How It Works: Draft Rights and Signing Draft Picks

NBA Draft

Image Source: clutchpoints.com

Introduction

The NBA Draft is an exciting time for teams and fans alike who see it as the best chance to build for the future. Teams in the lottery hope to find franchise building blocks while other teams try to find the most value at their respective draft positions and hope their selections develop beyond their pre-draft projections. Behind the excitement and hope for the future are the rules that govern Draft Rights and the options for teams and draftees. This post will detail the behind-the-scenes aspects of signing NBA draft picks.

Draft Rights

Draft Rights give a team the exclusive right to negotiate with and sign their draft pick. In general, a team will hold a player’s Draft Rights for a period of one year (Note: This time period only applies to non-Early Entry players). This upholds the sanctity of the NBA Draft and prevents draft picks from acting as free agents and signing with any team of their choosing. Draft Rights go into effect immediately after the player is drafted but are only maintained for the full year if the drafting team makes a Required Tender to their draft pick.[1] The substance of the Required Tender differs depending on whether the player is a first or second round pick. For first round picks, a Required Tender follows the rookie scale requirements and allows the player to sign until at least the first day of the regular season. For second round picks, a Required Tender is for at least the minimum salary and one season, and allows the player to sign until at least October 15th.

For first round picks, a Required Tender must be made on or before July 15th for the drafting team to keep the player’s Draft Rights. For second round picks, a Required Tender must be made in the two weeks before the September 5th. Teams can withdraw a Required Tender at any time after it is made but only if the player agrees to the withdrawal in writing. If Required Tender is withdrawn, the player immediately becomes a rookie free agent, free to sign a contract with any NBA team. Similarly, if a team fails to make a Required Tender to the player on or before the dates stated above, the team will lose the player’s Draft Rights he will become a rookie free agent.

If, for whatever reason, a player does not want to play for the team that drafted him, he can choose not to sign the Required Tender. He cannot, however, simply decline a Required Tender and sign with any other team for the upcoming season. Remember, just by making a Required Tender, the drafting team keeps the player’s Draft Rights for a full year.[2] Instead, the player must forego signing the contract and remain unsigned until the next NBA Draft when his drafting team’s Draft Rights will expire. Then, the player would enter that next NBA Draft (the “Subsequent Draft) (Note: This only applies to non-Early Entry players. Rules for Early Entry players are described in the Section below.). If the player is drafted in the Subsequent Draft, the Draft Rights process starts all over again. If the player is not drafted, he will be a rookie free agent.

As long as the player is a first round pick, the team and player also have the option to put off siging a contract, thereby delaying the Draft Rights process. The player can agree to renounce his right to accept any Required Tender from the team for the upcoming season. Once this happens, the player’s rookie scale cap hold comes off of his drafting team’s team salary and the player cannot be signed until the following July 1st, at which time the Draft Rights process will start over again. This is what happened with Josh Huestis and the Oklahoma City Thunder in 2014.

Early Entry Players – Draft Rights

Draft Rights for Early Entry players[3] are a little different from Draft Rights for other draft eligible players. For teams, things remain mostly the same – they gain Draft Rights the same way and the Required Tender requirements are the same. The only difference is how long the player’s drafting team holds his Draft Rights. Unlike other players whose Draft Rights are kept for one full year, Early Entry players are bound by their drafting teams until one year after the first NBA Draft they could have entered as non-Early Entry players. For example, Ben Simmons declared for the 2016 NBA Draft after his freshman season, making him an Early Entry player. Whichever team drafts Simmons will hold his Draft Rights until the 2020 NBA Draft, one year after the first draft Simmons could have entered as a non-Early Entry player (2019 NBA Draft). [4] As such, the consequences of an Early Entry player not signing a player contract are much more severe than for non-Early Entry players.

These rules for Early Entry players apply even if the player signs a contract overseas and attempts to be considered under International/Eurostash player rules (explained below). There is no loophole for Early Entry players to shorten their drafting team’s Draft Rights period.

