NHL CBA Talks: League Releases Details of Latest Offer

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In a sharp reversal Gary Bettman's comment yesterday that they "don't negotiate publicly", the NHL has published the details of their latest CBA proposal on their website, along with a detailed explanation of its terms. Let's give this thing a sniff test...

You can read the full text of the offer over at the NHL site, so I'll just jump to the interesting stuff:

4. Payroll Range:

  • Payroll Range will be computed using existing methodology. For the 2012/13 season, the Payroll Range will be computed assuming HRR will remain flat year-over-year (2011/12 to 2012/13) at $3.303 Billion (assuming Preliminary Benefits of $95 Million).
  • 2012/13 Payroll Range
Lower Limit = $43.9 Million
Midpoint = $51.9 Million
Upper Limit = $59.9 Million
  • Appropriate "Transition Rules" to allow Clubs to exceed Upper Limit for the 2012/13 season only (but in no event will Club's Averaged Club Salary be permitted to exceed the pre-CBA Upper Limit of $70.2 Million).

Those "transition rules" will be interesting to see - it looks like teams would have a year to get themselves under the new cap, which begins at $59.9 million, but could rise to something like $63-65 million after a year of reasonable growth in league revenues heading into the 2013-2014 season.

5. Cap Accounting:

  • Payroll Lower Limit must be satisfied without performance bonuses.
  • All years of existing SPCs with terms in excess of five (5) years will be accounted for and charged against a team's Cap (at full AAV) regardless of whether or where the Player is playing. In the event any such contract is traded during its term, the related Cap charge will travel with the Player, but only for the year(s) in which the Player remains active and is being paid under his NHL SPC. If, at some subsequent point in time the Player retires or ceases to play and/or receive pay under his NHL SPC, the Cap charge will automatically revert (at full AAV) to the Club that initially entered into the contract for the balance of its term.

That second bullet point sounds intriguing, but could be a nightmare in practice. The first portion (long-term contracts apply to a team's cap hit even if the guy retires) sticks it to those teams with players on huge, front-loaded contracts like Ilya Kovalchuk, Marian Hossa, etc.

The trick, however, comes with this notion that if you trade such a guy, and he retires at some point further on, that cap hit reverts back to the team which signed him. To me, this is like hanging the Sword of Damocles over any team that has traded away such a player, leaving them vulnerable at any time.

Say, for example, Vancouver trades Roberto Luongo somewhere, and after a couple of years, he decides to retire. If the Canucks are anywhere close to the salary cap, all of a sudden they would be pushed over the limit by an event wholly outside of their control. Surely there would have to be some kind of "transition rule" that apply in these cases, right?

Money paid to Players on NHL SPCs (one-ways and two-ways) in another professional league will not be counted against the Players' Share, but all dollars paid in excess of $105,000 will be counted against the NHL Club's Averaged Club Salary for the period during which such Player is being paid under his SPC while playing in another professional league.

Basically, teams wouldn't be able to stash salary in the AHL any more to avoid the cap. Nice.

In the context of Player Trades, participating Clubs will be permitted to allocate Cap charges and related salary payment obligations between them, subject to specified parameters. Specifically, Clubs may agree to retain, for each of the remaining years of the Player's SPC, no more than the lesser of: (i) $3 million of a particular SPC's Cap charge or (ii) 50 percent of the SPC's AAV ("Retained Salary Transaction"). In any Retained Salary Transaction, salary obligations as between Clubs would be allocated on the same percentage basis as Cap charges are being allocated. So, for instance, if an assigning Club agrees to retain 30% of an SPC's Cap charge over the balance of its term, it will also retain an obligation to reimburse the acquiring Club 30% of the Player's contractual compensation in each of the remaining years of the contract. A Club may not have more than two (2) contracts as to which Cap charges have been allocated between Clubs in a Player Trade, and no more than $5 million in allocated Cap charges in the aggregate in any one season.

This is the "teams should be able to trade cap space" provision that many have longed for. As long as the accounting is transparent, this seems to be a nice way to lubricate the trade market.

  • Entry Level System commitment will be limited to two (2) years (covering two full seasons) for all Players who sign their first SPC between the ages of 18 and 24 (i.e., where the first year of the SPC only covers a partial season, SPC must be for three (3) years).
  • Maintenance of existing Salary Arbitration System subject to: (i) total mutuality of rights with regard to election as between Player and Club, and (ii) eligibility for election moved to five years of professional experience (from the current four years).
  • Group 3 UFA eligibility for Players who are 28 or who have eight (8) Accrued Seasons (continues to allow for early UFA eligibility -- age 26).
  • Maximum contract length of five (5) years.

