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Assisted By Collective-Bargaining Rules, Jeremy Lin Flees to Houston

The New York Knicks failed to match the Houston Rockets’ offer sheet to flash-in-the-pan point guard Jeremy Lin last night, scared off by the odd contract structure that the Rockets were able to put on the table.

Rockets GM Daryl Morey has been portrayed as an evil genius this offseason in exploiting collective-bargaining loopholes to offer deals to free agents that makes it very difficult for home teams to re-sign. Lin’s three-year deal pays him around $5 million for each of the first two seasons and then almost $15 million in the third season. With the salary cap in mind, that last season makes the deal prohibitively expensive to match for a team like New York that has multiple large long-term contracts on its books. Morey has also offered a similar deal to Chicago Bulls backup center Omar Asik that the Bulls will have a huge problem matching.

Fortune writer Chip Lebovitz is outraged, writing that these deals will “force rich teams to choose between large payrolls and young players.” Well, yes, one of the explicit goals of NBA collective bargaining agreements is to even the playing field between the big-money big-market teams and small-market teams that have difficulties luring free agents and retaining superstars.

The reason that Morey’s offers are structured as they are is that the CBA necessitates it. Jeremy Lin is an undrafted second-year player who is a restricted free agent. That means that a competing team can’t offer him any more than the average player salary for the first year of the deal with an increase of 4.5 percent in the second year. The third year of an offer to a restricted free agent like Lin, however, is limited only by a team’s salary cap. These CBA rules mean that the Rockets aren’t allowed to offer Lin any more than about $5 million in the first two years of their offer sheet. In order to try to entice Lin away from New York, they upped that considerably in the third year. New York’s difficulty to absorb that third year into their books was a nice side benefit to Houston’s strangely structured offer sheet.

The CBA tries to balance three often-competing goals: letting home teams keep homegrown players, preventing big market teams from hoarding big contracts to dominate the playing field, and letting free agents get market value for their services. It’s these three values that caused the structure of the Jeremy Lin contract. Daryl Morey may be an evil genius, but he’s merely working with the rules as written to sign players at what he considers fair market value.


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