2012 NHL CBA: Eliminating Hockey Purgatory

When new rules are put in place to govern a sport the enterprising front office employees of the given league work to find any advantages (loopholes) they can that can remotely be defended as legal. The loophole most often exploited under the current NHL CBA has been clubs signing players to incredibly long deals where the final years have steep salary drops to artificially lessen the cap hit of the player. It’s a ridiculous process, but it isn’t the only one.

Front offices have also had the ability to stash expensive players in the minors indefinitely to remove cap hits from their ledger under the most recent CBA. Players like Wade Redden, Sheldon Souray, Cristobal Huet, Jeff Finger, and Rostislav Olesz significantly underperformed the contracts given to them by the owners to the point that no NHL team was willing to save them from hockey purgatory. Unless they retire they’re stuck not having the opportunity to play in the NHL until their contract runs out.

There is some thought that the players will move to eliminate this problem from the next CBA. Maybe they will, but this might actually be a bigger problem among the owners than the players. While the loophole definitely hurts players, it also gives big market clubs an unfair competitive advantage over smaller market clubs.

A player has his ticket punched to purgatory through a fatal mixture of poor performance, a giant contract relative to the player’s actual value, and being employed by an ownership or front office regime with a strong enough stomach to deal with paying a player significantly to continue playing in the AHL. Redden, Souray, Finger, Huet, and Olesz certainly fit the mold.

The current system inadvertently assigns the blame for the contract to the player who signed the deal. His options are incredibly limited. The only ways out for the player are to be claimed on regular or re-entry waivers, get bought out for 2/3 of your owed salary, seek a loan to Europe, or retire. There is very little NHL opportunity until the term of the deal runs out whether the player is still capable of playing in the NHL or not.

The owners in this scenario have relatively easy outs. They can waive the player and hope another team claims him, thus accepting his entire contract. They can send him through re-entry waivers after waiving him and take a cap hit of half of the player’s salary for the remainder of the deal if he’s claimed. Or, if they have the money, they can simply waive him, park him in the AHL, and let him miss out on significant portions of a potential NHL career with no cap penalty. Under the current arrangement there is no deterrent keeping rich owners from seeking this option instead of a buyout.

The players could move to fix this loophole with a new agreement. It is obviously a concern for the union on some level since it does impact members of the union, but how much does it really impact them? This scenario has only played out for a handful of players. The players still get paid so the union isn’t losing money. Perhaps they fight to fix it, but I don’t see this as a major sticking point for the union.

This could be one of several divisive issues for the owners though. No small market team can afford to take advantage of this loophole. They can barely stay above the rapidly rising cap floor as is. Big market clubs could continue to stash poor contracts as long as the team could afford to pay the contracts of the players in question. Small market teams are already at enough of a competitive advantage and seeking more revenue sharing so it makes sense that they might want this loophole either closed or more strictly regulated.

It’s a complicated problem to solve, but the solution could actually be really simple. Teams keep these players under contract because if they’re going to pay them they might as well play them somewhere that doesn’t impact the salary cap. Buyouts should be a possibility, but they currently have severe limitations. Blueshirt Banter describes the cap implications of buying a player out as the following:

Buyouts: Buyouts are a more complicated business, as it requires some serious calculations.

• A player over 26 can be bought out for 2/3 of his remaining contract worth. Note, this is not the salary cap hit, this is the actual dollar amount left on the contract.
• A player 26 and under can be bought out for 1/3 of his remaining contract. Note, this is not the salary cap hit, this is the actual dollar amount left on the contract.
• The cap hit for the buyout is calculated as follows:
  • Calculate the buyout amount (as explained above)
  • Spread the buyout amount evenly over twice the remaining years on the contract.
  • Take this amount, and subtract it from that year’s actual salary (not the cap hit). Let’s call this number the “savings”
  • Now, take the “savings” and deduct this from the cap hit (not the actual salary). This is your cap hit for the remaining years of the contract.
  • For the years that exceed the contract, the cap hit is the original buyout amount that was divided evenly across twice the years on the contract (step 2).

First of all, it’s a needlessly complicated process (much like revenue sharing, but we’ll get to that eventually). Let’s use Sean Avery to estimate a buyout cost. (This will give you a headache. Skip to the bold part to avoid annoying math.) If the Stars bought him out after the first year of his deal he had 12 million remaining. The Stars would have owed him 2/3 of that, so 9 million. He had three years remaining, but you double that to six and spread his 9 million out to get 1.5 million per year. The 1.5 million is subtracted from the salary from the current season (not cap hit) which is 4 million in this case. Now we have 2.5 million. 2.5 million is then subtracted from the cap hit which was something like 4.1 million dollars. His cap hit would have been in the neighborhood of 1.6 million dollars for six years with a cash payment of 9 million to cover his salary.

Teams that can afford that lump sum payment can likely afford to pay the player to play in the minors. These players remain in the minors more because of the cap implications than anything else. Teams like the Rangers need the cap space. An easy fix to this problem is to let all involved parties have their cake and eat it too. The league should lessen the buyout penalties, but also take other measures to keep teams from circumventing the cap.

The league can build a simple solution to this problem that doesn’t include an unnecessary amount of math, doesn’t take (much) money from the players, and gives teams incentive to free players from overbearing contracts. The idea is more or less a luxury tax, but in this case it’s a buyout tax. On long term deals enable teams to initiate a buyout of a contract after X number of years (2?) if the deal isn’t working out. The player, under this system, would be paid 1/2 of the remaining value on his contract.

The change is that teams aren’t immediately penalized for buying a player out. They’re only penalized if the sum total of their buyouts pushes them over the cap. They can still spend their cap space normally as if the buyouts didn’t occur, but every penny they go over the normal cap triggers a luxury tax of 50 cents on the dollar. This luxury tax would then go directly to revenue sharing to help assuage the competitive balance fears of smaller market clubs to some extent.

The period of the cap hit should also be reduced on the buyout. Doubling the length of the cap hit isn’t necessary with a luxury tax in place, and probably isn’t necessary now. It’s a major reason why players in this situation remain in the AHL. Do the Rangers want to have a Redden cap hit for eight years when he has four years left on his deal? Absolutely not, and no one can blame them.

The players should also have an out from these long term deals if they’re being forced to go to the minors. In baseball players can take free agency if they meet certain criteria after clearing waivers while still getting paid the contract owed to them. Giving players on long term contracts a similar out and essentially the same rights as teams, when those teams show them that their services are no longer desired, would give clubs more incentive to pursue a buyout. If the union wants to eliminate this situation from happening in the future they need to give the owners incentive to make something happen.

The biggest penalty for the team would then ultimately be the full salary of the player they released (1/2 to the player, 1/2 as a luxury tax), the players still get most of their contract paid in full while having career freedom, and the smaller markets get increased revenue sharing which would allow them to theoretically ice more competitive teams though the impact of the buyout tax would be minimal.

This situation may never come up in CBA negotiations making this entire post completely unnecessary, but if it does the parties involved have avenues to pursue to amicably settle the issue. Ultimately these players are for the most part worthy of being on NHL rosters. They’ve had significant chunks of NHL careers taken away from them in the name of cap space. Given the chance to make an NHL roster based solely on talent there are no guarantees that the list of guys buried in hockey purgatory would make it, but they should at least have the opportunity to fail instead of being punished for accepting a contract.

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Should the parties work to solve the “Redden” issue in the next CBA?