2014 Buccaneers Salary Cap: Carl Nicks and the construction of a contract

Kim Klement-USA TODAY Sports

While some Bucs fans argue that the team should free up cap space by releasing too-often injured guard Carl Nicks, the truth is looking at his contract shows that it is nearly impossible to cut him - but does offer a lot of valuable insight into the way NFL contracts are constructed.

Change has come to Tampa Bay; Greg Schiano's been replaced by Lovie Smith, Jason Licht has been hired to take over from Mark Dominik, and there's excitement in the air and among the fan base. Yet, there's more change to come - the yearly re-shaping of the roster, as old players aren't re-signed to new contracts or are released from the team, and new players join the Buccaneers through free agency and the draft. With all of the excitement of change, it's natural that many Bucs fans are already looking at the list of prospective free agents and licking their lips.

A few years ago, the idea that Bucs fans could be excited about free agency was a laughable one, with the front office keeping the wallet firmly shut throughout the first few weeks of the league year as the stars and playmakers were signed by other teams. In the past two years, though, the team has gone from one extreme to the other, doling out lavish contracts to Vincent Jackson, Carl Nicks, Eric Wright and Dashon Goldson, not to mention Darrelle Revis (though not a free agency signing). This year, there are several players due to hit the free market who have relationships with the new coaching staff, and fans are already connecting the dots. Scroll down to comments sections of many Bucs Nation articles, and you'll likely see multiple people talking about signing Jared Allen and Charles Tillman - hell, due to addition of former Browns' OL coach George Warhop, there's even a section of fans banging the drum to sign All-Pro center Alex Mack and move Jeremy Zuttah back to guard.

Of course, this isn't baseball - you can't just sign every big name to hit the market, there's a salary cap to adhere to. The Bucs currently have just over $12M in cap room for 2014, according to overthecap.com (who I'll be referring to frequently throughout this article, so for brevity's sake I'll refer to as ‘OTC'). That may seem like a decent amount of cap room (as of January 22, that ranks as the 16th most in the league), it's not quite as much as you might think - if the team were seriously considering signing Allen and Tillman, bear in mind that between them, they earned over $22M in 2013. Naturally, being older players now, they're not going to command nearly as much in free agency, but they'll still take up a hefty chunk of that $12M - and the team would need to keep at least $3-4 million free for rookie contracts (for comparison's sake, last year's #7 pick - the Cardinals' Jonathan Cooper - earned $2.6M last season).

The question then becomes where to find that extra cap room from - again, many of our commenters have several suggestions: restructure Darrelle Revis' contract; give Donald Penn and Davin Joseph ultimatums (ultimata?) of "pay cut or be cut"; give Gerald McCoy an extension to lower his $15.6 million cap hit. Yet, the one suggestion that seems to be most repeated is that the team should cut Carl Nicks - normally attached with the argument that, if released with a ‘June 1st Designation', the move would instantly free up $7 million in cap room. For those who advocate this move, I have bad news for you:

There could not be a financially worse move the Bucs could make than cutting Carl Nicks. His roster spot is essentially guaranteed - the team cannot afford to cut him.

I understand why some want him cut - no matter how good he may be when healthy (and, in my opinion, when 100% healthy he's the best interior lineman the league has seen since Alan Faneca and Steve Hutchinson were in their primes, and has the highest ceiling of anyone on the team, including Revis). For the $25 million he's been guaranteed through the first two years of his contract, he's been able to play all of nine games for the Bucs. At his current contract, he'll have made $32 million by the end of the 2014 season. Nonetheless, I think that when you get a talent as rare as his, cutting him is not a decision you should make rashly.

This article, though, isn't about defending Carl Nicks. While researching some of the facts and figures to reply to a comment on a hastily-written fan post, I learned more about NFL contracts then I ever thought I'd want to know. By looking at Carl Nicks' contract, and how it prevents the Bucs from realistically being able to cut him, we can learn the complexities of how an NFL contract is constructed.

