Full text of NHL/NHLPA MOU for new 2020 CBA - analysis and discussion

[seanlinden]

Looking for some clarification from the CBA experts in here....

Signing bonuses are not subject to escrow at the time of the bonus payment. If a guy has a $5m contract, of which half is signing bonus, he gets $2.5m upfront, and if escrow is 20% throughout the year, he ends up getting $1.5m in total paycheques as the bonus is included in terms of how much escrow a player owes.

What isn't clear -- what happens when a guy has a $10m contract, of which $9m is paid via a signing bonus. Does he have to pay back throughout the year?

With the new CBA, we know that escrow is capped at 20% this year, 16% the year after, and so forth. Was the possibility (likelyhood) of a-less-than-82-game season included as part of the CBA? If so, is it determined that player salaries will automatically be reduced on a per-game basis? or was it decided that the economics of a shorter season would be another discussion for down the road

 

[mouser]

Looking for some clarification from the CBA experts in here....

Signing bonuses are not subject to escrow at the time of the bonus payment. If a guy has a $5m contract, of which half is signing bonus, he gets $2.5m upfront, and if escrow is 20% throughout the year, he ends up getting $1.5m in total paycheques as the bonus is included in terms of how much escrow a player owes.

What isn't clear -- what happens when a guy has a $10m contract, of which $9m is paid via a signing bonus. Does he have to pay back throughout the year?

With the new CBA, we know that escrow is capped at 20% this year, 16% the year after, and so forth. Was the possibility (likelyhood) of a-less-than-82-game season included as part of the CBA? If so, is it determined that player salaries will automatically be reduced on a per-game basis? or was it decided that the economics of a shorter season would be another discussion for down the road

Actually, it's not clear that signing bonuses do not have escrow withheld when they're paid. The CBA doesn't cover how it would happen, and what % would be placed into escrow. However I've seen multiple articles from respected sources that state or imply money is withheld.

The MOU doesn't contain any formula for how salaries and bonuses would be handled if a less then 82 game season happens. It's possible that gets added to the final version of the CBA. Otherwise it would have to be done in a side agreement between the NHL and PA.

 

[LadyStanley]

Upcoming critical date: The NHL’s buyout window beings on Sept. 25.

With free agency starting 10/9, my guess is the window ends 10/8.

Which, if any, teams feel they need to cut their salary outlay to save a little cap space.

 

[mouser]

Upcoming critical date: The NHL’s buyout window beings on Sept. 25.

With free agency starting 10/9, my guess is the window ends 10/8.

Which, if any, teams feel they need to cut their salary outlay to save a little cap space.

Historically. teams have mostly used buyouts to open up cap space for more spending rather then cut salary.

 

[uncleben]

Upcoming critical date: The NHL’s buyout window beings on Sept. 25.

With free agency starting 10/9, my guess is the window ends 10/8.

Which, if any, teams feel they need to cut their salary outlay to save a little cap space.

The earliest the Cup can be awarded is the evening of the 25th. Possibly as late as the 30th
Just a little odd they'd run the buyout window while teams are playing.

 

[LadyStanley]

So QOs due 10/7.

 

[LadyStanley]

Rangers have some bonus cap issues.

 

[royals119]

The only way to clear bonus cushion money, since al of the Rangers' players are on entry-level deals, is to trade a player with those potential bonuses,...

This makes it sound like all the Rangers players are on ELC's, and obviously that isn't true. Does it mean all the players who have bonuses that count toward this issue are under ELC's, or something else, or is it just an error?

 

[uncleben]

This makes it sound like all the Rangers players are on ELC's, and obviously that isn't true. Does it mean all the players who have bonuses that count toward this issue are under ELC's, or something else, or is it just an error?

all the players who have bonuses that count toward this issue are under ELC's

 

[Northern Dancer]

Quick question, when a player retires under contract (Niskanen) does he have potential liability down the road if escrow does NOT cover the player's share of losses?

 

[mouser]

Quick question, when a player retires under contract (Niskanen) does he have potential liability down the road if escrow does NOT cover the player's share of losses?

If you're asking about the escrow carryover that's going to happen, then No. The players as a whole will accumulate a collective debt balance to be paid back in future years. Players would not accumulate individual debt balances.

If you're asking about whether a retired player is impacted by escrow, then the answer would be only if they already had money in the escrow account at the time of retirement, or somehow had future compensation scheduled that would be subject to escrow.

 

[LadyStanley]

Paywall. And pundits support it so there can be more signings on opening day of free agency.

 

[LadyStanley]

So, we know that this extension included elimination of the courting period (allowing pending UFAs and RFAs to talk with teams before free agency opened).

It appears another wrinkle is that teams & players heading to arbitration cannot settle/negotiate a deal once the hearing is held.

