Position Based Incentives/Escalators
Hello again! I wanted to add a new series to the Cap & Trade Newsletter on the topic of Cool Contracts. This will not be a regular series to newsletters, but rather published as I run across something interesting in player contracts.
In 2021 there were two contract extensions signed which included position based incentives and salary escalator clauses. The two contracts in reference are Taylor Moton with Carolina and Ryan Ramczyk with New Orleans. Coincidentally both players are offensive tackles.
Ramczyk and Moton have spent their respective careers at the offensive right tackle position. Moton, a 2nd round draft selection in 2017, signed his extension in July 2021 with Carolina. Ramczyk, a 1st round selection in 2017, signed his extension in June 2021.
Both extensions were executed at their respective market value for performance and future outlook. However both contracts include an interesting incentive. If the player earns a AP 1st or 2nd Team All Pro nomination as a Left Tackle, then there are incentives and escalators that kick in.
Obviously the player would have to make the move from right tackle to left tackle to be eligible for this vote. Under their respective incentives/escalators clause, each player is eligible to earn up to an additional $6 million in salary.
Ryan Ramczyk’s extension was valued at $19.2 million APY (average per year) at the base value. Base value meaning the incentives/escalators are not included in the value. If Ramczyk were to earn all available incentives and escalators, the contract value APY would increase to $20.4 million.
Taylor Moton’s extension was valued at $17.0 million APY in the base value. If Moton earns the full incentive and escalator package, the APY would increase to $18.2 million.
Neither player was able to make the shift to left tackle in 2021. Ramczyk has an opportunity to do so in 2022 if the Saints choose to move on from Terron Armstead. Given New Orleans salary cap outlook for 2022, that is a real possibility. Paving the way for Ramczyk to shift over to left tackle.
Ramczyk’s contract reset the right tackle market with his $19.2 million contract extension, topping Lane Johnson’s $18.0 million APY. The reason for the incentive/escalator package is due to the market difference between right tackle and left tackle. The top of the market left tackle, Trent Williams, APY is $23.01 million. There are 4 left tackle contracts valued, based on APY, higher than Ramczyk.
Salary Cap & Cash Effect
This incentive and escalator operates the same as any other incentive and escalator tied to player awards. Both contracts are setup the same in this regard. If the player meets the incentive and escalator threshold, the player would earn a $1 million incentive for the current year. And the remaining scheduled base salaries in the contract would increase by $1 million each year.
The incentive would be captured within the annual team adjustment with a negative $1 million adjustment for the following league year. The incentive would be paid out within the league year earned.
This type of incentive/escalator could continue to be negotiated into offensive tackle contracts if the discrepancy between right and left tackle markets continue on their current trajectory. The market is slowly adjusting the close the gap between the two positions. I am not sure there are any other positions where this type of clause would be deployed.
Today’s defensive schemes routinely allow for a team’s high profile pass rusher to line up over the right tackle versus left tackle. This was a common tactic employed by JJ Watt in his glory days. Watt would identify the weaker tackle and shift to that side for the remainder of the game to generate as much pressure as possible.
Houston’s left/right tackle Tytus Howard is contract extension eligible. Which position Howard plays in 2022 (and potentially beyond) is to be determined. There are multiple factors in play for which position Howard plays. Could Houston employ a similar structure on a Howard extension in the coming months? Potentially. Will an extension happen this offseason? Probably not.
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