NFL

NFL Free Agency Preview: How it Works

Frank Dyevoich| January 15th, 2020

Now that Super Bowl LIV is only three weeks away, it is time to start looking ahead at the 2020 season. Yes, already. The first major event of the NFL offseason is free agency. The idea of free agency seems pretty simple, unsigned players can sign with new teams for more money. However, free agency is actually very complex, but fear not, that’s what I am here for.

Players hit free agency for a variety of different reasons. Some players’ contracts are up, some are cut from their team, and some can only be signed to contracts with new teams under certain conditions. Further, there are two designations of free agents, restricted and unrestricted free agents. Perhaps the most complex aspect of free agency is the variety of ways that teams can protect themselves from losing a valuable player. Teams can apply the franchise tag or a transition tag, as well as a first, second, or an original round tender. So let’s break it all down!

Dates of NFL Free Agency (Eastern Standard Time)

February 25, 2020 – The first day NFL teams can apply the franchise or transition tag.

March 10, 2020 – 4:00 PM deadline for NFL teams to apply the franchise or transition tag.

March 16, 2020 – 4:00 PM start time of the legal tampering period.

March 18, 2020 – 4:00 PM official start time of 2020 NFL free agency. Also by this time, NFL teams MUST:

1. Exercise any 2020 options they have on player’s 2019 contracts;

2. Submit their qualifying offers for restricted free agents to retain the Right of First Refusal;

3. Be under the 2020 salary cap (196.8-201.2 million)

July 15, 2020 – 4:00 PM deadline for a franchise-tagged player to sign the tag or negotiate a long-term deal with their team.

Restricted vs Unrestricted Free Agents

When it comes to NFL free agents, there are two types, restricted and unrestricted free agents. An unrestricted free agent is as simple as it sounds, the player is not under contract and is free to sign with any team under any terms. A player becomes an unrestricted free agent in one of three ways. First, the player is released from his team and is not subject to waivers. A player is not subject to waivers if that player has less than four accrued seasons (on the active 53 man roster for at least six regular-season games) in the NFL. Second, the player was under contract and the contract has fully expired. Last, the player was not drafted in the NFL Draft.

Restricted free agents are a little trickier. Restricted free agents have restrictions on the terms under which they can sign with their original team or negotiate with other teams. A player is a restricted free agent when he has three (3) accrued seasons in the NFL and his contract is about to expire. This becomes complicated when you have first-round rookies, normally signed to a four-year contract, who sit out the year on injured reserve or the non-football injury list or suspension. These designations allow the teams to keep these players under contract while also removing them from the active 53 man roster. In other words, these players do not have an accrued season and are extremely likely to become restricted free agents down the road.

Restricted free agents must play under a one-year contract for a salary that is pre-determined by the league if they do not reach a long-term agreement with their team. However, they are also allowed to negotiate with other teams for a long-term deal. To protect themselves from losing a valuable player, the original team must assign a “tender” to the restricted free agent of either a first-round tender, second-round tender, an original round tender, or a Right of First Refusal tender.

The tender allows the player to negotiate with other teams but protects the original team by giving it what is called a Right of First Refusal. If another team reaches an agreement with the tendered player, they must sign that player to an offer sheet that lays out the full terms of the proposed contract. The Right of First Refusal means that the original team has the right to match any offer made to the tendered player. If the team matches the offer, then it creates a contract with the tendered player.

If the team does not match the offer, then the original team receives a draft pick from the new team which parallels the tender that was assigned to the player as compensation for losing the player. For example, Player A was a first-round pick, therefore the new team must give up its first-round pick in the upcoming NFL Draft to sign the restricted free agent.

If Player A was given an original round tender and he was drafted in the fourth round of the NFL Draft, then the new team must give up a fourth-round pick in the upcoming NFL draft to sign Player A. The exception is the Right of First Refusal tender which is a tender without any compensation if the player signs with a new team. The team still gets the Right of First Refusal to match the offer, but it receives zero compensation if they do not match the offer.

So why wouldn’t every team place a first-round tender on all of their restricted free agents? The tender picked also determines the salary for that player if a long term agreement is not reached. A first-round tender is obviously the most costly to a team.

Here are projections for restricted free agent salaries for 2020 according to overthecap.com:

2020 Projected RFA Tenders

Type                                Amount

First Round                   $4,667,000

Second Round              $3,278,000

Original Round             $2,144,000

Franchise Tag vs Transition Tag

NFL Teams have two options to prevent their superstar players from becoming unrestricted free agents and signing with another team when their contracts are about to expire. The first option is the franchise tag. This is essentially a one-year contract. The NFL pre-determines the salary for players who play under the franchise tag and the player has to either sign the tag and play for that salary or negotiate a long-term deal with his team before July 15, 2020.

The salary for a franchise-tagged player is set by one of two ways, either by averaging the top-five salaries by position for the previous league year or if it’s higher, 120% of a player’s salary from the previous season. This means players like quarterbacks and defensive ends will have a much higher salary under the franchise tag than positions like a tight end or a kicker.

Further, a team can franchise tag a player up to three times. The second franchise tag on a player requires a 120% increase from the players salary under the initial franchise tag, but if a team wants to franchise tag a player three years in a row, the player’s salary is either an increase of 144% from the second franchise tag salary or an average of the top-five salaries at the highest-paid position, whichever is higher.

Read that again. An average of the top-five salaries at the highest-paid position, not the same position. This means that if a team wanted to franchise tag a tight end for three years straight, his third year under the tag would give him a one-year salary of the average of the top-five quarterbacks’ salaries, not tight ends. That is why you never see a player tagged three years in a row.

