CBA question - Buyouts, retirement and front-loaded contracts

[Kritter471]

For those of you who spent a lot more time digesting the CBA than me, can you tell me if this is allowed under its terms?

Team signs 35 year old player to a five year contract. Contract is heavily front-loaded ($6 million, $5 million, $5 million, $2 million, $2 million). Cap hit is $4 million a year.

Said player reaches the fourth year of his deal and decides he wants to retire. If he just retired, the last two years of what would have been his contract count $4 million against the cap.

What if the team bought out his contract at that point? They would owe 2/3 of the remaining contract, so a little over $3 million, over twice the remaining term, so four years. That's under $1 million a year.

The buyout would go against the cap, but it would be at significantly less cost than if he just retired. The player would then go ahead and retire as an unsigned player.

Is this allowed?

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[Ted Hoffman]

No, it wouldn't. If a player 35 or older is signed to a multi-year contract, the 2nd and later years count against the cap no matter what. A buy-out does not change this - the team won't be paying him his full salary, but his full cap hit would still apply.

Tie Domi (TOR) and Shawn McEachern (BOS) fell into this category this past summer: both were 35 and signed 2-year contracts shortly after the lockout, and both were bought out after the 2005-06 season ... and in each case, their averaged salary counted in full against the cap for 2006-07 - hence the "no matter what" part. It's there to prevent teams from signing older players and then trying to cover up mistakes by just buying the guy out and getting out from under his cap hit.

 

[Kritter471]

Thanks!

I knew you or kdb would probably know.

 

[kdb209]

No, it wouldn't. If a player 35 or older is signed to a multi-year contract, the 2nd and later years count against the cap no matter what. A buy-out does not change this - the team won't be paying him his full salary, but his full cap hit would still apply.

Tie Domi (TOR) and Shawn McEachern (BOS) fell into this category this past summer: both were 35 and signed 2-year contracts shortly after the lockout, and both were bought out after the 2005-06 season ... and in each case, their averaged salary counted in full against the cap for 2006-07 - hence the "no matter what" part. It's there to prevent teams from signing older players and then trying to cover up mistakes by just buying the guy out and getting out from under his cap hit.

I'm not arguing the league's handling of the Domi and McEachern contracts/buyouts, but whether a buyout of a player who signed a multi year deal at age 35+ actually is a bit of a grey area by my reading of the CBA:

(5) All Player Salary and Bonuses earned in a League
Year by a Player who is in the second or later year
of a multi-year SPC which was signed when the
Player was age 35 or older (as of June 30 prior to
the League Year in which the SPC is to be
effective), but which Player is not on the Club's
Active Roster, Injured Reserve, Injured Non Roster
or Non Roster, and regardless of whether, or where,
the Player is playing, except to the extent the Player
is playing under his SPC in the minor leagues, in
which case only the Player Salary and Bonuses in
excess of $100,000 shall count towards the
calculation of Averaged Club Salary; plus

Once the team excercises the buyout, the SPC is terminated and it could be argued that the player is no longer "in the second or later year of a multi-year SPC which was signed when the Player was age 35 or older". That would have been my interpretation.

How did the league handle the buyout payments to Domi and McEachern w.r.t. the cap? Did they charge both the buyout payments and the contract (under the 35+ rules) - effectively double dipping?

In addition, if the Domi and McEachern contracts were back loaded (so that the teams got a cap discount in the first year due to averaging), that discount would effectively also been charged back against the cap after the buyout under the rules of 50.5(d)(iii).

 

[Ted Hoffman]

Once the team excercises the buyout, the SPC is terminated and it could be argued that the player is no longer "in the second or later year of a multi-year SPC which was signed when the Player was age 35 or older". That would have been my interpretation.

How did the league handle the buyout payments to Domi and McEachern w.r.t. the cap? Did they charge both the buyout payments and the contract (under the 35+ rules) - effectively double dipping?

The payments were handled as any normal buyout would be, but the cap hit for 2006-07 was locked in and couldn't be spread over '06-07 and '07-08.

I had a .pdf that supposedly illustrated where everyone stood wrt the cap on around November 30, 2006 - I could only tie my numbers for Carolina and Ottawa to it, and the file itself was a 1-page exhibit that wasn't terribly informative; however, it did have a column to account for adjustments and I could trace almost every buy-out to the numbers in that column. (Toronto, the Rangers, and Anaheim had extra dollars I could never account for.) That's why I'd say I'm confident that a buy-out of a "35 and older" player doesn't allow the team to spread his cap hit over future years. It has to be handled as I described above.