Get a closer look at how restricted free agency, unrestricted free agency and other terms work.

Free Agency Terminology

Below are some basic facts and things to know about several key terms often used and referred to during the free agency process in the NBA.

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Restricted Free Agency

A restricted free agent (RFA) can sign an offer sheet with any team, but the player’s original team can retain him by matching the terms of that offer. The original team is said to have the “right of first refusal.”

Restricted free agency exists in the following situations:

• Following the fourth year of rookie “scale” contracts for former first-round Draft picks.

• For all veteran free agents who have been in the NBA for three seasons or less. The exception to this rule is a first-round Draft pick following his second or third season if his team doesn’t exercise its option to extend his rookie-scale contract for the following season. These players then become unrestricted free agents.

• A player coming off a two-way contract was on an NBA active or inactive roster for at least 15 days in the season beforehand.

There are five basic options for a restricted free agent:

• Accept his team’s prior qualifying offer, play out the season and become a free agent the next summer.

• Accept his team’s maximum qualifying offer (where applicable) and play under that long-term deal.

• Negotiate a new contract with his original team that is independent of the qualifying/max qualifying offer.

• Sign an offer sheet with another team through March 1, which his original team has an opportunity to match (see below).

• Negotiate a sign-and-trade if he hasn’t signed an offer sheet with another team.

• If there is no qualifying offer, contract or offer sheet signed for one year, the original team can submit a new qualifying offer and the player will be a restricted free agent the next summer.

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Offer sheets

When a restricted free agent wants to sign with another team, he and the new team sign an offer sheet. The terms of that deal — which must be for at least two seasons — are given to the player’s original team, which has two days to match. If the team matches, then the player is under contract with his original team, but at the principal terms of the offer sheet. If the team passes on matching within two days, the player is under contract with the new team.

If the player for some reason refuses to report for a physical with the original team within two days of the match, the first refusal exercise notice is in play until the player reports. The original team also can withdraw its first refusal exercise notice if the player doesn’t report for a physical. At that point, the notice and the offer sheet are invalidated and the player becomes a restricted free agent again. He cannot sign with or be acquired by the offer sheet team for one year.

The team making the offer must have enough salary cap room for the offer sheet and must maintain that room until the offer sheet becomes official or the original team exercises the right of first refusal. The original team cannot match an offer greater than its salary cap room. That original team must have room for both the regular salary and any unlikely bonuses the offer sheet includes.

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Qualifying offers

For a player to become a restricted free agent, his team must submit a qualifying offer to the player between the day after the last game of the NBA Finals and June 29.

The qualifying offer is a standing offer for a one-year guaranteed deal, which becomes a regular contact if the player decides to sign it. This ensures that the team does not gain the right of first refusal without offering a contract themselves.

If a player is coming off a regular (non-Two-Way deal), he may qualify for a higher or lower qualifying offer provided he met (or did not meet) the “starter criteria” the previous season — or the average of the previous two seasons. Starter criteria are based on starting at least 41 games or playing at least 2,000 minutes in the regular season.

Qualifying offers expire on Oct. 1, but can be extended. However, the extension of a qualifying offer cannot go past March 1. If the deadline passes and the qualifying offer is neither withdrawn nor accepted, the player continues to be a restricted free agent. Teams and players are free to negotiate a new contract after the qualifying offer expires as the deadline only affects the player’s ability to accept his qualifying offer.

Players can always accept the qualifying offer and play the following season under its terms. This is sometimes done to ensure unrestricted free agency in the following offseason.

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Unrestricted Free Agency

In short, an unrestricted free agent (UFA) is free to sign with any team. Once they sign, they are a part of that new team.

However, some unrestricted free agents have options on their existing contracts that, if exercised, may impact their choices.

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Free Agency Moratorium

The Free Agency Moratorium is a negotiation period from July 1-6 in which teams may not sign most free agents or make trades. Starting at 6 p.m. ET on June 30, teams may negotiate deals with free agents. However, those players cannot officially sign until 12:01 p.m. ET on July 6.

Any deals struck during the moratorium period are characterized as agreements, but do not count toward team salary and are not binding for the player or team. Either side can back out in this situation — a scenario that took place in 2015 when DeAndre Jordan reneged on his verbal agreement with the Dallas Mavericks to instead re-sign with the then-incumbent LA Clippers.

Some signings can take place during the moratorium period, which are:

• Teams signing their first-round Draft picks to standard rookie-scale contracts.

