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You’re Just Figuring This Out Now?
by Mike Chen on 07/31/09 at 03:13 PM ET
Comments (11)
You gotta love the way the NHL’s investigation branch works (here’s s hint—they’re not quite as efficient as the guys on CSI). They’re just catching on to the fact that these ridiculously long contracts with significantly cheaper final years may have been designed as, shockingly, a way to circumvent the cap. First, everyone’s favorite whipping boy Marian Hossa was under the microscope, then word came out today that Chris Pronger’s new deal with the Flyers is under review.
Well, jeez guys, don’t you think you should have done this before actually approving the contract?
If you’ve got some time to kill and want to learn the ins and outs of NHL contractual logistics, you can read the entire 472-page PDF of the NHL CBA. It’s loads of fun and just slightly less dry than an advanced thermodynamics textbook. If that’s not up your alley, then here’s a pertinent section regarding contract approval. By the way, SPC stands for Standard Player Contract.
Section 11.5 part D
(d) From the date which is seven (7) days prior to the commencement of the
Regular Season, through the end of the League Year, the League shall approve and
register, or reject, an SPC by no later than 5:00 p.m. New York time on the day following
Central Registry’s receipt of such SPC (provided it was received by Central Registry by
5:00 p.m. New York time; SPCs received by Central Registry after 5:00 p.m. New York
time will be deemed to have been received on the following day for purposes of this
provision); at all other times the League shall have five (5) days from the day following
Central Registry’s receipt of an SPC (provided it was received by Central Registry by
5:00 p.m. New York time; SPCs received by Central Registry after 5:00 p.m. New York
time will be deemed to have been received on the following day for purposes of this
provision) to take such action. If no action is taken by the League, either to approve and
register, or to reject, an SPC during the applicable time period set forth in the prior
sentence, such SPC shall be deemed to be approved and registered.
In layman’s terms, contracts submitted for approval during the season will be reviewed within a day. During the off-season, the league has five days to review it. The league has the power to accept or reject a contract pending review.
So it’s not like those sneaky GMs came up with a master CBA-circumventing plan, pressed a button, and magically made it happen. The league has reviewed each and every project, from Rick Dipietro’s 15 years of hip rehabilitation to Vincent Lecavalier’s 11-year commitment to wackiness. Pronger and Hossa? They were reviewed and approved too.
The media’s been pretty on top of the CBA-circumventing method of this particular contract structure. Tack on a year or two at a much lesser salary, the overall cap hit suddenly shrinks, and no one is the wiser. Some have called this tactic brilliant and some have called it disingenuous, but the bottom line is that everyone knew about it for some time now. It’s not like Bill Daly suddenly woke up on Monday with an epiphany that Marian Hossa may not have actually intended to play out his entire contract.
If the league really wanted to make an example out of Hossa or Pronger or whoever else they’re investigating, they should have rejected the contract. Whether or not the rejection would stand to NHLPA investigation is another issue. This what the CBA says about regarding de facto reasons for rejecting a contract:
Section 11.6 Part A-1
If an SPC or an Offer Sheet is rejected: (A) because it results in
the signing Club exceeding the Upper Limit, or (B) because it does
not comply with the Maximum Player Salary or (C) because it is or
involves a Circumvention of either the Club’s Upper Limit or the
Maximum Player Salary
In short, that section states that the rejection of a contract is purely a numbers issue. If the numbers work, it’s a rubber stamp. Now, the league can reject a contract for reasons other than what’s mentioned above. In those cases, the NHLPA has a set time to dispute the rejection, and then a few different things could happen, including going to arbitration.
Is it possible to argue for a valid contract rejection because evidence points to the terms not being negotiated in good faith? If there are any contract lawyers reading this, feel free to put something in the comments. I would think that it’s a valid argument to say that a contract could be rejected because the intentions weren’t honest, but how can you prove that? Perhaps the league felt like they would lose in an arbitration hearing regarding this, so they’re letting it pass but shining a spotlight on it as a shot across the bow of the PA.
