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Brooks: NHL’s ‘cap recapture’ mechanism for lifetime contracts lurks as a franchise-killing clause

The New York Post's Larry Brooks penned a superb recap of the Rangers' 3-1 loss to the Boston Bruins on Saturday night, wondering what the future holds for Henrik Lundqvist and Rick Nash's team, but his main Sunday column includes ponderings about the Flyers tossing an offer sheet at Ryan McDonaugh, others tossing money at RFA's-to-be Kevin Shattenkirk and Alex Pietrangelo, whether Pascal Dupuis will cash in as an UFA, and, well...

Why the NHLPA didn't resist the NHL's insistence upon "cap recapture" mechanisms in the new CBA, which are designed to screw the teams that signed players to "lifetime contracts," the Rangers and Brad Richards included:

All these months later, it still is baffling that the NHLPA did not take a stand against the NHL’s insistence on applying the punitive cap-recapture provision of the collective bargaining agreement to contracts that already had been registered. Because if Brad Richards is bought out next month and Marian Hossa is bought out following either this year or next, the cap-recapture will be among the primary reasons management would have felt compelled to act.

The final three seasons of Richards’ nine-year, $60 million front-loaded deal are worth $1 million per. Under the cap-recapture formula that was among Brian Burke’s pet projects, if Richards were to retire with three seasons remaining on his deal, the Rangers would be hit with a dead-space charge of $5.667 million per. If he were retire with two seasons remaining on the contract, the charge would be $8.5 million per. And, counterintuitively, if he were to play all but the final season of his deal, the Rangers would be hit with an untenable charge of $17 million for 2019-20.

Remember this: If the Rangers defer the buyout decision until next summer off the belief No. 19 will re-establish himself after a normalized 2013-14 season that includes training camp and the pre-camp conditioning regimen and Richards is injured next year, the amnesty option disappears. And the Rangers then become at risk for either a cap-recapture or a difficult normal course buyout with which dead space would be applied for years.

Hossa has continued to play at an extremely high level for the Blackhawks. But the winger’s 12-year, $63 million deal that runs through 2020-21 features the final four seasons at $1 million per. If he were to retire with two years remaining, the charge would be $9.187.5 million per. If he were to play all but the final season of his deal, Chicago’s dead cap charge would be a crippling $18.375 million for 2020-21.

Now you might believe this is what these teams deserve after signing players to deals they might never have contemplated completing. Let’s not even revisit the Ilya Kovalchuk matter. But the fact is the league approved and registered every one of these contracts, the players who signed them are in relative jeopardy and the teams that signed them could face significant hardship.

The league identified this issue as an avenue through which to punish its big market teams for being creative in trying to win. The NHLPA always found something fishy with this provision — as well as the retroactively applied AHL provision — but would not identify it as a hill to die on.

Brooks continues at length...

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Comments

Avatar

I sorta tuned out a lot of the bluster during the Lockout and I haven’t seen a copy of the CBA yet. (It hasn’t been released publicly yet, right?)

What’s this ‘cap-recapture’ provision Brooks is on about? Does this only apply if a player won’t see his contract through fully and retires with seasons left?

Posted by Adi from India on 05/26/13 at 06:13 AM ET

George Malik's avatar

CBA isn’t out, but if a player doesn’t play through the lifetime of his contract, Capgeek explains it and offers a “cap recapture calculator”:

Per the CBA reached in January 2013, teams receiving a “cap advantage” from existing long-term contracts (defined as seven years or more) will be penalized in the event the player retires or “defects” from the NHL before the contract expires. A team receives a “cap advantage” when the player’s actual salary exceeds his cap hit in a given year. Please note, contracts that fall under the “over-35” rule do not qualify for cap benefit recapture, the NHL has confirmed.

Posted by George Malik from South Lyon, MI on 05/26/13 at 06:17 AM ET

Avatar

Thanks for the info, Geroge. smile

I am surprised this clause got in as it retroactively punishes teams for working under the rules of a (then) current CBA.

Posted by Adi from India on 05/26/13 at 06:45 AM ET

Hank Scorpio's avatar

George,

I’m a little baffled by this provision.  Do you know how it will affect the Wings in terms of the Zetterberg and Franzen contracts?

Thanks.

Posted by Hank Scorpio on 05/26/13 at 11:13 AM ET

shazam88's avatar

Wow, that 100% recap provision is really extreme.

Obviously there should definitely be an offset formula built into the provision in order to lessen the penalty by some percentage when a player actually plays some of the low salary years at the back end of the contract. I don’t even know who dropped the ball the most on this one, the NHLPA or some of the big market teams…it’s just stupid.

Posted by shazam88 from SoCal on 05/26/13 at 03:47 PM ET

Avatar

And, counterintuitively, if he were to play all but the final season of his deal, the Rangers would be hit with an untenable charge of $17 million for 2019-20.

Math is hard, but let me take a crack at these numbers.

If Brad Richards retires with one year left on his contract, he will have been paid $59 million dollars but the team will have had cumulative savings of $5,666,667 million dollars.  Ergo, the ‘charge’ would be $5.7 million, not $17 million. 

Every year the player plays at a cap hit *greater* than his salary, the penalty will decrease.  If Richards retires with 3 years left (at 1 million per), then it means that he will have been paid $57 million, while the team has only been charged total cap dollars of $40 million, a savings of $17 million.  Divide that $17 million over 3 years, and you get… $5.7 million per year. 

While those are big penalties, they are not absurd or unreasonable.  It simply ensures the team gets a cap charge commensurate with what they’ve paid their player.

Posted by jonquixote on 05/27/13 at 04:47 AM ET

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Paul Kukla founded Kukla’s Korner in 2005 and the site has since become the must-read site on the ‘net for all the latest happenings around the NHL.

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