Could Contract Lengths Lead to Another NHL Lockout?

by | Oct 16, 2016 | Soapbox | 4 comments

Length of player contracts could have the NHL & NHLPA butting heads again.

Length of player contracts could have the NHL & NHLPA butting heads again.

TSN Insider Bob McKenzie recently suggested the length of NHL player contracts could be an issue that forces the league to opt out of the current collective bargaining agreement in September 2019.

McKenzie noted teams sign players to long-term contracts to keep their costs down and the contracts affordable. With the decline of the Canadian dollar slowing the annual increase of the salary cap, he speculated contract lengths could be a contentious issue.

Under the previous CBA, there was no limit on contract lengths except for players on entry-level deals. That led to situations where some players received deals of 10, 12, even 15 years in length. While the deals were heavily front-loaded, the annual average salary was more affordable for a team’s salary-cap hit.

For example, Florida Panthers goaltender Roberto Luongo is currently in the seventh year of the 12-year, $64 million contract he signed while a member of the Vancouver Canucks. The bulk of that money ($57 million) is paid out through the first eight seasons. His actual salary this season is $6.714 million but, because of the length of the contract, the annual average value is $5.33 million.

This was something the teams, not the players, dreamed up as a means of legal salary-cap circumvention. In order to once again save the owners from themselves, contract lengths were capped at eight years for players re-signing with their teams, and seven years if they signed with other clubs.

As McKenzie pointed out, as long as the salary cap was rising by an average of $5 million per season, the current limits on players salaries wasn’t a serious problem. But with the cap ceiling rising more slowly in recent years, it could become an issue again. The owners could seek to lower the cap on contract lengths down to four or five years.

McKenzie isn’t saying for certain that contract lengths could become a sticking point that prompts the league to opt out of the current CBA in September 2019. But if the salary cap continues to make only marginal gains over the next three years, there could be some grumbling from the league over contract lengths.

A month ago, NHL deputy commissioner Bill Daly said he didn’t see any CBA storm clouds on the horizon from the league’s point of view, “at least not yet”. At the time, I listed several issues (escrow, trading of dead salary-cap space,  absence of the right to renegotiate contracts, lack of a player’s right to terminate a contract, limits on no-movement/no-trade clauses and paying the bulk of a player’s salary in signing bonuses) that could trigger another NHL labor dispute. We can now add player contract lengths to the list.

Speaking of escrow, McKenzie observed that the percentage of escrow clawbacks keeps rising. If the owners seek a cap on contract lengths, he speculated the players could seek a cap on escrow.

Two-to-three years into the previous CBA, there was some media talk of the league or the NHLPA triggering their early opt-out by 2010. That scenario failed to materialize, perhaps in part because the salary cap was making significant increases. But with the cap making only marginal growth under this CBA, perhaps it’ll be a different story this time around.







4 Comments

  1. Seems the salary cap is causing more problems than solutions…also players are out of a career sooner in the cap era than before… add in too many loop holes and all the shortcomings were never addressed for both sides…all this goodness and more to come on Bettman’s watch.

    • I’ve always been against the salary cap. Yes, it does cause more problems than solutions.

  2. Just do away with guaranteed contracts – as they do in the NFL. If a player doesn’t deliver what the team feels it is paying for, the club simply says “see ya.” Then, while the player is free to sign anywhere he likes, he’s not apt to get anywhere near his former deal unless the GM is a complete idiot.

  3. The salary cap is a good idea but has never been implemented in a manner which creates labour peace.

    I always felt the hard cap ceiling is the issue. You see this with how teams constantly cripple themselves being at or near it despite success or a lack of.

    Back at the lockout in 2004, my opinion was at the time a soft cap with a heavy luxury tax would balance things out. I am not wise enough in the ways of these economics to give a cohesive breakdown but I just thought it should look something like the following.

    50 million is the start of the soft tax ceiling. Every dollar between 50 and 60 million would be at .50 cents per dollar. So to get to 60 million you would pay 5 million in luxury taxes.

    60 million to 70 million would be dollar for dollar in what you pay in taxes. So you would spend 5 million in taxes plus 10 million to get to 70 million.

    70 million and up would be $2 for every dollar spent. So for argument sake you would have spent 15 million to get to 70 million and if you were at 80 million, your team would have spent a further 20 million in luxury taxes to get there.

    35 million in taxes to get to 80 million dollars. That money would of course go to other teams through revenue sharing to assist in markets that need it.

    It’s a simple idea and probably stupid really but I just felt that while you will get some teams that spend spend spend, there will always be a point where a team owner hits a threshold that they refuse to spend any more money. I have no idea how it could work if it could, smarter men than me would know the answer, but as an idea I do feel it could have some form of merit if the right people worked on it.

    Of course, in labour contracts and the like, there are always far more that goes into building labour peace.