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A Proposed CBA Solution

June 22, 2012; Pittsburgh, PA, USA; NHL Commissioner Gary Bettman on stage at the 2012 NHL Draft at CONSOL Energy Center.  Mandatory Credit: Charles LeClaire-US PRESSWIRE
June 22, 2012; Pittsburgh, PA, USA; NHL Commissioner Gary Bettman on stage at the 2012 NHL Draft at CONSOL Energy Center. Mandatory Credit: Charles LeClaire-US PRESSWIRE

There is no question that the impending September 15th deadline for the expiration of the current Collective Bargaining Agreement will be the dominant NHL story from now until a new agreement is reached, whenever that may be.

As a result, it seems only fitting that we spend a little time here at C&B discussing the matter. Scott Reynolds has already done an exceptional job of keeping everyone up-to-date on the latest proposals and offering his take on the major issues, so I thought I would take a shot at attempting to compare the positions of both sides to see if I could find some potential for common ground.

Unfortunately for me, (because he turns out articles at near world-record pace) Jonthan Willis beat me to the punch a few days ago while I was doing some research for this article. I will touch on some of the variances in our approaches as I go through my proposal.

After the jump, I single-handedly solve the NHL/NHLPA labour dispute (or not).

Before I begin here, I will admit up front that the two issues I have not sufficiently addressed below is that of revenue sharing and the classification of what is considered "Hockey-Related Revenues". The reason for this is that I simply find there is not sufficient information available to create any type of reasonable proposal for a solution. Elliotte Friedman provided the first solid look at the proposed changes to HRR here, but I still don't feel I have a good enough understanding on the implications of the proposed changes to speak to what is reasonable. At first glance, the requests from the owner's don't seem overly outlandish, but I'm reserving judgement for now.

As a result, in the interest of facilitating a comparison to the existing CBA, I have assumed for now that the definition of HRR is unchanged.

In the list below I will offer my suggestions relating to the major items that have been made public from the proposals of both the PA and the league.

#1 - Entry-Level Contracts Remain at 3 Years

Honestly, this is a no-brainer. The league would honestly be shooting themselves in the foot by extending the length of ELC's to five years. As Oiler fans are aware after the most recent NHL Draft, every year there is discussion of "The Russian Factor" and while I don't buy in to the specifics of how many in the media describe it, the point is that there is another professional league out there that is willing to offer large sums of money to 18 and 19 year old players to join their league rather than the NHL. Up until this point, very few players, and virtually none from North America have considered the KHL a viable alternative to the NHL. However, if the league tries to keep salaries for its youngest players fixed for an additional two years, you have to wonder if at some point, getting paid as a top-level player as a teenager might become attractive to players who know they will have to wait until they are at least 23 to be able to negotiate their first free agent contract.

#1b - Creation of a "Mid-Level Contract" With a Salary Limit.

As a compromise to the league's proposal above (and to justify another clause yet to come) there would be a new mid-level contract before allowing a young player the ability to negotiate at full free-agent status. The contract would have a minimum term of two years and a maximum term of three years so neither party can abuse the rule. Players would be unable to demand a 1 yr. deal to fast track themselves to full RFA status, and teams cannot demand players to sign for an extended term in order to achieve cost certainty for a longer period. The cap on the mid-level contract would be calculated as 10% of the mid-point of the salary cap range. For example, if the midpoint were $56.3 Million, as it was in 2011/12, the maximum allowable salary would be $5.63 Million/yr. This would allow for an incremental change in the salaries of young players, without unnecessarily limiting the earning potential of the elite young players in the league by keeping them on ELC's for an additional two seasons.

#2 - 10 Year Limit on Contract Length with Ceilings on Total Annual Compensation and Signing Bonuses

With the owner's gaining a more gradual change in salaries of their young players, the players get a slight benefit here by not having their deals limited to five or six years as the NHL is pushing for. The structure of free agent deals would also change slightly in a hybrid of the "Kovalchuck Rule" to incorporate additional measures to protect smaller market teams from having their players' poached by wealthier franchises. Call it the "Kovalchuck/Weber Clause" if you will. The league has asked for the elimination of signing bonuses, which is a bit extreme, so here is my proposed solution:

a) Total Compensation in any year of an SPC cannot exceed 150% of the AAV (Salary cap hit) or be less than 50% of the AAV

Ex: If Shea Weber signs a deal for 10 years at a $7.5 Million cap hit, his maximum salary in any season is $11.25 Million (or $7.5 Million x 150%) and the lowest amount he can earn in any season is $3.75 Million (or $7.5 Million x 50%)

b) Signing bonuses are capped at 75% of the salary in any single season.

Ex: Working with the same example above, in the years where Weber maxed out his salary at $11.25 Million, the distribution of the money would max out at: (approximately) $6.43 Million in salary with a $4.82 Million signing bonus.

This would accomplish a number of things that I believe are positive for the overall financial good of the game. It doesn't overly restrict a player's ability to sign a long-term high-value contract. It also limits the ability of teams to use financial strength to leverage players away from lower revenue markets. Finally, because the total compensation in any single year is must fall between 50% and 150% of the AAV, it has a similar effect to the Kovalchuck rule in that it slows the decrease in compensation over the life of the deal by limiting the ability to excessively front-load the contract and effectively ends the existence of bogus years added to the back end of contracts in order to bring down the annual cap hit.