A franchise tag can also be either exclusive or non-exclusive. An exclusive franchise tag is an equivalent of putting the player in jail. He is not allowed to negotiate with any other teams and must either sign a long-term deal or play under the franchise tag for one-year and accept the pre-determined salary. A non-exclusive franchise tag allows the player to negotiate with other teams but protects the original team by giving it a Right of First Refusal, similar to restricted free agents. If another team reaches an agreement with the franchise-tagged player, they must sign that player to an offer sheet that lays out the full terms of the proposed contract.

The Right of First Refusal gives the original team the right to match any offer made to the franchise-tagged player. If the team matches the offer, then it creates a contract with the franchise-tagged player. If the team does not match the offer, then the original team receives two first-round picks as compensation from the new signing team. This is rarely used because teams are very reluctant to give up two first-round picks for any player.

The second option an NFL team has to protect their superstar player from leaving is the transition tag. This is essentially a poor man’s non-exclusive franchise tag. The transition tagged player has the right to negotiate with other teams, and if another team signs the player to an offer sheet, the original team has a Right of First Refusal to match the offer. The difference is that if the original team does not match the offer, the player signs with the new team and the original team receives zero compensation. So why would a team use the transition tag instead of the non-exclusive franchise tag?

First, the pre-determined salary for a transition tagged player is less than a franchise-tagged player. Second, the transition tag allows teams to test the market for a given player because prospective teams usually will not sign a non-exclusive franchise-tagged player to an offer sheet given the two first-round picks they will have to give up if they sign him.

If another team knows they don’t have to give up anything to sign the transition tagged player, they are much more likely to make an offer, which gives the original team a very good idea on the player’s market without making him available or negotiating trades. However, there was a drastic decrease in the use of transition tags until 2011. Before 2011, prospective NFL teams started adding language to their offer sheets that basically made it a guarantee that the original team would not match the offer.

For example, in 2005 the Seattle Seahawks placed the transition tag on offensive guard Steve Hutchinson. The Minnesota Vikings signed Hutchinson to an offer sheet for $49 million with $16 million guaranteed, but they included language that said the entire $49 million contract was fully guaranteed if Hutchinson were not the highest-paid offensive linemen on the team he signed with. He would have been the highest-paid offensive lineman on the Vikings, but he would have been the second-highest-paid offensive lineman on the Seahawks.

This offer sheet basically meant if the Seahawks wanted to match the offer, Hutchinson’s $49 million was fully guaranteed. The Seahawks challenged the language in binding arbitration according to the CBA and lost. As a result, they did not match the offer sheet and the Vikings signed Hutchinson without having to give anything up in compensation to the Seahawks. This kind of language was known as a “poison pill” in an offer sheet and was thankfully banned in the 2011 CBA.

The last thing to note about the franchise tag and transition tag is that a team can only use one each season, not both. If an NFL team franchise tags their quarterback, they can not use the transition tag on another player and vice -versa. However, that is not the case this year, as it is the last year of the current collective bargaining agreement (“CBA”), and the CBA allows teams to use both the franchise tag and transition tag in its last year. That is why this year you will see teams tagging two players instead of one.

2020 Projected Franchise and Transition Tenders according to overthecap.com:

Position                    Franchise Tag                           Transition Tag

QB                             $26,895,000                                $24,373,000

DE                             $19,316,000                                $16,338,000

WR                            $18,491,000                                $15,926,000

CB                             $16,471,000                                $14,570,000

LB                             $16,266,000                                $14,080,000

OL                            $16,102,000                                 $14,666,000

DT                            $15,500,000                                 $12,321,000

S                               $12,735,000                                 $10,801,000

RB                            $12,474,000                                 $10,189,000

TE                            $11,076,000                                  $9,267,000

ST                             $5,297,000                                    $4,884,000

Legal Tampering Period

Officially, free agents can’t sign a contract with a new team until 4:00 PM on March 18, 2020. It is against league rules for players to talk to other teams about a contract while they are still under contract with their current team. However, the NFL allows impending unrestricted free agents to begin negotiating with other teams two days before the official start of free agency. This process is known as the legal tampering period. The NFL does not like that term so they refer to it as “the negotiating period for prospective unrestricted free agents.” You will also hear it referred to as the negotiating window or the negotiation period.

At 4:00 PM on March 16, 2020, impending unrestricted free agents are allowed to negotiate and agree to terms with a new team. The specific terms of the legal tampering period are that all teams have the right to negotiate all aspects of an NFL player contract with the certified agent of an impending unrestricted free agent. Essentially, player contracts are negotiated in full and verbally accepted during the legal tampering period, but the players can’t sign the contract and make their addition to the new team official until the official start of free agency on March 18th.

Although players are allowed to negotiate new contracts with prospective teams, there are a few restrictions to the legal tampering period. First, the legal tampering period is only for unrestricted free agents. Restricted free agents must wait until the official start of free agency to begin negotiating potential offer sheets with other teams. Second, teams are not allowed to visit or speak with the players directly, they must negotiate with the players’ certified agents only. This means that players who choose to represent themselves are not allowed to negotiate during the legal tampering period.

Lastly, players, agents, and teams are not allowed to make travel arrangements for visits on March 18th. Technically they must wait until free agency begins before making travel plans. Any violation of these rules can result in a penalty for conduct detrimental to the league as well as a violation of the NFL’s anti-tampering policy. This can result in substantial fines and even the loss of future draft picks if the offenses are egregious.

Be sure to be on the outlook for part two of my NFL free agency breakdown.

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