instead.

The qualifying offer, which is essentially just a one-year contract offer, varies in amount depending on a player’s service time and previous contract status.

If a player reaches free agency with three or fewer years of NBA service time under his belt, his qualifying offer is worth 125% of his prior salary, or his minimum salary plus $200K, whichever is greater. For instance, after earning $1,312,611 this season, Fred VanVleet will be eligible for a qualifying offer worth $1,699,698 this offseason — that’s calculated by adding $200,000 to his minimum salary for 2018/19 ($1,499,698). Malcolm Delaney‘s 2017/18 salary, meanwhile, was $2,500,000, so his qualifying offer will be worth 125% of that figure: $3,125,000.

The qualifying offer for a former first-round pick coming off his rookie scale contract is determined by his draft position. The qualifying offer for a first overall pick is 130% of his fourth-year salary, while for a 30th overall pick it’s 150% of his previous salary — QOs for the rest of the first-rounders fall somewhere in between. The full first-round scale for the draft class of 2014, whose first-rounders will be hitting free agency this summer, can be found here, courtesy of RealGM.

Here are a pair of examples for this offseason, based on RealGM’s chart: 2014’s fourth overall pick Aaron Gordon, coming off a fourth-year salary of $5,504,420, must be extended a qualifying offer of $7,260,330 (a 31.9% increase) to become a restricted free agent. 23rd overall pick Rodney Hood will be eligible for a qualifying offer of $3,472,887, a 45.5% increase on this season’s $2,386,864 salary.

A wrinkle in the Collective Bargaining Agreement complicates matters for certain RFAs-to-be, since a player’s previous usage can impact the amount of his qualifying offer. The CBA identifies the “starter criteria” as starting 41 games or playing 2,000 minutes per season, and rewards players for meeting those criteria. A player meets the starter criteria if he compiles at least 41 starts or 2,000 minutes in the season prior to his free agency, or averages at least that many starts or minutes over the two seasons before he becomes a free agent. Here’s how the starter criteria affects qualifying offers:

• A top-14 pick who does not meet the starter criteria will receive a same qualifying offer equal to 120% of the amount applicable to the 15th overall pick.
• A player picked between 10th and 30th who meets the starter criteria will receive a qualifying offer equal to 120% of the amount applicable to the ninth overall pick.
• A second-round pick or undrafted player who meets the criteria will receive a qualifying offer equal to 100% of the amount applicable to the 21st overall pick.

You can find examples of free-agents-to-be to whom these conditions apply right here.

A qualifying offer is designed to give a player’s team the right of first refusal. Because the qualifying offer acts as the first formal contract offer a free agent receives, his team then receives the option to match any offer sheet the player signs with another club.

A player can also accept his qualifying offer, if he so chooses. He then plays the following season on a one-year contract worth the amount of the QO, and becomes an unrestricted free agent at season’s end. A player can go this route if he wants to hit unrestricted free agency as early as possible, or if he feels like the QO is the best offer he’ll receive. Accepting the qualifying offer also gives a player the right to veto trades for the season.

During the 2017 offseason, for instance, Nerlens Noel and Alex Len signed their respective qualifying offers. Their teams likely would’ve been willing to negotiate longer-term deals (Noel reportedly turned down a lucrative four-year offer at the start of free agency), but neither player had a ton of leverage. Noel and Len ultimately felt it would be in their best interest to accept that one-year qualifying offer and reach unrestricted free agency in the summer of 2019.

Finally, while the details outlined above apply to players on standard NBA contracts who are eligible for restricted free agency, a different set of rules applies to players coming off two-way contracts. For most of those players, the qualifying offer would be equivalent to a one-year, two-way salary, with $50K guaranteed.

If a player coming off a two-way contract is ineligible to sign another one – either because he has already been on two-way deals with his current team for two seasons or because he has three years of NBA service – his qualifying offer would be a standard, minimum-salary NBA contract. The guarantee on that QO would have to match or exceed what a two-way player would earn in the G League. Timberwolves two-way player Anthony Brown is one example of a player who would be eligible for this form of qualifying offer this summer.

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.

Earlier versions of this post were published in 2012 and 2013.

Under the NBA’s old Collective Bargaining Agreement, which was in effect through the 2016/17 season, a player’s full salary (not including unlikely incentives) was used for trade purposes, whether or not it was guaranteed. If a player had an $10MM salary with a partial guarantee of $1MM, his outgoing salary in a trade was the same as it would have been for a player who had a fully guaranteed $10MM contract.

That’s no longer the case under the league’s new CBA, however. While contracts signed under the old agreement still operate by the old rules, contracts signed after July 1, 2017 will be subject to the rules of the current CBA.

Under the current CBA, only the guaranteed portion of a player’s contract counts for outgoing salary purposes in a trade, limiting the appeal of non-guaranteed salaries as trade chips.

This detail is crucial for determining how much salary a team can acquire in a trade — unless a team is under the cap, the amount of salary it sends out in a trade dictates how much salary it can take back. The amount of salary an over-the-cap team can acquire in a trade ranges from 125% to 175% of its outgoing salary, depending on how much salary the team is sending out and whether or not the team is a taxpayer.

In the old system, it might make sense for a cap-strapped club to trade a player with a guaranteed salary for a player earning an equivalent non-guaranteed salary — the cap-strapped club could then waive that newly-acquired player to cut costs. That’s trickier to do now.

Complicating matters further is that a team can’t simply circumvent the new rules by trading a player before a league year ends on June 30, then having his new team waive him when his non-guaranteed salary goes into effect on July 1. After the end of the regular season, a player’s outgoing salary for trade purposes is the lesser of his current-year salary and the guaranteed portion of his salary for the following season.

Here’s a practical example: Darren Collison‘s deal with the Pacers featured a fully guaranteed $10MM this season, with only $2MM of $10MM guaranteed for 2018/19. Once the regular season ends this year, Collison would only count for $2MM in outgoing salary for trade purposes.

To paint a complete picture of exactly how these new rules work, let’s assume that a free agent signs a two-year, $24MM contract during the summer of 2018. Each year is worth $12MM, but the first season of the contract is guaranteed for $3MM, while the second year is fully non-guaranteed. Here’s how it would count, for trade purposes, as outgoing salary:

1. From the date of the signing until the one-quarter mark of the 2018/19 season:
   • $3MM
   • Note: Due to other CBA rules, the player wouldn’t become trade-eligible until at least December 15, 2018 anyway.
2. From the one-quarter mark of the 2018/19 regular season until salaries become guaranteed on January 10, 2019:
   • A prorated amount of the salary based on the player’s earnings to date.
   • Note: The player would earn 1/177th of his $12MM salary per day; so 60 days into the season, his outgoing salary in a trade would be $4,067,797 (60/177ths of $12MM).
3. From January 10, 2019 until the 2019 trade deadline:
   • $12MM
4. From the day after the 2018/19 regular season ends until the start of the 2019/20 regular season:
   • $0
5. From the start of the 2019/20 regular season until salaries become guaranteed on January 10, 2020:
   • A prorated amount of salary based on earnings to date.
   • Note: The player would once again earn 1/177th of his $12MM salary per day; so 10 days into the season, his outgoing salary in a trade would be $677,966 (10/177ths of $12MM).
     
6. From January 10, 2020 until the 2020 trade deadline:
   • $12MM

This new rule in the league’s Collective Bargaining Agreement won’t stop teams from tacking on non-guaranteed years to the end of certain players’ contracts, since those non-guaranteed salaries still provide flexibility. However, the new CBA rules will ensure that they’re no longer as valuable for trade purposes as they once were.