Salary Cap 101: What are exceptions, and why do they matter?

The NBA salary cap is a complicated system, with rules and multiple situations where the rules don’t apply. In that sense, it’s a lot like the English language – it’s ‘I’ before ‘E’ except after ‘C’ or when sounding like ‘a’ as in neighbor and weigh, and on weekends and holidays and…sorry, Brian Reagan took over the keyboard.

Yet reading and understanding the NBA’s salary cap rules is something like that. We introduced the basics of the salary cap last week, and this week we will dig into one specific aspect of the cap: exceptions.

What are salary cap exceptions?

In general, an NBA team cannot sign a player or make a trade for a player that would take that team over the salary cap. However, the CBA does have a system of “exceptions” that allow teams to function while over the cap. A team that is over the cap can still sign new players, re-sign its own players and trade for players, provided they have an “exception” available at that price point.

What are the different exceptions?

There are exceptions available for trades and for signings, and they fall into three major groups: resigning players, signing new players, and trading for players. The most common exceptions used are those for re-signing players.

The Larry Bird Exception allows a team to exceed the salary cap in order to bring back one of its own free agents, up to that player’s maximum salary. This applies to any player who has played for three seasons without changing teams as a free agent or clearing waivers. That means a player on a longer contract who is traded retains those “Bird Rights” with the new team.

For example, Caris LeVert has full Bird Rights with the Cleveland Cavaliers this summer despite being traded to the team in 2022, and can therefore re-sign for any new contract number up to the max.

There are weaker versions of the Bird Exception that apply to players who only get to one or two years of play and aren’t yet eligible for the three-year Bird Rights. These are the Early Bird Exception and the Non-Bird Exception. These allow a team to exceed the cap to re-sign a free agent, but only to a certain amount.

The Early Bird Exception applies to a player after two seasons and allows a team to re-sign a player for 175% of their former salary or 105% of the “average salary” from the previous season, whichever is greater. The Non-Bird exception comes after a one-year deal and provides just a 120% salary bump on the previous year’s salary.

A key example of a Non-Bird player is Bruce Brown, who signed a one-year deal with the Denver Nuggets. The Nuggets can only offer him $7.97 million, which is likely to be well under what he can get on the open market.

What about signing new players?

There are a number of exceptions that teams can use to sign new players, and the availability of these is set by a team’s complete salary situation. A team that uses cap space in an offseason has access to the “Room Exception,” teams over the cap but under the first tax apron (usually a few million over the luxury tax line) can use the “Non-Taxpayer Mid-Level Exception” (MLE) and teams over the first apron but below the second (in 2023 another $10 million) can use the “Taxpayer Mid-Level Exception” (Tax MLE). A team can only ever use one of those three in a given season, and they can split them up to sign multiple players.

There is also a Bi-Annual Exception, which can be used in conjunction with the MLE and only once every other year. The Minimum Exception allows teams to always sign new players to their minimum amount no matter their financial situation. Finally, teams can sign their draft picks to rookie “scale” contracts no matter their cap situation using the Rookie Exception.

How much are the exceptions worth this year?

From largest to smallest:

• Mid-Level Exception: $12.2 million, up to four years
• Room Exception: $7.6 million, up to two years
• Taxpayer Mid-Level Exception: $5 million, up to three years
• Bi-Annual Exception: $4.45 million, up to two years

Wait, there is a trade exception too?

Yeah, there are. But we’ll get into that another time when we discuss the rules surrounding trades.

Hopefully, that breakdown was helpful. Please let us know if you have any questions!