I suppose this is all leading to the inevitable clash during the next round of CBA negotiations. The quick and simple way of dealing with it is to add in a term limit of, say, seven years and be done with it. The more flexible way to do it is to have certain items that would trigger a review. For example, IF a contract is greater than seven years and IF the contract’s final year is less than half of the average value and IF the player in question is over 31, then it gets sent to a review process.
Would the PA go for those? Probably not, and that’s where the dreaded CBA battle will be. I don’t think it’s a show stopper like the installation of the salary cap but it’s sure to create some testy negotiations.
Filed in: NHL | Mike Chen's Hockey Blog | Permalink
Tags: CBA, Chris+Pronger, Marian+Hossa,
Comments
Wysh is right and I hope the PA doesn’t back off on this when the next CBA comes around. Players that sign long-term aren’t getting duped into it; they know and accept the risks as much as the teams offering the contracts do.
Posted by J.J. from Kansas on 07/31/09 at 03:45 PM ET
Oh, I have no doubt that player’s aren’t duped into anything. It’s the GMs trying to get a leg up on each other and the NHL wants to protect themselves from that. I personally don’t have an issue with the existence of these long-term deals, though I’m not a fan of them simply because they tie you down too much.
Technically, Rick Dipietro’s long-term cap hit for a #1 goalie isn’t bad at all. But when you sign these deals, you carry the risk of injury. If I was a GM, that’d be enough reason not to offer any absurd terms.
Posted by Mike Chen on 07/31/09 at 03:51 PM ET
In the case of Ovechkin, there’s really no case for salary cap circumvention. It’s a long contract, but it’s also expensive to the very end ($10M in the final year). There are a few similar examples of long contracts within the “spirit” of the CBA.
The problem is adding a few “not likely to be earned” redundancy years at close to minimal salary at the end with the intent of reducing the cap hit.
Posted by Moq from Denmark on 07/31/09 at 03:52 PM ET
A quick addendum to my comment above…the “lowering the cap hit” years stuck at the end are usually given to guys past the age of 30. I don’t have too much of a beef with these contracts because in general, guys over the age of 30 are more injury prone than guys in their 20s. You’re picking up those risks when you’re stuck with a 30something player long term and you’d think that’d be reason enough to be careful with just throwing these ridiculous contracts around (like the Hawks). I’ve mentioned here in previous posts that I wouldn’t even consider giving a player a super long-term deal unless they’re under 25.
However, if the league was insisting upon sticking some sort of controller to these situations, I would think the reasonable compromise is the situation-specific trigger I threw out in the main post. That allows you to have lifetime deals for your franchise players while acting as some mechanism to preventing (or at least limiting) “fraudulent” contracts.
Posted by Mike Chen on 07/31/09 at 04:00 PM ET
However, if the league was insisting upon sticking some sort of controller to these situations, I would think the reasonable compromise is the situation-specific trigger I threw out in the main post. That allows you to have lifetime deals for your franchise players while acting as some mechanism to preventing (or at least limiting) “fraudulent” contracts.
I think that would be a good compromise.
In the meantime, I don’t have any problem with teams violating the “spirit” of the CBA when that spirit is obviously more about protecting owners from their own mistakes than fostering cooperation between the league and the PA.
Posted by J.J. from Kansas on 07/31/09 at 04:09 PM ET
Chris Pronger’s new deal with the Flyers is under review.
It doesn’t matter how absurb the last two years of Pronger’s contract are. He signed a contract extension and it doesn’t go into effect until next year…at which time he’ll be over 35. So no matter when he retires, the Flyers are going to be stuck with his full $6.25M cap hit. That move was almost as dumb as some of the stuff the Hawks have done this summer.
In the case of Ovechkin, there’s really no case for salary cap circumvention. It’s a long contract, but it’s also expensive to the very end ($10M in the final year).
I agree, moq. But he’ll only be 34 when that contract expires, so I doubt the Caps were trying to do what Chicago did, and what Philly thought they were doing, with the Hossa and Pronger contracts.
