Designated Player Rule - History

History

The team salary cap was estimated to be around US$1.9 million in 2006, was $2.1 million in 2007, and was raised to $2.3 million for the 2008 season. As part of the 2010 Collective Bargaining Agreement between MLS and the MLS Players' Union, the 2010 salary cap will be $2.55 million with an automatic five percent increase each year until the expiration of the agreement at the end of the 2014 season.

Under the 2007 rule:

• The rule expires at the end of the 2009 season, and must be renewed then or allowed to lapse.
• For each Designated Player, $400,000 of his salary is charged to the salary cap and paid by the league, with any remaining salary being paid by the team's owner. This value was increased for the 2009 season to $415,000.
• Prior to the 2007 season, there were three players whose salary exceeded $400,000. These players were Landon Donovan, Carlos Ruiz and Eddie Johnson. According to the rule, these players were grandfathered in for the 2007 season, and the exemption was extended after the 2007 season, with the league planning to review the issue at a future date. It was possible that the league would be required to renegotiate these players' contracts or consider them Designated Players. However, prior to the start of the 2008 season, Johnson moved to Fulham of the Premier League, while following Dwayne De Rosario's signing by Toronto FC in January 2009, Ruiz was released by the club and left MLS to play for Olimpia Asunción. This left Donovan as the lone player whose 2009 salary remained grandfathered under the exemption provision. However, there were several more players whose guaranteed salary exceeded the Designated Player amount, but whose salary cap expense was actually lower than their true salary due to the allocation rule. These players include Shalrie Joseph ($450,000), Christian Gomez ($430,000), Dwayne De Rosario ($425,750), and Taylor Twellman ($420,000).
• Each team initially had one Designated Player spot, but could trade their Designated Spot to another team; teams were allowed a maximum of two Designated Players.
• Only $325,000 of a team's second Designated Player counted against the salary cap, which was increased to $335,000 in 2009.

The 2010 changes:

• The rule has no expiration date.
• For each Designated Player, $335,000 of his salary is charged to the salary cap and paid by the league ($167,500 for DP players joining during the MLS summer transfer window), with any remaining salary being paid by the team's owner. This amount is halved for Designated Players signed in the middle of the season. The salary cap value of Designated Players can also be reduced using allocation money. Finally, teams whose Designated Players transfer abroad in the middle of a season can recoup part of the Designated Players' salary cap value.
• Landon Donovan is no longer grandfathered into the rule and must be considered a Designated Player.
• Each team is allowed two Designated Player spots, and they can no longer trade their Designated Player spots. The New York Red Bulls will receive $70,000 in allocation money in return for the nullification of their 2007 trade with Chivas USA for an additional Designated Player spot. This means that both New York and Chivas USA will have two Designated Player spots for the 2010 season.
• Teams can pay a $250,000 "luxury tax" for the right to sign a third Designated Player. This $250,000 would be distributed equally to all MLS teams that have not signed a third Designated Player in the form of allocation money.

The 2012 changes:

Starting with the 2012 season, the rule will be changed with respect to younger players. MLS announced the changes in August 2011 after clubs expressed concern about signing young international players with no guarantees that they would develop into stars.

• Designated Player over the age of 23 will carry a salary budget charge of $350,000, unless the player joins his club in the middle of the season, in which case his budget charge will be $175,000.
• Designated Player 21–23 years old counts as $200,000 against the club’s salary budget.
• Designated Player 20 years old or younger counts as $150,000 against the club’s salary budget.
• The budget charge for the midseason signing of a young Designated Player (23 years old and younger) is $150,000 and this amount cannot be lowered with allocation funds.
• Clubs will not have to buy the third DP roster slot to accommodate Designated Players 23 years old and younger.
• Age of player is determined by year (not date) of birth.