• Second-round Draft picks accepting a required tender, which is a one-year contract offer teams must submit to keep the rights to that player.

• Restricted free agents can accept qualifying offers from their existing team.

• A restricted free agent finishing the fourth year of his rookie-scale contract can accept a maximum qualifying offer.

• A restricted free agent can sign an offer sheet with a new team, which triggers the 2-day period for his original team to match it.

• Players can be signed to minimum-salary contracts for one or two seasons (but the deals have no bonuses of any kind).

• Teams can sign players to Two-Way contracts, turn a Two-Way contract into a standard NBA contract or convert certain standard NBA contracts into a Two-Way contract.

• Teams can waive players or claim players waived by other teams.

Otherwise, all other signings must wait until after the moratorium period ends.

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Team Options

A team option grants the original team the right to keep a player for another year. If a player has a three-year contract with a team option for the fourth season, that means if the option is exercised (by the team in this example), the contract extends through the fourth season. If the option is not exercised by the team, then the contract ends after the third season (in this example).

Once an option is exercised it cannot be revoked — meaning (in this case) the team can’t change their mind on the option once they exercise it. Conditional team options are not allowed, which means the option cannot be contingent on something like number of games played, team wins or scoring average.

There can be only one option year (except in the case of rookie-scale contracts). For rookie-scale contracts for first-round picks, those contain a team option before both the third and fourth seasons.

Option years cannot have a lower salary than the previous season.

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Player Options

A player option grants the player the power to decide whether to stay for another year or become an unrestricted free agent. If a player has a three-year contract with an option for the fourth season, that means if the option is exercised (by the player in this example), the contract extends through the fourth season. If the option is not exercised (by the player in this example), then the contract ends after the third season. The player then becomes an unrestricted free agent.

Once an option is exercised it cannot be revoked — meaning (in this case) the player can’t change their mind of the option once they exercise it. Conditional player options are not allowed, which means the option cannot be contingent on something like number of games played, team wins or scoring average.

There can be only one option year (except in the case of rookie-scale contracts). For rookie-scale contracts for first-round picks, those contain a team option before both the third and fourth seasons.

Option years cannot have a lower salary than the previous season.

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Early Termination Options

An early termination option gives the player the right to end a signed contract. The option cannot be exercised before the end of the fourth year of an existing contract, which means the contract must be for five seasons. If the player declines to exercise the option, he remains with the original team. If the option is exercised, he becomes an unrestricted free agent and is free to sign with any team.

Early termination options are always held by the player (in other words, there are never team early termination options). A contract that has an ETO cannot be extended if the ETO is exercised.

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Salary Cap Exceptions

There are 11 types of Salary Cap exceptions that are available to NBA teams. These exceptions allow teams to exceed the salary cap and are as follows:

• Qualifying Veteran Free Agent Exception (aka the “Bird” Exception): A team may re-sign its own free agent to a contract with a first-year salary of up to the maximum player salary if he played for the team for some or all of each of the prior three consecutive seasons (or, if he changed teams, he did so by trade or by assignment via the NBA’s waiver procedures during the first of the three seasons).

• Early Qualifying Veteran Free Agent (aka “Early Bird”) Exception: A team may re-sign its own free agent to a contract with a first-year salary of up to the greater of (a) 175% of the player’s salary in the last season of his prior contract, or (b) 105% of the average player salary for the prior season, if he played for the team for some or all of each of the prior two consecutive seasons (or, if he changed teams, he did so by trade or by assignment via the NBA’s waiver procedures). A contract signed using the Early Bird Exception must be for at least two seasons (not including any option year).

• Non-Qualifying Veteran Free Agent (aka “Non-Bird”) Exception: A team may re-sign its own free agent who is neither a “Bird” nor an “Early Bird” player to a contract with a first-year salary of up to the greater of (a) 120% of the player’s salary in the last season of his prior contract, (b) 120% of the player’s applicable minimum salary for the current season, or (c) if the player is a Restricted Free Agent, his Qualifying Offer amount.

• Bi-annual Exception: Teams can use the Bi-annual Exception to sign one or more players to contracts whose first-year salaries, in aggregate, provide for up to a total of $3.382 million. This exception cannot be used in consecutive years and contracts signed using this exception can’t cover more than two seasons. Finally, teams can use this exception to re-sign their own free agents, but can’t use it to acquire a player by assignment.

• Non-Taxpayer Mid-Level Salary Exception: Teams can use the Non-Taxpayer Mid-Level Salary Exception to sign one or more players to contracts with first-year salaries that, in the aggregate, provide for a total up to $8.641 million. Contracts signed using this exception can be for up to four seasons. Additionally, this exception can be used to re-sign a free agent but not to acquire a player by assignment.

