The Rose Rule: Why it needs to change

The Vertical
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With All-NBA honors announced Thursday, The Vertical Front-Office Insider Bobby Marks breaks down one of the quirkiest aspects of the NBA’s Collective Bargaining Agreement, the Rose Rule, and the effect it had on Damian Lillard and Anthony Davis

The maximum salary rules
There are three designated slots the NBA defines as the maximum a player can earn. All three slots are based on years of service.

For players with zero-to-six years of service (Tier 1), the slot is 25 percent of the cap. Players with seven-to-nine years (Tier 2), the slot is 30 percent, and for players with 10-plus years (Tier 3), the slot is 35 percent.

Although the percent defined above is stated in the CBA, the league and players negotiated a lower percentage of basketball related income that would be used to define a maximum salary. If the league used the 25 percent Tier 1 max slot during this current season, the max number would have been $17.5 million; but the negotiated lower percentage is $16.4 million.

For cap purposes, the best way to calculate a max salary slot is 23.4 percent (Tier 1), 28.1 percent (Tier 2) and 32.8 percent (Tier 3).

The Rose Rule
When the NBA introduced a new collective bargaining agreement in 2011, it also introduced a little-known rule named after All-Star Derrick Rose. The rule was named after Rose because he earned first-team All-NBA honors in 2010-11 and was also selected by fans to play in the All-Star Game in 2011 and 2012 while still on his rookie contract.

Derrick Rose reached staggering heights under his rookie deal. (AP)
Derrick Rose reached staggering heights under his rookie deal. (AP)

The league’s goal was to reward players operating under rookie-scale contracts who had signed a maximum salary extension but had outperformed the Tier 1 (25 percent) maximum salary slot.

If a player on his rookie contract accomplishes one of the following – (1) earns All-NBA first-, second- or third-team honors twice, (2) is voted an NBA All-Star starter by the fans twice, or (3) named NBA MVP – his salary slot will be eligible for the Tier 2 maximum salary (30 percent) when the extension begins in his fifth season.

Teams do have the right to negotiate the percentage of a max salary slot as long as it falls between 25 percent and 30 percent in the first year of the extension if the player reaches the criteria set forth above.

For example, the Pacers signed Paul George to a designated max salary extension in the 2014 summer. Because he earned third-team All-NBA honors in 2012-13 and 2013-14, George was eligible for an increased salary under the Rose Rule. However, the Pacers and George negotiated a 27 percent max salary slot, but allowed George to opt out of his contract after the 2017-18 season.

Problems with the rule
First, to have a possible salary increase dictated by a fan vote is absurd. All-Star fan voting has turned into a popularity contest instead of an exercise in rewarding a player for his performance.

Second, to have the media dictate financial consequences for a team and player should not be allowed. A player's contract should not be tied into a media vote.

There is also a wide discrepancy between being voted first-team All-NBA and third team. A player such as George shouldn’t be eligible for the same salary as LeBron James (first-team honors) just because he earned a lesser All-NBA honor in consecutive years.

 

Finally there is no room to negotiate or amend the criteria, only the percentage earned.

The elite company
Since the current CBA in 2011, nine players have been eligible for a salary increase under the Rose rule, with Lillard being the latest to achieve the criteria.

Blake Griffin benefited from the Rose Rule. (Getty Images)
Blake Griffin benefited from the Rose Rule. (Getty Images)

Blake Griffin and Rose are operating as Tier 2 max-salary players, and Lillard's and George’s percentage increases were negotiated in their contracts.

Although the Thunder’s Kevin Durant signed his rookie extension in 2010 under the old CBA, the NBA grandfathered Rose Rule criteria for his current contract. Durant, in the final year of his five-year extension, has been operating as a Tier 2 max player.

One player that missed out on the Rose Rule but eventually met the criteria was Russell Westbrook. When the All-Star signed his rookie extension in January 2012, Westbrook had already met part of the criteria but did not negotiate the clause into his contract. Oklahoma City tabbed Westbrook as their “designated player max.” The tag allowed Westbrook to receive a five-year max extension (not including the fourth year on his rookie scale) while allowing the Thunder to have luxury tax flexibility going forward. The luxury-tax savings allowed the Thunder to eventually trade for Enes Kanter and match the offer sheet Kanter signed with Portland last summer.

Davis and Lillard were eligible for the Rose Rule this season, but only Lillard reached the criteria.

Both players signed max rookie extensions last summer, with Davis earning All-NBA first-team honors in 2014-15 and Lillard earning third-team honors in 2013-14.

Anthony Davis
Before the season started Anthony Davis seemed to be a shoo-in for a Tier 2 max salary in 2016-17, with the Pelicans coming off a playoff berth and Davis earning his All-NBA honor and being voted by the fans to the 2015 All-Star Game.

But after failing to be voted by fans to the All-Star Game, Davis was left off the All-NBA teams by the media. Although Davis statistics mirrored last season, his team missed the playoffs, he was shut down in mid-March with shoulder and knee injuries, and a strong forward class left him on the outside looking in.

A look at the financial implications of Davis missing out on All-NBA honors:

Davis

     Current salary

  Earning All-NBA

2016-17

     $21.52m

  $25.85m

2017-18

     $23.14m

  $27.79m

2018-19

     $24.75m

  $29.72m

2019-20

     $26.37m

  $31.66m

2020-21

     $27.98m

  $33.61m

Total

     $123.76m

  $148.63m

Pelicans cap implications
The Pelicans’ cap situation will remain unchanged.

Davis' $21.5 million cap figure will count toward New Orleans' books for next season. With $65 million guaranteed contacts and Ryan Anderson’s free-agent cap hold ($12.75 million), New Orleans currently has $8.6 million in cap room. If Davis had earned an All-NBA honor, the cap room would be cut in half. The cap space factors in the Pelicans’ No. 6 overall pick in the draft, as well as the cap holds of Eric Gordon and Norris Cole being released.

Damian Lillard
Similar to the George situation, the Trail Blazers and Lillard negotiated a lower percentage than the maximum 30 percent allowed by the NBA. In fact, the Lillard extension is similar to what George signed with Indiana, especially because both players had earned third-team All-NBA honors before reaching the criteria in their fourth season. In Lillard’s case, earning All-NBA honors will see his salary next season change from $21.5 million to $23.7 million.

Although the NBA is loaded with high-level guards, Lillard’s performance this season was certainly All-NBA.

Lillard’s salary All-NBA change:

 Lillard

     Tier 1 max

  Earning All-NBA 

 2016-17

      $21.52m

   $23.73m

 2017-18

      $23.14m

   $25.51m

 2018-19

      $24.75m

   $27.29m

 2019-20

      $26.37m

   $29.10m

 2020-21

      $27.98m

   $30.85m

 Total

      $123.76m

   $136.48m

Trail Blazers cap implications
The Trail Blazers’ cap situation is fluid based on restricted free agents Meyers Leonard, Mo Harkless and Allen Crabbe, as well as key free agent Gerald Henderson.

With the additional $2 million of salary added from Lillard’s revised cap figure, the likely scenario is Portland with $14 million in room, including the free-agent cap holds of Leonard, Harkless, Crabbe and Henderson.

The good-faith extension
One could argue that the best course for the Pelicans and Trail Blazers would have been to mirror what Detroit did with Andre Drummond.

Instead of locking up Drummond, a restricted free agent this summer, with a rookie extension and cap hit of $21 million, the Pistons will only have an $8.1 million hold against the cap, creating a $13 million buffer toward free agency.

However, when you have franchise-level players such as Davis and Lillard, the last thing a team wants to do is haggle over negotiations.

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