Opinion

The dilemma of fully guaranteed contracts

Photo courtesy of the NFL via Wikipedia.

Major sports leagues are experiencing an unprecedented spike in the total value of player contracts. 

On one end of the spectrum, the NBA has various rules that artificially limit contract values from ballooning. On the other end, the MLB just shrugs and allows astronomically large contracts to be handed out left and right.

In both cases, players are fully guaranteed their contracts will be paid out, regardless of injury or performance. The glaring exception in this pool of fully guaranteed contracts is the NFL. 

At the time of writing, there is only one quarterback who has a fully guaranteed contract — Deshaun Watson. It’s a contract that many fans of the NFL mock due to Watson’s poor play and off-field controversy combined with the team paying him so much being the Cleveland Browns.

When this contract was signed in the 2022 offseason, fans were expecting other quarterbacks seeking new deals to get the same fully guaranteed treatment. Instead it appears, in the wake of arbitration, that the NFL and team owners may have colluded to keep fully guaranteed mega-contracts from becoming precedent. 

Outside of avarice motivation for owners to avoid paying  fully guaranteed contracts, why is it that the NFL is so against these guarantees?

The issue lies with the NFL’s way of keeping teams on an even financial playing field. All 32 teams in the NFL have the same salary cap, regardless of how rich the owner of the team might be. Teams are punished for going over that salary cap, much more heavily than in most other leagues.

The current salary cap is about $280 million, and the average annual salary of a superstar quarterback is in the range of $50 million to $60 million. As it stands, a decent portion of that money is tied up in performance-based incentives. 

If that money is fully guaranteed annually, it becomes much more difficult for teams to justify signing multiyear contracts due to the risk of player injury, especially at the quarterback position. The second your star quarterback gets injured, that’s over a fifth of your team’s cap space for the year sent straight down the drain.

This problem will be much worse if players at all positions began receiving fully guaranteed contracts — as many contracts for players at other positions are tied up in performance-based incentives. 

Players would likely see overall contract value plummet as teams attempt to fully guarantee pay to a 53-man roster that has a high potential to be decimated by injuries or poor performance over the course of a year.

Or, if contract values stayed similar to where they are today, the NFL would become similar to the NBA in how often players are traded around as teams attempt to manage their cap space while having to pay out fully guaranteed contracts.

There’s no good outcome with the current structure the NFL has in place because that structure isn’t built for fully guaranteed contracts. Since colluding should be off the table, what can the league do?

The first solution would be to convert to the ways of the MLB. Small market teams would be relegated to mediocrity while big market teams are encouraged to sign rising stars and proven veterans to exorbitant contracts with basically zero consequences. 

While this would be hilarious to watch unfold, the NFL would struggle in the long term if some teams are simply incapable of paying for the best talent in the league.

The better solution would be to rip a page out of the NBA’s book — the amnesty clause. Historically, this clause allowed NBA teams to cut one player and not have their contract count against the team’s salary cap for the remainder of the contract.

This could be done once during the period of the collective bargaining agreement those clauses were included in — and teams were required to pay out that player’s contract.

If the NFL were to adopt an amnesty clause — maybe usable once every year or two — teams would be much more likely to sign players to fully guaranteed deals with the peace of mind that their future won’t be devastated by one player getting injured.

Where it stands now, the NFL will likely eventually have to budge on fully guaranteed contracts. Before they do though, they should probably make some changes to help ease the transition along — otherwise it will be a train wreck for all parties involved.