Agent's Take: How the Chiefs could protect themselves in a potential new Tyreek Hill deal
Hill avoided suspension and is entering the final year of his contract, but the Chiefs must walk a fine line
Tyreek Hill got some good news last week. The NFL announced Hill wouldn't be suspended because it couldn't conclude he violated the league's personal conduct policy based on the information presently available. After the NFL's decision, the Chiefs lifted the ban placed on Hill in April preventing him from participating in team activities due to allegations of child abuse against his 3-year-old son. Hill can participate in Chiefs training camp when veteran players report on July 26.
The NFL left open the possibility of revisiting Hill's situation if warranted by additional information becoming available. Details of the investigation conducted by local authorities in Kansas City, which has been closed without any criminal charges being filed against Hill, weren't made available to the NFL.
Prior to the allegations, the Chiefs and Hill's agent, Drew Rosenhaus, had been discussing a contract extension, which reportedly would have re-set the wide receiver market. Negotiations reportedly could resume shortly, since Hill avoided discipline by the NFL. It wouldn't be surprising if the Chiefs insisted on an extremely team-friendly structure with a new deal for Hill in light of the child abuse allegations and the domestic violence charge, which was expunged from his record last August after he successfully completed a three-year probationary period, in case there are any incidents in the future.
Hill's market value
Hill, who is entering the final year of his four-year rookie contract with a $2.025 million salary, had the finest season in Chiefs history for a wide receiver in 2018. He set a franchise record with 1,479 receiving yards, which was fourth in the NFL. He also set career highs of 87 catches and 12 touchdown receptions. One of the NFL's most explosive playmakers because of his rare speed, Hill led the league with 27 receptions of 20 yards or more. His 17.0 yards per catch was fifth in the NFL.
Wide receiver salaries are seemingly set to reach unprecedented heights, presumably before the regular season starts. The anticipated deals for Julio Jones and Michael Thomas with the Falcons and Saints, respectively, are expected to make the pair the NFL's first $20-million-per-year pass catchers. Thomas has the best chance of surpassing Odell Beckham, Jr.'s $65 million in overall guarantees and $40.959 million fully guaranteed at signing, which are the existing wide receiver benchmarks, because he is four years younger than the 30-year-old Jones. Without the latest allegations, a new Hill contract would be comparable in money and guarantees.
Ideally, the Chiefs will sign either Hill or defensive lineman Chris Jones, who is also in a contract year and a potential holdout, to a long-term deal sometime this year. Only one of the two can be designated as a franchise player in 2020. The Chiefs have a little more flexibility than usual since 2020 is the final year of the NFL's Collective Bargaining Agreement. A franchise and transition designation can be used in 2020 instead of one or the other, like in the CBA's first nine years. The transition tag would only give the Chiefs a right to match any offer sheet signed whereas two first-round picks is the compensation with an unmatched offer sheet for a franchise player.
The three-year contract averaging $16 million per year and containing $30 million fully guaranteed that Kansas City gave Sammy Watkins as a free agent in 2018 wouldn't enter into the equation with Hill, under ordinary circumstances. A Hill deal would be substantially more in all aspects since he is clearly Kansas City's primary wide receiver. Nonetheless, a Hill contract would probably be affected more structurally than financially. NFL contracts aren't fully guaranteed like MLB and NBA contracts.
Chiefs' preferred contract structure
Kansas City's typical contract structure for their most lucrative deals has a fairly substantial signing bonus where the first-year base salary is fully guaranteed at signing. Eric Berry, Frank Clark, Justin Houston, Alex Smith and Sammy Watkins are players who have signed deals within the last five years containing a signing bonus of at least $15 million.
Most, if not all, of the second-year base salary is fully guaranteed at signing. Any guarantees in the third year convert from injury only at signing to fully guaranteed at the beginning of the second year. This is in March, when the new league year starts. There are also annual workout bonuses in these contracts usually ranging from $100,000 to $500,000. The first-year salary cap number is relatively low, with a ballooning cap figure in the second year.
Clark received a five-year, $104 million contract in connection with his trade from the Seahawks, who had designated him as a franchise player, as late April's NFL draft approached. The Chiefs were comfortable giving Clark $62.305 million in player-friendly guarantees where $43.805 million was fully guaranteed at signing, although he has a checkered past.
A Hill contract at the top of the wide receiver market in terms of total value and average yearly salary should be too concerning. The most important metrics in NFL contracts are the amount of money fully guaranteed at signing, or will become fully guaranteed early, and compensation in the first three years of a multi-year deal.
There are several things the Chiefs could do to protect themselves in a Hill contract should they choose to deviate from their preferred structure. How the 49ers structure contracts could provide a blueprint for the Chiefs.
The 49ers have the most team-friendly structure, especially with their most lucrative contracts, in the NFL. Signing bonuses are fairly modest. For example, edge rusher Dee Ford, who was traded by the Chiefs in March as a franchise player, signed a $17-million-per-year deal containing just an $8 million signing bonus.
The guarantees after the first contract year are injury guarantees which typically become fully guaranteed on April 1 of each specific contract year. San Francisco's guarantee vesting date is the latest in the NFL. Since Hill's second-year salary wouldn't be fully guaranteed when signed and any third year guarantee wouldn't be vesting in the second year, Kansas City's usual March date would be sufficient. A Hill contract with these features would allow Kansas City to exit of the deal with significantly less cap consequences than with their typical structure and at an earlier stage, if necessary.
Large annual game-day active roster bonuses are also standard with 49ers veteran contracts. The primary benefit of the roster bonuses is they provide the 49ers some financial relief with injuries. The principle would also apply if Hill was unavailable to the Chiefs because of off-the-field conduct. Money that would ordinarily be base salary would be shifted into the per-game roster bonuses.
The per-game amount is only payable if the player is on the 46-man active roster for that particular game. For example, Colin Kaepernick's 2014 extension with the 49ers had $2 million worth of roster bonuses annually. When Kaepernick was put on injured reserve after nine games in 2015, it cost him $875,000 because he didn't earn seven games worth of the roster bonuses.
Some Kansas City contracts have a per-game roster bonus, but none of those have had the highest average yearly salaries. Tight end Travis Kelce has the largest per-game roster bonus amount on the Chiefs with $1 million ($62,500 per game) in each of the last four years of his contract.
It is standard for NFL contracts to contain language voiding salary guarantees for a laundry list of reasons (suspensions under the personal conduct, substance abuse and performance enhancing drugs policies or by the team for conduct detrimental, failing or refusing to play, practice or report to the team, etc.). The conditions vary depending on team convention, the attention the agent pays to the language and his/her leverage in negotiations.
The Chiefs would likely insist upon broad language where Hill's guarantees would also void for engaging in personal conduct that adversely affected or reflected poorly on the franchise. In some cases, fines can trigger the voiding on guarantees. Kansas City contracts typically don't contain such language.
The Chiefs will have to walk a fine line between insisting upon a contract structure that's so team friendly that playing under a franchise tag becomes a more attractive option to Rosenhaus and Hill. The wide receiver franchise tender or number is going to be close to $18 million next year, provided the 2020 salary cap is in the $200 million range. A second franchise tag for Hill in 2021 at a CBA mandated 20 percent raise could be more than $21.5 million. A franchise player's salary becomes fully guaranteed once he signs his one-year tender. Hill would make approximately $19.75 million per year playing under franchise tags for two years where he would become an unrestricted free agent in 2022 at 28 while still in the prime of his career. He would likely be in a position for a massive payday provided he was a model NFL player away from the field.
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