Hoops Rumors Originals

While a rule like the Gilbert Arenas provision can flatter its namesake, the late Ted Stepien, former owner of the Cavaliers, may have preferred not to go down in history as the reference point for the Ted Stepien rule.

Stepien owned the Cavs in the early 1980s, and made a number of trades that left the franchise without first-round picks for several years. As a result, the NBA eventually instituted a rule that prohibited teams from trading out of the first round for consecutive future seasons. It’s now informally known as the “Stepien rule,” even though the Cavs owner isn’t explicitly mentioned in the league’s Collective Bargaining Agreement.

Because the Stepien rule applies only to future draft picks, teams are still permitted to trade their first-rounders every year if they so choose, but they can’t trade out of the first round for back-to-back future drafts.

For instance, since the Celtics have traded their 2023 first-round pick to Indiana, they aren’t currently permitted to trade their 2024 first-rounder. Following the 2023 draft, the Celtics would regain the right to trade that 2024 first-round pick, since their ’23 first-rounder will no longer be considered a future pick.

The Stepien rule does allow a team to trade consecutive future first-round picks if the team has acquired a separate first-rounder from another team for either of those years. So if Boston were to trade for another team’s 2023 first-rounder, that would give the Celtics the flexibility to move their 2024 pick without having to wait until after the 2023 draft.

Teams are permitted to include protection on draft picks. This can create complications related to the Stepien rule, which prevents teams from trading a first-round pick if there’s any chance at all that it will leave a team without a first-rounder for two straight years.

For example, the Trail Blazers have traded a lottery-protected 2023 first-round pick to Chicago — it will only convey if it falls outside of the top 14. That traded 2023 pick is protected all the way through 2028, and as long as there’s still a chance it won’t convey immediately, the Blazers are prevented from unconditionally trading any of their next few first-round picks.

Portland could trade a conditional 2025 first-round pick, but a team acquiring that pick would have to accept that it would be pushed back one year every time the pick Portland has traded to Chicago doesn’t convey.

[RELATED: Traded first round picks for 2023 NBA draft]

Teams will have to take the Stepien rule into account at this season’s trade deadline as they mull including draft picks in deals. It’s why the Lakers, for instance, don’t currently have a tradable first-round pick prior to 2027.

As part of the Anthony Davis blockbuster, Los Angeles agreed to send its 2024 first-rounder to New Orleans, but the Pelicans have the option to defer that pick until 2025. As a result, the Lakers can’t trade their 2023 or 2026 first-rounder, since moving either one could put them in position to be without first-round picks in consecutive future years.

Here are a few more rules related to trading draft picks:

• The “Seven Year Rule” prohibits teams from trading draft picks more than seven years in advance. During the 2022/23 season, a 2029 draft pick can be traded, but a 2030 pick cannot be dealt.
• The Seven Year Rule applies to protections on picks as well. If a team wants to trade a lottery-protected 2029 first-rounder at this year’s deadline, it can’t roll those protections over to 2030. For example, one of the picks the Timberwolves sent to the Jazz in the Rudy Gobert trade is a top-five protected 2029 first-round pick. If that pick falls in its protected range, Utah will instead receive Minnesota’s 2029 second-rounder, since picks in 2030 and beyond were off limits when the two teams negotiated the protections.
• A team can add protection to a pick it has acquired as long as there wasn’t already protection on the pick. For instance, the Jazz currently control the Timberwolves‘ unprotected 2023 first-round pick. If Utah wants to include that selection in a trade, the team could put, say, top-three protection on it.
• For salary-matching purposes, a traded draft pick counts as $0 until the player signs a contract.

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 version of this post were published in previous years.

When an NBA team cuts 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 teams decide if they want to try to add him to their roster.

A player remains on waivers for at least 48 hours 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 4:00 pm Central time two days after his release (or three days later, if he was cut after 4:00 pm CT) 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.
• The player is on a two-way contract.

Since most NBA teams go over the cap and sizable TPEs and DPEs are somewhat rare, the majority of players who are claimed off waivers are either on minimum-salary contracts or two-way deals. Claiming those players simply requires an open roster slot.

More often than not though, 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 on an expiring contract (or a contract that could become expiring as a result of an option decision) can’t be waived between the end of the regular season and the start of the next league year. He also can’t be waived at the end of the regular season if he won’t clear waivers before the date of each team’s final regular season game.
• 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 can’t re-sign with his former club until one year after the trade or until the July 1 after his original contract would have expired, whichever is earlier.
  • Note: If a player is traded twice before being waived, he’s allowed to re-sign with the team that first traded him.
• 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’s 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.

Earlier versions of this post were published in 2012, 2018, and 2020.

Most salary cap workarounds, such as the mid-level exception, can be used every year — or at least every other year, as in the case of the bi-annual exception. However the disabled player exception is only available under certain circumstances. Like other salary cap exceptions though, the DPE allows a team to sign a player without using cap space.

If a player is seriously injured, his team can apply for the disabled player exception to replace him. In order for the exception to be granted, an NBA-designated physician must determine that the player is “substantially more likely than not” to be sidelined through at least June 15 of that league year.

If granted, the disabled player exception allows a club to sign a replacement player for 50% of the injured player’s salary or for the amount of the non-taxpayer’s mid-level exception, whichever is lesser.

For instance, if a team is granted a disabled player exception for a player earning $10MM, the exception would be worth $5MM. But if the injured player is earning $30MM, the DPE would be worth the equivalent of the mid-level exception (this season, that’s $10,490,000).

A team must formally apply for a disabled player exception and it requires the approval of the league. The cutoff to apply for a DPE each season is January 15. If a team has a player go down with a season-ending injury after that date, it cannot obtain a DPE to replace him. A team must also use the exception by March 10 of the current season or it will expire.

Unlike mid-level, bi-annual, or trade exceptions, the disabled player exception can only be used on a single player, rather than spread out across multiple players. However, a team can use it in a variety of ways — the DPE can be used to sign a free agent, to claim a player off waivers, or to acquire a player in a trade.

If a team uses its disabled player exception to take on salary in a trade, it can acquire a player making up to 100% of the DPE amount, plus $100K. For example, a $5,000,000 DPE could be used to trade for a player making $5,100,000.

A free agent signed using the DPE can only be offered a rest-of-season deal, while a player acquired via trade using the DPE must be in the final year of his contract. A player claimed off waivers must also be in the final year of his contract, and his salary must fit into the team’s DPE. Essentially, the purpose of the exception is to give the team some flexibility to replace a player following a season-ending injury, but not beyond the current season.

The team must have room on its roster to sign the replacement player — the disabled player exception doesn’t allow the club to carry an extra man.

In the event that a team is granted a disabled player exception, uses it to acquire a player, and then has its injured player return ahead of schedule (ie. before the end of the season), the team is allowed to carry both players.

However, if a team has an unused disabled player exception and then trades its injured player, the team would lose the exception. The same is true if the injured player returns to action before the DPE has expired or been used.

Most disabled player exceptions ultimately go unused, but some come in handy in trades. For example, after being granted a DPE in the wake of Chet Holmgren‘s season-ending foot injury earlier this year, the Thunder used that exception to acquire Maurice Harkless from Atlanta in a deal where Vit Krejci‘s outgoing salary wasn’t sufficient for matching purposes.

Note: This is a Hoops Rumors Glossary entry. Our glossary posts 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 2017.