How every major sports league except the NFL got to guaranteed contracts
In March 2020, veteran outside linebacker Kyle Van Noy left the New England Patriots to sign a four-year contract with the Miami Dolphins. The deal was worth $51 million, including $30 million in guarantees. Well, that's how its terms were reported, anyway.
Twelve months later, the Dolphins released Van Noy, completely wiping out the final three years of his contract. According to Over the Cap, Miami paid Van Noy a total of $15.025 million for his one season of work. The team was under no obligation to pay him another penny. Van Noy has since signed back with the Patriots on a deal that will pay him a maximum of $12 million across two years, though if he were to be released again after one season, he'd collect a total of just $6 million. It's possible he could earn $30 million less than what he was contracted for a little more than a year ago.
Van Noy's situation is no outlier. Among the major North American sports leagues - MLB, NBA, NFL, NHL - the NFL is the only one that does not customarily guarantee multi-year contracts for veteran players, even as it brings in the most revenue.
There are some longstanding structural barriers that have prevented guaranteed contracts from becoming more common in the NFL. But contrary to popular belief, there is nothing to prevent a player or player's agent from negotiating a contract that is fully guaranteed. In fact, that's exactly how such deals became the norm for players in MLB, the NBA, and the NHL. The difference is that years ago, a variety of competitive circumstances provided players in those leagues with a strong enough bargaining position to establish contract guarantees as standard in ways that never happened in the NFL.
As Roger Noll, an emeritus professor of economics at Stanford University, told me: "Guaranteed contracts were created by competitive necessity."
How NBA players did it
The NBA was founded as a competitive enterprise, and it battled other leagues for the rights to players for significant portions of its first 30 years of existence, a period in which guaranteed contracts came into fashion.
The National Basketball League began play in mostly smaller markets in 1937, but in 1946 it found itself going head to head with the Basketball Association of America, which looked to capitalize on bigger markets that had hockey arenas. The rivalry between the two leagues created an intense bidding war for players. Contracts in all major sports typically went year to year way back when, but George Mikan - basketball's biggest star - commanded a five-year deal from the NBL's Chicago American Gears as far back as 1946, according to Robert Bradley of the Association for Professional Basketball Research. The pact was worth a whopping $60,000 (more than $828,000 in today's dollars), plus incentives.
Noll said that guarantees mostly vanished in the years after the BAA merged with the NBL to become the NBA in 1949. But they soon returned when the American Basketball League began play in 1961-62. The NBA wasn't exactly on solid financial footing at the time, but pro sports were expanding and basketball appeared to have growth potential.
The ABL folded shortly into its second season, in no small part because of the pressure its competition with the NBA exerted on player salaries, which proved to be more than most franchises could pay in an era before television networks began showering sports leagues with cash.
In spring 1962, ex-Ohio State star Jerry Lucas turned down a three-year offer worth $100,000 from the NBA's Cincinnati Royals, choosing instead to accept a proposal from the ABL's Cleveland Pipers, who'd also drafted him. The Pipers' deal - the brainchild of some dude named George Steinbrenner, who'd later gain some renown for showmanship as the mercurial owner of MLB's New York Yankees - was for less cash than the Royals proposed, but its benefits package included stock options and an executive position with the team.
Lucas, an eventual Hall of Famer, later told columnist and author Bill Livingston he "never saw any of that money." But a precedent had been set, especially after the better-funded American Basketball Association launched in 1967 to compete with the NBA. The ABA-NBA rivalry caused a number of players to switch leagues for better offers before eventually forcing the leagues to merge a decade later after years of litigation - most notably Oscar Robertson's lawsuit, which challenged the proposed consolidation on antitrust grounds.
According to Bradley's account, the NBA Players Association in those days largely fought for pensions, better working conditions, and increased minimum salaries, with the Robertson case running point on securing free agency, which became reality in conjunction with the merger. But guaranteed contracts eventually just happened on an individual basis.
"The poster boy for the return of guaranteed contracts was Jerry Lucas," Noll told me. "He had the best form of guaranteed contract - partial ownership of the team! Since the NBA has had more or less continuous competition - ABA in 1967, then free agency when the leagues merged - its players have had at least partially guaranteed contracts ever since the Lucas episode."
How NHL players did it
The NHL's path to contract guarantees is a bit more convoluted than the NBA's, though it can also be traced to direct competition with an upstart league.
As far back as 1966, the Boston Bruins signed future Hall of Famer Bobby Orr to what Robert C. Berry, William B. Gould IV, and Paul D. Staudohar describe in their book, "Labor Relations in Professional Sports," as a "precedent-setting contract" that made him the highest-paid player in the sport even though he was still only 18. It paid $70,000 plus a $25,000 signing bonus.
