Article VII, Sections 6(e)-(g) of the Collective Bargaining Agreement lay out the terms for the Mid-Level Exceptions.

While Bird rights carry the heavy lifting for teams looking to retain their own free agents, the Mid-Level Exception is often the most powerful tool over the cap teams have to add new talent. 

The Three Mid-Level Exceptions:

There are three different Mid-Level Exceptions but each team can only use one at most in a given league year. The current CBA changed the structure from a single MLE to three that function in different circumstances.

The Non-Taxpayer Mid-Level Exception can be used by teams under the apron (always exactly $4 million above the luxury tax line) and not so far under the salary cap to lose their exceptions. It is the largest of the MLE’s in terms of annual value and can be used to sign players for up to four seasons.

The Taxpayer Mid-Level Exception can only be used by teams over the apron. It has a lower annual value (about 60% of the Non-Taxpayer MLE this season) and contracts can only be three seasons at the most. 

The Room Mid-Level Exception becomes available when a franchise drops so low below the salary cap that they lose the use of exceptions. It has the lowest annual value (about 50% of the Non-Taxpayer MLE this season) and contracts cannot be longer than two seasons. 

How the Mid-Level Exceptions Work: 

Teams can use one Mid-Level Exception every season- Unlike the Bi-annual Exception, using the MLE one season has zero effect on their ability to use it the next season. 

The amount of each Mid-Level Exception is specified in the CBA and does not vary based on the salary cap- For better or for worse, the Collective Bargaining Agreement dictates the amount of each MLE for each season. RealGM has the specific amounts, as does Larry Coon’s invaluable CBAFAQ. 

Each Mid-Level Exception can be split; While much more prevalent for the larger Non-Taxpayer MLE, each of the Mid-Level exception variants can be split among multiple players during a given season.

The Mid-Level Exception cannot be used to acquire a player via trade; The MLE’s do not work like trade exceptions. 

There is one other nuance that can be useful to understand: Since using any of the benefits available only to non-tax teams triggers a hard cap at the apron (meaning they cannot spend more than $4 million above the luxury tax line for any reason), a team signing someone using the Non-Taxpayer Mid-Level Exception would prevent them from going over that line. However, if the team spends less of the Non-Taxpayer MLE than the amount of the smaller Taxpayer MLE (smaller in money and maximum years), it can be reclassified and the hard cap will not apply because of it. Interestingly, Section 6(g)(2) says that a team using the Taxpayer Mid-Level Exception cannot then use the Non-Taxpayer MLE, so a franchise that signs a contract for the Taxpayer MLE and then moves under the apron cannot use the increased flexibility to sign anyone else.

The Purpose / Future of the Mid-Level Exception:

At its most basic, the Mid-Level Exception functions as a way for expensive teams to add more talent. Since the current CBA limits the tools for over the tax teams to add talent, even a comparatively limited MLE still holds plenty of value. The current CBA’s handling of the three different Mid-Level Exceptions has worked very well but the players and owners must consider tying this essential team-building piece to the salary cap because it has quickly lost its relative value due to a skyrocketing salary cap fueled by increased revenues.

Beyond that sort of change, it appears unlikely that the next Collective Bargaining Agreement will bring about as large a change as the current one. More likely, it will tweak the relative strengths of the three MLE’s while maintaining the general structure.