Signing and Restructure

Let's begin at the beginning. In the first 24 hours of the 2012 league year - when free agency began - the Bucs came to agreements with Jackson, Wright and Nicks, in that order. Nicks' contract was for 5 years at $47.5 million, of which $31 million was initially reported as being guaranteed. That was soon clarified, however - only $25 million was fully guaranteed; the other $6 million was guaranteed for injury. The contract broke down as follows: he would earn $6 million in the first year of his contract, plus a $6.5 million roster bonus; his second year salary would have been $12.5 million. Those two years represented the $25 million that was fully guaranteed; the following season his salary would have been $7 million, followed by a fourth and fifth year at $7.75 million each.

Things changed, however, in December of that year. The Buccaneers restructured both Nicks' and Vincent Jackson's contracts. The final three years of both players' five-year contracts remained unchanged, but their second year salaries - $12.5M for Nicks, $13M for Jackson - were effectively gutted, down to $715,00 for the former and $840,000 for the latter. This significantly reduced the pair's salary cap hits for 2013, which no doubt enabled Dominik to execute the trade for Revis. The rest of those 2013 salaries were then paid out immediately, which, as ProFootballTalk noted at the time, saved them each over half a million dollars by pre-empting an upcoming tax increase. Though the remainder of the 2013 salaries were paid out in 2012, for cap purposes they were turned into pro-rated bonuses - so, in the case of Nicks, that $11.785 million was turned into five $2.357 million chunks, to be added to the cap hit for the players during each year of their contract.

So, to recap so far: prior to that 2012 restructure, Nicks' contract looked something like this:

Year of contract

Salary

Cap hit

2012

$6,000,000 base salary + $6,500,000 roster bonus

$12,500,000

2013

$12,500,000 base salary

$12,500,000

2014

$7,000,000 base salary

$7,000,000

2015

$7,750,000 base salary

$7,750,000

2016

$7,750,000 base salary

$7,750,000

After the restructure, his contract became this:

Year of contract

Salary

Cap hit

2012

$6,000,000 base salary + $6,500,000 roster bonus + $2,357,000 prorated bonus

$14,857,000

2013

$715,000 base salary + $2,357,000 prorated bonus

$3,072,000

2014

$7,000,000 base salary +

$2,357,000 prorated bonus

$9,357,000

2015

$7,750,000 base salary + $2,357,000 prorated bonus

$10,107,000

2016

$7,750,000 base salary + $2,357,000 prorated bonus

$10,107,000

Post-restructure, the contract is still worth a total of $47.0 million, but as you can see, it's now distributed differently. Here's the key: those prorated bonuses, in bold italics, were already paid out as a lump sum in 2012. That means, no matter what, they HAVE to be ‘paid' - not physically in cash, but they have to be clocked against the salary cap over the life of the contract. Something else worth pointing out - that fully-guaranteed $25 million? If you add together his first and second year base salaries, his first year roster bonus, and the sum total of those prorated bonuses (which, in terms of cash, has already been paid), then you'll see that, on paper, Nicks has already earned all of that $25 million.

Cuts, bonuses and the June 1 designation

Going back to OTC; they have on their website a "salary cap calculator" , where you can fiddle around with your roster, exploring different contract options to see how it affects your cap space. If you go to the calculator and select to cut Nicks, you'll see his cap number drops from $9.357 million to $7.071 million, freeing up a little over $2 million. If, however, you choose to give Nicks a "June 1 Cut" - cutting a player with a ‘June 1st designation', then Nicks' cap number for 2014 drops much more significantly, from $9.357 million to $2.357 million, freeing up $7 million in cap space. It's this potential scenario that has some Bucs fans believing that Nicks is a viable option to be cut, releasing that $7 million to let the team sign some premier free agents.

Now, it might just be me not paying attention, but it appeared to me that the first time much was really made of this ‘June 1' rule was last offseason, with it not being a regularly reported-on instrument available to teams to manage their cap in previous free agency periods. But what exactly does that ‘June 1' designation mean?

