Contract Restructuring

[jsm7302]

Can someone explain how this works in the NFL; do any other leagues take part in this? Could the NHL institute such a clause in upcoming contract negotiations? I feel like contract Restructuring and limiting NMC's are two items that would make an abundance of difference in a hard cap league.

[Ozzy]

I don't think it's allowed in the NHL, JSM.

[Phil]

I can't speak to how it works in other leagues, so I'll let someone else do the lifting on that front, but what I can say with high confidence is the likelihood of this coming to the NHL without a protracted lockout is incredibly low. An entire season was sacked to secure guaranteed contracts. You'll pry that from the NHLPA's cold, dead hands.

 

If the League is asking the PA for this, it's going to be incredibly controlled and will come at significant cost to the NHL to implement. I have no idea what they could/would possibly give up to achieve this. Especially if you assume, as I do, that term limits are going to be the "hill they die on" again.

[Sod16]

Can you spell "lockout/strike"?  As with all of the other issues, the NHLPA is all about the interests of a few older already rich players at the expense of younger players and players with short careers.

 

One thing that is needed is a change in the way the cap is calculated.  It should be calculated game by game (in other words, the yearly cap hits of your roster or perhaps dressed players must be within the cap each game).  This would prevent a team (like the Rangers) from banking cap space during the year and spending it on rentals at the end.  You couldn't fit Tarasenko and Kane, even with retention, under the cap during the last 20 games that way.  The way it is now, staying a dollar under the cap for the first 60 games gives you three dollars of cap space for the last 20.

Edited March 6, 2023 by Sod16

[Phil]

2 minutes ago, Sod16 said:

Can you spell "lockout/strike"?  As with all of the other issues, the NHLPA is all about the interests of a few older already rich players at the expense of younger players and players with short careers.

 

Younger players and players with short careers likely have no interest in the concept of contract restructuring, either. Why would they? This is ultimately a tool to help (bad) GMs rework (bad) contracts. Any player at any age accepting it is fundamentally agreeing to give up money they were awarded in good faith.

 

As a fan, I'd love to be able to renegotiate Trouba's deal, but I also recognize that he was given that deal in good faith and has little incentive to willingly give up his own salary. Especially so that the team that gave it to him in the first place can just turn around and give it to someone else instead.

[Sod16]

I agree, a deal is a deal.  NMCs could be scaled back, but their beneficiaries are too strong in the union.  The current structure, where a player in his third year makes $900k and a no-better veteran makes $4m reflects the power structure within the union.

[Phil]

All it takes to mitigate the nuisance of trade protection and bloated salaries is a non-zero number of GMs to put their foot down, similar to how CAR operates currently. Make your market determination and if the player and/or agent don't agree, let them go somewhere else to get it. When the number of brave/principled GMs rises, the frequency of issues around these two "problems" will dissipate.

[jsm7302]

56 minutes ago, Phil said:

All it takes to mitigate the nuisance of trade protection and bloated salaries is a non-zero number of GMs to put their foot down, similar to how CAR operates currently. Make your market determination and if the player and/or agent don't agree, let them go somewhere else to get it. When the number of brave/principled GMs rises, the frequency of issues around these two "problems" will dissipate.

I agree. Let Edmonton pay silly money for ridiculous term to lure a player to the middle of nowhere. NY shouldn't have to do it. None of the original 6 should have to do it; wanna be a part of history then there is a give and take.

 

I just cannot stand having to watch the inevitable decline of players when they sign these ridiculous deals. Yea, it is on the GM's but if they want to stay competitive, they are spending what they deem necessary to attract/retain talent. 

 

[Pete]

1. Get rid of trade protection
2. Profit

[LindG1000]

So, there is a way to do guaranteed contracts and restructures together. A number of restructures basically take a future salary and convert it to a "now" signing bonus, using cap hit accrued in the current season to offset cap hits in future seasons.

 

This gets real dicey for the NHL because the reason why restructures work in other leagues is that their cap hits aren't calculated by average value; they're calculated by the annual payout. So, as an example, Jacob Trouba's deal in 2019-2020 would have hit us for 12m against the cap. This year, only 6M. Obviously not the way the NHL works - and this works in no small part in other leagues because contracts are often not guaranteed. 

