LeBron James announced on Friday that he will be returning to Cleveland after four seasons and two championships with the Miami Heat. His announcement in Sports Illustrated that he would rejoin his old team, the Cleveland Cavaliers, ended a great deal of speculation and anxiety in the basketball world over where he would play next. His reasons for returning include wanting to raise his family in his home state of Ohio and wanting to lead the Cavaliers to a championship.
The world of sports contracts and NBA salaries is complex, but for the basics, and how they affected James’ decision, read on.
Free agency and contracts
A free agent is simply a player who is not under contract with a particular team at the time. The NBA differentiates between two kinds of free agents.
Unrestricted free agents can sign with any team.
Restricted free agents can sign with another team, but their current team has three days to exercise right of first refusal and keep their player by matching the other team’s offer.
Salary caps for teams and players
There are two kinds of salary limits in the NBA: limits on the amount of money a team can pay its players and limits on the amount of money an individual athlete can earn. These caps are determined by the league’s collective bargaining agreement.
Salary caps for teams. The NBA places a limit, or a salary cap, on how much a team can pay its players. The number is based on a percentage of the league’s earnings from the previous year, so the amount changes year to year. For the 2014-15 season, the cap is set at just over $63 million.
Salary caps for players. For a member of the team, salary is determined in large part by the number of years played. For a player like James who has been in the NBA for over ten years, rules regarding base-salary caps stipulate a maximum salary of roughly 35 percent of the team cap. That means James could technically sign a contract for $20.7 million per year.
“Soft” salary caps. While leagues like the NFL and the NHL have hard salary caps, the NBA’s salary cap is soft, meaning that there are exceptions to the rules. Some exceptions, like the Larry Bird exception, allow teams to sign their own free agents at an amount exceeding the cap. Exceptions like these allow flexibility for building a well-rounded, competitive team.
Luxury tax. The NBA applies a luxury tax in the form of a hefty fee to teams who spend more on players’ salaries than the cap allows.
The limits are intended to ensure a more even distribution of playing talent by preventing teams with more money from signing the most talented players, thereby reducing competition between teams. But for the individual player, it could mean he is not being paid what he is truly worth to the team’s franchise.
What free agency meant for James
Akron, Ohio, native James joined the Cleveland Cavaliers in 2003 and stayed with them until 2010, when he became a free agent. Due to his incredible ability and MVP status, several teams courted him, and he announced his intent to join the Miami Heat at a televised conference called “The Decision.” James was criticized heavily and publicly for his choice to leave the Cavaliers and for the way he announced it.
James selected the Miami Heat in large part because he wanted to play with superstars Dwyane Wade and Chris Bosh. Together, the so-called Big 3 helped earn the Miami Heat back-to-back championships in the 2011-12 and 2012-13 seasons. All three players took pay cuts in order to play together. James’ six-year, $110.1 million contract with the Miami Heat shorted him about $15 million total over those six years. This time around, however, James was vocal about wanting to sign for the maximum.
After ten days of free agency that started on July 1 – known as the NBA’s “silly season” – James announced his decision to rejoin the Cavaliers and signed a contract the following day. His two-year contract with the Cavaliers is reportedly worth $42.1 million. At the end of that contract, he will have the choice to be a free agent again, and then the speculation can start all over.
Photo: Wikipedia
