Guaranteed Contracts are Death in a Salary Cap League
With all the news about the CBA out there these days (ok, a few stories Romero, Denz) I thought that a key point would be the key areas where the Players and League disagree. Some of these may have compromises, some will not. There will be points where one side or the other will get their way.
The main issues where the Players and League disagree are the following -
- Guaranteed Contracts
- Free Agency
- Club Autonomy
- Salary Floor
- Developmental Players
The secondary issues that are not necessarily CBA related (ht to denz again)
- Salary Cap
- Designated Player Slots
- Allocation
This isn't necessarily going to be another series of stories, but I think that the topics might build on each other. First though is something that soccer fans may have trouble accepting, but those that follow American sports will understand quite well - Guaranteed Contracts are Death in a Cap League.
I'm totally serious. This might be the one issue where I will never be on the players' side in the CBA debate. For those that followed the Sonics I offer up two names - Jim McIlvaine and Vin Baker. In any discussion of the effects on salary caps that an awful guaranteed contract has on the ability of a club or franchise to make moves for their future these are two of the most common names, and in Seattle they should be particularly powerful.
While yes, McIlvaine's contract was also awful in that it pissed off Shawn Kemp, it also limited the ability of the club to sign future players because they had millions tied up in awful - awfully large, and awfully bad. For years that contract influenced the decisions that management could make on future players.
Just when they could have gotten out from under tall, slow and part-timer they decided instead to spend even more money on a player who went from good, to mediocre. Vin Baker went from being a solid contributor to fat, slow and uncoachable. The Sonics, without a creative trade, would have been forced to eat that salary every year. Every single year over ten million dollars would be spent on a player that was completely useless. At times that was over 15% of the salary cap that Sounders ownership and their GM were forced to factor in as a sunk cost.
Baseball, and international soccer don't have this issue, but MLS will. It needs the cap so some level of parity exists, so that Seattle, Toronto, Los Angeles and Red Bull don't just own the league. Yes, it pains me as a Seattle fan to say that MLS needs a cap, but the fact is in these nations, at this time people in Salt Lake, in Houston, in Columbus, in DC have to think that they can win a Cup in any given year. Right now that's true. Without a cap, it won't be.
The NFL does not have guarantees, but even than clubs get hurt by bad decisions, and they should. To use a soccer metaphor (yeah, soccer metaphor on soccer site, odd huh?) think of Davino in Dallas. That was a bad decision. The club should suffer a bit for the signing, but not for the full two years (they didn't as they waived the player), and the NFL only punishes a team a bit in the years following a cut, this is applied through a pro-rated signing bonus.
The league most like MLS, the NHL does things a bit differently, it is a cap league, with the cap figured as a percent of league revenue, the cap has a floor and ceiling as well. It does well in installing an exception for long term injuries, as MLS currently does, but most radically due to the nature of the League's massive overspend in its last year before the 2005 CBA started the league reduced all player salaries by 24% in remaining years and allowed teams to buyout long-term contracts rather than force clubs to sit with massively overpaid players on the squad.
In the NHL deal, and the NFL deal (two hard cap leagues) MLS should find its model. The key is that players need a certain level of guarantee, but also clubs can't be hurt too much long term for the poor financial decision of a GM and/or Owner. It would also involve a certain level of compromise.
1 - While MLS contracts will not be guaranteed there will be a buyout value. This value would be a minimum amount (33%), or the percentage of a single year salary based on the match day of the season which ever is higher. That would be the contracts value v. the Salary Cap for the year. No further years or salaries would count towards future caps.
2 - A player released by a club, after being under contract would be a Free Agent. Free to sign with another club within MLS, other USSF or CSA sanctioned league, or any other FIFA sanctioned league in the world. A player not yet signed, but waived could still have their rights held for a maximum period to be negotiated by the Players and League.
3 - Allocation dollars will continue to not count towards the Salary Cap.
These two changes alone would grant the MLSPU a key element in their negotiations, while offering a limited compromise on the "guarantee" that enables clubs to take risks on players, but also to not be damaged in the long term for a poor contract. The Buy-Out Clause would mean that players that get cut still get some monies, and that they would be Free to sign with other teams, earning a new contract.
