The Salary Cap is a number determined by the league that is a spending limit for teams - it basically says, "salary increases may not increase your total team salary for the current season beyond this number." Note the phrasing here - it means you can't go from "under" the cap to "over" the cap and if you already over the cap, you cannot increase your salary. That also means regardless of your cap position, you are always permitted to DECREASE your salary, no exceptions needed. It also means the cap only cares about salary THIS SEASON, not future salary, so as long as the current year's salary of a player is legally acquired, raises in his contract for future years are also legal.
1. WHAT ARE "EXCEPTIONS?"
Exceptions are just that - exceptions to the "Rule" of the Salary Cap. In other words, it is ways in which you are allowed to increase your total team salary even if (1) the increase takes you from under the cap to over the cap or (2) you are already over the cap. The full list of exceptions follows:
- One-year veteran minimum contracts
- Signing your own rookie draft picks to their pre-slotted contracts
- Signing Free Agents that were on your team last year with Bird Rights (at least 3 Bird Years) - You may be over the cap by any amount after signing these players for any contract offer (up to the max allowed for their years of service)
- Signing Free Agents that were on your team last year with Early Bird Rights (2 Bird Years) - You may be over the cap by any amount after signing these players for any contract offer up the lesser of "1/13 of the salary cap" or "175% of their previous year's salary"
- Signing Free Agents that were on your team last year (1 Bird Year) - You may be over the cap by any amount after signing these players provided the contract offer is up to 120% of last year's contract number.
- Signing Players with the Mid-Level Exception (MLE) - Teams that qualify for the Mid-Level Exception may sign one or more players using "Mid-Level Exception" dollars even if the contracts result in the team being over the cap.
2. HOW DOES A TEAM QUALIFY FOR THE MLE?
Think of the MLE as a "minimum Free Agency budget" guaranteed to all teams. If a team reaches the start of the Free Agency period with less cap space available to them than the MLE (including 0 or negative cap space), they are granted access to the MLE. Since the MLE is set at 8.5% of the cap, this means teams whose salary commitment is greater than 91.5% of the cap will have access to the MLE for that off-season. Any MLE dollars that a team has access to are applied to the team's cap space as a "cap hold" during the off-season (so a team with a salary commitment of 92% that gets access to the MLE will have an 8.5% cap hold applied show a "total salary" of 100.5% of the cap - this is to prevent teams from trying to "double dip" by offering an 8% contract from "cap space" and an 8.5% contract from the "MLE pool" as this would allow them to spend a total of 16.5%).
3. CAN A TEAM LOSE ACCESS TO THE MLE?
Yes. If a team makes a transaction that lowers their salary commitment sufficiently that they have less than 91.5% of the cap committed (i.e., they have more "true" cap space available than the MLE amount), they immediately lose access to the MLE for the offseason (even if they later make a transaction that pushes their salary back above the threshold).
4. HOW WILL I KNOW IF MY TEAM WILL HAVE ACCESS TO THE MLE?
During the Rookie Draft, all teams are provisionally given access to the MLE; this shows on the "Cap Report" page generated by FBB here: Enhanced/html/capreport.htm and the "Cap Hold" for the MLE will reflect on a teams' available "Cap Room." So while the Rookie Draft is in progress, if your team shows BOTH an MLE amount AND has a negative amount of cap space, you will have access to the MLE at the beginning of Free Agency.
5. HOW DO RFA CAP HOLDS AFFECT MLE ACCESS?
They don't. Remember, you only get access to the MLE if you have less cap space than the MLE amount continuously throughout the entire Free Agent period. Free Agency starts when the rookie draft ends - i.e., before Restricted Free Agency, meaning your cap figure as of the end of the draft is used. The temporary cap holds we use for RFA are applied AFTER Free Agency starts, so you need to check your salaries during the rookie draft to know whether or not you will have MLE access rather than waiting until RFA cap holds to be processed and posted.
6. DOES THE MLE SKEW THE CAP REPORT WHEN CALCULATING LUXURY TAX?
It shouldn't. Luxury tax calculations are made at the end of the season; to my knowledge the MLE is only factored into a team's "Cap Space" calculation on the Cap Report page during the offseason. Once the season starts, teams may still have access to the MLE (for use in signing a Free Agent to a larger-than-minimum salary), but it no longer factors into cap calculations. This extra Free Agent money would probably only make a difference if multiple teams tried to "bid" on the same Free Agent in-season at the same time, but we use a first-come, first-signed system insetad.