Eurostash Players – Draft Rights

For Eurostash players, the Draft Rights process works a little differently. A team typically stashes a player in Europe because he is either under contract with a non-NBA team or he’s not developed enough to make an NBA roster. After drafting a Eurostash player, the negotiation process is put on hold. A team that drafts a player who is either currently under contract with a non-NBA team or expects to be under contract with a non-NBA team holds the player’s Draft Rights until one year from the earlier of (i) the date the player notifies his drafting team that he is available to sign a contract or (ii) the NBA Draft occurring in the period from September 1st-August 30th in which the player notifies his drafting team of his availability and intention to play in the NBA for the season following such 12 month period. Put simply, if a Eurostash player notifies his team between September 1st and the upcoming NBA Draft that he is available to sign, his team will hold his Draft Rights until one year passes from the date of such notification. If, on the other hand, a Eurostash player notifies his team between the day after the NBA Draft and August 31st that he is available to sign, his team will hold his Draft Rights until one year passes from the most recent NBA Draft.[5]

If a Eurostash player notifies his team by a certain date, his drafting team has a set date by which they need to offer a Required Tender.  If the player gives notification to his drafting team between January 1st and July 1st he will be available to sign and play with them by September 1st of the same year, the team must make a Required Tender to that player by September 10th.[6] If a Required Tender is not made, the player becomes a rookie free agent on September 11th. If the notification comes between July 2nd and December 31st, however, the CBA does not require the team to make a Required Tender by a certain date, though the team’s Draft Rights will still expire in accordance with the applicable one-year timeline described in the preceding paragraph.

There are a several different outcomes if a Eurostash player does not enter into a contract with his drafting team during the one-year exclusive negotiation period. These situations are detailed below:

  • If, during the one-year exclusive negotiation period, (i) the player signs a new contract with a non-NBA team, (ii) has not made an effort to negotiate a contract with his drafting team or has made an effort and his team made a Required Tender, then his team will keep the player’s draft rights and retain an  exclusive one-year period to negotiate when such player’s new contract is up.
  • If, during the one-year exclusive negotiation period, (i) the player signs a new contract with a non-NBA team, (ii) the player made an effort to negotiate a contract with his drafting team, and (iii) his drafting team failed to make a Required Tender to such player, then the team will lose the player’s Draft Rights and he will immediately become a rookie free agent.
  • If, during the one-year exclusive negotiation period, the player’s drafting team makes a Required Tender and the player does not sign with his drafting team or any other non-NBA team, then (i) the player will be eligible to enter the Subsequent Draft and be available for selection, or  (ii) if clause (i) previously applied to such player such that the now-expired Draft Rights belonged to the second team that drafted the player, then he will immediately become a rookie free agent.

Trading Draft Rights

Lastly, Draft Rights to a certain player can be traded by teams. These draft rights have no monetary value in a trade, though, depending on the player and situation, cap holds may apply to the team receiving the Draft Rights. If a player’s Draft Rights are traded, the rules stay the same. The player has all of the same rights as does his “new” team.

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[1] Making a Required Tender is the Collective Bargaining Agreement (“CBA”) term for the offer of a player contract.

[2] There is an exception to this rule: Team’s can unilaterally renounce their exclusive right to negotiate with and sign the player so long as the renunciation occurs after the first day of the regular season (for first round picks) or October 15th (for a second round pick).

[3] For our purposes, an Early Entry player is a player who is at least 19 during the calendar year when the draft is held, at least one NBA season has occurred since the player graduated high school and who has played less than 4 years in college.

[4] In order to maintain the player’s Draft Rights, the drafting team must make a Required Tender every year by the relevant date according to the player’s draft position (July 15th or the period two weeks before September 5).

[5] An example may be helpful here. If a Eurostash player was drafted in 2013 and notifies his team on September 15, 2016 that he is available to sign a contract, his team will have his Draft Rights until September 15, 2017. If, however, he notifies his drafting team that he is available to sign on July 15, 2015, he team will have his Draft Rights until the 2017 NBA Draft.

[6] It’s important to note that the team still has a one-year exclusive negotiation period with the player. The September 10th deadline is simply the deadline by which the player’s team must offer a contract.

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