Agent’s Take: Deshaun Watson’s potential suspension carries varying financial ramifications

A crucial step in resolving Browns quarterback Deshaun Watson’s playing status for the 2022 season is taking place. A disciplinary hearing to determine whether Watson violated the NFL’s Personal Conduct Policy conduct started on Tuesday.

Watson had been facing 24 civil lawsuits alleging inappropriate sexual conduct by him during massage sessions that took place while he was with the Houston Texans. Twenty of the 24 cases were settled last week. Two grand juries in Texas declined to pursue criminal charges against Watson, who has denied any wrongdoing, earlier this year. 

Retired U.S. District Court judge Sue L. Robinson, who was jointly appointed by the NFL and NFLPA, is conducting the hearing. The proceeding is expected to last several days.

Procedurally, the NFL was required to inform Robinson, Watson and the NFLPA of its recommended discipline at least 10 days prior to the hearing, according to the NFL Collective Bargaining Agreement. There are multiple reports of the NFL seeking an indefinite suspension that lasts at least one year. Talks between the NFL and the NFLPA/Watson prior to the hearing failed to produce a settlement.

There isn’t a set timetable for Robinson to issue a ruling. Ideally, a ruling will occur before the Browns open training camp on July 27. A finding of no policy violation, which doesn’t seem likely, would be the final resolution of the case.

Both sides have three business days to file an appeal if discipline is imposed. Commissioner Roger Goodell or someone he appoints as his designee would preside over the appeal, with the latitude to increase, decrease or affirm Robinson’s punishment.

Signing bonus forfeiture/voiding of guarantees

Whether Watson receives a yearlong suspension or is allowed to play football this season, the $44.965 million signing bonus in the fully guaranteed five-year contract worth $230 million he signed in March as a part of his trade from the Texans isn’t in jeopardy because of the way the contract is structured. Watson’s salary guarantees won’t void in either case as well.

It’s because of specific language in Watson’s contract. The relevant language about the signing bonus is as follows.

“… a suspension by the NFL solely in connection with matters disclosed to Club in writing pursuant to Paragraph 42 which results in Player’s unavailability to Club solely for games during the 2022 or 2023 NFL League Years shall not subject Player to forfeiture of Signing Bonus.”

Without this language, the Browns would have the right to ask Watson for the $8.993 million of the signing bonus attributed to the 2022 salary cap with a one-year suspension. It would have been one-eighteenth of the $8.993 million signing bonus attributed to the 2022 salary cap for each week of the 18-week regular season Watson missed with a shorter suspension. For example, an eight-game suspension would have given the Browns to ability to recapture $3,996,889 (or eight-eighteenths of $8.993 million) from Watson.

Technically, Watson hasn’t received any of his signing bonus. Fifteen million is payable on July 31. Another $15 million is due next Jan. 31 and the final $14.965 million will be paid next March 31. The salary deferrals don’t impact the exemption.

Suspensions are without pay, but that pertains to base salary. Since Watson’s 2022 base salary is $1.035 million, he will lose $57,500 (or one-eighteenth of the $1.035 million) for each week he misses due to a suspension. 

The pertinent language keeping Watson’s guarantees from voiding is below.

“…it shall not constitute a failure or refusal to practice or play with the Club and Player shall not be in default if: … (iii) Player is suspended solely in connection with matters disclosed to Club in writing pursuant to Paragraph 42 which results in Player’s unavailability to Club solely for games during the 2022 or 2023 NFL League Years.”

The language is significant because it prevents the Browns from potentially getting out of the contract without massive cap consequences because of misbehavior that was known prior to the trade. Presumably, any additional allegations in connection to massage sessions while Watson was with the Texans wouldn’t qualify as new misconduct.

In other words, the Browns can’t exit the deal because of accusations stemming from the massages. Practically speaking, the Browns wouldn’t do so even if it were possible after giving up 2022, 2023 and 2024 first-round picks, a 2022 fourth-round pick, a 2023 third-round pick and a 2024 fourth-round pick to get Watson and a 2024 sixth-round pick.

These limitations pertain to the first two years of the contract. Should any discipline from these matters occur after 2023, the Browns will have the right to ask for signing bonus money back from Watson and/or void the remaining guarantees in the contract.

One-year suspension ramifications

The biggest ramification of a yearlong suspension is Watson’s contract currently running through 2026 will toll. Essentially, Watson’s contract would be frozen and resume in 2023 with tolling. This means his 2022 contract year would become his 2023 contract year and additional years in the contract would also get pushed back one year. Instead of Watson’s contract expiring after the 2026 season, it would end after the 2027 season. 

Although the contract would get pushed back a year, the signing bonus proration of $8.993 million annually from 2022 through 2026 would remain intact. Watson’s 2022 salary cap number is $10.028 million consisting of the $8.993 million of salary bonus proration and his $1.035 million base salary. This base salary would come off Cleveland’s books for $1.035 million of 2022 cap relief. 

Watson 2023’s cap number would become $10.028 million with his 2022 base salary shifting to 2023 and his $46 million 2023 base salary shifting to 2024. The 2024 through 2026 cap numbers would each be $54.993 million composed of a $46 million base salary and $8.993 million in signing bonus proration. The 2027 cap number would be the $46 million base salary that was originally for 2026.

Ramifications of a shorter suspension

Another important ramification of a yearlong suspension would be Watson’s banishment from training camp. That wouldn’t be case with a suspension allowing him to play football in 2022. Watson would be allowed to fully participate in training camp and play in Browns preseason games. The suspension wouldn’t go into effect until Sept. 5, which is the day after the preseason training camps end as defined by the CBA. 

Watson’s contract doesn’t toll with a suspension where he can play football in 2022. His contract years will run as intended, meaning his deal would end after the 2026 season. Watson would forfeit any base salary that wasn’t earned because the suspension. For instance, an eight-game suspension would cost Watson $460,000 (or eight-eighteenths of the $1.035 million) since he earns $57,500 each of the 18 weeks in the regular season. 

Watson would be allowed back in team facilities and permitted to participate in limited activities during the second half of a suspension. The permissible activities would be practically the same as players who are suspended under the NFL’s substance abuse and performance enhancing substance abuse policies.

Most importantly, Watson would be able to attend team meetings, individually work out with the Browns’ strength and conditioning coach, meet individually with Browns head coach Kevin Stefanski, offensive coordinator Alex Van Pelt and quarterbacks coach Drew Petzing, and get treatment/rehab from the Browns’ medical staff and trainers after the fourth game of an eight-game suspension. Prohibited activities during the entire suspension include attending, observing or participating in practice, going to home or away games, and attending or participating in group workouts.