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Salary caps are mostly used by North American sports leagues: the National Football League and the National Basketball Association and minor leagues in various sports. In England, the top-level leagues in both rugby codes—the Zurich Premiership in Rugby Union and the Super League in Rugby League—have salary caps. Recently, several European football (soccer) leagues have also discussed introducing salary caps.
Salary caps were largely unnecessary in the era of the reserve clause, which was long a standard clause in professional sports player contracts and which forbade a player from negotiations with another team without the permission of the team holding that player's rights even after the contract's term was completed. This system began to unravel in the 1970s due largely to the activism of players' unions, and the threat of anti-trust legal actions. (Anti-trust actions were not a threat to baseballBusch Stadium in Saint Louis, Missouri. Baseball is a team sport in which a small hand-sized ball is thrown and hit with a bat. Scoring involves running and touching markers on the ground called bases, hence the name. The ball itself is also called a base, which has long been exempt from these laws.) By the 1990sCenturies: 19th century 20th century 21st century Decades: 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s 2020s 2030s 2040s Years: Events and trends Computers, technology Explosive growth of the Internet; decrease in the cost of computers and other techn most players with several years' professional experience became free agentsIn sports, a free agent is a player whose contract with a team has run out and is now free to sign with another team. The term came into wide use after most player contracts with sports leagues no longer contained a " reserve clause". In some leagues, the upon the expiry of their contracts and were free to negotiate a new contract their previous team or with any other team. This situation led to "bidding wars", which were generally (although not always) won by more affluent teams in larger media markets.
In a response to this and as a way of limiting the damage this did to the competitive balance necessary to maintain fan interest in their sports, in the 1990s both the National Football League and the National Basketball Association negotiated salary cap arrangements with their respective players' unions.
The NFL cap is a so-called "hard cap", which no team can exceed for any reason under penalty from the league. This figure is increased annually based on growth of the league's revenues. As of 2004, NFL salary cap is 80.5 million US dollars per team.
The player salary which counts towards the salary cap is not necessarily the same as the amount which he is actually paid in the current year. For example, if a player signs a multi-year contract and is paid a signing bonus, only a part of the bonus counts towards the salary cap in the first season. (The rest is divided over the next years of contract.) The full relationship between a player's actual annualized salary and his so-called "cap number" is quite complex and beyond the scope of this article. Teams often design contracts so that some of money paid in the first years does not count towards cap until later. This effectively results in real salaries being slightly higher than the cap.
The effect of the salary cap has been the release of many higher-salaried veteran players and their replacement by lower-salaried younger players. The salary cap prevents teams from formerly widespread practices such as keeping a one-time stellar quarterbackThe quarterback is a position in the offensive backfield of American and Canadian football. He is generally the leader of the offensive team when it is on the field, responsible for initiating play by the snap of the ball from the center. After snapping t whose skills are beginning to decline with age around to train a new, highly-touted but "raw" rookie, or generally keeping older players who had contributed much to the team on the playing roster until they are ready to retire on their own terms. It has also served to limit the rate of increase of the cost of operating a team. This has accrued to the owners' benefit, and is widely regarded as being responsible for the National Football League being overall the most financially stable of the major North American sports organizations.