The Over-38 rule is a provision in the NBA’s Collective Bargaining Agreement (CBA) designed to discourage teams from offering contracts of four or more years to players who are 38 years old or will turn 38 during the term of the contract.[2] This provision is unique to the NBA and recent revisions to the rule underscore the league’s commitment to maintaining a player-friendly environment while preventing teams from manipulating salary cap regulations.
History
The Over-38 rule, originally introduced as the "Over-35 rule" in the 1995 CBA, later evolved into the "Over-36 rule" and remained largely unchanged for many years.[3] It wasn't until 2016 that former National Basketball Players Association (“NBPA”) President Chris Paul played a key role in a significant revision.[4] The timing of this revision correlated with the extension of many players’ careers due to advances in the health and wellness area.[5] These advancements in player conditioning and body preservation techniques allowed athletes like LeBron James to extend their playing careers well into their late 30s and beyond.[6] Recognizing the impact of the Over-36 rule on veteran players like James, Chris Paul successfully advocated for changes that evolved into the current "Over-38 rule."[7] Before the revisions, teams faced full cap penalties if a player retired mid-contract, discouraging long-term deals for older players and limiting their financial security. The revised Over-38 rule offered more flexibility for veteran contracts, giving players better leverage for guaranteed money. This adjustment allowed aging players, including both Paul and James, to negotiate more favorable contracts as they approached the later stages of their careers.[8]
Language of CBA
The Over-38 rule is outlined in Article VII, Section 3 of the CBA which focuses on deferred compensation. The general rule of this provision states, “All Player Contracts entered into, extended, or renegotiated after the date of this Agreement shall specify which Season(s) in which any Deferred Compensation is earned. Deferred Compensation shall be included in a player’s Salary for the Salary Cap Year encompassing the Season in which such Deferred Compensation is earned.”[9] As seen in Article VII Section 3(a)(2) of the CBA, the Over-38 rule lays out provisions that “shall apply to any Player Contract entered into, extended, or renegotiated that, beginning with the date such Contract, Extension, or Renegotiation is signed, covers four (4) or more Seasons, including one (1) or more Seasons commencing after suchplayer will reach or has reached age thirty-eight (38) (an “Over 38 Contract”).”[10] The rule applies to any contract that lasts four or more seasons and includes at least one season where the player is 38 or older.[11] If a player signs a contract like this, the salary for the seasons after they turn 38 gets spread out into earlier years of the contract.[12] For example, if a player aged 35 or 36 signs a five-year deal with their current team, the salary from the later 2 or 3 years of the contract gets shifted into the earlier years. The Over-38 rule attempts to stop teams from deferring too much salary to the later years of the contract when the player might be less productive or retire, and it helps balance how the salary counts against the team's salary cap in earlier years.
Purpose
Paul pushed for revisions to the “Over-36 rule” to introduce flexibility and encourage multi-year contracts for veterans, giving them more leverage to negotiate guaranteed money. Previously, if a player retired mid-contract, teams were still hit with the full remaining salary against the cap, making long-term deals for older players risky and limiting their financial security. Not only does the new iteration of the rule accommodate aging players longevity in the league, but it also continues to address issues with deferred compensation.[13] Before the rule, teams could exploit this by offering long, high-paying contracts to players nearing retirement, effectively circumventing salary cap rules.[14] The rule acts as a safeguard, preventing teams from compensating players beyond their active playing years and discouraging contracts that extend into a player’s retirement.
Exception
An exception to the Over-38 rule exists when a team holds Bird rights over the player whose contract is being negotiated and the player is 35 or younger before October 1st.[15] Bird rights permit teams to exceed the salary cap to re-sign players, offering them up to the league's maximum salary, and they were established to allow teams to retain players by providing a stronger financial incentive for them to stay.[16] To be eligible for Bird rights, a player must have been with the same team for at least three consecutive seasons, been traded with a contract guaranteeing at least three years, or been claimed off waivers during the first year of their contract.[17]
If a player’s 38th birthday falls after October 1st in the fourth year of their contract, they are typically ineligible to sign a four-year (or longer) contract unless their team holds their Bird rights.[18] If a player satisfies these conditions, the team is allowed to offer a contract that extends one year longer than what would be permitted for a player without Bird rights. This additional flexibility is helpful in negotiations for players who might otherwise face limitations under the Over-38 rule.
Impact on Notable Players
While the Over-38 rule is not widely discussed, it has become increasingly relevant as star players who have defined the current era of NBA basketball age. Recent contract negotiations for players like Kevin Durant, Chris Paul, and Lebron James highlight the potential impact of this rule.