Is it perfect? No. But it is likely the best that the Players and League can get at this time, with the current financial environment in which the league operates (decent, but still in debts). Oh, and does the mention of Allocation seem out of place? It is, a bit, but again, note the NFL's concept of signing bonuses and that will give you a start as to how I envision the League working.
If you were a player would you accept this as a compromise? Any idea where I'm headed with the Allocation dollars?
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and if you don't believe it...
… look at the NBA. It’s ridiculous, and the horrible business mode that league has is one of the many reason my interest in the sport dwindled in the later Sonics era years…
I have no idea whether your idea is feasible or not — I’m simply not well-versed in the details of the CBA/MLS business model, et. al. to offer an opinion. I know that your idea seems like a “common sense” approach, which actually worries me. In my life as a Sports Fan, it is astonishing how rarely the people who run the “business” of the sport don’t make common-sense decisions. Let’s hope I’m wrong about MLS!
...that's MISTER Keller to you!!!
by malcontentjake on Dec 18, 2009 8:51 PM PST reply actions 0 recs
The version of "guaranteed" in the FIFA regs would be a good compromise
Rule 16 of FIFA’s Regulations on the Status and Transfer of Players states: “A contract cannot be unilaterally terminated during the course of a season.” If MLS implemented this rule, a player’s contract would be guaranteed for the season once it starts, but he could be released when the season ends. That means that the player has the assurance of a guarantee in that if the team can’t drop him in the middle of a season, but the team is protected from long term damage because as soon as the season ends they are once again free to release the player. The fair thing, of course, would be to make the player a free agent, so he can find another club.
by CarlosT on Dec 18, 2009 10:43 PM PST reply actions 1 recs
Even then, imagine a West Ham/Ljungberg situation happens here
Freddie counts as 18% of the cap, but what if the bottom just completely falls out, and in the MLS secondary window the Sounders are unable to sign a player because they have that money on their cap books.
As long as there is a Salary Cap, a guarantee of any sorts will dramatically impact a team’s ability to make the moves necessary to be a winner.
Allowing a formalized buyout system would actually just codify what happens in other FIFA leagues at this time, as recently happened wtih Sol Campbell and Notts County. It is a minor change, but a necessary one as long as there is a salary cap. I would be intrigued to find out if J-League and A-League follow that FIFA “right” because they are the other cap leagues which I know.
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I am not a Fan
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Sounder At Heart
by Sounder At Heart on Dec 19, 2009 6:53 AM PST up reply actions 0 recs
Also notable
That a renewing annual contract and guaranteed contract have very different meanings in the American sports landscape. The MLSPU is negotiating with people who have NFL backgrounds, not FIFA, not EPL. They need to use the same language when negotiating. The players play in the US and Canada, with precedence in contract law that applies in those nations.
It would seem to me to be a key to negotiate within that framework.
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I am a Sounder
Sounder At Heart
by Sounder At Heart on Dec 20, 2009 5:00 PM PST up reply actions 0 recs
I am not a lawyer, but ...
I don’t think a no-unilateral-terminations clause would be problematic in the context of US contract or labor law. Remember that there are guarantees in MLS now, they just kick in fairly late into the season.
The advantage of the FIFA way is it really is a compromise. The players don’t get fully guaranteed contracts, instead they get a bit more assurance that they won’t be chucked out on their ears randomly. The owners don’t get the right to drop a player pretty much whenever they want, but they aren’t saddled with a bad contract for years on end. And if you’re really worried about a West Ham/Ljungberg scenario, you could always write in a buyout option on a performance basis into a player’s contract, and it wouldn’t run afoul of the rule, because those would be non-unilateral terminations, as in they would have been agreed upon ahead of time, and therefore perfectly acceptable.
Finally, I don’t think it’s altogether a bad thing to make teams live with the results of a bad decision, especially if it’s only really for one season. Managing risks when signing players is something a GM needs to be able to do, and if a GM does that badly, why should the league necessarily bail him out?
by CarlosT on Dec 21, 2009 4:02 AM PST up reply actions 0 recs
We are a bit on the same page
I’m just offering that there is a built in buy-out rather than on a contract basis.
