The Rise of the Three-Year, $40 Million Aussie Rules Contract
The Internal Revenue Service (IRS) and the National Football League (NFL) have long been in competition with one another over who gets to share in the profits from taxes paid on sports books. In recent years, the NFL has made increasing amounts of money from such sources. As such, the NFL has sought to impose harsher restrictions on how and where the money generated from sports book owners can be spent. For its part, the IRS has sought to impose stiffer penalties on owners who fail to properly account for their sports book profits. The goal is to ensure that the tax money generated does not exceed the amount reasonably expected by the owner.
Unlike most other leagues, the NFL has instituted a UFA rule, or unrestricted free agent rule, that allows unrestricted free agents to sign with the NFL prior to signing a new contract with another professional sports league (i.e., a free agent may sign with the NFL and become an unrestricted free agent if he is cut by his current team at the conclusion of the current season). Since the implementation of the UFA rule, many professional football players have transferred to other teams to play following a transfer. Unfortunately for the NFL, these players are considered unrestricted free agents, which gives them the right, but no the obligation, to negotiate a contract with another team prior to signing with his current team. As a result, if the player plays in two different NFL seasons, he is able to receive compensation from more than one team (i.e., he receives compensation for playing in the NFL for two separate years). The UFA rule was implemented to prevent NFL players from engaging in conduct that would circumvent the restrictions placed on them by the NFL while they were participating in the NFL.
Although the ufaA has been applied frequently throughout history, the most recent example of it was in the mid-2000s with the arrival of the three-year contract. Prior to this type of contract, players were often limited to playing one season in the United Football Association. Although players could be restricted from signing a contract within three years of signing, they were not prohibited from signing one-year contracts after turning professional.
The three-year ufaA was first implemented in the American Football League (NFL) during the 1994 season. Players in the NFL had previously been limited to signing one-year contracts following their college graduating from high school. However, because of the lack of protection within college football, professional football players were sometimes pressured into signing longer contracts by teams. As a result, numerous college seniors decided to play professional football instead of entering the professional baseball draft, which often entailed signing a five-year, $40 million contract. As a result, the average high school graduate in America today is required by NCAA rules to receive at least a three-year, $40 million deal as a pro athlete.
Unfortunately for the sport of football and its players, UFA rules soon led to the cessation of the three-year, $40 million Aylways contract, and the popularity of college football in America quickly declined. Because of this, the NCAA approved a change in the way schools could qualify for Aylway contracts, which allowed the schools to place two additional players on their athletic roster as long as those players met the aforementioned three-year, $40 million agreement. Today, just three players – Dallas Cowboys quarterback Tony Romo, running back Darren Sproles, and center Max Unger – remain to be on an Aussie contract for over three years. Even with the current situation, the amount of money that players are being offered in Aussie Rules contracts is still very attractive.
If the NFL allows players to be paid based upon how long they spend in the NFL, then the current salary cap situation is in favor of the league’s revenue producers, which results in high incentives for players. In addition to incentives, players who sign one-year contracts will also receive full payment for one season, regardless of whether they play in the NFL or not. In essence, it would be comparable to being given a free car and being told you have to pay a certain monthly fee for driving it every week. Of course, this type of scenario could also lead to players getting greedy and signing five-year deals while ignoring the potential risk of injury and the amount of money they will need to pay over the course of those five seasons.