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How to stop ‘cap leakage?’

The Hockey News’s John Grigg reports that neither the NHL nor the NHLPA are necessarily happy with the fact that the league’s CBA currently allows players with one-way contracts to be “banished” to the AHL, with the NHL disliking the fact that the salaries of “banished” players don’t count against the players’ share of revenues, and the PA obviously disliking the fact that the hard cap’s yielding players who find themselves stuck in the NHL until their contracts expire. Grigg says that both sides hope to rectify the issue in the next CBA, but the concept of allowing players to “opt out” of their contracts and leave money on the table isn’t exactly a “slam dunk”:

[A] source told me the NHLPA would, obviously, argue the problem is ultimately created by the cap itself. If there wasn’t a cap, teams wouldn’t send players down, rather they would keep them, buy them out or search the trade market for a suitor. The union fears the existance of an opt-out clause would lead to pressure from teams, and the media, to have a player void his contract or else be sent down. Although the agent I spoke with didn’t believe pressure from anyone would be much of an issue. You can be sure the PA wants to see its guys in the NHL if they’re good enough, but it would push for a new buyout system, not a system in which players have to leave their money on the table.

According to the agent, the NHL terms the burying of one-way contracts in the AHL as “leakage,” as in cap money leaking out of the league. Last year there was about $30 million that wasn’t counted towards NHL teams’ total cap hit. While that helps some individual clubs operate, it affects the owners’ cumulative bottom line because that’s $30 million that wasn’t counted against the league’s hockey-related revenues. It’s those revenues that dictate how much money the players, as a group, take home each year and how much money the owners don’t.

“The league doesn’t want any leakage at all,” the agent said.

So a compromise is needed and will be addressed during the next round of collective bargaining negotiations. But that’s a season away and you’ve got to feel for the guys stuck in the minors right now and wonder if they’d take advantage of opting out. Such a clause wouldn’t be difficult to write, about 15 minutes worth of work according to the agent. The only thing that would hold up the process is acrimony between the league and the NHLPA.

If it got done, an opt-out clause would be a stop gap for both sides. The NHL wouldn’t have to deal with as much leakage and players would have options if priced out of the best league in the world. Seems like a win-win. And only fair.

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Comments

Crater's avatar

Would it make more sense to just have the cap larger, but have any non AHL-Only contracts count towards the cap hit? Account for prospects and things of that sort to figure out a reasonable number, if a two-way contract their AHL salary will hit the cap when they are down, but NHL will hit when up. That way a one-way contract being sent down wont save you anything but a roster space.

This could help many teams who need a bit of extra cap space like the Wings with the increased space as long as it is managed properly with proper AHL contracts, reasonable 2 way dollar amounts.

New and radical, but it seems like a better option than an Opt out. That just seems to be a cop out, why have a contract if it can just be opt’d out of. I think that makes things unfair for teams that would go out and sign big players for way too much money to just cut them loose a few weeks later if it doesn’t pan out. No risk really. They wont ever be handcuffed.

Posted by Crater from SoCal on 04/04/11 at 02:56 PM ET

J.J. from Kansas's avatar

I also don’t like the concept of opt-out, but I’m not sure about the legality of counting the contracts of people in the AHL/ECHL/Any other league against the cap.

I think the NHL and NHLPA might be worried there with the fact that not everybody who plays in the lower leagues, including the AHL, actually has a contract with an NHL club.  With that happening, the NHL and NHLPA would be collectively bargaining an agreement that would affect a league where the agreement would not be able to be applied uniformly and would open both of them to lawsuits by a dissenting player group who feel that they weren’t represented during a bargaining session.

My suggestion would be that every player who is under an NHL contract will have his cap hit (but not necessarily his roster space) counted against the league maximum if they are not on injury status and their contract calls for them to make more than $1M per season at the NHL level, regardless of where they were playing.

Under this deal, Cristobal Huet could play to his heart’s content in Switzerland, but that $5.6M cap hit would still be sitting on the Hawks’ balance sheet.

I would set the $1M minimum figure to index with the league minimum payment dollar-for-dollar as well.  Right now, most of the players who get called up and sent down are not making that kind of money, so they would be exempt from this type of deal.  It would certainly still involve some cap “leakage”, but it’s leakage that’s designed into the system, rather than the kind of leakage that can best be described as teams like the Rangers and Blackhawks filling a water balloon until it bursts.

Posted by J.J. from Kansas on 04/04/11 at 03:52 PM ET

Bradley97's avatar

J.J., I like your idea of building a leakage cap into the overall cap. I think that would help with a lot of the overpaid contracts that teams think they can sign and then when it does not work out send the player down for the season(s).

As for the opt out option, I think that’s for the players to exercise, not the teams. If players with larger contracts like Huet who cannot make their team have the choice of collecting the easy money or opting out of their contract to become a UFA, I think most would rather take the opportunity to sign a short deal with another club, prove themselves, and then get a good deal, especially goalies who have at some point been starters. A guy like Meech might have decided to opt out and join another team around Thanksgiving that needed a defenseman rather than know he’d be playing all season in GR because of reentry waivers.

Of course, the question of how and if waivers of any sort would apply for an in-season opt out would be an issue. I think waivers in general are an issue, in particular with regard to players like Nabokov. Nabby signed and played a bit in the KHL but it did not work out for his family, so he requested and was granted a release. His team did not have to do that, so that’s very classy on their part (whether his stats helped them make the decision or not, the KHL is not known for allowing that type talent to walk). He then had his agent inform every team in the NHL that he wanted to return, and laid out his contract requests. It’s clear he wanted to sign in the West, and he only wanted to go to a playoff contender.

Signing here was a big gamble because Howard was likely to get better, not worse with his competition, and though Osgood was hurt, he is still the more experienced champion backup. But a team that did not meet his requests picked him up because of the current waiver rules. Holland and a number of other general managers don’t like the rule as it stands, and neither do the players (Brooks will likely make a stink when this particular waiver requirement is eliminated in the new CBA because Holland will be leading the charge).

I expect the league and PA to find a middle ground on all of these issues. I don’t think the cap will increase, though there are a number of strong arguments to create some looser space. I expect to see a franchise player exemption of some sort, though not for the full contract, and probably not until the next negotiations. For now I think the waiver deadline for players who sign abroad and then get released might at least be moved to around mid-season because everyone (except maybe Snow) wants that rule gone or adjusted. I also think we’ll see a new buyout system and/or an opt out clause. However, if there is a player opt out clause there will be restrictions. The last thing the league and PA want are more bad contracts and high pressure to opt out when they go bad instead of a buyout. Like the article suggests, there is middle ground.

Posted by Bradley97 on 04/05/11 at 01:55 AM ET

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The Malik Report is a destination for all things Red Wings-related. I offer biased, perhaps unprofessional-at-times and verbose coverage of my favorite team, their prospects and developmental affiliates. I've joined the Kukla's Korner family with five years of blogging under my belt, and I hope you'll find almost everything you need to follow your Red Wings at a place where all opinions are created equal and we're all friends, talking about hockey and the team we love to follow.