Musings on Latest NHL CBA Talks – November 9, 2012.

With the NHL and NHLPA finally locked in serious CBA negotiations, here’s my take on some of the main issues reportedly discussed so far.

Make Whole” option. This is the main sticking point which requires resolution if there’s to be a season-saving CBA.

The NHL reportedly offered to pick up the cost of deferred escrow payments resulting from the immediate implementation of a 50-50 revenue split from existing player contracts, rather than have it come from the players share of revenue as originally proposed. The NHLPA, meanwhile, prefers a more gradual decrease, as well as assurances existing contracts will be honored.

To me, the PA’s proposal of a gradual reduction to 50-50 by Year Three makes the most sense, but if the league still insists on immediate implementation, it must provide a formula to cover those losses which would be satisfactory to the players. Compromise will be crucial toward brokering some arrangement which will satisfy both sides.

Despite the other, significant issues still to be resolved, if the two sides can reach an agreement on the “make whole” issue, it should be the breakthrough required in brokering a new CBA and ending the lockout by December.

Revenue sharing: The PA has been pushing for increased revenue sharing from the big market owners since negotiations formally began in July. The league was initially resistant, even suggesting in one proposal the players carry the freight from their portion of hockey-related revenue.

Increased revenue sharing is crucial, not just for the struggling franchises, but also for the players. It helps build better teams, which generate more revenue, resulting in a higher salary cap. True, it won’t turn incompetent general managers into smarter ones, but it at least gives struggling teams a fighting chance.

In the league’s recent proposal, it finally displayed a willingness to increase revenue sharing, up from $150 million to $200 million. I can see the players seeking more – some reports had them pushing for up to $260 million – but what might be more important is the formula for determining both eligibility for, and distribution of, revenue share dollars.

Player contracts. The NHL wants to impose five-year term limits on non-entry level contracts, reduce the length of entry level deals from three to two years, and eliminate the loophole allowing front- and back-loaded contracts as a means of legalized salary cap circumvention.

The New York Post reported Thursday the league may be flexible on the term limit, but absolutely wants to crack down on front-loaded deals (proposing a “year-to-year, five percent variance within the contract”) and remains committed to two-year entry-level deals.

If push came to shove, I really don’t see the PA getting upset over a five-year term limit on contracts, as the average NHL contract length is around three years. They’ll kick up less of a fuss over the elimination of front-loaded deals. Reducing the length of entry-level deals, however, might be another matter, especially in conjunction with eligibility for unrestricted free agency. Read on to find out why.

Eligibility for free agency. The league still wants raise the eligibility for unrestricted free agency to age 28 or eight years NHL service, up from the current age 27/seven years service.

Combined with the reduction of the entry-level contracts by one year, this ensures the player remains with the team which drafted him for a longer period, while reducing the number of long-term deals for players coming out of their entry-level deals.

Not sure if the players will be keen on that, but if this were to become the only outstanding issue blocking a potential resolution, I don’t believe they’d dig in their heels too much over it.

Amnesty buyout. For the first time since talks began this summer, the amnesty buyout option – anticipated by many observers – was finally proposed by the league.

This penalty-free, one-time-only option was used at the start of the previous CBA to allow teams to buy out one player contract. It was intended to help teams become cap compliant in the first year of that CBA, but most saw it as an opportunity to dump a bad contract.

Nearly every NHL club has a player whose contract they now regret carrying and would love to buy out without incurring any salary cap penalty. It could also help a number of them become cap compliant whilst keeping the remainder of their rosters intact.

It wouldn’t hurt the players, as those being bought out would get most, if not all, of their remaining salaries, allowing them to become unrestricted free agents eligible to sign with other clubs, albeit at reduced salaries.

I’ll be surprised if an amnesty buyout doesn’t appear, in some form, in the final agreement.

2 Comments

  1. In regards to the player contracts, there appears to be an easy compromise regarding front-loaded, multi-year contracts. The NHL made a prior proposal that any player whose contract runs over 5 years retires, gets traded, etc becomes the responsibility of the team that initially signed the contract. If agreed upon by the NHLPA, in theory, the CBA could allow for contracts for any length of time as it is presently, without the 5% maximum variation clause. In reality, however, owners will be much more reluctant to offer this sort of front-loaded contract because of the potentially disastrous future cap hits for players no longer on their roster, but it would at least remain an option for a player entering his prime who enjoys playing for a particular team.

  2. One thing you didnt include in the players proposal of make whole is that they still want guaranteed income increases even if the revenue doesnt…..while the NHL wants a hard 50/50, the players version would once again guarantee increases over time beyond 50/50

    Bob Mackenzie wrote an excellent article outlining some of the same things as you have Lyle, though he seems privy to a bit more of the inside information