First, to explain Nicks' cap numbers according to the OTC calculator. The $9.357 million that represents his current cap number comes from his $7 million base salary, and the $2.357 million bonus. Between the 2012 $11.785 million payout, 2012 $6.5 million roster bonus, 2012 $6 million base salary and 2013 $715,000 base salary, that guaranteed $25 million has been paid out, so cutting Nicks should (and does) take the base salary off the books. However, because the prorated bonuses represent money already paid, they have to be marked against the salary cap. Cutting Nicks means that while his base salary is subtracted from his 2014 cap number, the prorated bonuses due to be counted against the cap in 2015 and 2016 are accelerated, so that they are claimed against the 2014 cap. Those three prorated bonuses add up to $7.071 million - Nicks' cap number if you just plain cut him on the OTC calculator.

The 2011 Collective Bargaining Agreement, however, gives an ‘out' for teams who don't want to have to pay all of an accelerated bonus in a single cap year, by creating a deadline of June 1 - which you can find (for those interested) in Article 13, Section 6b(ii)1 of the CBA. If a player is released on or after June 2, then only the money that was guaranteed to him during the current year counts against the current year's cap; all other guaranteed money counts against the following year's cap. To use Nicks as an example:

Release date

2014 cap number

2015 cap number

On or prior to June 1

$7,071,000
(2014 + 2015 + 2016 prorated bonuses)

$0

On or after June 2

$2,357,000
(2014 prorated bonus)

$4,714,000
(2015 + 2016 prorated bonuses)

So, by cutting Nicks outright the Bucs get just over $2 million in 2014 cap space, according to OTC, but by using the June 1 designation, they would free up $7 million in 2014 cap space, at the cost of carrying $4.714 million in dead money against the 2015 cap.

Before you think that this is an acceptable price to pay for a significant increase in 2014 cap room, it's not quite that simple. Or, rather, it's the most simple thing in the world, people just appear to have looked past it: using a June 1 designation doesn't actually take effect until June 2. Until that point, in terms of cap number, it's as if you never cut the player. For demonstration's sake, let's say the Bucs cut Carl Nicks on March 11, the first day of the league year and the date free agency begins. This is how his cap number would change, depending on whether or not the June 1 designation was used.

2014 cap number March 10

2014 cap number March 11-June 1

2014 cap number June 2

2015 cap number

Without June 1 designation

$9,357,000

$7,071,000

$7,071,000

$0

With June 1 designation

$9,357,000

$9,357,000

$2,357,000

$4,714,000

As you can see, even though in this scenario he'd be cut on March 11, by using a June 1 designation Carl Nicks would still carry his original 2014 cap number until June 2. In other words: yes, cutting Nicks with a June 1 designation, according to OTC's numbers, would free up $7 million in 2014 cap space - but not until two and a half months into free agency. Allen, Tillman, Mack, will all have been long gone by then.

The infamous offset language

So why would a team release someone early with a June 1 designation, instead of just physical waiting until June 2? The answer is one of the last contested aspect of rookie contracts now that there's a cap in place: offset language. If a player has offset language in his contract, then if he is a cut by Team A who still owes him guaranteed future money but is then signed by Team B, then the amount Team B pays that player is taken away from the money Team A still owes him.

Let's say that a player (for argument's sake, let's call him Joe Bloggs) is cut by the Bucs on March 11 of this year, has offset language in his contract, and is due $10 million guaranteed for 2014. Bloggs then signs with, say, the Panthers, who will pay him $6 million for 2014. Due to the offset language, Bloggs would still get his $10 million - $6 million from the Panthers, and $4 million from the Bucs. Accordingly, Bloggs would still count $4 million against the Bucs' 2014 cap, even while playing for the rival Panthers. If, however, Bloggs didn't have offset language in his contract, then the Bucs would owe him all of that $10 million - and have to carry that $10 million against the 2014 cap - while the Panthers pay him $6 million, allowing Bloggs to earn $16 million for 2014.