In 2021, Kevin Durant and the Brooklyn Nets agreed on a four-year, $198 million contract extension.[19] By the end of the deal, Durant would be 37, which played a key role in his decision not to pursue a five-year contract. The Over-38 rule impacted his decision, as delaying until the summer of 2022 wasn’t feasible because by then, Durant would be 38.[20] Also, having only spent two seasons with the Nets, he didn’t qualify for the Bird rights exception to the rule. To ensure financial security, Durant opted for the four-year extension in 2021. This decision carried significant consequences; without it, he might have tested free agency instead of requesting a trade in 2023.[21] Ultimately, the Over-38 rule shaped not only the duration of Durant’s contract but also the course of his career.[22]
In contrast, Chris Paul was able to use the Over-38 rule to his advantage during the 2021 offseason. He agreed to a four-year, $120 million contract with the Phoenix Suns, which would extend through his 40th birthday.[23] This was made possible because the Suns held his Bird rights after acquiring him in a trade during the 2020-21 season.[24] Since Paul was still on a long-term deal when traded, Phoenix was able to take advantage of the Over-38 rule and offer him a four-year contract despite his age.[25] This enabled Paul to lock in a high-value deal that would carry him into his 40s.
In the past offseason, the Over-38 rule played a role in LeBron James' decision to sign a two-year, $104 million extension with the Los Angeles Lakers.[26] As LeBron nears his 40th birthday in December 2024, the rule limits his ability to negotiate contracts longer than two years.[27] While this restriction reduced his leverage for a longer deal, the shorter contract provided benefits like a player option for the second year and flexibility to play with his son, Bronny James, in the 2024-25 season.[28]
Conclusion
The Over-38 rule, though often overlooked, plays a crucial role in NBA contract negotiations for aging stars. The revised rule was introduced to address increasing player longevity due to advances in health and wellness, while maintaining its original purpose of preventing teams from backloading contracts. While it has enabled veterans like Chris Paul to negotiate favorable financial terms, it has also limited stars like Kevin Durant and LeBron James from securing longer-term deals, highlighting its variable impact on players. However, given its effectiveness in balancing player compensation with salary cap management, other professional leagues may soon explore implementing similar measures.
GABBY PAINTER (staff writer) is a 2L from Spring City, PA. She is an avid Philadelphia sports fan. Currently, Gabby is on the Basketball Negotiation Team at Villanova and interning in the athletic compliance department at her alma mater, Franklin & Marshall College. After graduation, she hopes to pursue a career in negotiating contracts for a professional basketball team.
References:
[1] Photo by Surturoth23 on Flickr
[2] Adams, Luke. Hoops Rumor Glossary: Over-38 Rule. (15 June 2018) https://www.hoopsrumors.com/2018/06/hoops-rumors-glossary-over-38-rule.html
[3] Id.
[4] Id.
[5] Windhorst, Brian. Union Reps Lebron James, Chris Paul Could be Big Winners Through Over-38 Rule. (16 Dec. 2016) https://6abc.com/sports/union-reps-lebron-james-chris-paul-could-be-big-winners-through-over-38-rule/1659878/
[6] Id.
[7] Adams supra.
[8] Id.
[9] NBA Players Association. NBA – NBPA Collective Bargaining Agreement. (1 July 2023)
[10] Id.
[11] Id.
[12] Id.
[13] Id.
[14] Leroux, Danny. CBA Encyclopedia: Over-38 Rule. (29 Nov 2017). https://basketball.realgm.com/article/248182/CBA-Encyclopedia-Over-38-Rule
[15] Patterson, Hunter. What is the NBA’s over-38 rule, how it relates to Lebron James’ new Lakers contract. (19 Aug 2022). https://www.nytimes.com/athletic/3523096/2022/08/19/over-38-rule-lebron-james-lakers/
[16] Adams, Luke. Hoops Rumor Glossary: Over-38 Rule. (9 March 2024)
[17] Id.
[18] Patterson supra.
[19] Id.
[20] Id.
[21] Id.
[22] Id.
[23] Id.
[24] Id.
[25] Id.
[26] Axson, Scooby. How obscure ‘Over-38 Rule’ can impact Lebron James signing longer deal with Lakers. (3 July 2024) https://www.usatoday.com/story/sports/nba/lakers/2024/07/03/nba-over-38-rule-lebron-james/74290083007/
[27] Patterson supra.
[28] Id.
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