I am not a Supporter
I am not a Fan
I am a Sounder
Sounder At Heart
by Sounder At Heart on Dec 21, 2009 6:02 AM PST up reply actions 0 recs
The players would probably take that deal
My sense, built from zero evidence, is that the league is really wanting to clamp down on the players and is really unwilling to meet in the middle. In my opinion, most of the things the players are asking for will benefit the league in the long run, allowing it to attract better players and therefore improve the quality of the product. MLS will stagnate and die if the product doesn’t continue to improve and the league is going to need to be willing to take some risks to make that happen.
by CarlosT on Dec 21, 2009 4:30 PM PST up reply actions 0 recs
There is a ton of fear in the League offices
The history of American soccer is not success, and so they have fears.
Tonight, I’m going to look at either Allocation Dollars or Reserve League concepts.
I am not a Supporter
I am not a Fan
I am a Sounder
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by Sounder At Heart on Dec 22, 2009 10:20 AM PST up reply actions 0 recs
It would be ironic, then, if timidity ended up killing the league
That’s as much a danger as anything else.
by CarlosT on Dec 22, 2009 4:25 PM PST up reply actions 0 recs
it wouldn't kill the league to be timid
just prevent it from growing.
I am not a Supporter
I am not a Fan
I am a Sounder
Sounder At Heart
by Sounder At Heart on Dec 22, 2009 5:41 PM PST up reply actions 0 recs
I partially agree with this
I think the bit about guaranteed contracts is easier to fight for than within-league free agency, something the players are never going to get. The latter is simply religion to the owners.
But it is true that while the owners currently have a double-standard (overperform your contract, and they can delay a raise for years, underperform it, and you can be canned instantly) the players don’t want to end the double-standard, they want to apply it in the reverse direction, so that any player over-performing can force a transfer, while any player under-performing is safely ensconced in his contract.
And you’re right that a lot of the fans who don’t have enough experience with US sports history have not thought through the full ramifications of being ‘stuck’ with a player for years who isn’t performing to his salary.
'Gentlemen' he said,
'I don't need your organization,
I've shined your shoes,
moved your mountains and marked your cards,
but Eden is burning.
Either get ready for elimination,
or else your heart must have the courage,
for the changing of the guards.'
by Sgc on Dec 19, 2009 11:06 AM PST reply actions 0 recs
The solution will be painful
The more I have been thinking about this, and reading about it, I come back to a real sticking point. Players want contracts that are unbreakable, but at the same time they want the ability to become free agents and negotiate with other teams in the league while still playing for their team. To me it really seems that this might just be wanting your cake and eating it too.
IT is funny that so many of the world’s elite teams are running massive amounts of debt, while the MLS isn’t and our players are pushing for the system that is on the point of breaking the sport in Europe. If it weren’t for the huge television deals in England there are several EPL sides that would be declared null because they have so much debt.
I fear that if the players push too hard they will end up in a very bad place, one where contracts are one year long and their agents are forced at the end of each season to try and justify a new contract. A part of me would welcome this as it would put a lot of pressure on players to perform at a higher level, but I fear it would really cause havoc for the league with players moving each off season in massive numbers, causing fans to think that they have become like all the rest of US sports players, more interested in money than their team.
I use one simply example of why guaranteed contracts in MLS is a bad idea, ask DC United about Emilio and his 3/4 of a million dollar contract. He has been less successful each year as his salary has gone up, and now while he was still one of the better players on their team, should DC be allowed to ask for some of that money back? Or will they be allowed to ask him to drop back down to his 2007 pay of 300K?
A lot of sticky issues, I just hope both sides realize that the league is close to making some major inroads into the mainstream of US sports but a stoppage would kill that momentum and could be the death of the league. The confusion with the USL/NASL is on clear example of why the league has needed a strong central organization, but also a sign of why the future will need to start to look different in MLS.
by denz on Dec 19, 2009 11:16 AM PST reply actions 1 recs

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