The deal coincided with major expansion that doubled the size of the league from six to 12 teams. Within five years, Orr would sign a five-year deal worth $200,000 annually. But because most NHL teams had shaky finances, windfalls like Orr's didn't quite catch on. Instead, it took the formation of the rival World Hockey Association in 1972 to create that kind of pressure.
Noll told me there's no precise precedent for guaranteed deals in the NHL, but he did say one of the most prominent cases involved another Bruins player, Derek Sanderson. In August 1972, not long after he helped lead Boston to its second Stanley Cup in three years, Sanderson jumped to the WHA's Philadelphia Blazers after signing a five-year, $2.6-million contract that made him the highest paid athlete in the world. Sanderson was also the lead plaintiff in an antitrust suit that successfully challenged the NHL's reserve clause, which led to free agency.
Like the ABA, the WHA hung around and tried to poach NHL players until eventually merging with the NHL toward the end of the 1970s.
"Before the entry of the WHA," Noll said, "(most) contracts were not long term and were not guaranteed."
The NHL now has a salary cap and a system that allows teams to buy out long-term contracts for either one-third or two-thirds of the remaining value of that deal, depending on a player's age. But such buyouts happen rarely - maybe a dozen or so in a given year out of more than 600 players.
How MLB players did it
It's easy to pinpoint when guaranteed deals in baseball were established. There was plenty of bidding involved, but unlike what happened for players in the NBA and NHL, a rival league had nothing to do with it.
In 1974, before free agency in MLB was even a thing, Catfish Hunter bargained for a deal with the Oakland A's that required owner Charlie Finley to make a payment into a trust fund by a given date. After Finley missed the payment and attempted to pay Hunter directly, Hunter and MLB Players Association chief Marvin Miller got an arbitrator to agree that Hunter's deal with the A's should be voided because Finley broke its terms.
This made Hunter a free agent, and teams quickly set about jockeying for his services. On New Year's Eve 1974, Hunter agreed to an unprecedented deal with the Yankees: total compensation of $3.75 million across five years, all fully guaranteed.
Joel Maxcy, a professor of sports business at Drexel University, pointed me to a provision of MLB's CBA that still states that a player whose contract is terminated between seasons "for failure to exhibit sufficient skill or competitive ability" is entitled to just 30 days' pay, no matter his contract status. Yet that kind of collective contract language is now routinely superceded by the wording of individual player deals, starting with Hunter's.
The book by Berry, Gould, and Staudohar notes that the language of Hunter's contract did not specifically use the word "guarantee." Rather, it stated that payments "shall be the obligation of the Club, notwithstanding the inability of the player to perform the services provided for under the contract." This represented a profound shift in the way baseball players were about to be compensated.
"Prior to the dawning of free agency, it was a rare circumstance for a player to get anything more than a one-year contract, and a guaranteed contract was virtually unheard of," University of Wisconsin-La Crosse economist Michael Haupert wrote in "The Economic History of Major League Baseball." "If a player was injured or fell off in performance, an owner would slash his salary or release him and vacate the remainder of his contract."
MLB players would soon get free agency after Andy Messersmith and Dave McNally successfully challenged the reserve clause through arbitration in 1975, winning a battle through channels established in the collective bargaining process that Curt Flood had lost in the courts just a few years before. The floodgates opened, and players soon had much more bargaining power.
"Soon thereafter," Berry, Gould, and Staudohar wrote, "guaranteed contracts became the norm."
Haupert told me one of the reasons players were quickly able to leverage guarantees is because the MLBPA quickly set about publicizing contract details, an act that served a larger purpose for future contracts.
"So what that did right away is it let every player know what everybody else was getting," Haupert said. "The word doesn't have to spread slowly; it became apparent very quickly. Every agent wanted every new agent to have all the information, every player wanted it. They all had something to gain by getting as much information out there as they could."
Of course, MLB's lack of a salary cap also means teams aren't hamstrung by what they can spend in the future. In the NFL, things are a wee bit different.
What this means for the NFL
In the 1960s, the NFL faced competition for players from the American Football League that led to an increase in labor costs. Yet while the leagues formally merged in 1970, they'd agreed to come together in 1966, two years before the NFL's first collective bargaining agreement with the NFL Players Association.
Unlike their NBA, NHL, and MLB peers, NFL players are up against several institutional factors that prevent guaranteed contracts from becoming more widespread:
The constraints of the salary cap. The cap went into effect in 1994, in conjunction with the advent of free agency after years of labor strife and court battles. NFL teams are not granted any exceptions to exceed the cap in a given year, and they also must account for anything paid to a player, though the bookkeeping can stash that money into the future, where it can limit what a team can pay to players in a given year once the bill comes due. Additionally, teams can roll over any unused cap space in a given year, which incentivizes many of them to squirrel away cap resources that might otherwise have to be spent.
Significant injury risk. A 2017 paper from the Football Players Health Study at Harvard University, which was funded by the NFLPA, found that (emphasis mine) "the mean number of injuries suffered per game in the NFL is approximately 4.9 times higher than the sum of those other leagues." Teams don't want to pay for that kind of risk any more than they might have to.