#3 - Elimination of Salary Arbitration and Reduction in Compensation for RFA Offer Sheets

I will freely admit to stealing this idea from Scott's post linked to above. I think it is brilliant. The salary arbitration process is one that is appealing to nobody. It forces teams to find ways to skew numbers to create the appearance that the player has the smallest possible value to their organization. It can be damaging to the relationships between player and team and it is almost universally avoided at all costs.

However, in order to ensure that the abolition of salary arbitration does not adversely affect the players' ability to negotiate a fair contract, the compensation amounts for RFA offer sheets will be drastically reduced. This will allow players the option of negotiating the best deal they can with any team while giving their current franchise the option to match as is the current arrangement. By reducing the penalty for issuing offer sheets, the players would be banking on the GMs not being able to help themselves and signing RFA players to big deals in an attempt to pry them away from their current teams. Given the GMs inability to restrain their spending every July 1st, I would think that this is a decent bet for the players to make once the punishments have been drastically diminished.

#4 - UFA Status available 3 years after the end of the "Mid-Level Contract"

I was trying to formulate this rule in my head at the exact time that I saw Jonathan Willis' article (linked to above) with his proposed CBA. In his piece, Willis suggests that UFA status be granted for a player after they have played six seasons beyond the end of their ELC. This is exactly the sort of approach I was searching for and I have simply modified it to fit the rest of my proposed structure.

In my proposal, the standard 3 year ELC is still in place (or a 2 year ELC for some NCAA players such as Justin Schultz). After the completion of their ELC, players must sign a 2 or 3 year mid-level contract ("MLC"), which would bring their number of years of service to anywhere between 4 and 6 seasons. Players entering the league in their first post-draft season like Steven Stamkos and Taylor Hall would likely have 5 years of service (assuming a 3 year ELC then a shorter MLC in order to allow them to reach peak earning potential in the shortest time possible). At that point, the team would still hold RFA rights to the player for an additional 3 seasons.

The result here is that the fastest any player can reach UFA status is 8 years post-draft (or 26 years old) which is one year later than the current arrangement. However, the MLC, as discussed creates a gradual increase in salary over the course of the player's career until at least age 23. While the players may not be initially fond of the MLC idea, they would likely see some benefits when they do reach full RFA status. At that point, players are only 3 seasons from UFA eligibility, which means they can sign for a shorter term and have the right to choose where they play, or, they can sign for up to 10 years at this point. Under this arrangement, any long-term RFA deal would have to purchase a significant number of the player's first few UFA-eligible seasons. History has shown that players are typically able to leverage surrendering UFA years on a deal into higher compensation on an annual basis. If that were to continue, then the elite players (who are really the only ones this applies to) may be able to make back some of the money lost during their second contract.

#5 - The CBA will be a new 6 year term with the players receiving 52% of HRR. Similar to the NHLPA's original proposal, the players will discount their % of HRR in the first few years of the deal to create a pool of funds to assist distressed franchises.

This is the big one, which is why I have saved it until near the end. The new six year CBA would see the players get 52% of HRR. This is the big win for players. At the end of the day, I think the players want to avoid anything at 50/50 or below because it means they are looking at getting even less in future negotiations. By ending this deal at 52%, it gives them the ability to fight another day to stay at or above an equal split with owners.

In order to sell this to the owners, as a modification of the NHLPA's own initial proposal, the players would discount their 52% down to 50% in years 1 and 2 of the deal, and then 51% in years 3 and 4, before receiving the full 52% in the final two years of the agreement. The savings derived from this for the owners will create a pool of funds that is designated to provide financial assistance to teams in need of revenue sharing to make the franchise viable. If the NHL continues to increase revenues by approximately 7% per year (which is the assumption I have used for all calculations below) then the owners would receive just under $215 Million from the players over four years.

The last part of this arrangement that I need to mention prior to giving everyone a look at the table below which plays out my proposed scenario is that I have also included two additional clauses:

a) the salary cap range will be expanded. The ceiling and floor will each now fall $10 Million above or below the midpoint as opposed to the previous arrangement of $8 Million.

This creates an additional $4 Million cap range for teams. It will allow teams struggling to reach the floor a slightly lower commitment and teams that have the financial muscle to flex the ability to do so to their advantage without drastically altering the competitive balance of the league.The league strangely wanted to narrow this range, likely to reign in GMs who are unable to control their spending, but I think giving low revenue teams the ability to spend less on salaries is a fair trade off.

b) Teams will be able to trade a limited amount of cap space, to a maximum of 5% of the midpoint of the salary cap range.

This further allows teams suffering significant financial issues to save money or teams trying to push for a long playoff drive additional options to improve their team at the trade deadline. As an example, in 2011/12, the mid-point of the salary cap range was $56.3 Million, this would mean that the maximum amount of space a team could trade or trade for was approximately $2.82 Million. Meaning teams would have the ability to spend up to $2.82 Million above the cap or below the floor provided they can work out a deal with another team.

Truthfully, I don't know if I am a huge fan of this idea myself, but it is something that has been discussed on both sides, and I see benefits to both the teams and the PA of having such an option in place, so I have included it in my proposal.

To finalize this proposal, and hopefully help people wrap their heads around the implications of #5 on my list, I have included the table below which plays out the entire course of the CBA based on an annual revenue growth of 7% for the full 6 year term.


Click here for the full-sized version

I am reasonably certain that the CBA that is eventually worked out will not resemble my proposal at all, but I believe it makes a lot of sense for both sides. Personally, I don't feel like my proposal is overly generous to the players, and I still believe the deal they end up getting will be worse than this one.

I would love to hear your comments and opinions on this proposal. After all, it's not like there is a whole lot else to talk about at this point anyway...