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Kovalchuk Signs With The Devils

Yesterday the highest profile free agent of the 2010 summer, Ilya Kovalchuk re-signed with the New Jersey Devils.  He signed a 17 year pact worth $102 million.  This gives him an annual salary cap hit of $6 million.  This is a glorious example of legal contravention of the salary cap.  Nobody seriously believes that Kovalchuk will still be playing in the NHL at age 44 when the deal ends.  Nobody seriously believes that Kovalchuk will play for the 17 year term or have an annual average salary as low as $6 million.

That said there is nothing the NHL can do about the deal right now.  There is significant precedent for these long term deals with declining pay in the sunset seasons to keep the annual salary cap hit down.  There are more than a handful of players signed to these deals who are not expected to complete them.

As far as the New Jersey Devils are concerned, signing Ilya Kovalchuk for a $6 million salary cap hit is a good thing.  The salary cap hit is reasonable for a player of his ability.  The Devils are a team that could afford to exceed the salary cap if rules allowed it.  Effectively now they are.  They are using their financial muscle to sign a player for more money than his salary cap hit will report.  They have the money to do this and it is in their best interest to use the advantage.

Likely when the CBA gets renegotiated, we shall see some rules changed to prevent future long-term deals like this one.  We may even see some sort of change to these deals that are still on the books (after all player pay was reduced by 24% on existing deals in the last negotiations).  That is no reason to fear such long term deals.  The NHL doesn’t seem likely to do much about them.

The big boogeyman often touted in these long term deals is insurance.  Teams cannot insure contracts against injury for the extreme length of these contracts.  That is nothing significant to worry about.  Insurance is a bet against the health of the player and it is a bet with bad odds.  If the insurance companies didn’t win over the long term, they wouldn’t stay in business.  Basically, the Devils cannot make a bet against Kovalchuk that is likely a money losing one.  That is nothing to worry about.

Ilya Kovalchuk is a good player.  He is one of the best players in the league who has never been a serious MVP candidate.  That may change now that he is permanently out of Atlanta and into what should be a better situation.  Even if Kovalchuk never does have that MVP candidate year, at $6 million a year that isn’t necessary for him to be a good signing.  New Jersey made a good signing under the NHL rules.  The length of the contract is ridiculous and that is the NHL rules have pushed these contracts.

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Comments

Da lil Guy's avatar

If you think the league can’t do anything, you should read s. 28.6 (a) of the CBA.

The fact that these cap defeating long term deals are already happening isn’t a reason to let them get further and further out of control.

Posted by Da lil Guy from Guelph, Ontario on 07/20/10 at 07:33 PM ET

PuckStopsHere's avatar

The NHL CBA is available for download from nhl.com.  Here is the link.

Article 28 refers to the player fund which pays players brought up during the playoffs their hotel bills and a per diem.  There is no 28.6 (a) - this is a reasonably simple part of the CBA that is not numbered that far.

Right?

Posted by PuckStopsHere on 07/20/10 at 07:41 PM ET

Da lil Guy's avatar

My bad - 26.3 (Circumventions) . To be fair, I was going from memory.

“No Club or Club Actor, directly or indirectly, may: enter into…any SPC…if (it) is intended
to or has the effect of defeating or Circumvent ing the provisions of this Agreement or the
intention of the parties as reflected by the provisions of this Agreement, including…Team Payroll Range…”

Possible sanctions where a circumvention is found include voiding the SPC, a fine of up to $5 million, forfeiture of draft picks, etc.

Posted by Da lil Guy from Guelph, Ontario on 07/20/10 at 09:23 PM ET

PuckStopsHere's avatar

Those are the words that the NHL *could* have used when they saw the first long term contract with declining pay beyond the years normally played by NHL players to reduce the annual salary cap hit.  However, the NHL has not acted upon that except for a review of some of the first contracts of this type that was began well over a year ago and to my knowledge no definitive final result was announced - which I interpret as the NHL not doing anything about it and having no plans to do anything about it.

We all know that about a handful of players signed these contracts (Zetterberg, Franzen, Hossa etc.) that they are highly unlikely to play through to their final years.  Kovalchuk has merely joined the club.

All Kovalchuk has to say is maybe he will play until he is 44 - and likely some circumstance will change things someday.  New Jersey has to say that he might play that long and if he does they are happy he will be a Devil.  There is nothing the NHL can do about it with the predicents of how they have treated other contracts.  As long as there is no clear promise that Kovalchuk will definitely retire in N years where N < 17, all is legal with the recent contracts the league has accepted.

Posted by PuckStopsHere on 07/20/10 at 09:38 PM ET

VooX's avatar

Would you like some ketchup with your foot?

The NHL rejected the Kovalchuk contract for circumventing the cap, just as predicted by Jean Chretien (aka Da lil Guy)... in the words Chretien used to describe the GST law once… Kovalchuk’s contract is “GONE!”.

Posted by VooX from Behind the Bar in the Hasek Club Car on 07/20/10 at 10:44 PM ET

PuckStopsHere's avatar

I am surprised.

Although it is likely Kovalchuk would retire before the conclusion of the contract, the same is likely true of a handful of other players who had contracts accepted, although none kept them in the league to age 44.

I find it hard to justify this decision (which I agree with) and the opposite decision in the case of for example Marian Hossa or Johan Franzen.

Posted by PuckStopsHere on 07/20/10 at 10:49 PM ET

Da lil Guy's avatar

I knew my law degree was good for something.

Posted by Da lil Guy from Guelph, Ontario on 07/21/10 at 12:50 AM ET

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imageThe Puck Stops Here was founded during the 2004/05 lockout as a place to rant about hockey. The original site contains over 1000 posts, some of which were also published on FoxSports.com.

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