Explaining the NBA's "Maximum Contract"

During the offseason, the term “maximum contract” is often thrown out loosely. So loosely, in fact, that I’ve heard it thrown at three players of completely different levels — Enes Kanter, Draymond Green, and LeBron James.

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There was talk that Kanter would command a “max deal” in this year’s free agency, and he eventually did: the Thunder matched the Trail Blazers’ four-year, $70 million offer to Kanter. There was also talk of the Warriors offering Draymond Green a “max deal.” And of course we all knew LeBron James was going to get one; any team that was able would have exuberantly paid him the “max.”

But did this mean that Kanter is going to be paid the same amount as, say, LeBron James? The same amount as Kobe Bryant? Enes Kanter is making the same amount of money and LeBron James and Kobe Bryant?!

The short answer is no.

But I was confused, and you might be too. So here’s an explanation of the NBA’s rather convoluted “maximum contract.”

1. First, it’s all about the salary cap. The salary cap is primed to explode next year, but for this 2015-2016 season it’s a hefty $70 million. Players earning a “maximum contract” earn a percentage of the cap.

2. The percentage is based on the number of years the player has been in the league. Here’s how it breaks down:

Years of Experience	% of Cap	2015-2016 Max Salary
0-6	25%	$17.5 million
7-9	30%	$21 million
10+	35%	$24.5 million

3. Players can earn 105% of their last salary, even if it was a maximum salary. So that’s how Kobe keeps making so much more than other guys on “max contracts.” But you can take the salary that’s bigger; if a player is commanding a max deal, but 105% of his last deal is less than the max, he can still take the max contract.

4. Annual Raise Percentage: If a team owns a player’s Bird Rights, his salary can be raised 7.5% each season. But if he signs a max contract with another team, they can only raise him annually by 4.5%. Bird Rights can only be obtained if a player has played three or more years with a single team, but rights can also be transferred if a player is traded.

So this is why we heard about Dwight Howard a few years ago taking “less money” to sign with Houston, while he was still getting the max. Had Howard re-signed with the Los Angeles Lakers, who owned his Bird Rights, he could have earned more money over the course of his contract with them. Same thing with DeAndre Jordan this year, who will make slightly more with the Clippers than he could have with the Mavericks.

5. Derrick Rose Rule. Wait, but what about Anthony Davis and Kevin Durant? They haven’t been in the league for too long, so are they going to make the same amount of Enes Kanter?

No, thanks to the Derrick Rose Rule, which allows a player to make a higher starting salary starting in his fifth year in the league. To do so, a player must have been the MVP, been named to an All-NBA team twice, or have been voting an All-Star starter twice. Then they can receive 30% of the cap, like an older, 7th year player could. Durant has already been profiting from the rule, and Davis is expected to as well; an All-NBA team and spot as an All-Star starter seem almost certain for the uni-browed superstar.

Jan 27, 2015; Oakland, CA, USA; Chicago Bulls guard Derrick Rose (1) tries to work around Golden State Warriors guard Stephen Curry (30) during the fourth quarter at Oracle Arena. Bulls won 113 to 111. Mandatory Credit: Bob Stanton-USA TODAY Sports

So what does this mean for the Warriors?

Currently they have Steph Curry on the NBA’s biggest bargain — $11 million this year, and $12 million next year — and yet are still on the books for $97.8 million in contracts next season. With the tax line set at $84.7 million for next season, the Warriors will pay $22 million into the NBA’s luxury tax, according to Tim Kawakami.

The 2016-2017 cap is projected to be $89 million, and the luxury tax $108 million. The Warriors currently have $84.8 million on the books, although it is likely that Festus Ezeli and Harrison Barnes will choose to become restricted free agents — meaning the Warriors can match any offer they receive on the open market — instead of taking their “qualifying offers” of $3 and $5 million, respectively.

And then comes the 2017-2018 season during which the salary cap is projected to boom to $108 million and the luxury tax to $127 million. It can also be known as the year Steph Curry gets paid — the reigning MVP, barring injury, finally getting paid like one. Curry’s max deal — about $32 million, with current projections — comes at an interesting time: only he, Draymond Green, and Klay Thompson — as of right now — will have guaranteed contracts.

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The Big Three, the Splash Bros + One, seem to be here to stay, but who will the Warriors surround them with? The Warriors have flexibility; they can resign Bogut, Iguodala, and Livingston in 2017, or they can surround them with new talent.

My Lakers fan friends have been talking about their cap space, and about how LA is a “destination,” but the Warriors too are going to have cap space, even as soon as 2016: Shaun Livingston’s contract is non-guaranteed, and the cap is expected to balloon.

And with the growth of Silicon Valley, the home of the world’s greatest technology companies and startups, the business center of the future — who’s to say we aren’t the next destination? The Warriors have a promising, talented coach, a Big Three, and fans who have been filling up the arena for decades, win or lose.

This year’s championship was only the beginning; the Warriors are going to be a marquee destination for years to come.

Now review the “maximum contract” stuff. It’s pretty confusing.

Maybe you’ve already forgotten. Quick: What’s a Bird Right?

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Explaining the NBA’s “Maximum Contract”

By Hutchinson Fann | Jul 29, 2015

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