Below is a brief history of free agency, and at times the lack thereof, in the NFL.
The Reserve Rule (1920-1946)
The reserve rule allowed teams with right to resign a player in perpetuity. Players could not move on to another team by choice. Players really had three options: play for the same team, get traded or retire.
This rule bound a player to one team indefinitely. Each player contract contained this clause, allowing teams to continually resign their own players to one-year contracts with the same terms as their previous contract. This clause also remained in the new deal, which is how teams were able to sign players to one-year contracts each season in perpetuity.
The One Year Option Rule (1947-1962)
In 1947, the NFL replaced the reserve rule with the “one year option” rule. Under this rule, teams had the right to use a reserve clause one time after the expiration of his player contract. The option year could not contain the reserve clause, which gave players the ability to negotiate and enter a contract with any team. This made players free agents, with no restrictions, and seemed to pave the path for unrestricted free agency.
The first player to change teams under this rule was 49ers wide receiver R.C. Owens. After playing out his option year in 1961, Owens had completed his contractual obligation with the 49ers and decided to sign a new contract with the Baltimore Colts.
The Rozelle Rule (1963-1976)
After Owens left the 49ers and due to complaints from the team’s then owner, Vic Morabito, NFL owners proposed (and the NFLPA later accepted) the inclusion of the “Rozelle Rule,” named after then NFL Commissioner Pete Rozelle, in the collective bargaining agreement.
The rule allowed the NFL Commissioner, at his discretion, the right to award compensation from a team signing a free agent to the team losing the free agent, unless the two teams agreed on a compensation package. Compensation could be in the form players, draft choices or cash considerations. Any decision the commissioner made are final and conclusive.
In 1976, the NFLPA challenged the Rozelle Rule in the case Mackey v NFL. The court found that the rule violated Section 1 of the Sherman Act as an unreasonable restraint on trade. The court stated that the rule:
- Deters clubs from negotiating with and signing free agents
- Decreases players’ bargaining power in contract negotiations
- Players were denied right to sell services on open market
- Absent the rule, there would be more movement in interstate commerce of players from one club to another
The court found three main things that were wrong with the rule. First of all, it was too broad. What was defended as a rule to maintain competitive balance (to stop star players from switching teams) applied equally to all players, even those who were not stars. It was also extremely restrictive because there was no end in its duration; it served as a perpetual restriction on all player’s ability to freely market and sell his services on the open market for the entirety of their careers. There was also no way for teams to know what they compensation tied to signing a specific player would entail.
However, the NFLPA sacrificed its free agency victory in Mackey v. NFL for other employment benefits in the 1977 NFL CBA. The Rozelle Rule was replaced by something very similar: the right of first refusal and a compensation structure for teams losing free agents.
The Right of First Refusal and Compensation (1977-1988)
The settlement of the Mackey case led to a revision of the Rozelle Rule, with new forms of free agency restrictions in the 1977 collective bargaining agreement.
A free agent’s original team held the right of first refusal, enabling it to retain its player by matching any contract offer by another team. The original team was also entitled to draft choice compensation from the team signing its player. However, there was an actual structure, based on a player’s NFL experience and his new salary, which determined the number and caliber of draft picks to be awarded.
This allowed teams rights to its players that, contractually, no longer existed.
The 1982 collective bargaining agreement also still included the right of first refusal and draft pick compensation but adjusted draft compensation to align with multiple tiers of salaries.
Plan B Free Agency (1989-1992)
With an anti-trust suit still pending and multiple offers proposed from each side, the owners unilaterally imposed Plan B free agency with the absence of a labor agreement. Owners had the right to protect 37 of its players (when the league had 47-man rosters) from becoming free agents. Players protected under Plan B were subject to the same compensation rules if signed by another team.
Unprotected players were not subject to right of first refusal or draft compensation rules. They were free to negotiate and sign with any team. This led to an influx of player movement in the NFL. However, players who were protected, essentially the team’s best 37 players, were not given the same freedom and faced the same market restrictions as players before Plan B. Only one restricted player, linebacker Wilber Marshall, changed teams while the system was in effect.
The First Glimpse of NFL Free Agency (1992)
On September 24, 1992, U.S. District Court Judge David Doty ruled that Eagles tight end Keith Jackson, Patriots defensive end Garin Veris, Browns wide receiver Webster Slaughter, and Lions running back D.J. Dozier were awarded a temporary restraining order and became unrestricted free agents for five days, until an evidentiary hearing could be heard.
Jackson (Dolphins), Slaughter (Oilers) and Veris (49ers) each signed contracts with new teams. Dozier remained unsigned.
NFL Free Agency (1993-Present)
In his closing arguments over Plan B free agency, the NFL’s attorney, Frank Rothman, said that removing Plan B “would be the destruction of the National Football League that we know today.”
That day came in 1993.
White v. NFL led to the “White Settlement,” which is what brought about a new form of free agency. Any veteran with at least five years of experience (eventually lowered to four) would become unrestricted free agents. However, it allowed teams to name its most valuable player as a “Franchise” player, and in the first and final two years of the CBA, it could name a player as a “Transition” players, each of which restricted their movement on the market.
Players with three or four seasons of experience were subject to the same right of first refusal/compensation system as before, essentially what we know today as restricted free agency. Teams had exclusive negotiating rights to players with fewer than three years of experience—what we know as exclusive rights free agents.
The settlement also brought about the salary cap. In 1994, the salary cap was introduced to the NFL because player salaries in 1993 reached the agreed upon 67 percent of team revenues. Set at $34.6 million for its initial season, the cap intended to serve as an equalizer in response to free agency.