 

[Ted Hoffman]

So, we know that this extension included elimination of the courting period (allowing pending UFAs and RFAs to talk with teams before free agency opened).

It appears another wrinkle is that teams & players heading to arbitration cannot settle/negotiate a deal once the hearing is held.

Good, IMO. If you got to that point and had the hearing, deciding to then settle was a waste of everyone's time - especially the arbitrator's. I'd even be fine saying "if you don't have a deal within 72 hours of the hearing, you can't strike one and you have to go through the arbitration hearing."

 

[LeHab]

Looking a little closer at the new "lag formula" to set a future cap (which looks less and less likely to see the day in this CBA but just for fun):

Maximum year-over-year increase in the Upper Limit will be the lesser of 5% and the trailing two-year average HRR growth percentage (measured using Final HRR from the League Year four years prior, Final HRR from the League Year three years prior, and Preliminary HRR from two years prior and after taking into account any FX impact adjustments)

My interpretation to set Maximum increase in the Upper Limit for a hypothetical 2023/24 cap we take the lesser of 5% or:

We need trailing two-year average HRR thus

((HRR Growth from League Year 21-22 to 22-23) + (HRR Growth from League Year 2020-21 to 21-22))/2

However when reading their interpretation of trailing two-year average HRR growth:

(measured using Final HRR from the League Year four years prior, Final HRR from the League Year three years prior, and Preliminary HRR from two years prior and after taking into account any FX impact adjustments)

They seem to go back as far as 4 League Years prior thus would be

((HRR Growth from League Year 20-21 to 21-22) + (HRR Growth from League Year 2019-20 to 20-21))/2

I must be missing something as that does not seem right. Why disregard the year immediately prior? Also why use Preliminary HRR from two years prior when Final HRR is available from two years prior? Only Final HRR from year prior is not known.

Parties to discuss and approve detailed mechanics and implementation of the ‘Lag’ formula subject to the following general parameters:

I get they will work more on this, still curious how I should read what is there already. Also they need to define under what conditions Maximum or Minimum increase is used.

 

[MNNumbers]

^^^^
Disregard year immediately prior because it often takes too long for the final numbers to come in?

 

[LeHab]

^^^^
Disregard year immediately prior because it often takes too long for the final numbers to come in?

But they are using Preliminary from Two years prior not immediately prior. In a normal year, preliminary HRR for the Year ending on June 31st is calculated shortly after SC finals in June while Final (which still is often contested) follows somewhere around September. Final HRR from Two years prior is thus available.

If I have it right, to calculate midpoint which leads to cap floor they are using HRR from Two Years prior instead of preliminary from immediately preceding year:

(1) Use HRR from the League Year two years prior (instead of Preliminary HRR from the immediately preceding League Year) (i.e., using HRR for Year 1 to set the Payroll Range for Year 3).

In this case they have not specified if this is Final or Preliminary for Two Year prior unlike formula for Maximum cap increase.

 

[mouser]

But they are using Preliminary from Two years prior not immediately prior. In a normal year, preliminary HRR for the Year ending on June 31st is calculated shortly after SC finals in June while Final (which still is often contested) follows somewhere around September. Final HRR from Two years prior is thus available.

If I have it right, to calculate midpoint which leads to cap floor they are using HRR from Two Years prior instead of preliminary from immediately preceding year:



In this case they have not specified if this is Final or Preliminary for Two Year prior unlike formula for Maximum cap increase.

It’s not unreasonable to use preliminary HRR from two years ago if you’re familiar with how long certifying final HRR has taken some seasons. We’ve seen seasons where it took over a year to certify final HRR, as the PA rightfully has the power to audit, review and challenge HRR figures. Some of those challenges have taken a long time to sort out, even requiring arbitration.

I don’t think any of those disputes have resulted in a change to HRR exceeding 1%, which would result in a nominal 0.5% cap change at most. Using Preliminary HRR from two years ago allows the cap to be easily computed even if an extended HRR dispute over that season is ongoing, without creating an unfair cap number in my opinion.


For those curious about what the nature of the “HRR disputes” have been, it’s historically been less about whether a specific financial number was falsely reported. Generally more disagreements between teams and the PA over if a source of team income should be classified as HRR or not. Also disputes if the categories of HRR that allow deduction of team costs are accurately tallying those revenues and costs.

 

[LeHab]

It’s not unreasonable to use preliminary HRR from two years ago if you’re familiar with how long certifying final HRR has taken some seasons. We’ve seen seasons where it took over a year to certify final HRR, as the PA rightfully has the power to audit, review and challenge HRR figures. Some of those challenges have taken a long time to sort out, even requiring arbitration.