• Taxpayer Mid-Level Salary Exception: Teams can use the Taxpayer Mid-Level Salary Exception to sign one or more players to contracts with first-year salaries that, in the aggregate, provide for a total up to $5.337 million. Contracts signed using this exception can be for up to three seasons and can be used to re-sign a free agent. However, it cannot be used to acquire a player by assignment.

• Mid-Level Salary Exception for Room Teams: If a team has Salary Cap room at any time during a Salary Cap Year such that the team lost its Exceptions and has not already used the Bi-annual Exception, the Non-Taxpayer Mid-Level Salary or the Taxpayer Mid-Level Salary Exceptions in the same Salary Cap Year, then the team may use the MLSE for Room Teams to sign one or more players to contracts with first-year salaries that, in the aggregate, provide for a total up to $4.449 million. Contracts signed using this exception can cover up to two seasons and can be used to re-sign a team’s own free agent, but not to acquire a player by assignment.

• Rookie Exception: Teams may sign their first-round draft pick for up to 120% of his Rookie Salary Scale amount. (Note: There will be a new Rookie Salary Scale each season, which will be issued prior to the start of the Moratorium Period for that season and will reflect the increase or decrease in the Salary Cap from the prior year.)

• Minimum Salary Exception: Teams may sign a player to a one-year or two-year contract at the applicable minimum player salary (prorated as appropriate for a 10-Day or Rest-of-Season contract). This Exception may also be used to acquire by assignment a player who was signed to a one-year or two-year minimum contract. (Note: As with the Rookie Salary Scale, there will be a new Minimum Annual Salary scale each season, which will be issued prior to the start of the Moratorium Period for that season and will reflect the increase or decrease in the Salary Cap from the prior year.)

• Disabled Player Exception: Teams may replace a player who suffers a season-ending injury or illness with one player signed to a contract with a salary of up to the lesser of either 50% of the disabled player’s current salary OR the amount of the Non-Taxpayer Mid-Level Salary Exception for the season in which the Disabled Player Exception is used. That said, the following rules apply to the Disabled Player Exception:

• An application can be made with respect to a Salary Cap Year at any time from July 1 through January 15 of such Salary Cap Year, regardless of when the injury or illness occurred.
• The disabling injury or illness must make it substantially more likely than not, in the judgment of an NBA-appointed physician, that the disabled player would be unable to play through the following June 15.
• A contract signed pursuant to the Disabled Player Exception must be for one season, or if the Exception is used to acquire a player by assignment, then the acquired player must be in the final season of his contract.
• A Disabled Player Exception expires on the March 10 following the date on which the Exception is granted.

• Traded Player Exception: (Editor’s note: Settle in, because this one is complicated.) For one year following the date of the trade of a player contract to another team, a team may replace that traded player with one or more players acquired by assignment. There are rules pertaining to non-simultaneous and simultaneous trades, which are as follows:

• For teams whose post-assignment Team Salary would be equal to or less than the Tax Level for the then-current Salary Cap Year (for purposes of this rule, a “non-taxpaying” team), a traded player may be simultaneously (i.e., in the same transaction) replaced by one or more players acquired by assignment whose salaries in the aggregate do not exceed the greater of (i) the lesser of (A) 175% of the salaries of the players being traded plus $100,000, or (B) the salaries of the players being traded plus $5 million, or (ii) 125% of the salaries of the players being traded plus $100,000.
• For teams whose post-assignment Team Salary would exceed the Tax Level for the then-current Salary Cap Year (for purposes of this rule, a “taxpaying” team), a traded player may be simultaneously replaced by one or more players acquired by assignment whose salaries in the aggregate do not exceed 125% of the salaries of the players being traded plus $100,000.
• A traded player may be replaced in a non-simultaneous transaction by one or more players acquired by assignment whose salaries in the aggregate do not exceed 100% of the salary of the player being traded, plus $100,000.
• A team with a Team Salary below the Salary Cap may simultaneously acquire one or more players by assignment whose post-trade salaries, in the aggregate, do not exceed an amount equal to the team’s salary cap room plus $100,000.
• In certain circumstances in connection with sign-and-trade transactions, the player traded will not generate the Traded Player Exception amounts described above. Specifically, if a team that is over the Salary Cap enters into a sign-and-trade contract with a Bird or Early Bird free agent using the Bird or Early Bird Exception, and the salary in the first year of the contract is in excess of 120% of the player’s salary in the prior season, then for purposes of calculating the assignor team’s Traded Player Exception, the player’s salary will be deemed equal to the greater of the salary for the last season of his prior contract or 50% of the first year salary under the sign-and-trade contract. (f) For contracts entered into or extended beginning with the 2017-18 season (but in the case of extensions, only with respect to the extended term): (i) in circumstances where a player’s salary protection is less than full, Traded Player Exceptions arising from the trade of such contracts will be calculated based upon the amount of the player’s protected salary in the applicable season (rather than the sum of the player’s protected and unprotected salary); and (ii) with respect to trades conducted following the last day of a regular season, Traded Player Exceptions will be limited to the amount of the player’s protected salary for the following Salary Cap Year (rather than the current Salary Cap Year).