 

The NHL can come up with some variant of this, because most players care about the dollars and not the years. So, something like "Hey, Trouba, we've got the cap space to do this and we'd like to convert 2025-26 to a signing bonus" to send him to FA sooner could be a thing, but it has no meaningful impact on the cap hit of the deal without saying something like "we recognize the duration and remainder of a restructured contract as a separate deal". 

 

 

[BrooksBurner]

We think of contract restructures generally as something to help a team restructure an underperforming contract to not be such a dead weight, but the reverse is also true. Players under contract holding out for more money. You can't successfully have both a hard cap and have contract restructuring.

 

I would rather the NHL pursue something like the NBA's Bird Rights, which gives teams the ability to go a certain amount over the cap to keep their own players.

Edited March 7, 2023 by BrooksBurner

[Phil]

14 hours ago, BrooksBurner said:

We think of contract restructures generally as something to help a team restructure an underperforming contract to not be such a dead weight, but the reverse is also true. Players under contract holding out for more money. You can't successfully have both a hard cap and have contract restructuring.

 

I would rather the NHL pursue something like the NBA's Bird Rights, which gives teams the ability to go a certain amount over the cap to keep their own players.

 

Can you explain this a bit? Like the elevator pitch version? Is it similar to how the NFL uses a franchise tag, or how MLB utilizes a luxury tax?

[LindG1000]

Just now, Phil said:

 

Can you explain this a bit? Like the elevator pitch version? Is it similar to how the NFL uses a franchise tag, or how MLB utilizes a luxury tax?

 

Kind of.

 

The MLB's luxury tax says "you can exceed the cap but it'll cost you more"

The NFL's got a few types of franchise tag, but the TL;DR is that they amount to "we're keeping you at the average of the top 5 salaries at your position"

 

Bird rights in short are "players the team owns for 3 years can be offered greater incentives to stay that don't count against the cap. A player with Bird rights is eligible for a 5 year deal, whereas the NBA max is 4 - and their contract can exceed the cap. It's far more complicated than that because the NBA salary structure has far more rules, but that's the shorter version of it.

[Phil]

Interesting. Is the NHL's current 8-year allowance versus 7-year allowance for contracts as version of that already? It just doesn't come with any direct cap benefits?

[LindG1000]

4 minutes ago, Phil said:

Interesting. Is the NHL's current 8-year allowance versus 7-year allowance for contracts as version of that already? It just doesn't come with any direct cap benefits?

 

The cap benefits are the key feature. It originally came up when the Celtics successfully argued that they can and should be allowed to exceed the cap to keep Larry Bird.

[BrooksBurner]

23 minutes ago, Phil said:

 

Can you explain this a bit? Like the elevator pitch version? Is it similar to how the NFL uses a franchise tag, or how MLB utilizes a luxury tax?

 

So I'm sure there's more nuance, I'm not a NBA cap guy. But my understanding is if a free agent player has enough years of accumulation with the same team (3 years I believe), that team can offer them a certain salary percentage amount more and an extra year than anyone else. The "more" is what the team is allowed to exceed the cap by. It entices players to stay with the same team and it doesn't damage the team's cap (just their wallet) to offer that extra amount.

 

This is just an illustrative example:

 

Player C has played 3 years for Team A

Team A's max offer (defined in CBA terms) allowed to player C might be 5 years $200M ($40M per)

Team B's max offer allowed to player C might only be 4 yr $140M ($35M per)

 

The cap hits for Team A and Team B will ultimately be the same, at $35M, since $5M difference in yearly pay between max offers is Bird Rights, and can allow the original team to exceed the cap by that amount.

 

For the NHL, there's already the extra year for extensions vs UFA, to entice a player to stay given the higher total contract value at 8 vs 7 years. The heavy lifting would be establishing in the CBA what a max offer can look like.

