Aaron Hernandez Salary Cap Implication Thread

[Bergs]

This is a thread dedicated to discussing the Aaron Hernandez cap hit.
 
Let me preface this by saying I'm no expert on this, and I'm hearing conflicting reports. In a fair world, it seems like the NEP ought to be able to take no hit at all for releasing a dude who ends up being a murderer. As Odin Lloyd can attest, however, this is no fair world.
 
First of all, here's Barnwell's take from Grantland: http://www.grantland.com/blog/the-triangle/print?id=66991
 

Financially, the ramifications of the move are even murkier. In the short term, the Patriots will have just more than $10 million in dead money hit their cap as a result of cutting Hernandez. Because they released him a mere season after signing him to an extension, $10 million of his $12.5 million signing bonus, which was spread over the seven years in his extension, accelerates into the present. Since Hernandez was released after June 1, the cap hit is spread over two seasons, but combined with guaranteed base salaries for 2013 and 2014, the financial impact is noticeable. The Patriots will have $4.1 million in dead money for Hernandez on their cap this season, with a more painful $8.6 million coming next year.

The Patriots can try to recoup some of the money owed to Hernandez, but it's unlikely to prevent the deal from hitting their salary cap. NFL Network's Ian Rapoport noted that Hernandez's contract does not contain any "failure to perform" clauses that would allow the Patriots to skip out on paying him the remaining $3.25 million due from his signing bonus or his guaranteed base salaries in 2013 ($1.32 million) and 2014 ($1.14 million). According to Rapoport, most Patriots contracts contain such a clause, but Hernandez's deal only holds that to be the case in terms of his workout bonuses, which should save the Patriots a mere $82,000 in 2013 and $500,000 in 2014. The only way the Patriots could save more money would be if another team signed Hernandez, with their payments offsetting some or all of the money the Patriots were otherwise due to pay him.

 
And this from Reiss (http://espn.go.com/blog/boston/new-england-patriots/post/_/id/4744681/revisiting-details-of-hernandez-contract):
 

For those asking what the salary cap charge would be in the event the Patriots ever decided to terminate the contract, the charge would be the acceleration of the $12.5 million signing bonus. If that happened in 2013, Hernandez would count $2.55 million against the salary cap, and then in 2014 would carry a cap charge of $7.5 million from the remaining proration on the signing bonus.

 
This would all seem to be bad news. However, this bit of language from the same Reiss article gives me some hope:
 

One other factor to consider: A club can recover bonus money and avoid a cap hit if a player violates one of the league's personal conduct policies or defaults on contract language.

 
And this from the NFL's Personal Conduct Policy:

Players shall not murder motherfuckers in spectacularly stupid fashion.

 
OK, I made that last bit up (I did look up the policy, and violence is specifically mentioned). Point is, is there a possibility the Pats can avoid any cap hit whatsoever?
 
 
 

 

[Morgan's Magic Snowplow]

I don't know for sure. But I have read that the new CBA covers all this "failure to perform" and conduct policy, such that the absence of language in the contract is relatively meaningless.

It may be harder for the team to avoid the cap hit from the bonus, which has already been paid, than from the guaranteed salary, which seems easier to void.

 

[soxfan121]

I do not have an answer but I distinctly remember reading something, pre-murder investigation, about how Hernandez's contract was structured to pay him if he played and wouldn't if he didn't. But infant-brain-rot keeps me from finding the reference/thread. 
 
Further, Ian Rappaport is not a reliable source. Anything he says should be fact checked relentlessly. Mike Reiss, OTOH, has an impeccable reputation for accuracy. 

 

[Corsi]

I do not have an answer but I distinctly remember reading something, pre-murder investigation, about how Hernandez's contract was structured to pay him if he played and wouldn't if he didn't. But infant-brain-rot keeps me from finding the reference/thread. 

 
I remember this too, but think it may have been in relation to Gronkowski's extension.  Let me see if I can dig it up.
 
Edit: this may explain it:
 

ANALYSIS: Gronkowski has a higher earning ceiling, which he can feel good about if he performs at a high level over the course of the deal. One key part of his contract is a $10 million option bonus the team can pick up on the final day of the 2015 league year. That activates the final four years of the contract. For Hernandez, his ceiling might not be as high, but he received more up-front bonus money and also has one less year on his contract. The deal for Hernandez looks more “real” in the sense that he could realistically play it out as it doesn’t have the volatile spike that Gronkowski’s does in the final two years when it comes to base salaries.

http://espn.go.com/blog/boston/new-england-patriots/post/_/id/4728201/comparing-hernandez-gronk-deals

 

[teddykgb]

I very distinctly remember some murmurs at or near the very start of this saga where someone was reporting that the Patriots had protected themselves "very well" in case something like this happened.  Now we hear that there isn't even a basic morals clause in the contract.  It's hard to know which report to believe, but this is certainly an important issue given the actions by the Pats yesterday.  It was certainly the right people thing to do, and that's probably enough, but it'd be a shame if that cost them so immensely in terms of the salary cap, in particular.