Posted by OlderThanChelios from Grand Rapids on 07/31/09 at 04:10 PM ET
Mike, I think you’ve covered most of the alternatives for dealing with long-tern contracts in the next CBA, from contract length to various salary and age related modifiers if the former is too rigorous.
Another measure would be to add a cap penalty where retirement doesn’t eliminate the full cap hat. Depending on age it could be a certain percentage. Similar to the current 35+ rule. That would still allow some room for circumvention but lessen the gain.
All in all, there’ll be some interesting negotiations ahead. The inventive managers will probably find another loophole to exploit, but I don’t think you can ignore the current problem.
Posted by Moq from Denmark on 07/31/09 at 04:15 PM ET
I figured this out ages ago. I thought it was pretty obvious. They lower the amount of money in the last few years to do a few things. 1. front load the contract thus lowering the cap hit while giving the player the “big money” he wants. 2. If they buy out the remaining years of the contract, the cap hit of the “lower valued years” is much lower, since it is 1/3rd the amount times double the amount of years. So if say in a 4 year contract, with an average cap hit of 6 million, they buy out the last year, but the last year is only worth 2 million, then they would only be on the hook for approx. 620,000 spread over 2 years.
Another benefit is that, if the player retires, they won’t be on the hook for his waning years, and if he doesn’t, they can trade him to a team that is “struggling” to make the cap floor. ex. even if his cap hit is 7 million, hes only “actually getting paid” 2 million or whatever .
These loop holes were explored from the outset of the new nhl. REGARDLESS, of how ridiculous it is to not see this, the blackhawks would have to be really REALLY STUPID TO ADMIT TO THIS. Cause thats the only way i see them getting caught.
The fact that the NHL is just realizing this is really remarkable.
Posted by Luongo-is-my-hero on 07/31/09 at 04:49 PM ET
I’m not sure what a “contract lawyer” is, but I am a labor lawyer. I read the CBA over a year ago and don’t have much recollection of it.
But here’s my opinion: these contracts are valid, this issue isn’t adequately addressed, if at all, in the CBA, and a significant proportion of all of the SPCs have different values over different years. The CBA is focused on the cap for the year, and averages the contract going forward.
There may be some mushy language in there, and there may be some “bad faith” but I think the cat is out of the bag on this one.
Whether it comes up in the next round of CBA talks will depend on whether it affects the owners’ goals of cost certainty and the players’ interest in pigging out. The cap is still the cap year-to-year, so I don’t see anyone’s interests really being hurt by this. Fans may not like it, and it may be a transparent sham, but I’m not sure how it hurts the stated goals of the current CBA.
Posted by jon from Gullivorniya on 07/31/09 at 04:51 PM ET
If they buy out the remaining years of the contract, the cap hit of the “lower valued years” is much lower, since it is 1/3rd the amount times double the amount of years. So if say in a 4 year contract, with an average cap hit of 6 million, they buy out the last year, but the last year is only worth 2 million, then they would only be on the hook for approx. 620,000 spread over 2 years.
This is true in terms of dollars paid, but the cap hit is calculated based on a different formula, including the actual salary paid in the remaining years versus the cap hit. In the case of Pronger, he’s only making $525k the last two years of his deal, so if they buy him out with two years left, they only actually pay $175 per year for four years, but the cap hit is over $4.5M those first two years after the buyout (see section 50.5 in the CBA).
Personally, I think they should allow all contracts that would pay the player up to a certain age (say 41 or 42). No contract should last past that, because there’s not much chance he would be able to play at all. Of course, if the team did talk to the player about possibly retiring before the contract term would be up, I think that would constitute fraud. But of course you would need to prove such a conversation took place.
Posted by mepex on 07/31/09 at 08:41 PM ET
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See the first name here for the best argument against this stupid notion of “term limits” on contracts:
http://www.nhlnumbers.com/overview.php?team=WAS&season=0910&expand=y
The Capitals should have every right to sign him to that deal, and Ovechkin should have every right to sign it.
Posted by Greg Wyshynski from Washington, DC on 07/31/09 at 03:43 PM ET