Edited March 7, 2023 by BrooksBurner

[Phil]

Thanks, that's super helpful. Max offers already exist in the CBA, though — it's based on a percentage of the cap ceiling in the year in which the player is signing a new contract, so I don't see that as much of an issue. This is an interesting concept, though. The player still gets that money, and the team still formally pays it, so it's not outside of HRR. I feel like there's probably some grounds here to essentially just expand on the "eight years" clause.

 

I use quotes becuase I think the NHL is going to the mat on term limits again, so that is likely going to go to five or six years in the future. But I can definitely see the blueprints of adopting this.

[Albatrosss]

another option would be to limit contract years to 4 and 5 instead of 7 and 8.  Cap hits wont be affected and you can get rid of bad contracts faster

[BrooksBurner]

2 hours ago, Phil said:

Thanks, that's super helpful. Max offers already exist in the CBA, though — it's based on a percentage of the cap ceiling in the year in which the player is signing a new contract, so I don't see that as much of an issue. This is an interesting concept, though. The player still gets that money, and the team still formally pays it, so it's not outside of HRR. I feel like there's probably some grounds here to essentially just expand on the "eight years" clause.

 

I use quotes becuase I think the NHL is going to the mat on term limits again, so that is likely going to go to five or six years in the future. But I can definitely see the blueprints of adopting this.

I actually didn’t know that. Well then, you could allow a team to go 10% over that max and have that excess not count against the cap. However, players getting max allowed doesn’t happen in the NHL (since the cap has gone up and nobody has surpassed McDavid yet), so I’m not sure it would ever be utilized much as currently constructed.

 

NBA players getting max contracts is much more frequent because there’s way fewer spots to fill, and only 5 starters who play the majority of the game. The NHL would have to come up with an alternative of some sort.

[Phil]

15 minutes ago, BrooksBurner said:

I actually didn’t know that. Well then, you could allow a team to go 10% over that max and have that excess not count against the cap. However, players getting max allowed doesn’t happen in the NHL (since the cap has gone up and nobody has surpassed McDavid yet), so I’m not sure it would ever be utilized much as currently constructed.

 

NBA players getting max contracts is much more frequent because there’s way fewer spots to fill, and only 5 starters who play the majority of the game. The NHL would have to come up with an alternative of some sort.

 

Right, but there's enough meat here to probably craft the concept. Forget the fact that the NHL is gonna go hard after lowering max term for a moment. Let's use the current environment to game out an example:

 

$81.5 million salary cap. $16.3 million maximum AAV. Eight year limit. Auston Matthews.

 

10% overage is an additional $1.63M they can add on, right? So their offer is eight years, $132.03 million ($17.93 million "salary" but $16.3 million AAV) whereas other teams can only offer seven years, $114.1 million ($16.3 million AAV). Do I have that right?

[BrooksBurner]

18 minutes ago, Phil said:

 

Right, but there's enough meat here to probably craft the concept. Forget the fact that the NHL is gonna go hard after lowering max term for a moment. Let's use the current environment to game out an example:

 

$81.5 million salary cap. $16.3 million maximum AAV. Eight year limit. Auston Matthews.

 

10% overage is an additional $1.63M they can add on, right? So their offer is eight years, $132.03 million ($17.93 million "salary" but $16.3 million AAV) whereas other teams can only offer seven years, $114.1 million ($16.3 million AAV). Do I have that right?

Yup.

 

I think where I’m stuck is that this only helps teams who have a player who is even worth the max. Even if the max were lowered to like 12, how many are worth 12? Or even 10?

 

There has to be some benefit for teams without a max player to offer their own players and see some kind of break as well. I’m not sure how you do that.

Edited March 7, 2023 by BrooksBurner

[Phil]

Yes, if it hinges on hitting max, rather than the eighth year itself. The NHL already has that option available to teams to extend term, so maybe the solution here is that the team doesn't actually have to pay for that year on their cap? Or they can artificially lower the AAV of the player given the eighth year by whatever the AAV value of the deal is?

 

Say its Matthews again and it's $13 million x 8, his AAV to them can actually be $11.375 million using this framework ($104 million minus $13 million).