Agent’s Take: The economic ramifications of Deshaun Watson’s 11-game suspension

The NFL and the NFLPA reached an agreement on Thursday in connection with the discipline of Browns quarterback Deshaun Watson for violating the league’s personal conduct policy. Watson is suspended without pay for Cleveland’s first 11 regular-season games and fined $5 million. He must also undergo a mandatory evaluation by behavioral experts and follow their treatment plan.

The settlement is the final resolution of the disciplinary case and ends the NFL’s appeal of the six-game suspension without a fine imposed on Watson by Sue L. Robinson, who was jointly appointed by the NFL and NFLPA. Robinson found in her 16-page judgment that Watson committed a violation through sexual assault, conduct that poses a real threat to the safety and well-being of another person, and conduct that undermines or threatens the integrity of the NFL. The settlement bars the NFLPA from pursuing appeals through the federal court system.

Prior to the settlement, the NFL had sought an indefinite suspension that would allow Watson to seek reinstatement after a year from Peter C. Harvey, who had been chosen by Commissioner Roger Goodell to handle the appeal. The 11-game ban is the longest suspension ever imposed under the personal conduct policy for sexual misconduct. It is unknown if Robinson’s mandate to restrict Watson’s massage therapy to team-approved massage therapists for the remainder of his career will remain in place. Watson’s punishment is consistent with what the NFL was seeking in settlement talks prior to Robinson’s decision. The NFLPA declined the NFL’s reported offer of a 12-game suspension and a $10 million fine.

Watson’s suspension goes into effect August 30 when the final roster cut to 53 players for NFL teams takes place. Under the NFL’s collective bargaining agreement, Watson will return to team facilities and participate in limited activities during the second half of a suspension, on terms similar to players suspended under the NFL’s performance-enhancing substance policy. On October 10, the day after the Browns’ Week 5 match against the Chargers, his permitted activities include attending team meetings, individual training with the Browns’ strength and conditioning coach, and individual meetings with Browns head coach Kevin Stefanski, offense coordinator Alex Van Pelt and quarterbacks coach Drew Petzing and receive treatment/rehab from Browns medical staff and coaches. Watson will be able to train for the last two weeks of the suspension from November 14. The suspension will be lifted on November 28. Watson will be eligible to play in the Browns’ Week 13 game against the Texans, Watson’s former team. on December 4th. His return will be in week 13 instead of week 12 because Cleveland has a reunion in week 9.

Many of the other NFL teams feel the fully guaranteed five-year, $230 million contract Watson signed in March as part of his deal with the Texans was structured to minimize the financial fallout from the suspension . Without salary refers to the base salary with breaks. Watson received a signing bonus of $44.965 million and his 2022 base salary is $1.035 million, his minimum base salary in the league under the deal. He loses $632,500 (or 11/18 of his 2022 base salary of $1.035 million) as he earns $57,500 in each of the 18 weeks during the regular season.

The Browns will receive $632,500 of the 2022 cap from base salary, which Watson will not earn due to the suspension. Presumably, the $57,500 from the Week 9 reunion will be treated like suspensions under the NFL’s substance abuse policy. It should be paid out in equal installments over the remainder of the season after Watson has served his suspension. Watson’s contract is not linked to his 11-game ban. His contract years are running as planned, meaning his contract will end after the 2026 season. His salary caps for 2023 through 2026 each remain at $54.993 million ($46 million base salary and $8.993 million signing bonus portion).

Had there not been an agreement that gave Harvey Watson the year-long suspension the NFL was seeking for his contract, this would have worked. Essentially, Watson’s contract would have been frozen and resumed in 2023 with tolls. His contract year 2022 would have become his contract year 2023 and further contract years would also have been pushed back by one year. Rather than letting Watson’s contract expire after the 2026 season, it would have ended after 2027. Although the contract would have been delayed a year, the signing bonus portion of $8.993 million annually from 2022 to 2026 would have remained intact.

None of Watson’s $44.935 million signing bonus is at risk, thanks to wording in the contract. Watson’s salary guarantees will not expire either. Contractual guarantees usually expire for an exhaustive list of defaults by a player. Upon cancellation, the player would still have the opportunity to earn the no-longer-guaranteed salary on a non-guaranteed basis.

The relevant language about Watson’s signing bonus is as follows:

“…a suspension by the NFL solely relating to matters communicated to the club in writing pursuant to Section 42 and resulting in the player being unavailable to the club solely for games during the 2022 or 2023 NFL league years will not result , the player forfeits the Signing Bonus.”

Were it not for that language, the Browns would have had the right to ask Watson for one-eighteenth of the $8.993 million signing bonus attributed to the 2022 salary cap for each week of the 18-week regular season, which ended with the 11- Game ban was missed. The Browns would have had an opportunity to recoup $5,495,722 (or 11/18 of $8.993 million) from Watson.

The relevant language preventing Watson’s warranties from being voided is set out below:

“…it will not constitute a default or refusal to train or play with the club and the player will not be in default if: …(iii) the player is suspended solely in connection with matters affecting the club have been notified in writing pursuant to paragraph 42, resulting in the player being unavailable to the club only for games in the 2022 or 2023 NFL league years.”

The language matters as it prevents the Browns from potentially getting out of the contract without massive cap consequences due to pre-trade known misconduct. In other words, the Browns can’t walk out of the deal amid allegations of suspension of the personal conduct policy. In practical terms, the Browns would not have done so early in the contract if possible, having given up first-round picks in 2022, 2023 and 2024, a 2022 fourth-round pick, a 2023 third-round pick and a 2024 fourth-round pick to pick Watson and get a sixth-round election in 2024.

The suspension ends a 17-month ordeal that will not be easily forgotten. Watson still maintains his innocence Thursday, though Robinson called his behavior predatory and “more egregious than any previously reviewed by the NFL,” which is overwhelmingly viewed as disappointing. Last week’s apology sounds hollow and appears to be something he made specifically so that an agreement could be reached.