Larry Bird may be one of the most well known basketball players of all time: from playing in the highest rated college basketball game of all time, to his inclusion on maybe the most famous basketball team of all time, but his most recent contribution is something that happened years ago in the boardroom.  The NBA’s relationship with its players, as well as the salary cap for the league’s teams, is governed by its collective bargaining agreement (CBA), a product of the protracted lockout of 2011.  The agreement allows NBA teams to exceed the salary cap in order to re-sign its own free agents if the player has played for the team for at least three years.  The team is even able to sign the player for up to the maximum allowable salary.  If the player is traded these rights travel with him and allow his new team to utilize this same clause.

A version of this clause also extends to players who have played two seasons for the same team.  These rights are called “Early Bird Rights.”  Using this exception for two year players, a team can re-sign a player for 175% of his previous season salary, or the average NBA salary, whichever is greater.  Until a few weeks ago if a player was traded, or placed on waivers, his Early Bird Rights were terminated.  Previously, it was unexpected that a player placed on waivers would be valuable enough to a team to warrant Early Bird Rights.  However, that was before Linsanity.

On June 22, the NBA Players Union faced off against the NBA in front of an arbiter over whether a player who was waived retained his Early Bird Rights for his new team.  The arbiter decided that a waived player does retain these rights, as long as the player did not make an affirmative decision to move to a new team, which does not occur when a player is claimed off waivers.  The NBA appealed this decision, and again, Jeremy Lin came out on top.  Now, what does this mean?

First, it means the New York Knicks can go over the salary cap in order to resign international phenomenon Jeremy Lin.  Even if the Knicks are comfortable blowing past the NBA’s salary cap, prior to Lin there were few waiver players even the Knicks would break the bank to retain.  Second, this may incentivize teams taking more risks on waiver wire players.  If the team knows it can go past the salary cap to retain the player if he’s good, teams may be more willing to explore the waiver wire to fill its roster.  It also ensures the continuation of Linsanity in New York, for better or worse.

– Jeremy Gove

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