Ironing Out Some CBA Issues

Will the owners ever learn? While most fans are consumed with the happenings in free agency and the trades that could, would or should happen (Nash, Ryan and Luongo), the Collective Bargaining Agreement between the league and the player’s union draws ever closer to its conclusion. If an agreement cannot be reached in time the owners might once again lock the players out risking part or all of the 2012 – 2013 regular season. Are the owners actually greedy and/or stupid enough to do so again? It appears they might.

Just eight years ago the league lost an entire season as the owners grappled with the players in an effort to institute a hard salary cap. The owners felt it was necessary because the big-market teams couldn’t seem to resist spending too much money on player salaries and the small-market clubs claimed they couldn’t keep up with escalating payrolls. Eventually the players would blink and the league got their salary cap.

Since then the salary cap ceiling has risen from just less than $40 million for the 2005 – 2006 season to a touch over $70 million this year on the back of rising league-wide revenues yet once again the owners are crying poverty. They head to the negotiating table evidently trying to lower the player’s share of the revenue pie and thus consequently decreasing both the salary cap ceiling and floor. They will also likely push to limit contract lengths to eliminate the so-called “retirement contracts.” Basically the owners demanded the players agree to a salary cap to stop themselves from blowing big money on free agents then they’ve spent the last seven years exploiting every imaginable loophole in order to circumvent the cap they insisted upon. Sounds ridiculous, doesn’t it?

It certainly looks as if the next few months are going to be tense ones for all involved; particularly the fans who don’t want to lose any hockey. The summer is already long enough, no reason to prolong it needlessly with a lockout of the players. With that in mind I’ll take a stab at solving the issues that will likely confront the owners and player’s union as they attempt to find common ground on a new CBA.

Hard Salary Cap versus Soft Cap w/ Revenue Sharing

The owners wouldn’t want to give up the hard cap but the players would likely be interested in a soft cap which would allow teams to spend beyond the limit with a penalty attached. The penalty I would propose would be $2 for every $1 spent over the cap. If a team exceeded the soft cap limit by $5 million then they would have to pay an additional $10 million in “luxury taxes.” These luxury tax payments would be pooled and divided among the lower revenue teams on the condition they use the money on player salaries or scouting/development instead of lining the pockets of those teams’ owners. Of course that would require the type of transparency the NHL would be reluctant to provide to the union.

This modification to the salary cap would allow big market clubs to spend more if they choose to while providing extra revenue to smaller market teams to help them stay competitive payroll-wise. Although, as we’ve seen with the big revenue teams in MLB (the Yankees come to mind), they’ve begun trimming their payrolls to lessen their luxury tax burden. Just because they would be allowed to spend more doesn’t necessarily mean they will.

Contract term limits

This has become a major talking point due to the recent rash of “retirement contracts” handed out by teams to players. These deals are usually heavily front-loaded to ensure the player gets a bulk of the value while he is still playing. The last few years pay out a relative pittance to keep the AAV manageable under the cap.

The league has grown increasingly frustrated with these deals and a couple of years ago forced the union to agree to certain limitations pertaining to the maximum age a player can be signed through and mandating the salary in the last years has to be at least half of the first season’s salary. Still, clubs found a way to cheat that as they’ve structured deals to pay out huge sums as signing bonuses rather than as actual salary. The matching contracts doled out by Minnesota to Ryan Suter and Zach Parise, for example, call for a first year salary of just $2 million with a $10 million signing bonus. That allows them to pay out $1 million salaries at the end of the contract to help lower the AAV of the deal.

Obviously players like the security a long term deal provides them and their families. I see no reason to take that away. If the league wants to prevent “retirement contracts” there is an easy solution. Instead of not counting signing bonuses toward the 50% rule they should count it. In the cases of Parise and Suter that means instead of $1 million salaries in each of the final two seasons the salary would need to be $6 million, or half of the $12 million they are receiving this season. That would also raise the annual cap hit by a minimum of almost $770,000.

Amnesty/Buyouts/Demotions

Assuming the owners do get their way and the salary cap is lowered ahead of the start of the regular season, teams should have the ability to buyout at least one player’s contract with no salary cap ramifications in order to help them become cap compliant. They did that after the implementation of the existing CBA and it makes sense to do so again.

Some teams have come under fire for signing free agents to exorbitant contracts then demoting said player to the minors or sending them to play in Europe to clear the cap hit when the player fails to play up to the level of the contract. Some notable examples; Wade Redden, Jeff Finger, Ales Kotalik and Christobal Huet were all given big money deals only to face the ignominy of being sent away to get their cap hits off their club’s books.

I agree this needs to be eliminated. I don’t think it is necessarily fair to the players to lose their NHL job primarily because the team irresponsibly signed them to a contract later determined to be an albatross. The team needs to pay for their mistake.

That being said I also believe the new CBA should loosen up the buyout provision some. I agree the club needs to be penalized for cutting bait on a player’s contract but in most cases a buyout benefits both the team and the player. The club clears some cap space and the player is free to go to a team that might provide a better fit for him.

The current buyout formula is relatively complicated and I believe a better solution can be reached. Instead of 2/3 of the remaining cap hit spread out over twice the remaining term, perhaps it makes more sense to penalize the club ½ or 1/3 of the cap hit for each year left on the deal. Most teams tend to avoid buyouts because they are forced to carry dead cap space for years beyond when the original deal expires.

There are more issues to be ironed out but these are likely to be among the most contentious. My ideas are obviously not the only ones and they probably aren’t the best but it seems to me better than a lockout. The league took in somewhere in the neighborhood of $3.3 billion in revenues last year. I’d like to think the two parties could figure out a way to split that pie in a way that makes each side happy.