Key Takeaways:

  • A two-way contract allows an athlete's salary to vary based on the league they play in.
  • In the NHL and NBA, two-way contracts are commonly used for developing or fringe players.
  • In hockey, salaries differ depending on NHL vs. AHL assignments and may include waiver rules.
  • In basketball, two-way contracts allow limited NBA participation and G League development.
  • NBA players on two-way contracts can now appear in up to 50 games and earn a flat rate.
  • Teams can convert two-way contracts into standard deals or sign new players if a spot opens.

A two-way contract is a binding agreement concerning professional athletes, which states that an athlete's salary depends on what league he is assigned to play in. It is the opposite of a one-way contract, which states that the athlete's salary remains the same, irrespective of what league he plays in.

Two-Way Contracts in Hockey

Professional hockey players entering the NHL as first-timers usually sign a two-way, entry-level contract with a team. These contracts specifically state that they'll be paid better salaries if assigned to play with the NHL team, and will receive poorer salaries if assigned to play for a minor league like the ECHL or American Hockey League.

There's a common belief that a player who is bound by a one-way contract is expected to play exclusively in the NHL. That is true because an organization considers its players under one-way contracts to be good enough to play in the NHL. They also don't want to pay NHL-level salaries to players who are not in the NHL.

How a Two-Way Contract Works in Hockey

For the sake of illustration, let's say that a blueliner was awarded a one-way contract for one year worth $874,125. If the Bolts wanted him to go to the AHL and he successfully clears waivers, he would still earn $874,125 with Syracuse Crunch, the Tampa Bay Lightning's AHL affiliate. A two-way player isn't qualified for a 10-day contract. However, if he's released from his two-way contract, he qualifies to sign a 10-day contract with any team.

In a two-way contract, salaries associated with a player are of two different kinds. The kind the player receives depends on whether the player is on an organization's NHL roster or AHL roster. A player, for instance, was signed to a two-way contract for one year. So, playing with the Crunch will earn him an annual salary of $70,000 and playing with the Bolts will earn him an annual salary of $874,125. Bear in mind that these two amounts are fixed, depending on how long he spends and where.

Waiver Restrictions

Waiver restrictions apply to two-way contracts but vary from contract to contract. A player can freely alternate between the Lightning and the Crunch as the need arises because he's not old enough or hasn't reached the experience level where a waiver restriction applies. On the other hand, if a player who is old enough and experienced enough was to be reassigned to Syracuse from the Lightning, he would be required to clear waivers before reassignment because of his age and experience level.

Two-Way Contracts in Basketball

The NBA D-League was changed to the G League in 2017, and with that change of title, other slight differences were introduced into the world of basketball. Maybe the most significant of them all was the highly expected addition of two-way players to the NBA. A two-way player is a member of both the parent club in the NBA and the G League team.

When a player signs a two-way contract for one or two years, the player can spend as many as 45 days with the NBA team. Within the 45-day period that a player is on the roster of the NBA, he earns an NBA-level salary. However, that changes and he earns a G League-level salary when he joins the minors

In the past, G League players were typically called up during the second half of the season, when 10-day contracts could be signed in January. Now, they can be invited up and down as often as there is a need within the limits of their 45-day NBA tenure.

Benefits and Limits of a Basketball Two-Way Contract Player

Summarily, the following will be true of a player who signs a two-way contract:

  • He'll be on both the G League and NBA teams.
  • He'll enjoy guaranteed payments, but there's no contract security because he can be replaced by another two-way player at any time.
  • He can spend as long as 45 days on the roster of the NBA while earning an NBA salary.
  • He can't sign a 10-day contract.
  • He can be invited up and down as many times as the need arises within the limits of his 45-day NBA tenure.

Eligibility and Limitations of NBA Two-Way Contracts

To qualify for a two-way contract in the NBA, a player must have less than four years of NBA experience. “Experience” is defined as having played in at least one NBA game during a season. Importantly, a player cannot exceed two years on a two-way deal with the same team.

While two-way players are not eligible for postseason play, they can now participate in up to 50 regular season games (as opposed to the previous 45-day rule that counted both games and practice days). This increased flexibility helps teams respond to injuries or manage workloads throughout the season.

Salary and Cap Considerations for Two-Way NBA Players

Players on two-way contracts receive a flat salary equal to 50% of the NBA minimum salary, regardless of how many games they play. These salaries are not guaranteed, meaning players can be waived without receiving the full season’s pay.

From a team’s perspective, two-way contracts do not count against the salary cap or luxury tax, offering a cost-effective way to evaluate emerging talent.

Converting Two-Way Contracts to Standard NBA Contracts

NBA teams can convert a two-way contract into a standard NBA contract at any time. This often happens when a player has performed exceptionally well or when the team wants to secure postseason eligibility. Once converted or waived, the two-way slot becomes available for a new player.

Historically, many teams—including the Golden State Warriors—have used this mechanism to promote standout players to full-time roles before they reach free agency.

Examples of Two-Way NBA Contracts in Practice

Examples of two-way players making an impact include:

  • Quinn Cook and Damion Lee with the Golden State Warriors
  • Nico Mannion and Juan Toscano-Anderson, who started as two-way players and later contributed to the main roster

These examples illustrate how two-way deals serve as stepping stones for players aiming to secure standard NBA contracts.

Frequently Asked Questions

1. What is a two-way contract in sports? A two-way contract allows an athlete’s salary to change based on the league they’re assigned to—higher in the major league (e.g., NHL or NBA), lower in the minor league (e.g., AHL or G League).

2. How many games can an NBA two-way player play? As of recent updates, NBA two-way players can play up to 50 regular season games but are not eligible for the playoffs.

3. Are two-way contracts guaranteed? No, two-way contracts are not guaranteed. Players are paid up to the point they are on the roster and can be released at any time.

4. Can two-way players be promoted to standard NBA contracts? Yes, teams can convert a two-way contract to a standard NBA contract, often to allow postseason eligibility or secure long-term rights to the player.

5. Do two-way contracts affect the salary cap? No, two-way contracts do not count against a team’s salary cap or luxury tax.

If you need help with a two-way contract, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.