The Mid-Level Exception rule is essentially redundant, and that could just be the start
April 27th, 2016

The Mid-Level Exception was introduced in the 1999 Collective Bargaining Agreement, and quickly became a vital tool in the interminable team building struggle, if not for many, the most vital.

For teams over the salary cap, the Mid-Level Exception (also known in its infancy as the Middle-Class Exception, and never since then) was a way to continue to sign players for significantly more than the minimum salary, thereby enabling themselves to add players of decent to good quality despite having already spent the theoretical maximum any team could spend on players. In practice, then, the MLE was, to an extent, the most powerful weapon most teams could have – with it, there was less incentive to stay under the cap.

However, the 2011 CBA shifted the balance back and provided a far greater incentive to stay under the cap. By introducing the post-cap room MLE and other mechanisms (such as the ability for teams under the salary cap to make amnesty waiver claims, which does not matter anymore but which certainly did to begin with), there was more reason to stay under the cap; concurrent as it was with the rules shortening contract length, and a much-heightened awareness in the internet era of the importance of salary cap management, it was not only preferable to stay under the cap but much more important to do so.

Far fewer teams had cap room in years past compared with today – compare the three that had cap room in the summer of 2009 (under the 2005 CBA, where the MLE ruled the day) with the 15 in the summer of 2013 (when the benefits of the new 2011 CBA were ripe for the taking).

Simultaneous to that shift in the balance came big revenue spikes in the league, which drove the salary cap up. Way, way, way up. Now, with the new projected salary cap and luxury tax figures announced by the NBA last week including a salary cap projection of $92 million (compared to the actual 2015/16 figure of an even $70 million), concurrent with the earlier decision to forgo any “phasing in” of the huge salary cap spikes caused by last year’s new TV deal, teams will pretty much have no choice but to be under the salary cap. With this in mind, the MLE’s value has been hugely diminished.

The MLE used to be the main, if not the only way that teams over the salary cap could be seen to be “adding” pieces. In practice, this usually meant giving far too large four or five-year contracts to players the calibre of Jason Kapono or DeSagana Diop, but it was nevertheless the main way for many.

The MLE was roughly equal to the league average salary, and by a simple extension of that logic, it should have been used to yield, at worse, average players. But the number of years given out rarely was average, and only the salary in the first year was ever average.

The salary would almost always grow throughout the life of the contract, yet the player’s ability would rarely follow suit. Only when average-to-good players sustained or improved their play – for example, Beno Udrih – did full value MLE contracts ever work out. And even Udrih was salary filler in a trade towards the end.

In the 2011 CBA – the one we are still under for at least one more year – the value of the MLE changed in multiple ways. Firstly, there were now three MLEs – a full one for teams over the cap but below the tax, a smaller and shorter one for taxpayers or would-be taxpayers, and the aforementioned third one for teams with cap room to use after using their cap room (that has not proven to be that much different in size or function to the tax paying version).

Additionally, however, the starting salary value of the MLE was detached in 2011 from the average salary calculation. Whereas previously the MLE value would be one of the myriad financial instruments dependent on the league’s financial audit and calculated only during the July moratorium at the start of each season (new seasons technically start on July 1st, as does the moratorium), the amount was instead pre-determined as a part of the CBA negotiations. For this reason, the MLE’s value has not grown as the salary cap has.

In 2006/07, the starting value of the MLE was $5.215 million, against a salary cap of $53.135 million. It was roughly a tenth of the size of the cap. In 2008/09, it was $5.585 million against a salary cap of $58.68 million. But in 2011/12, the first year of the latest CBA, the new rules not only delineated the MLE amount from the cap but also shrank it down to an even $5 million against a salary cap of $58.044 million.

Next year, with the aforementioned prediction of a $92 million salary cap, the MLE will only be a comparatively paltry $5.628 million, only $43,000 bigger than it was eight years ago even though the cap will have grown by more than $33 million, and now only roughly a sixteenth of the size of the cap.

In practical terms, it follows logically that the MLE will not be able to yield as much. Even players such as Al-Farouq Aminu (an average role player, and, again, average is not a pejorative here) earned more than that last year before the huge salary cap spike now facing us.

This will happen again. Until such time as the MLE’s value can again be more reflective of an average player salary – which will not happen until at least the next CBA, which will not happen until the current one ends, which cannot happen until at least next summer – the MLE no longer yields the value it once did.

It used to be a way for over the cap teams to add a quality rotation piece without having to take anything apart that they did not want to. But this is now going to be much harder.

In theory, a well-used MLE could still yield the leftovers from the great cap room grab. But all the above ties in with a wider shift in the paradigm. In this era of heightened awareness of salary cap management, as well as a CBA with far more restrictions on how front offices can spend on players (which in practice has been the result of putting in many rules to protect general managers from themselves), there is now much more money to spend than players to spend it on.

Whereas before three teams had cap room and everyone else had an MLE to fight for the same prize pool (admittedly with sign-and-trades easier and thus more prevalent), the majority of teams will now have cap room in the foreseeable future, and although there are going to be far more free agents than there used to be, only a few of them will be hot property that will generate significant bidding. Basically, then, there might not be many leftovers.

We are finding more and more that there is quite the swathe of residual cap room left over after the peak free agency period, often running into the season, often running up to the trade deadline, and sometimes even after it. There has long, long been an NBA minimum salary, for instance, but no one had ever threatened it until recently.

Indeed, it had not ever been missed. But it has now, by multiple teams, and by multiple teams in the same year. Because there is more money to spend and only shorter deals to give out, there are few albatross contracts, far fewer salary dumps, and still only roughly the same number of quality players to spend it on.

Gone were the days of Kapono, Diop, and Mickael Pietrus for $5.3 million per for four years. In came the days of Marreese Speights for less than $4 million annually.

But those days might be largely gone now too. Those deals may still be found on occasion. But the MLE, while not dead, does not matter that much anymore. As the NBA’s spending middle class has grown, the Middle-Class Exception has shrunk.

Posted by at 11:32 PM