If I were the players I would argue for a shorter road to UFA status (why should they give up another year?), and I'm sure many will bristle over the maximum length of 5 years, but given the fact that they play a contact sport with guaranteed contracts, a 5-year limit seems to be a reasonable way to limit risk (a la Rick DiPietro).

Limit on year-to-year salary variability on multi-year SPCs -- i.e., maximum increase or decrease in total compensation (salary and bonuses) year-over-year limited to 5% of the value of the first year of the contract. (For example, if a Player earns $10 million in total compensation in Year 1 of his SPC, his compensation (salary and bonuses) cannot increase or decrease by more than $500,000 in any subsequent year of his SPC.)

Kowabunga, this would really simplify things and get rid of much of the gamesmanship regarding contracts. They could probably ease these constraints a bit (10% would be OK), but I like this.

7. Revenue Sharing:

  • NHL commits to Revenue Sharing Pool of $200 million for 2012/13 season (based on assumption of $3.303 Billion in actual HRR). Amount will be adjusted upward or downward in proportion to Actual HRR results for 2012/13. Revenue Sharing Pools in future years will be calculated proportionately.
  • At least one-half of the total Revenue Sharing Pool (50%) will be raised from the Top 10 Revenue Grossing Clubs in a manner to be determined by the NHL.
  • The distribution of the Revenue Sharing Pool will be determined on an annual basis by a Revenue Sharing Committee on which the NHLPA will have representation and input.
  • For each of the first two years of the CBA, no Club will receive less in total Revenue Sharing than it received in 2011/12.
  • Current "Disqualification" criteria in CBA (for Clubs in Top Half of League revenues and Clubs in large media markets) will be removed.
  • Existing performance and "reduction" standards and provisions relating to "non-performers" (i.e., CBA 49.3(d)(i) and 49.3(d)(ii)) will be eliminated and will be adjusted as per the NHL's 7/31 Proposal.

I don't know if $200 million is enough, frankly, to handle this issue, especially if they strike down the disqualification criteria which kept the Islanders, Devils & Ducks from receiving funds. This may still be a bone of contention, but again, I see this as more of an intra-ownership issue than one the NHLPA has much say in.

8. Supplemental and Commissioner Discipline:

  • Introduction of additional procedural safeguards, including ultimate appeal right to a "neutral" third-party arbitrator with a "clearly erroneous" standard of review.

I wonder who the third-party might be here, that could prove to be a very tricky business.

9. No "Rollback":

  • The NHL is not proposing that current SPCs be reduced, re-written or rolled back. Instead, the NHL's proposal retains all current Players' SPCs at their current face value for the duration of their terms, subject to the operation of the escrow mechanism in the same manner as it worked under the expired CBA.

As expected, escrow will be the mechanism used to bring the players from 57% down to 50% - basically a sizeable chunk of their pay will be held back, but people will still refer to their contracts as having the value they do today.

10. Players' Share "Make Whole" Provision:

  • The League proposes to make Players "whole" for the absolute reduction in Players' Share dollars (when compared to 2011/12) that is attributable to the economic terms of the new CBA (the "Share Reduction"). Using an assumed year-over-year growth rate of 5% for League-wide revenues, the new CBA could result in shortfalls from the current level of Players' Share dollars ($1.883 Billion in 2011/12) of up to $149 million in Year 1 and up to $62 million in Year 2, for which Players will be "made whole." (By Year 3 of the new CBA, Players' Share dollars should exceed the current level ($1.883 Billion for 2011/12) and no "make whole" will be required.) Any such "shortfalls" in Years 1 and 2 of the new CBA will be computed as a percentage reduction off of the Player's stated contractual compensation, and will be repaid to the Player as a Deferred Compensation benefit spread over the remaining future years of the Player's SPC (or if he has no remaining years, in the year following the expiration of his SPC). Player reimbursement for the Share Reduction will be accrued and paid for by the League, and will be chargeable against Players' Share amounts in future years as Preliminary Benefits. The objective would be to honor all existing SPCs by restoring their "value" on the basis of the now existing level of Players' Share dollars.

Now this is interesting - basically, the league is aiming to ensure that the players don't actually lose any money in 2012-2013 compared to 2011/2012, by spreading out payments covering that gap over the duration of their contracts. The kicker, however, is that those deferred payments will count towards the Players' Share in those future years, so it will hold back their progress on the financial front.

TSN's Bob McKenzie shares some insight from the players' side this morning, and as we can expect, it's being met cautiously. At least something workable has been proposed, however, so hopefully the players can come back with a productive response sometime soon so we still have a chance at playing a full season.

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