 

[Corsi]

As to the signing bonus, the team’s decision to cut Hernandez makes it much more difficult to block the final payment or to recover any of the $8.75 million already issued to Hernandez.  As to the guaranteed salaries, multiple sources have indicated that Hernandez likely will not be entitled to any further payment.
 
Despite the absence of forfeiture language for the guaranteed salaries, the guarantee applies only to terminations made due to injury, skill (i.e., perceived lack of it), and the salary cap.  Because the Patriots cut Hernandez pursuant to paragraph 11 of the standard player contract, which permits termination of employment when the player “has engaged in personal conduct reasonably judged by Club to adversely affect or reflect on Club,” the guarantee evaporates.
 
As we understand it, that’s not merely the team’s position.  The NFLPA, we’re told, agrees with the interpretation.
 
While this doesn’t prevent Hernandez from filing a grievance aimed at getting the money, it’s a steep uphill climb and, frankly, the least of his concerns.
 
The more intriguing fight will arise in connection with the unpaid $3.25 million installment of the signing bonus.  That money already has been earned by Hernandez.  But cutting him, the Patriots apparently surrendered any ability to recover the money that has been paid or to keep the portion that hasn’t been paid.
 
Still, it currently appears that the Patriots will at a minimum force Hernandez to sue for the rest — and at most try to recover as much of the previously-paid signing bonus as they can.

http://profootballtalk.nbcsports.com/2013/06/27/hernandez-likely-wont-get-his-guaranteed-base-salaries/

 

[BucketOBalls]

I very distinctly remember some murmurs at or near the very start of this saga where someone was reporting that the Patriots had protected themselves "very well" in case something like this happened.  Now we hear that there isn't even a basic morals clause in the contract.  It's hard to know which report to believe, but this is certainly an important issue given the actions by the Pats yesterday.  It was certainly the right people thing to do, and that's probably enough, but it'd be a shame if that cost them so immensely in terms of the salary cap, in particular.

 
Isn't he facing "accessory to murder" at best?(if hist lawyers manage to confuse the issue of who did it enough...and it's quite likely to be worse than that)
 
How can that not violate the leagues conduct policy?

 

[DennyDoyle'sBoil]

http://profootballtalk.nbcsports.com/2013/06/27/hernandez-likely-wont-get-his-guaranteed-base-salaries/

 
Good stuff.
 
My read of the CBA is that in order to avoid a cap hit on guaranteed salary, you need only show that guarantee did not apply to the "reason" you cut the player.  Art. 13, Sec. 6(d)(iv).  So, the question is whether Herndandez's player contract guarantees future salary for cuts based on crimes.  Doubtful.  
 
Next is the portion of the signing bonus not yet paid, which this reports as being $3.5 million.  I would think the Patriots actually have a fighting chance here.  The relevant section seems to be Art. 13, Sec. 6(b)(iv).  it says the team gets a credit so long as "the Club fails to pay any previously allocated portion of a signing bonus (including any amount treated as a signing bonus)."  As I read this, so long as the team "fails to pay," it gets the credit.  This raises the question whether the Patriots have a legal basis to "fail to pay" the signing bonus.  That would turn on the player contract and the law of contracts.  Seems to me the Patriots are in a pretty good position to withhold the amount, claim it as a cap credit, and make Hernandez sue to try to make them pay it.  Given that his agent likely has a $150,000 interest in getting that payment made, this could theoretically be messy and maybe there is a remedy under the CBA or a streamlined process.  But either way, Hermandez won't be the most sympathetic plaintiff in the world, even to the NLPA.
 
As for the amounts already paid as a salary bonus, that looks pretty tough.  Again, the relevant section seems to be Art. 13, Sec. 6(b)(iv).  Once you actually pay a salary bonus, there appears to be only two ways to get a cap credit:  (1) if you get a "refund" from the player, or (2) if you have insurance that reimburses you for a signing bonus if the player does not play.  I would think a "refund" from Hernandez will be near impossible.  He's facing all sorts of civil liability and legal fees for his criminal defense.  Even if the Patriots sued him or brought an arbitration like they are doing with Fanene, I doubt there will be much to recover.  As for insurance, maybe they have it.  But even if they do, it's hard to think it would cover a situation where the team voluntarily cuts a player.  Perhaps that's why Schefter reported yesterday that by cutting him they cannot recover signing bonus.  Because I can't see how that would be true otherwise. 
 
Edit:  $3.25 million, not  $3.5 million.

