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What Are Void Years in an NFL Contract?
Over the past few seasons, the term void years has become very common when discussing NFL player contract structures. This contract mechanism became especially popular this past offseason due to the NFL salary cap decreasing from 2020 for the first time since 2011 when the new league CBA changed how the salary cap was calculated. Let’s explore what “void years” truly are as well as their benefits and downfalls.
The word “void” is a legal term defined as “having no legal force or binding effect.” Comparatively, if an agreement is “voidable” then an agreement becomes void if a certain condition is met. Here, we are dealing with “void” years – years that are agreed upon from the outset that have no legal effect.
Before diving into “void years”, let’s take a step back and understand how signing bonuses are treated when it comes to the salary cap. Unless you are familiar with the NFL CBA or player contracts, you may not understand that there is a drastic difference between cap and cash. When a player signs a contract that contains a signing bonus, they are paid that signing bonus upfront in “cash.” Sometimes this occurs immediately upon signing, but other times the team has a few weeks or months to actually make the payment. Regardless, the player is receiving 100% of the signing bonus in Year 1 of the deal.
However, the team will not account for 100% of the signing bonus on their cap in the first year that the contract is signed. Rather, the team spreads the salary cap charge for the signing bonus over the length of the contract up to the first 5 years. The CBA dictates that a team may only spread the signing bonus over the first five years, even if the deal is for more than 5 years. This is often referred to as “prorated money.” The same proration occurs with an option bonus.
Now that you understand the basics of salary cap accounting, we can dive into void years. Imagine a contract that is only 2 years in length and includes a signing bonus of $10 million. In this structure, the $10 million would be divided evenly by the amount of years on the contract, and the salary cap charges for the signing bonus in each year of the deal would therefore come out to $5 million. Simple enough. However, there is a way to cut those charges for the first two years in half. Enter “void years.”
Using the same $10 million signing bonus, a team can instead sign a player to a 4-year deal and reduce the cap charges from $5 million to $2.5 million per year. This would normally require the player to agree to two extra years of team control. However, by making the final two years on the deal void, the team still gets the benefit of the reduced cap hits in years 1 and 2 and the player becomes a free agent after just 2 years. In order to make the years void, the team literally writes language into the contract that states the contract becomes void on a certain date, nullifying the remaining years and all of the details associated.
While the team saves money in the early years of the deal, the salary cap charges in the void years do not simply vanish into thin air. Rather, they become a “future you” problem – the sum of the prorated bonus money across the void years accelerates (gets pushed forward from future years to the present), and the team will take a dead cap hit in the first void year of the deal. Therefore, using the same example as above, the dead cap hit in Year 3 becomes $5 million compared to $0 in a standard 2-year structure.
I believe teams have become far too reliant on this contract mechanism. My belief is that it should only be used in the three instances described below:
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