NHL Lockout: 8 Ways to Approach the Issue of Contract Length & Cap Circumvention
Back when there was still a significant monetary gap between the NHL and the NHLPA, it was hard to imagine that something like contractual rights would be an issue. But alas, the negotiators have surprised us again.
One of the main issues currently preventing a Collective Bargaining Agreement (CBA) is how to restrict contracts. About a month and a half ago, I published an article focused on the negative impacts a long-term contract can have on a team. When you add that to the unfortunate fact that many general managers are using long contracts to circumvent the salary cap and lessen the blow of a cap hit, it becomes clear that something needs to be done.
What do you think about the term limit the NHL is proposing?
There are numerous ways the NHL can approach this, but let's start with the two methods that have been most discussed and are most likely to be a part of the new CBA.
Term Limit: Limiting the length of a contract is a great way to eliminate the negative impacts of a long contract and cap circumvention. Two birds with one stone, right? The downside is that teams won't be able to lock down franchise stars for as long as they'd like. Similarly, the players would like the option to secure themselves long-term.
Before the negotiations fell apart on Thursday, the NHL proposed a five-year term limit, where teams can re-sign their own players for up to seven years. Despite the few number of players who slip outside of those limits, the Players' Association is pushing for more.
Variance Limit: This is the second method which has been oft discussed, and will likely be used in addition to a term limit. A variance limit simply means that the yearly salary cannot vary greater than a certain percentage throughout the term. The NHL has asked for a five percent restriction, while the NHLPA has proposed 25 percent.
Even without the term limit, a variance limit, whether throughout the duration of the term or on a year to year basis, would significantly reduce the number long contracts, as it leaves cap circumvention virtually impossible.
Although a combination of term and variance restrictions is most likely, the negotiations are stuck on this point, and because of that, we must explore other possible solutions.
Leave It As It Is: Don't get me wrong here, cap circumvention is an unfair loophole and it should not be allowed. General managers will do this until they are no longer able to. But, that doesn't mean long-term contracts aimed a circumventing the cap are beneficial. Fair or not, the consequences of the long-term contract still exist. Perhaps the solution is to let teams learn the hard way.
As cap circumvention has become more and more of an issue over the years. One GM who has admirably kept away from long term contracts is Brian Burke of the Toronto Maple Leafs. It would be nice if other GMs did the same, but then again, most teams would do everything in their power to avoid becoming the Maple Leafs.
Salary = Cap Hit: This is a solution that has been tossed around by analysts during the negotiations, but there haven't been any reports that it has been discussed by the NHL or NHLPA, and for good reason.
By doing this, teams would reap no benefit from signing players well into their retirement years, essentially eliminating that form of cap circumvention. But imposing this would open the door to some other loopholes, and it's a general manager's job to find them.
Amnesty Clause: I'm sure in the months leading up to the lockout, you heard about the possibility of an amnesty clause at one point or another. An amnesty clause is essentially a one-time opportunity for team's to remove a contract from the salary cap.
This method would likely be used in addition to another discussed method, as it helps protect teams from the consequences of a long-term contract, but doesn't address cap circumvention.
Needless to say, if an amnesty clause was included in the new CBA, Scott Gomez would be the first to get shown the door.
Make the 35+ Rule Universal: The NHL currently has a clause which targets multi-year contracts with players signed when they were 35 or older. According to Capgeek:
Players who sign multi-year contracts when they are age 35 or older (calculated on June 30 of the season the contract begins) count toward the cap under all circumstances, regardless of where (or if) the player is playing. The only cap relief is $100,000 from the player's cap hit if he is assigned to the minors after the first year of the contract.
This method would simply make it so this rule applies to all contracts which extend past the age of 35, regardless of how old the player is when it's signed. In this example, if a player's career is cut short when the player is over 35 years old, whether the cause is injury or retirement, the original cap hit will count against the team for the duration of the signed contract, even though the player may not get actually get paid.
Take Roberto Luongo, for example. if by some shocking turn of events he does not remain active in the NHL until he's 43 years old, his $5.33 million cap hit will remain against the Vancouver Canucks (or whichever team may have him) until the original contract expires after the 2021-22 season.
Cap Hit is the Average Annual Salary Cap Before Age 35: This is a solution I came up with myself, so it may not be feasible, but it's worth throwing out there. This method is pretty self-explanatory. The formula to determine the cap hit stays the same until the player is 35 years old, and when the player surpasses that age, the cap hit is equal to the salary.
For example, if this was imposed before the Minnesota Wild's shopping spree this summer: Zach Parise's cap hit would be $10 million until the end of the 2019-20 season, and would equal his annual salary thereafter (as opposed to the $7.54 annual cap hit he currently brings).
Likewise, Ilya Kovalchuk's cap hit would be $9.56 million per year until the end of the 2018-19 season rather than the $6.67 million it currently is.
If for some reason term and variance limits were taken off the table, which would be the best solution to handle long-term contracts?
Performance Based Contracts: Much like the amnesty clause, this would help protect teams from the consequences of long-term contracts, but would not address cap circumvention. For such a logical solution, this is very rarely discussed. Why shouldn't hockey players be on performance based contracts? That's how the rest of us work. If I don't do the job I was hired to do, I will get fired; it's simple.
For example, Scott Gomez received the contract he did because of the offensive ability he had shown. In 2005-06 and 2006-07 (the two seasons prior to his contract), Gomez had .95 points per game. A performance based contract could have stated that if Gomez's production ever dips below 75 percent (or whatever number might fit) of that number (.71 points per game), provided the team gives him the fair ice-time, the team could walk away from the contract. In this case, the Montreal Canadiens would have had the option to void Gomez's contract following his 38 points in 80 games in 2010-11. If they chose not to, that option would be off the table for the remainder of the contract, regardless of how low his production falls.
Performance based contracts would be the most difficult of the options to implement, as there are too many factors that could affect a players performance, but it is still an option worth suggesting.
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