 

[soxhop411]

Ben Volin ‏@BenVolin3m
To recap: Hernandez's 2013 cap number supposed to be $4.073m. Many expected it to rise to $5.092m. But currently listed at $2.55m
 
https://twitter.com/BenVolin
 
 
 
Ben Volin ‏@BenVolin22m
Interesting: #Patriots salary cap ledger currently has Hernandez as "released," but 2013 cap number of just $2.55m--no accelerated charges

 

[soxhop411]

Ben Volin ‏@BenVolin36s
Confirmed via Patriots source: Hernandez's cap numbers will be $2.55m in 2013 and $7.5m in 2014. They voided his guaranteed monies
 
 
https://twitter.com/BenVolin/status/350758703873536002

 

[Bergs]

Ben Volin ‏@BenVolin36s
Confirmed via Patriots source: Hernandez's cap numbers will be $2.55m in 2013 and $7.5m in 2014. They voided his guaranteed monies
 
 
https://twitter.com/BenVolin/status/350758703873536002

 
I find it insane that the Patriots are on the hook for a 7MM cap hit in 2014. What about  "a club can recover bonus money and avoid a cap hit if a player violates one of the league's personal conduct policies" would not apply here?

 

[JohnnyK]

I find it insane that the Patriots are on the hook for a 7MM cap hit in 2014. What about  "a club can recover bonus money and avoid a cap hit if a player violates one of the league's personal conduct policies" would not apply here?

"Allegedly"
 
No idea if earlier reports of the Pats forfeiting any chance to go after the money by releasing him are true, but I guess they will try to recover as much as possible should he be convicted.

 

[soxfan121]

I find it insane that the Patriots are on the hook for a 7MM cap hit in 2014.

 
It is the difference between actual cash paid out (which they could recover) and the salary cap rules (which looks only at the amortized signing bonus when determining "cap hit"). 
 
Bob Kraft might recover some of the signing bonus paid out, as in get the actual cash back, but the NFL CBA holds no provision that I am aware of that will eliminate the cap hit. 

 

[SeoulSoxFan]

It is the difference between actual cash paid out (which they could recover) and the salary cap rules (which looks only at the amortized signing bonus when determining "cap hit"). 
 
Bob Kraft might recover some of the signing bonus paid out, as in get the actual cash back, but the NFL CBA holds no provision that I am aware of that will eliminate the cap hit. 

 
While this is certainly true, the possibility that Goodell will make a special provision on cases like this -- basically allowing teams to make personnel decisions early on without worrying about salary cap implications -- cannot be ruled out. 
 
By making such a provision, Goodell sends a strong signal that teams will have more power to deal with player conduct. In turn, NFLPA will have a PR backlash if they choose to fight it.
 
I take BK at his word when he says the release was done w/o thinking of negative financial implications. However, that also would not preclude how teams will not get salary cap relief in certain circumstances, despite such languages not specified in the current CBA.

 

[soxfan121]

The NFLPA would LOVE for Goodell to try something like that - it gets them away from fighting for Hernandez and into a fight with the league about personal conduct, a policy of Goodell's they are obviously opposed to and willing to fight about. And I think Goodell knows it, which is why the Patriots and Kraft won't do anything at all. They'll take the cap hit and wait for Hernandez's case to resolve itself. Then - very quietly - they will file with an arbitrator (like they did with the Fanene injury) and hope to get the cash back or a levy on Hernandez's future earnings (depending on how the case turns out). 
 
The $7M cap hit is our (Pats fans) new thing to bitch about...and it's not going away until after the 2014 season.

 

[Super Nomario]

The NFLPA would LOVE for Goodell to try something like that - it gets them away from fighting for Hernandez and into a fight with the league about personal conduct, a policy of Goodell's they are obviously opposed to and willing to fight about. And I think Goodell knows it, which is why the Patriots and Kraft won't do anything at all. They'll take the cap hit and wait for Hernandez's case to resolve itself. Then - very quietly - they will file with an arbitrator (like they did with the Fanene injury) and hope to get the cash back or a levy on Hernandez's future earnings (depending on how the case turns out). 
 
The $7M cap hit is our (Pats fans) new thing to bitch about...and it's not going away until after the 2014 season.

The Pats are already withholding guaranteed money (deferred signing bonus payments) owed Hernandez per this report, even though it will still count on the cap. So the NFLPA will still have an interest here. In fact, they should care more about that than the cap implications; freed cap space is money that can go towards other players, while money that counts on the cap but is not paid is money taken out of players' pockets.

 

[Super Nomario]

Miguel thinks the Patriots got a little over $1 MM of salary cap relief related to Hernandez: http://boston.suntimes.com/new-england-patriots/7/119/82847/patriots-recently-received-a-1184000-salary-cap-credit-for-aaron-hernandez