It should be clear, therefore, why a team would use a June 1 designation. Following on from the previous example, let's say in addition to having his $10 million base salary guaranteed in 2014 (but with offset language), Bloggs is also due a prorated bonus of $2 million for 2014 - 2016. If the Bucs release him outright, he would count $16 million against the 2014 cap, but be off the books for 2015. If the Bucs, however, cut him with a June 1 designation, then up until June 1 he carries a $16 million 2014 cap hit; from June 2 onwards, though, he would carry just a $6 million 2014 cap hit - his 2014 $2 million bonus, plus the leftover $4 million that was offset by the Panthers paying him $6 million (with the remaining $4 million from his 2015 and 2016 bonuses counting against the 2015 cap).

If the Bucs physically waited until June 2 to release Bloggs, and another team signs him at that point, then the offset would still count - but it's June, not just two and a half months into free agency, but also after the draft and subsequent influx of undrafted free agents. How many teams on June 2 would have both the roster need and the cap room to sign a player to a significant contract? By releasing Bloggs on March 11 with a June 1 designation, the Bucs' cap figures might be the same as if they released him on June 2, but he has a much better chance of being signed to a significant contract by another team - meaning a greater amount of the Bucs' guaranteed salary will have been offset, thereby lowering the 2014 cap number from what it would have been if they had actually waited until June 2.

That wouldn't be the case for Nicks, though. According to OTC, the Bucs don't owe him any more guaranteed base salary, just the prorated bonuses. There can never be offset for prorated bonuses because, while the cap hit for the bonus is spread over the life of the contract, the money itself was already paid in December 2012. Even if Nicks was released, and then signed with another team, it wouldn't affect the cap space, since the cap hit from the bonuses is for money already spent by the team, so must eventually be counted against the salary cap. (On a side note, each team is only allowed to release up to two players with a pre-emptive June 1 designation. Naturally, the only advantage would be to use those designations on players whose guarantees can be offset.)

The conditional guarantee

You might have noticed that I continually have used the phrase "according to OTC" when referencing what Nicks is due. That's not by coincidence; it's because it's the numbers from  OTC's salary cap calculator that is typically quoted when someone makes an argument for cutting Nicks - and because, with all due to respect to them (who do fantastic work), OTC are wrong, or at the very least, offer an incomplete view of Nicks' contract.

As I've shown, on paper, Nicks' fully-guaranteed $25 million has been paid by his 2012 & 2013 base salaries, his 2012 roster bonus and the payout that became those prorated bonuses. That's just his fully-guaranteed money, though; Nicks also has $6 million guaranteed against injury - and in case you didn't notice, Nicks has been through his fair share of injuries over the past two years.

Fox Sports' Mike Garafolo, in an article that paints a murky picture of Nicks' future, reported that of Nicks' 2014 $7 million base salary, $6 million is guaranteed against injury. Bucs Nation has not only had those figures confirmed, but has learned that there's even more to the puzzle - $6 million of Nicks' 2014 $7 million base salary is guaranteed for injury WITHOUT an offset. This means that the $6 million has to come from the Bucs, and has to be fully counted against the 2014 salary cap, if he is cut due to injury.

This $6 million is not mentioned or included in OTC's cap calculator, possibly because they only count fully-guaranteed salary in their numbers. So let's say the Bucs release Nicks - and you'd have to imagine that it would be because of his injuries. Here's a comparison of how cutting Nicks would affect his cap number:

Roster status

2013 salary construction

2014 cap number

On roster

2014 $7,000,000 base salary + 2014 $2,357,000 prorated bonus

$9,357,000

Cut

2014 $6,000,000 base salary guaranteed for injury +
2014 $2,357,000 pro rated bonus +
2015 $2,357,000 pro rated bonus +
2016 $2,357,000 pro rated bonus

$13,071,000

That's right; cutting Nicks wouldn't free up just over $2 million, but would rather increase his cap number by just under $4 million. Even with the June 1 designation, then Nicks' 2014 cap down would still go down to just $8.357 million - freeing up only a million dollars in cap space, and even then, not until two and a half months after free agency begins.