More On Exceptions:

• Exceptions cannot be added together to sign or acquire a player, except that a team may aggregate two or more Traded Player Exceptions for the purpose of acquiring — in the same transaction — one or more replacement players. Teams that are trading two more more players may elect to apply the exception separately to each of the players it is trading (or where permitted by the CBA) to aggregate the salaries of multiple players it is trading and then apply the exception.

• The Non-Taxpayer Mid-Level, Taxpayer Mid-Level, Mid-Level for Room Teams, Bi-annual, Bird, Early Bird, Non-Bird, and Rookie Exceptions are prorated beginning on January 10 of each season. The Minimum Player Salary Exception is prorated after the first day of the season.

• Use of the Bi-annual Exception, Non-Taxpayer Mid-Level Salary Exception, Taxpayer Mid-Level Salary Exception, or Mid-Level Salary Exception for Room Teams are also subject to restrictions.

• A team may use either the Bi-annual or Non-Taxpayer Mid-Level Salary Exception only if the Team Salary at the time the Exception is used and at all times thereafter during such Salary Cap Year does not exceed the Tax Level for the then current Salary Cap Year plus the Tax Apron Amount and at the time the Exception is used, the team has not already used either the Taxpayer Mid-Level Salary Exception or the Mid-Level Salary Exception for Room Teams in that Salary Cap Year.

• A team may use the Taxpayer Mid-Level Salary Exception only if the team’s Team Salary immediately following the team’s use of the Exception exceeds the Tax Level for such Salary Cap Year plus the Tax Apron Amount, and the team has not already used the Bi-annual Exception, Non-Taxpayer Mid-Level Salary Exception, or Mid-Level Salary Exception for Room Teams in that Salary Cap Year, or acquired a player pursuant to a sign-and-trade in that Salary Cap Year.

• A team may use the Mid-Level Salary Exception for Room Teams only if the team’s Team Salary at any time during that Salary Cap Year was below the Salary Cap such that the team is not entitled to use the Bi-Annual, Non-Taxpayer Mid-Level Salary Exception, or Taxpayer Mid-Level Salary Exception, and at the time the Mid-Level Salary Exception for Room Teams is used, the team has not already used the Bi-annual Exception, Non-Taxpayer Mid-Level Salary Exception, or Taxpayer Mid-Level Salary Exception in that Salary Cap Year.

• If a team uses the Non-Taxpayer Mid-Level Salary Exception to sign one or more player contracts not exceeding three seasons in length and providing aggregate first-year salaries and unlikely bonuses not exceeding the amounts that can be paid using the Taxpayer Mid-Level Salary Exception, and the team does not engage in any other transaction (i.e., using the Bi-annual Exception or acquiring a free agent via sign-and-trade) that would otherwise prevent the team from spending above the Tax Level plus the Tax Apron Amount, then the team will be permitted to exceed the Tax Level plus the Tax Apron Amount (for example, by signing its Bird free agent or by using the Minimum Salary Exception), whereupon the team will automatically be deemed to have used the Taxpayer Mid-Level Salary Exception instead of the Non-Taxpayer Mid-Level Salary Exception, and the team’s ability to use the Non-Taxpayer Mid-Level Salary Exception will be extinguished.

** FULL CBA EXPLANATION FOR ALL CONTRACT EXCEPTION RULES**

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Two-way Free Agents

A Two-Way player (other than a first round draft pick whose third or fourth year option was not exercised) will be a Restricted Free Agent at the conclusion of a Two-Way Contract if he was on the NBA team’s active or inactive list for 15 or more days of the NBA regular season in the last season of such contract and provided that the team makes a Qualifying Offer to the player.

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