Much larger rosters. In-season NFL rosters are made up of 53 players, which means there are many more players to pay under the constraints of the cap. None of the other leagues' teams carry even half that total. In MLB, the roster number is 26. In the NHL, it's a maximum of 23. The NBA has just 15 - and the presence of one or two players can completely elevate a team. "Players kind of co-opted that," Haupert told me. "The players really drive the bus in the NBA. The NBA markets it around players, so it gives more power to the players, market-wise, and there's a smaller number of them that can make a difference."
Certain provisions of the collective bargaining agreement. The NFL's CBA has long been hardwired with restrictions on player movement: franchise and transition tags that allow teams to keep valued players from testing the free-agent market; the rookie wage scale that went into effect in 2011; and a rule that mandates that teams put any guaranteed money into escrow, minus a deductible that was increased from $2 million to $15 million when the current CBA was approved last year. The CBA also spells out that teams can terminate a contract for reasons related to "skill," "injury," or "cap" unless an individual deal overrides one or more of those provisions.
But the CBA itself doesn't have to be an obstacle to a fully guaranteed deal. A player just needs to have the market power to make it happen, which is often a trickier proposition.
"It's not like the NBA has guaranteed contracts in their CBA," NFLPA executive director for external affairs George Atallah explained to Defector's Drew Magary back in April. "They don't. Individual players and agents negotiate guarantees."
The fully guaranteed three-year deal Kirk Cousins got from the Minnesota Vikings back in 2018 is indicative of how difficult this process can be. As a starting quarterback with a decent track record who managed to make it to free agency, Cousins had unique leverage. (Yes, a supertsar like Tom Brady hit the market last year, too, but Brady was 43 and willing to settle for less than top-of-the-market money. So Cousins is a much more relevant case study.) When he signed with Minnesota, Cousins had just played back-to-back seasons on the franchise tag for Washington, which worked to establish a negotiating floor for any potential suitors of roughly $24 million per year.
Cousins used his bargaining position to lock down a full guarantee, but few players have the kind of negotiating power to get anything like a full guarantee beyond a year or two.
"The players never really had much leverage in the NFL," Maxcy told me.
Some veteran contracts with full guarantees extend those guarantees into Year 2, though a handful will go into Year 3, and usually with offsets that get a player's current team off the hook if he were to sign elsewhere after being released. The only NFL players with fully guaranteed contracts that extend beyond two years are most of those selected in the first round of the draft - conditions largely drawn into the rookie wage scale that took effect in 2011.
Per Over the Cap, the top 26 picks from 2020 all have all four years of their rookie deals guaranteed, while the rest of those taken in the first round all have guarantees that extend into Year 4. Teams also have an option for a fifth (and more expensive) year for all first-rounders. Second-rounders have two years guaranteed, with the top six having a portion of those guarantees stretch into Year 3. But the rookie scale is an enormous bargain for teams, a way to fill roster holes with younger, cheaper talent and cost certainty that lasts nearly as long as the average NFL career.
It will take a quarterback on the caliber of Aaron Rodgers or Russell Wilson to establish the kind of guarantee standard that might begin to trickle down. A few years ago, before both of them signed their current deals, there were reports that one or the other might insist on some sort of norm-altering benchmark such as a full guarantee, a player option, or a mechanism that pegs yearly salaries to the annual growth of the salary cap. In the end, both went with rather conventional, high-priced deals.
Then again, for star players like Rodgers and Wilson - as opposed to marginal or even above-average players, who make up the vast majority of the NFL's veteran workforce - there is evidence to suggest it's wiser to take a deal with front-loaded cash payments via some mechanism like a signing bonus instead of guarantees, even though that might seem counterintuitive.
This is because securing a bigger guarantee means having to accept a shorter, cheaper contract - in essence, bargaining away additional money in exchange for the guarantee. A front-loaded deal ensures that a player will collect a substantial portion of what's contracted even if a team were to terminate the contract early. And a signing bonus gets paid up front or within the first year, while the accounting has to be prorated across the life of the contract, which places a dead-money risk on the team that may make it less likely to cut a star.
As Ian Whetstone, an expert analyst of the Pittsburgh Steelers' cap, once told me, a boatload of front-loaded cash for a star player essentially functions as an effective guarantee: a team isn't going to cut a guy right after handing him a deal that averages $20 million a year, so why insist that first year be guaranteed?
The problem for most of the NFL's rank and file, of course, is that they lack this kind of leverage. The NFL is a have and have-not league, with the stars at one end of the salary scale making serious money, the draftees and the try-hards at the other end making substantially less, and a legion of guys like Kyle Van Noy stuck somewhere in between, capable of playing their way into a substantial payday but always at risk of having most of it taken away.
Dom Cosentino is a senior features writer at theScore.