There is one option available to the Bucs, though: claiming that Nicks' is fully healthy and able to participate in football practices and games, and is being cut for performance-based reasons. This would allow the Bucs to release Nicks without having to pay any of the $6 million guaranteed against injury. And if you believe that Nicks, his agent, or the NFLPA would be willing to accept such a decision by the Bucs, then I have a bridge to sell you.

If Nicks is cut, then you can be assured that his representation, and the union, would immediately file a grievance. What happens in that situation? The answer lies in the CBA, Article 13, Section 5e. That part of the CBA dictates that 40% of the disputed amount is to count towards that year's cap number; if the grievance is over turned, then that 40% is reimbursed to the team by increasing the following year's salary cap by the same amount - but if the grievance is upheld, then the following year's salary cap is reduced by the remaining 60%.

So in terms of Nicks, should the Bucs release him but claim that it is not an injury-related move, they would still need to carry $2.4 million against the 2014 cap as a result of the inevitable grievance. They would then either have $2.4 million added to the 2015 cap, or be deducted $3.6 million from the 2015 cap, depending on the outcome of the grievance.

Assuming that the Bucs do try and get out of paying the $6 million, then Nicks' 2014 cap number is likely to be $9.471 million - $114,000 greater than it would have been to keep him on, with a risk of then having a further $3.6 million taken away from the 2015 cap.*

Where can the Bucs go from here?

These are the Buccaneers' options for Carl Nicks in 2014:

Action

Cap implications

Keep

$9,357,000 against 2014 cap

Cut

$13,071,000 against 2014 cap

Cut, June 1 Designation

$8,357,000 against 2014 cap AND
$4,714,000 against 2015 cap

Cut, no injury guarantee

$9,471,000 against 2014 cap AND

Will have $2,400,000 added to 2015 cap OR
Will have $3,600,000 taken away from 2015 cap

Cut, no injury guarantee, June 1 Designation

$4,757,000 against 2014 cap AND

$4,714,000 against 2015 cap AND

Will have $2,400,000 added to 2015 cap OR

Will have $3,600,000 taken away from 2015 cap

As you can see, the only option that would actually reduce Nicks' 2014 cap number is to cut him, claim that the cut is not injury related, and use a June 1 designation - which, again, wouldn't take into effect until two and a half months into free agency. Even then, the Bucs would be risking $8.314 million of their 2015 cap, between the possible outcome of the injury grievance and the rollover of the prorated bonuses that comes from using the designation.

The answer, then, is obvious: for 2014, Carl Nicks is essentially uncuttable. Cutting him would, at best, release just over $2 million in cap space for the beginning of free agency, and at very worst could create  $13.786 million in dead money against the 2014 cap. Even if Nicks retired (and one would assume it would be retirement due to injury), then the team would still owe him all of the remaining prorated bonuses, injury guarantee, and anything left outstanding from the fully guaranteed $25 million - and that would all count against the 2014 cap, so it's better for the Bucs if he doesn't retire.

The only option is to keep Nicks on the roster for 2014. In 2015, Nicks should have earned over $31 million across the first three years of his contract - assuming that there are no performance-based clauses that might alter his base salary - meaning that all guarantees, including the injury guarantee, will have been earned. The Bucs could then cut him, with only the 2015 and 2016 bonuses left to be paid, which would be accelerated to count as $4.714 million against the 2015 cap. As Nicks' current cap number for 2015 is scheduled to be $10.107 million, this would be a wise decision.

All that was a very complicated way of saying: "no, you will not save any money by cutting Carl Nicks - it'll actually cost the team cap space to cut him". However, hopefully it's given you some insight into the way NFL contracts are constructed, the different ways they can count against the cap, and the various mechanisms available to NFL teams to strike that balance between contract and cap. In the meantime, all we can do is hope that Nicks' foot injuries improve so that he can get back to being that dominant lineman he's shown he can be when healthy.

Thanks to @NFLosophy for his number checking and his help with researching for this article

*We originally wrote that there may be $715k outstanding from Nicks' $25 million guarantee, but have since learnt that this is unlikely to be the case.

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