The kind of lengthy, front-loaded contracts signed this summer by Sidney Crosby, Zach Parise and Ryan Suter could become a thing of the past under the next collective bargaining agreement.
Looking back upon the period of the current NHL collective bargaining agreement, it’s interesting to note it spawned a number of lengthy, front-loaded contracts for some of the league’s best players.
The trend began with the New York Islanders signing goaltender in September 2006 to a fifteen-year, $67.5 million contract. Though it wasn’t front-loaded (meaning most of the salary would be paid out in the early years of the deal), it nevertheless locked in DiPietro to a $4.5 million per season salary to the age of forty, making him affordable to carry on their payroll going forward.
From September 2006 to June 2012, twelve other players (Ilya Kovalchuk, Alexander Ovechkin, Duncan Keith, Henrik Zetterberg, Mike Richards, Roberto Luongo, Marian Hossa, Vincent Lecavalier, Jeff Carter, Johan Franzen, Nicklas Backstrom and Christian Ehrhoff) were also signed to deals of ten years or longer. (Source: CapGeek.com)
Over the same period, another 32 players, including such notables as Brad Richards, Rick Nash, Drew Doughty, Eric Staal, Daniel Briere, Jason Spezza, Anze Kopitar, Dany Heatley, Henrik Lundqvist and Miikka Kiprusoff, netted deals between six to nine years in length.
In July, Pittsburgh Penguins captain Sidney Crosby inked a twelve-year, $104.4 million contract extension (effective July 1, 2013), former Penguin Jordan Staal agreed to a $10 year, $60 million deal with the Carolina Hurricanes, while Zach Parise and Ryan Suter both signed 13-year, $98 million contracts with the Minnesota Wild.
With a few exceptions, most of these contracts were heavily front-loaded, with the players earning most of their salaries in the first half of their contracts, after which their actual salaries tapered down in the remaining years of the deal.
The purpose of these contracts was to generate a lower salary cap “hit” for their respective teams, since the average annual salary is calculated against the salary cap, not the actual salary itself.
Duncan Keith’s contract is a good example. In the first seven years of his 13-year contract with the Chicago Blackhawks, he earns $8 million per season in the first three years, $7.65 million in year four, $7.6 million in year five, $7.5 million in year six, and $6 million in year seven. His average cap hit, however, is just over $5.538 million.
That’s because in the final six years of his contract, his real annual salary drops steadily, from $5 million in year eight, to a mere $1.5 million in year 13.
Critics correctly pointed out this constituted circumvention of the salary cap, but in only one instance – the Devils initial re-signing in 2012 of Kovalchuk – was a contract rejected by the league for circumvention.
The original Kovalchuk deal was nullified by the league primarily because it was too long (17 years), taking him well past an age the league considered reasonable to expect him to continue playing.
Front-loading contracts (as well as “back-loading”, where more is paid out in the second half of the contract) is a legal method of cap circumvention. There’s nothing in the current CBA preventing teams from this practice. As long as the length of the deal is reasonable, and the amount of money paid at either the front or back end isn’t ridiculously high, it’s permissible.
That practice, however, might soon be coming to an end.
While there are teams and general managers quite willing to offer up those kind of deals, others frown upon it, consider it cheating, and want the practice abolished. Those particular owners and general managers are expected to push for term limits on players contracts in the next CBA.
If they get their way, all contracts going forward could be no longer than five years, potentially bringing an abrupt end to the practice of front- and back-loading, thus closing off a loophole which has enable teams to get a lower cap hit when signing expensive talent.
As for the current front-loaded contracts, they’ll have to be honored going forward in the next CBA, though if the league gets its way and another salary rollback is implemented, the value of those existing front-loaded contracts could decline, though the length of the deals wouldn’t change.
It’s possible the deals signed this summer by Parise, Suter, Crosby and Staal could be the last of their kind.