What in the World Are “Voidable Years” and Why Are They Dominating NFL Free Agency?

The first time Adam Schefter’s Twitter feed made me question the fabric of my reality was on Friday.

In tweeting about the Buccaneers’ new deal with Tom Brady, Schefter wrote a convoluted phrase that stood out: “A four-year contract extension that voids to a one-year extension that locks him into Tampa through the 2022 season.”

Excuse me? What does that mean? Is the contract for four years or one year? Usually when you read a sentence six times, you can deduce whether something is singular or plural. But not here. Fortunately, ESPN ran a story that explained it further, saying, “The additional voidable years are there to defray the cost.” Ah, yes, that clears it up. Oh wait, no it doesn’t! I’m more confused than ever!

After successfully crowbarring open this hole in my psyche, Schefter widened it on Sunday with a tweet about Taysom Hill’s restructured deal with the Saints.

“Details are great,” Schefter wrote. “It’s a 4-year, $140 million contract extension - but all years are voidable and it’s a mechanism to free up cap space this year, per source. It saves Saints over $7.5M against cap this year.”

¯\_(ツ)_/¯

So to be clear:

1. “Taysom Hill” and “$140 million” are in the same sentence.
2. Hill is getting a contract extension . . . but the entire extension is voidable.
3. Also apparently “paying” someone $140 million saves money.

With my head sufficiently spinning, I went to the dictionary, thinking I must have forgotten the meaning of the word “void.” But sure enough, the first definition listed is “not valid or legally binding.” Isn’t the point of a contract to be, you know, valid and legally binding? Is “voidable contract” an oxymoron like “freezer burn” or “jumbo shrimp”? And how is this saving the Saints money?

The amazing part is that this was not one of those fake Adam Schefter Twitter accounts. It was actually the real Adam Schefter, but he was reporting on contracts that were basically fake—at least on paper.

Voidable years and contract restructures are the hot salary-cap loopholes that franchises are using this offseason to keep championship-caliber teams together. They’re in vogue at the moment because the cap is going down for just the second time in 27 years. While these accounting sleights of hand are not new, they are more popular than ever (they’re basically SPACs, but for football). Because if necessity is the mother of invention, then desperation is the father—and teams are desperate. Here’s what you need to know about voidable years and the implications they have for the teams using them.

What is a voidable year?

A voidable year is essentially a self-destructive mechanism a la the tapes from Mission Impossible. Tom Brady inked a four-year contract last week, but after the first year, the contract basically rips itself up. So on paper it is a four-year deal, but by all rational logic it is a one-year deal.

Why would teams do something so convoluted?

To (legally) circumvent the salary cap via magical accounting. Duh.

How does this work?

First, let’s go through a “normal” contract. Say we’re signing you to a deal that’s worth $10 million in 2021 (congratulations). Since the team is paying you $10 million this year, it has to account for $10 million on its 2021 salary cap. Easy, right?

Now let’s do that again, but say that right before you’re about to sign, the team comes to you with an idea. Instead of a $10 million salary, they’re going to give you a $10 million signing bonus. This is even better for you than a $10 million salary, because the money is up front. Direct deposit. You’ll have all $10 million in your account by Friday. Good deal!

In exchange, the team wants you to sign a five-year deal. Except it’s not really a five year deal. It voids after the first season, so it’s actually a one-year deal disguised as a five-year deal. By signing you to a “five-year” deal, though, the team can spread the cap hit of that signing bonus out over the life of the contract. So instead of a $10 million cap hit in 2021, the team only has a $2 million cap hit. Wait, what?

Yes. The cap hit of a $10 million bonus on a five-year deal—even a fake five-year deal—is spread out evenly across all five years. But your special deal voids after one season, and the remaining $8 million accelerates to 2022. So functionally speaking, the team pushed $8 million of the cap hit from 2021 into 2022. This is a win-win. You, the player, get all the money right away. The team pushes the majority of the cost into 2022, which is great for the team. And your very talented teammate can get a new contract with the savings instead of leaving in free agency.

Why would teams want to push money into the future?

Two reasons:

1. Who wants to pay their bills on time if they don’t have to?
2. Inflation.

The first: Teams want to win now. The people who run NFL franchises are competitive. They don’t want to wait and build a championship-caliber team the financially sound way when they could bring guys in immediately and worry about the ramifications later. Also, if these executives don’t win right now, they might get fired. So short-term gains are sometimes prioritized ahead of long-term financial health.

The second: It actually is financially smart to push cap charges into the future.

The NFL made less money than usual last year because of the COVID-19 pandemic. Subsequently, the salary cap figure dropped (because the cap is a percentage of league revenue). Teams have less money to spend this year than they thought—almost $30 million less than previous projections indicated. Naturally, teams want to cut salary cap costs in 2021.

But they don’t really need to cut costs; they just need to punt them into future seasons. While this is a down year for the NFL’s finances, the league is also preparing to make more money than ever before—and soon. The main way the NFL makes money is by selling game rights to TV networks. And the league is currently renegotiating all of its preexisting TV contracts. While those deals are not done yet, they are expected to almost double in price. Fox might go from paying the NFL $1.1 billion a year to paying it about $2 billion a year. Teams know their Scrooge McDuck swimming pools will have a lot more gold coins in 2022, 2023, and 2024 than they do right now, so they don’t mind backloading contracts.

What does this actually mean for teams?

