The New Rules and Loophole Lou

Loophole Lou always seems to be a step ahead. Point and laugh, Lou. Point and laugh.

As pretty much all of our regular readers will already know, the Ilya Kovalchuk contract situation has (mercifully) come to an end.  Ilya Kovalchuk is officially a Devil, and will be for a long time to come.  But along with Kovalchuk's new contract came a few new rules that I'd like to lay out, so that there's an easy place to come back to find them when they're needed in the future.  After the jump, I'll take a look at those new rules, and talk about why I think Lou Lamoriello knew what was coming before he submitted the second Kovalchuk deal to the league.

First, the new rules.  I'd like to have found a more official document than an article by Dan Rosen on nhl.com (nothing against Dan, it's just that he's not exactly Bill Daly or Gary Bettman), but his article was the most official source I was able to find:

The regulations will be added as a supplement to the Collective Bargaining Agreement and apply to all contracts signed from today.

(...)

The agreement includes two major regulations that go into effect immediately and will be a part of the Collective Bargaining Agreement until its expiration on Sept. 15, 2012. If there is no CBA at the start of the 2012-13 NHL season, the rules will be grandfathered until a new CBA is negotiated:

1. While players and clubs can continue to negotiate long-term contracts (five years or longer) that include contract years in a player's 40s, for purposes of salary-cap calculation the contract will effectively be cut off in the year of the contract in which the player turns 41.

(...)

2. In any long-term contract that averages more than $5.75 million for the three highest-compensation seasons, the cap charge will be a minimum of $1 million for every season in which the player is 36-39 years of age. That $1 million value will then be used to determine the salary cap hit for the entire contract. If the contract takes the player into his 40s, the previous rule goes into effect.

So that's pretty simple.  Anything that was signed prior to the Kovalchuk contract is grandfathered, and these new rules don't apply.  Any contracts signed after the Kovalchuk deal will be governed by these new rules.  The new rules only govern long-term deals, and only deals that pay out a substantial amount of salary in at least three seasons, so grunts signing longer-term deals won't be getting squeezed.  The rules themselves will be in force for as long as the current CBA is in use. 

One important issue to deal with here is the definition of "age".  In the CBA, the League Year begins on June 30th, but the language above talks about "the player turn[ing] 41" during the year.  So, when I use "age"  in the table below, I mean the player's age as of June 30th +1.   So a player who turns 35 on April 10th 2011 would be considered 35 for the 2010-11 season in the table below.  Now, let's look at all of the contracts currently signed that would have been impacted by these new rules.  If you feel the new rules should be interpreted differently, please let me know.  Once again, the new rules don't actually apply to these deals, but if they did, this is how things would change (in the chart, the three columns are "salary", "the cap number under the old rules", and "the cap number under the new rules"):

New_rules_1_medium

New_rules_2_medium

New_rules_3_medium

The first thing I notice is that there are only five contracts in the entire league that would have been impacted by these new rules.  Vincent Lecavalier?  He's good.  Duncan Keith?  No problem.  Henrik Zetterberg and Johan Franzen?  They're just fine.  Now, to me, that means that these new rules don't stop teams from circumventing the spirit of the salary cap - they just make it so that teams can't be ridiculous, and the league isn't embarrassed in the future by a contract that takes a player to fifty.  These new limits are very reasonable, but they really won't change much of what's been going on; these long-term deals are far from a thing of the past.

Still, it's too bad the league didn't make the new rules apply to these deals too.  Watching Canucks' fans see Luongo's cap number suddenly balloon almost $1.4M would have been hilarious.  But I suppose it's not really fair to the teams to apply the rules retroactively, and not fair to the players to void their deals.  Besides, it's not really in the league's interests to do damage to big-market teams like the Flyers, Devils, Canucks, and Blackhawks (the impact on the Bruins is negligible, though they are the only team who would have been impacted by the second new rule).

But it seems to me that Lou Lamoriello saw these new rules coming, and constructed Kovalchuk's contract as though they'd apply to him.  How else can we explain the structure at the back end of this deal?  The tail on most contracts declines every year, never rising, but this deal drops to $1M for three years before jumping to $3M and $4M in the last two!  Whereas we might have expected a tail that went 4,4,3,1,1,1 we instead see a tail that goes 4,1,1,1,4,3.  Why is that?

To game the (new) system of course!  If Kovalchuk's contract was to be under the new rules, each season from 36-39 would have counted for at least $1M against the cap.  By some coincidence, that's the exact figure at the bottom of Kovalchuk's deal in those years.  Further, under the new rules, the last two years of Kovalchuk's contract wouldn't have counted in the averaging of his overall cap number for the first thirteen seasons.  Instead, whatever salary he's paid in the year he turns 41 counts as his cap number for that season, and the same is true for the year he turns 42.  Lo and behold, Lou brought the "circumvention years" forward a couple of seasons, and Kovalchuk is promised a bit more on the tail end of the deal, when he can be safely stowed in the minors or Russia if he's not playing well, but doesn't want to retire.  Good old Lou always seems one step ahead, doesn't he?  In this case, he's gamed a system that didn't apply to him a week before it had even become official!

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