I don’t think any of those disputes have resulted in a change to HRR exceeding 1%, which would result in a nominal 0.5% cap change at most. Using Preliminary HRR from two years ago allows the cap to be easily computed even if an extended HRR dispute over that season is ongoing, without creating an unfair cap number in my opinion.

If I recall some have taken +two years to sort out. In particular reported market value of local TV rights were contested when club is owned by same parent who is the local broadcaster (Leafs with BCE/Rogers).

Initial HRR (of which preliminary HRR is part), Interim HRR Report (if one was required) and Final HRR Report are all subject to challenges. If sections of Final HRR are challenged which are also found in other report(s), do those other reports become automatically subject to review as well? CBA seems to have dispute deadlines for each so perhaps no. In any case seems to me even the original version of the Final HRR (before challenges) would be more accurate than Initial HRR.

 

[Ted Hoffman]

Also they need to define under what conditions Maximum or Minimum increase is used.

I swear the way they wrote what the max/min change will be makes absolutely no sense and I keep feeling like I have to be missing something here.

 

[LeHab]

I swear the way they wrote what the max/min change will be makes absolutely no sense and I keep feeling like I have to be missing something here.

As per MOU disclaimer maybe we should not attempt to get too much into the weeds as much remains to be discussed regarding the new lag formula. I will keep in mind the general spirit of trailing two-year average HRR growth.

 

[Ted Hoffman]

As per MOU disclaimer maybe we should not attempt to get too much into the weeds as much remains to be discussed regarding the new lag formula. I will keep in mind the general spirit of trailing two-year average HRR growth.

Let me go back to my complaint. The MOU - at least the copy I have in front of me - specified the min/max change as follows [emphasis is mine]:

Maximum year-over-year increase in the Upper Limit will be the lesser of 5% and the trailing two-year average HRR growth percentage

Except for the 2026-27 League Year, minimum year-over-year increase in the Upper Limit is the lesser of 2.5% and the trailing two-year average HRR growth percentage.

Using examples (a) 2-year growth rate = 6%, (b) 2-year growth rate = 4%, (c) 2-year growth rate = 1%:

(a) Maximum change = min (5%, 6%) = 5%, minimum change = min (2.5%, 6%) = 2.5%. The two conditions yield inconsistent answers; I would guess the actual change is 5%.
(b) Maximum change = min (5%, 4%) = 4%, minimum change = min (2.5%, 4%) = 2.5%. The two conditions yield inconsistent answers; I would guess the actual change is 4%.
(c) Maximum change = min (5%, 1%) = 1%, minimum change = min (2.5%, 1%) = 1%. The two conditions yield consistent answers; the actual change should be 1%.

[Editorial note: where the reference change in the Upper Limit, IMO they should really be referencing change in the Midpoint. You can make it work as they wrote it, but you end up having to build in an adjustment factor to back into the correct Midpoint that's not specified anywhere either in the CBA or the MOU. However, I realize who was involved in writing this and note they probably didn't think ahead that far - so, we'll see how long before someone else in either the NHL or NHLPA catches on and realizes shit, that's not right and gets language corrected accordingly.]

I would guess that the actual language in the minimum condition should be something like:

Except for the 2026-27 League Year, minimum year-over-year increase in the Upper Limit is the greater of 2.5% and the trailing two-year average HRR growth percentage.

Otherwise, why have that condition in there and make reference to a 2.5% figure? From the examples given above, you'd end up with change = min (2-year growth rate, 5%) and so why make reference to a min and a max at all?

 

[LeHab]

Reading again, noticed the following which I believe applies also to the min/max formula:

(1) Use HRR from the League Year two years prior (instead of Preliminary HRR from the immediately preceding League Year) (i.e., using HRR for Year 1 to set the Payroll Range for Year 3).

This explains my earlier confusion around trailing year not being immediately preceding but rather offset by an additional one year. The way MOU is written makes more sense now.

[Editorial note: where the reference change in the Upper Limit, IMO they should really be referencing change in the Midpoint. You can make it work as they wrote it, but you end up having to build in an adjustment factor to back into the correct Midpoint that's not specified anywhere either in the CBA or the MOU. However, I realize who was involved in writing this and note they probably didn't think ahead that far - so, we'll see how long before someone else in either the NHL or NHLPA catches on and realizes shit, that's not right and gets language corrected accordingly.]

I would guess that the actual language in the minimum condition should be something like:


Otherwise, why have that condition in there and make reference to a 2.5% figure? From the examples given above, you'd end up with change = min (2-year growth rate, 5%) and so why make reference to a min and a max at all?

My interpretation is Midpoint (to yield Lower Limit) calculation remains the same as always except we use HRR from two years back instead of last. Concept of Adjusted Midpoint (and thus adjusted Lower Limit) is gone as per following:

(2) Remove the Growth Factor (i.e., do not adjust the resulting Midpoint (based on Final HRR per (1) above) upward to yield the Adjusted Midpoint as provided for in Section 50.5(b)(i)).

