The Rajala Method

This is Toni Rajala in action; his contract was also in action this year. Both the player and the contract have made some improvements.

With Ilya Kovalchuk's contract getting punted - the Roughriders have already offered Richard Bloch a contract - I've been trying to think of other subtle ways to circumvent the cap that wouldn't cause the NHL to get lawyered up.  As these thoughts were swirling around, I took a gander at the contract of one Mr. Toni Rajala, the Oilers' fourth round pick from the 2009 entry draft.  Rajala signed a contract with the Oilers on July 16th last year, shortly after being drafted.  After looking at his contract again in the last few days, I'm now convinced that this is a good strategy for rich teams to pursue with their new draftees, and I'll explain why after the jump.

When Rajala was signed, his contract was a three-year deal that had a cap number of $875,000 (special thanks to capgeek.com for all of the salary information used in this post).  One season later, Rajala's cap number is now down to $845,833.  Why?  Here's the relevant sections from the CBA:

Unless a Player and Club expressly agree to the contrary, in the event a Player's SPC is extended an additional year in accordance with this subsection, all terms of the SPC contract, with the exception of Signing Bonuses... shall be extended.

For any ELC that has its term extended... the original averaging of the Signing Bonus shall not be readjusted as a result of the "slide," although, the Averaged Club Salary following the slide shall be adjusted based on the new total Player Salary and Bonuses to be paid following the slide.

So what does that mean?  It means that since Rajala was already paid his $87,500 at the start of last year, that money no longer counts against the cap.  Thus, his cap number moves from $875,000 to $845,833.  Should Rajala spend another year outside of the NHL and have his contract slide once again, his cap number would fall to $816,667.  And what happens to that money as far as the cap goes?  Once again, here's the relevant section from the CBA:

If a player is in the Minor Leagues but has an NHL SPC which includes an Entry Level Signing Bonus, Roster Bonus, or Reporting Bonus, such bonuses shall not count toward the Actual and Averaged Club Salary for such player's NHL Club, nor shall such Bonus count toward the Players' Share.

In essence, it disappears.  The money is spent, but it doesn't count against the cap for any league year.  That makes it a way to transfer money to players without counting that money against the cap.  For a team on a big budget, that's an attractive option.  The idea of signing early should also be pretty attractive to a lot of players.  Many players who get chosen in the second round or later simply aren't guaranteed an NHL contract.  Further, getting their hands on money two years early (since they get the bonus money immediately) is also awfully nice.

The most a player can receive in signing bonus money is 10% of his overall salary, but that "overall salary" includes performance bonuses as well.  Let's use Ryan Martindale as an example.  The average salary given to players drafted between 58th and 64th overall who actually signed is $815,648 with $629,167 of that coming in base salary and $186,482 in bonuses.  Three of the fourteen players didn't receive a contract at all and two of the fourteen haven't yet, but are still playing in the NCAA (i.e. their draft club retains their rights).  Martindale was drafted in the third round instead of the second.  By signing early he'd be getting more money up front than average (some of these guys did, but most didn't), and he'd be eliminating any risk of not getting a professional contract (whether due to injury, poor play, or something else).  Would he be open to a deal that pays him as follows:

1st year - $550,000 base salary, $80,000 signing bonus, $170,000 performance bonuses
2nd year - $550,000 base salary, $80,000 signing bonus, $170,000 performance bonuses
3rd year - $550,000 base salary, $250,000 performance bonuses

If he ends up being a player, the Oilers end up with a great deal on his entry-level contract, since for cap purposes, all of that signing bonus money will get pushed off of the contract in his last two years in junior.  Would this be an attractive option for a guy like Curtis Hamilton who has dealt with injuries?  Or Martin Marincin who hasn't yet played in North America?  If there's a player willing to take less money for increased security and some money in their pocket up front, I think it's definitely worth pursuing.  If the player doesn't turn out, the team has burned some money, but it hasn't hurt them against the cap.  This isn't really a "circumvention" in that the whole process is laid out in the CBA, but it is an interesting way to get superior value against the salary cap for entry-level contracts.  It won't result in a tonne of savings, but when you're involved in an efficiency contest, every little bit counts.

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