RealGM Analysis
Article I, Section 1(p) of the Collective Bargaining Agreement details the Designated Player Rookie Scale Extension provision.
How the Designated Player Works
It only applies to players who sign rookie extensions: Before getting into the nitty gritty of the rule, this core concept must be made clear: rookie scale extensions can be agreed to during the offseason after a first round pick (only first round picks are subject to the rookie sale) has played three seasons in the NBA. If someone was drafted in the second round or a first rounder waits until after that window to sign their next contract, they are not subject to the rules pertaining to Designated Players.
For example, Kawhi Leonard and the Spurs waited to sign his contract until after his fourth season, possibly to keep his low cap hold on the books. Since his new contract was not a rookie scale extension, the Designated Player rules did not apply.
The first year of a Designated Player extension must be worth at least the 0-6 season 25% maximum: While teams and players can still agree on how to handle circumstances where the player qualifies for the higher 30% max through the Rose Rule, the contract cannot be for less than the standard maximum salary for players with 0-6 years of NBA experience. This came up most notably when the Nuggets had to re-work their extension with Kenneth Faried because it added five seasons for a lesser value. They adjusted it to a four-year, $50 million deal since the Designated Player amount was too lucrative.
Designated player extensions must have 7.5% annual raises. While there is potential wiggle room on starting salary for Rose Rule players as discussed above, the annual raises cannot be less than the maximum 7.5% allowed under the current CBA.
There are restrictions on how many Designated Players a team can have on roster at any one time: The more well-known attribute of this rule is that a team cannot sign someone to a Designated Player extension while someone else they signed is still on one of those contracts. For example, John Wall inked a Designated Player extension in 2013 so Bradley Beal could not have agreed to one with Washington when extension-eligible in 2015. Interestingly, there is an additional restriction: no team can have traded for more than one player currently playing on a Designated Player extension. Since the Knicks acquired Designated Player Derrick Rose in a trade this offseason, they would not be allowed to trade for another player on a Designated Player extension while he is on their roster and on that contract (which expires after the 2016-17 season). Teams can have a maximum of one Designated Player extension that they signed and one they acquired via trade.
One previously unresolved possibility has also recently been explained. Russell Westbrook is the Thunder’s drafted Designated Player but agreed to a renegotiation and extension off that Designated Player extension. The question was when Westbrook no longer counts against the Thunder’s restriction and according to reporting from the Norman Transcript’s Fred Katz, it will be until Westbrook’s original Designated Player extension ends after the 2016-17 season. That also means Thunder center Steven Adams is ineligible for a Designated Player extension with Oklahoma City.
Designated Player extensions can have a fifth-season option: While the extension must add five seasons to the rookie scale contract and has specifications in terms of salary and annual raises, it can have an option on that final season. Most recently, Anthony Davis secured a final-season player option on his Designated Player extension in 2015.
Recent uses of the Designated Player
As of this writing, no one has agreed to a Designated Player extension in the 2016 offseason. Other than Rudy Gobert and Steven Adams, there may not even be any particularly strong candidates for it with Giannis Antetokounmpo agreeing to a four-year, below max extension in late September.
In 2015, two members of the 2012 Draft class agreed to Designated Player extensions: Anthony Davis with the Pelicans and Damian Lillard with the Trail Blazers. Incidentally, fellow 2012 draftees Bradley Beal (Wizards) and Andre Drummond (Pistons) signed five-year max contracts with their current teams but both did so after their fourth season so their franchises are not subject to the Designated Player restrictions.
The future of the Designated Player Provision
After five years, it proves hard to ascertain a natural constituency of supporters for the Designated Player. The team arguably most affected by it (Minnesota, since they gave Kevin Love a shorter extension to keep the Designated Player open for Ricky Rubio) is a small market franchise that drafted well and it has not hurt the best teams’ ability to secure and retain talent.
That said, the next CBA could go in a series of different ways even without the Designated Player. While some will argue for simply opening up extension length to non-max players, removing the restriction in terms of number of Designated Players could work as a solution too. That way, teams still have to pony up for that extra season even without the same trade-offs. Others will argue that artificially limiting contract length for non-max players is unfair to those individuals and they will have a valid point since any extension requires the agreement of all parties.
While not the most impactful rule in the Collective Bargaining Agreement, Designated Player extensions have played a meaningful part in some huge events over the last five years and are a key component of the overall extension and free agency picture.
