CBA Analysis: Fixing the Frontload Loophole

Moneypuck -Contributor IJuly 31, 2009

Any GM or player agent will tell you how hard and grueling a labor negotiation is, how time-consuming and hair-pulling aggravating the discussions can get. How the pressure and the tension builds as it comes down to the 11th hour. I'm pretty sure at some point in the last two talks Bettman wanted to strangle Goodenow.

However when the dust settles and the CBA is finally written up, the next battle begins, finding the loopholes. For the next few days, GMs, Assistant GMs , Director of Hockey Operations, Legal Advisors all scramble through the 400 page monster to try and find the mistakes their opposing party made during the negotiations or what "wording" they can take advantage of.

Well they found one loophole at least during this new CBA, the frontload loophole, and if you don't know what I'm talking about you really aren't paying attention.

Its evident in Marian Hossa's 12 year deal worth 62.8 mil with only 3.5 paid in the last 3 years and  Henrik Zetterberg's 12 year 72 million deal with only 2 million paid in the last 2 years.

What happens is this, whenever a player retires, as long as they were under 35 upon the signing of the deal, then their cap hit comess off the team, as well as they walk away from the money. However if a player is over 35:

If a player who, as of June 30 of the upcoming season, is over the age of 35 signs a multi-year deal, the signing team will take a cap hit for each year on the contract, regardless of if the player retires. For example, if Chris Chelios signs a three-year deal worth $2 million per year, and retires after the first year, the signing team still takes a $2 million cap hit for the remaining years on the contract. However, since Markus Naslund’s 35th birthday was after June 30, he was 34 as of June 30, thus his retirement removes his cap hit.

The issue here is teams are getting high-end players for less than market value on the salary cap but yet players are getting paid their market value in real dollars. Teams are signing Marian Hossa who is currently 30, or Henrik Zetterbrg who is currently 28 knowing full well theres a good chance they won't fulfill their deals.

In fact, the NHL is " currently investigating the Flyers for signing Chris Pronger knowing he would retire beforehand. The NHL and Bill Daly and doing the same for" Marian Hossa, too.

The penalty for signing a guy under those circumstances that circumvent the CBA could be a fine of up to $5 million dollars and a loss of draft picks if found guilty (I have no clue how the NHL will do that).

Listen nobody here is an idiot, we all know what happened and why it happened, the issue here is not to discipline those taking advantage of the loophole, the priority for the NHL should be to talk with Paul Kelly and the NHLPA to fix this issue for the upcoming labor talks.

My suggestions is this:

1. Get rid of average salary. Get rid of average cap hit and average salaries being what counts towards the Upper and Lower Limit. Sports critics are non-stop in pounding on MLB for their non-capped league, but I prefer their ways of paying players as opposed to a Cap system which is a true payroll.

I realize the NHL used to operate like this, but I fail to see why the league cannot do this. Sure it wouldn't be as easy and you would have to plan a little harder to to fit things around a backloaded or frontloaded deal in a hard cap system with Limits, but with a cap that values the team true payroll as the cap hit, it will easily get rid of the frontload loop.

Teams won't be able to as easily sign these deals, because such a huge percent of their cap hit would come in the early years, that it would cripple their team (imagine Flyers fans or Rangers fans having to watch Briere or Gomez have a 10 million cap hit). Also players won't agree to backloaded deals unless they know they would retire prior to the deal ending.

For NHL accounting purposes it would make things a little harder, but its a small price to pay to end this issue.

My second proposal is scaling contracts, seeing as we're working in a payroll system, it would be very unfair to teams who sign a guy to a frontload deal (if they choose to) and the cap comes down a few million, such as how it may in 2010-2011. In this system, players contracts scale up and down according to the cap floor/roof that year and according to their payment. In fact I think they should do it even in the current system, with the cap fluctuating so much year-to-year.

So lets make an example: Marian Gaborik signs a seven year $50 million deal, that averages out to 7.14 per year. Now lets say the team makes his payment plan as such:

Year 1: $8 milliom
Year 2: $8 million
Year 3: $10 million
Year 4: $8 million
Year 5: $8 Million
Year 6: $4 Million
Year 7: $4 Million

This is all under a $55 million cap. So in Year One, Gaborik makes 14.55 percent of the cap hit. Lets say the cap goes up now to 60 million, that was 9 percent increase so to determine his Year Two cap hit you increase his Year Two salary by 9 percent, which comes out to $8.72 million. If it goes down in year three to $52 million, his Year Three cap hit is now $8.67 mil. While that may not seem like such a huge drop when you take into account the 52 mil cap it is, in fact its 16.67 percent of the cap hit, so it scaled up in terms of percent of cap hit as opposed to Year One as it was intended to.

Some may argue that players may end up getting ridiculous amount of money or losing some because of this system, but really they wouldn't lose or earn a dime more than before. Because the players have already signed a CBA that intricately links salaries to revenues.

Due to this agreement, if the players make too much they just write a big, fat check back to the owners, if they are underpaid (which is doubtful) the owners just write them a check until the players get the exact amount they're supposed to be paid according to the CBA.