EXAMPLES OF SCENARIOS THAT MIGHT CAUSE CONFUSION:
I'm going to list some examples here that can show how the fact that we process transactions in "batches" between HTML uploads may lead to some confusion, because I think these are useful.
EXAMPLE 1:
A team has committed 80% of its salary to contracts as of the end of the Rookie Draft. They drafted a rookie four seasons ago and have exercised RFA rights on that player going into RFA - let's say they drafted #11 so that's a 20% cap hold applied.
During the Rookie Draft, the Cap Report page will show that team having access to the MLE, and will apply a cap hold equal to the MLE to their salary, so they will appear to have 88.5% of the cap shown in "Total Salary" and will have a positive amount of cap space (11.5% of the cap).
After the Rookie Draft is complete and Free Agency begins, the team has more cap space available than the MLE, so the MLE access (and cap hold) is removed. The team will see a 20% cap hold applied to their salary cap so when RFA opens, their team will appear to have 100% of the cap committed in total salary and no MLE access. This is because they dipped below 91.5% (to 80%) at the start of Free Agency.
Because RFA cap holds remain in place until the end of RFA, if the team re-signs their own player to a max contract (25% of the cap), they will show as having committed 125% of the cap on the Cap Report Page (80% for other players, 25% for the max contract, and the 20% cap hold).
When RFA concludes and RFA cap holds are removed (at the start of Unrestricted Free Agency), the team's Cap Report will show as 105% of the cap (80% for other players, 25% for the max contract, no cap hold). This may be a bit confusing because from our perspective, the team was over the cap (first at 125% then at 105%) for all of the Free Agency HTML exports and we might think they are entitled to the MLE, but remember, the team was actually at 80% at the beginning of the Free Agency period (which is why I suggest watching the Cap Report as of the end of the draft).
EXAMPLE 2
A team has committed 92% of the cap to salary as of the end of the Rookie Draft/start of Free Agency. They will have access to the MLE and will show cap space use of 100.5% at the beginning of Free Agency (92% salary plus 8.5% MLE).
This team makes two trades after the opening of Free Agency but before the first round of bids is processed; the first trade reduces their salary by 1% of the cap, and the second trade increases their salary by 2% of the cap.
When the first trade is processed, the team's salary commitment drops to 91% of the cap; they have 9% of the cap available or "more than the MLE" of 8.5% so they immediately lose access to the MLE. When the second trade is processed, their commitment increases to 93% of the cap. Since multiple trades get processed between HTML uploads, it is possible from our human perspective the team went from 100.5% of the cap with the MLE directly to 93% of the cap with no MLE (and a team with 93% of the cap would normally have access to the MLE 7% is less than 8.5% and we are confused, but it was that "intermediate moment" where they lost access to the MLE.
Had the trades been specified to be processed in the reverse order (e.g., Process "Trade 1" AFTER "Trade 2") the team's commitment would have gone first to 94% then down to 93% so they would never have had an instant with more cap space than the MLE value, so they would retain their MLE.
That's right, the order in which trades are processed can be the difference between keeping and losing access to the MLE. Bear this in mind when making trades.
EXAMPLE 3
A team has committed 91.6% of the cap to salary as of the end of the Rookie Draft/start of Free Agency. They will have access to the MLE and will show cap space use of 100.1% of the cap (91.6% salary plus 8.5% MLE).
The team cuts its second-round draft pick to save 0.2% of the cap and bids a 15% of the cap contract on their own Free Agent with Bird Rights. The cuts are processed right before Day 1 of Free Agency. Their salary commitment dropped to 91.4% of the cap effective with the cut and they immediately lost access to the MLE because they had "more cap space than the MLE." Then they signed their player so their new commitment looks like 106.4% of the cap... but they have lost access to the MLE.
Had they chosen to make the second-round cut contingent on signing another player first (i.e., "only process if I make a Free Agent signing") the processing order would have been "sign player" to go to 106.6% of the cap then "cut player" to go to 106.4% of the cap and since they were never in a position where they had more cap space than the MLE amount. Again, "order of operations" matters when you're flying very close to the cap and want to keep your MLE access.