The remaining aspects of the Payroll Range (i.e., the Lower Limit and Midpoint) shall in all instances be set in accordance with the terms of the current CBA.

It does not look like Lower Limit is adjusted by the same factor yielded from min/max formula for Upper Limit (Melnyk rejoice). This may have for effect to provide a wider spread (percentage wise) between Lower and Upper limit from what we had up to now. Should provide extra relief to cash strapped franchises.

As for Min/Max we will really need to see more details as we can spin it many ways. Cap will not go above 5% unless there is a shortfall in which case both sides can agree to increase by up to another 5%. Current min/max potentially allows for the Cap to decrease but should this be the case, both sides will assess other options:

The parties agree to discuss the Upper Limit in good faith in the event projected or Actual HRR decreases on a year over year basis.

Just like we don't want to go below 81.5M at the moment.

 

[Ted Hoffman]

My interpretation is Midpoint (to yield Lower Limit) calculation remains the same as always except we use HRR from two years back instead of last. Concept of Adjusted Midpoint (and thus adjusted Lower Limit) is gone as per following:

I disagree that the concept of an adjusted Midpoint is gone; I think the growth factor explicitly provided for is now replaced with the 2-year growth rate in the lag formula. Otherwise, I don't disagree with how the calculation of the Midpoint is being done or its new reference point; as noted, nothing changes.

I'm just saying it's really weird to reference the Upper Limit instead of the Midpoint as the focus for the min/max change. The Upper Limit is a calculation off the Midpoint, not the other way around. If you were going to constrain the Upper Limit, you would do that by constraining the Midpoint. You can shift terms and constrain the Midpoint by constraining the Upper Limit, but then you're saying "we're going to calculate the Midpoint as usual, calculate the Upper Limit that results, constrain it if needed, then back into a constrained Midpoint that produces the desired Upper Limit." It's an inefficient way to get to the final answer and produces an adjustment term that's not specified anywhere in the calculations. [It also creates other problems; see below.]

Or, you just say "we don't care about the constrained Midpoint that produces the desired Upper Limit" and keep calculating an actual Midpoint and a constrained Upper Limit, and over time end up with a Midpoint and an Upper Limit that become more disconnected over time and IMO creates other unintended problems. [Again, see below.]

The $81.5M Upper Limit until we get to the desired HRR figures is an artificial constraint, so the Midpoint is irrelevant until then. It's when HRR hits $4.8 billion that it becomes an issue.

I agree, it's unclear how Lower Limit moves. Again, I think the explanation for how min/max change works needs to be fully clarified. It should move with the same magnitude as the Upper Limit but if the UL is constrained then it's possible the LL doesn't as things appear to be written. That might be OK [UL has little to no growth, LL is allowed to decline] or not [UL constrained at 5% increase, LL moves up at a faster rate]. Again, simply referencing the Midpoint would eliminate the question and keep the UL/LL ratio in balance.

 

[LeHab]

I disagree that the concept of an adjusted Midpoint is gone; I think the growth factor explicitly provided for is now replaced with the 2-year growth rate in the lag formula. Otherwise, I don't disagree with how the calculation of the Midpoint is being done or its new reference point; as noted, nothing changes.

I'm just saying it's really weird to reference the Upper Limit instead of the Midpoint as the focus for the min/max change. The Upper Limit is a calculation off the Midpoint, not the other way around. If you were going to constrain the Upper Limit, you would do that by constraining the Midpoint. You can shift terms and constrain the Midpoint by constraining the Upper Limit, but then you're saying "we're going to calculate the Midpoint as usual, calculate the Upper Limit that results, constrain it if needed, then back into a constrained Midpoint that produces the desired Upper Limit." It's an inefficient way to get to the final answer and produces an adjustment term that's not specified anywhere in the calculations. [It also creates other problems; see below.]

Simply attempting to interpret what is there rather than getting into suppositions/assumptions. MOU also explicitly references how to calculate the midpoint/lower limit.

The remaining aspects of the Payroll Range (i.e., the Lower Limit and Midpoint) shall in all instances be set in accordance with the terms of the current CBA.

As you say, if they wanted to adjust both Upper & Lower Limits by the same factor as yielded from min/max then I would expect "Midpoint" and not "Upper Limit" in min/max formula. Once again don't want to get into suppositions and I do agree this could lead to some interesting scenarios.

Official CBA may very well contain clarification for LL or be completely reworked. Over Summer time pretty sure priority was to agree on general parameters for the Upper Limit and even then, formula will require quite a bit of work. Few teams are dragging at the bottom anyway.