Quick Primer: How NFL Injury Settlements Work
I’ve received several questions regarding injury settlements and the effects on the salary cap.
When a player suffers a season-ending injury, the first and easiest option from an accounting point of view is to keep that player on season-ending injured reserve, where he will collect his salary each week, the same if he were on the active roster.
However, if a player who is on injured reserve becomes completely healthy, he can simply be removed from injured reserve without any kind of settlement.
Based on the Giants’ wording in their press release, that appears to be the case with QB Sage Rosenfels, who was “removed … from injured reserve.” Rosenfels was apparently declared healthy to where he did not receive an injury settlement from the Giants.
In terms of accounting, the Giants have paid Rosenfels approximately $705,880 of his $3M base salary. So that frees up an estimated $2,294,120 of cap space (because Rosenfels was acquired in a trade from the Vikings, the Giants are not hit with the prorated part of Rosenfels’ signing bonus.)
Stokley, meanwhile, did receive an injury settlement according to the team, so let me try to explain how that works.
Stokley, a 13-year NFL veteran, received a one-year deal for $910K, the veteran minimum for a player with 10+ years of accrued service. He was signed in Week 2 of the season, so his prorated weekly salary (over 16 weeks) comes to about $56,875 per week.
What happens with an injury settlement is that the team and the player reach an agreement on a lump sum that reflects how long both sides think the player is going to remained sidelined.
So let’s say for example that the Giants and Stokely agreed that he’ll be sidelined another four weeks with his quad injury. That means that Stokley’s injury settlement would be $227,500.
From an accounting standpoint, the Giants will have devoted $341,250 to Stokley to cover the weeks he was on the roster. With a four-week injury settlement (and again, I want to stress that I am only using this as an example as I do not know what kind of settlement he received), the Giants’ cap savings would come to $568,750 less whatever signing bonus Stokley might have received (which I can’t imagine was a big number).
Now let’s say that Stokley, who is now free to sign with another team, does so before the time period specified in his injury settlement expires (assuming that clause was int here). Depending on the terms of his negotiations with the Giants, he may have to rebate some of his settlement to the Giants, who would then receive a credit against their cap.
The terms of a rebate, I’m told, can be anything from a percentage on the entire settlement to a fee based on number of weeks. In some cases, a team won’t bother to ask for a rebate if a player signs with another club before his injury settlement period expires.
By the way, a player does not have to accept an injury settlement.
And before I get this question, in the cases of former Giants players such as C Shaun O’Hara, G Rich Seubert, and FB Madison Hedgecock, all of who suffered injuries in the 2010 league year, those guys were NOT eligible for injury settlements. I’m told that injury settlements only apply to the current league year in which the injury actually takes place.