90. Can a free agent be signed and immediately traded?
There is a rule that allows teams to re-sign their own free agents for trading purposes, called the sign-and-trade rule. Under this rule the player is re-signed and immediately traded to another team. This is done by adding a clause to the contract stipulating that the contract is null and void if the trade to the specific team is not completed within 48 hours. To qualify for a sign-and-trade, all of the following must be true:
The player must re-sign with his prior team -- a team cannot include another team's free agent in a sign-and-trade.
The player must finish the preceding season with that team (deals are no longer allowed that sign-and-trade players who are out of the league, such as the sign-and-trade that sent Keith Van Horn from Dallas to New Jersey as part of the Jason Kidd trade in 2008).
The player cannot be a restricted free agent who has signed an offer sheet with another team (see question number 44).
Starting in 2013-14, the team receiving the player cannot be above the "apron" ($4 million above the tax level) after the trade1, 2. A team above the apron can receive a player in a sign-and-trade if the trade reduces the team's payroll and the team finishes the trade below the apron.
Starting in 2013-14, the team cannot receive a player in a sign-and-trade if they have used the Taxpayer Mid-Level exception (see question number 25) that season.1
The trade must be completed prior to the first game of the regular season (sign-and-trades are not allowed once the season begins).
The player cannot be signed using the Non-Taxpayer Mid-Level exception, the Taxpayer Mid-Level exception, or any exception that cannot be used to offer a three-year contract (see question number 25).
A sign-and-trade deal can be made with a free agent who has been renounced, as long as all the above criteria are met. Sign-and-trade contracts must be for at least three seasons (not including any option year) and no longer than four seasons. The first year of the contract must be fully guaranteed, but the remaining seasons can be non-guaranteed. The combination of a three-year minimum with a one-year guarantee ensures that the player's new team cannot acquire the player's Bird rights any sooner than if they had signed him directly (if they wanted to re-sign him in less than three years they would first have to waive him, and lose any Bird rights -- see question number 33).
The starting salary in a contract signed for a sign-and-trade may be any amount up to the player's maximum, however if the player meets the 5th Year 30% Max criteria (see question number 17) he cannot receive a salary greater than 25% of the cap. Raises are limited to 4.5%. The player may be considered to have a lower outgoing salary for trade purposes, which can complicate the trade (see question number 88).
If a sign-and-trade contract contains a signing bonus, then either team can pay it. By default the team that signs the player pays the signing bonus (as with any other contract), but since a sign-and-trade is in essence a contract with the receiving team, the teams can agree that the receiving team will pay it. Any portion that is paid by the signing team counts toward the team's annual limit for cash included in a trade (see question number 96), which in effect limits the portion of the signing bonus that can be paid by the signing team.
If a sign-and-trade contract contains a trade bonus, then the bonus is not earned upon the trade that accompanies the signing, but rather on the first subsequent trade. See question number 94 for more information on how long a team must wait before they can trade a player.
Starting in 2013-14 if a team acquires a player in a sign-and-trade, the apron -- the point $4 million above the tax line -- effectively becomes a hard cap for the remainder of that season. See question number 28 for details.
1 These teams are free to send players to other teams in sign-and-trade transactions, or to receive players in sign-and-trade transactions who weren't signed-and-traded themselves. Also, the restriction applies only to the sign-and-trade transaction itself -- teams are free to acquire players who had been signed-and-traded in earlier transactions.
2 A different team salary definition is used for determining whether a team is above or below the apron -- see question number 14 for details.