This is all very strange and esoteric to talk about hypothetically, so let’s get concrete. Here is what these teams did with their players this week and how it helps both parties.

Tampa Bay Buccaneers

Prior to Friday, the Buccaneers had not given out a contract with voidable years in over a decade, according to ESPN’s Jenna Laine. Now they’ve done it at least three times over the last week. First came Tom Brady’s extension. Brady’s contract looks like a four-year deal, but in reality it’s a one-year extension with three dummy years. But even that language is confusing. The one-year contract extension is on top of the one year remaining on his current deal. So what really happened is Brady signed a two-year contract for $50 million, or an average of $25 million annually. But the Bucs decided to pay $40 million of that $50 million to Brady via bonuses, and then spread the cap hit of those bonuses out across five years (three of those five years being fake). You can see it in this chart, courtesy of Over the Cap. I added some giant red circles because charts are boring.

Essentially Brady is going to get all of that $50 million—and he’s going to get it in the next two years. But the Bucs are planning to account for that money over a five-year period. They divided Brady’s bonuses to equal $8 million per year, and are essentially dropkicking $24 million into the future when the salary cap will be much larger. It’s kind of like if you could delay paying half your credit card bill at no fee because you know you’re getting your stimulus check next month. That is how the Bucs are paying Brady $26 million in cash this season, while his cap hit is just $9 million.

Tampa Bay pulled a similar move last week in its new contract with linebacker Lavonte David. David will make $12.5 million this year, but he has a cap hit of just $3.4 million. And Gronk’s new deal also has voidable years. The tight end signed a one-year contract for $8 million this week, but the Bucs threw on an additional four seasons to bring his 2021 cap hit down to just $4.8 million, according to Greg Auman of The Athletic. Eventually this will catch up to the Buccaneers, but by then they won’t care—they’ll have maximized their Super Bowl window by living in the moment.

The money the Bucs saved from those deals is being spread around the roster. Tampa Bay re-signed pass rusher Shaq Barrett and franchise tagged receiver Chris Godwin—two of the team’s best players who were scheduled to hit free agency—largely because of the cap space Brady, Gronk, and David helped create.

New Orleans Saints

Hill’s contract is a little more confusing than Brady’s. The details are still murky, but the gist is that Hill was set to cost the Saints $16 million this season, and now that the team has added four voidable years to the deal, he’ll cost just $8.4 million against the cap in 2021. Now, why the team added those four voidable years at the ludicrous cost of $140 million—money that Hill is almost certainly never going to see—is unclear. Jason Fitzgerald at Over the Cap wrote a bonkers explanation of what the Saints might be trying to do that’s worth a read if you want to dive deeper into the subject.

It’s possible the Saints have some grander strategy in mind that can help them even more cap-wise. But it’s also possible that this is (at least partially) a public relations move to appease Hill and his agents. Financially, Hill wants to be seen as a quarterback. (Who wouldn’t, honestly?) And a four-year $140 million extension—even if it’s completely and utterly fake—makes it clear he’s a quarterback.

Ultimately, though, this comes down to New Orleans needing every dollar of cap space it can get. The team was $75 million over the cap just a month ago. They have already shimmied that down to less than $5 million by cutting players and restructuring deals, but they’ve still got a ways to go. And moves like this one with Hill are how the team can franchise tag safety Marcus Williams at an eight-figure cost even when its salary cap space at the time was technically negative. If NFL contracts are like nailing smoke to a wall, then the Saints are the smoke monster from Lost.

Kansas City Chiefs

The Chiefs haven’t specifically used voidable years like Tampa or New Orleans, but they basically did the same thing this week by restructuring a bit of Patrick Mahomes’s contract.

Mahomes signed a mammoth $503 million contract last offseason that was so complicated we made a whole video just to explain it (spoiler—it’s not actually worth half a billion dollars). This week, the Chiefs dipped into Mahomes’s deal to create some cap space. Mahomes was due a $21 million roster bonus this month. But the Chiefs converted that into a signing bonus, which allows them to spread the $21 million across five years. (Does it make sense that they needed to convert a roster bonus to a signing bonus to do this? No. But none of this makes sense.)

The result is the same accounting magic the Bucs got by adding dummy years. Mahomes is getting that $21 million direct deposit this week, but his 2021 cap hit will be just $7.4 million. When experts say Mahomes is helping the Chiefs bring back their core players, this is what they mean.

Not only did the Chiefs restructure Mahomes’s contract, but they also did the same thing with tight end Travis Kelce and defensive lineman Chris Jones. Then they used the money they got back—along with money gained by cutting both of the team’s starting tackles—to give guard Joe Thuney a contract that is essentially guaranteed for three years and $48 million. All of this accounting black magic may be boring—OK, it’s definitely boring—but it’s also how the Chiefs could fix the offensive line that failed Patrick Mahomes in the Super Bowl last month. It is no coincidence that the two teams that just made it to the championship game are the ones at the forefront of this tactic.

Sure, this is robbing Peter to pay Paul, and eventually Peter will need that money back. But by 2023, the salary cap might be $50 million higher than it is now, so the Chiefs don’t care. Neither does Kelce. He appeared on the Pat McAfee show on Tuesday and seemed unconcerned by all the minutiae of his deal’s restructuring.

“It just went right over my head, man,” Kelce said. “I don’t know anything about these voidable years. I just know you play, you get paid.”