Is this a flaw in the CBA that will help rich teams?

Discussion in 'Fugu's Business of Hockey Forum' started by Shainsaw, Jun 20, 2007.

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  1. Shainsaw

    Shainsaw Registered User

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    Please keep in mind that I am playing with the numbers a bit to make a point.

    Player X is a highly sought after UFA. Other teams are bidding 7mil over 4 years for this player. The cap hit for this player would normally be 7 mil.

    A rich team such as the Red Wings really wants this player but cannot have the high cap hit. Player X’s agent and the team prearrange a 10 year contact as follows:
    Year 1 9 mil
    Year 2 9 mil
    Year 3 8 mil
    Year 4 8 mil
    Year 5 2 mil
    Year 6 2 mil
    Year 7 2 mil
    Year 8 1 mil
    Year 9 1 mil
    Year 10 1 mil

    The cap hit is the total contract divided by the number of years. The cap hit becomes 4.3 mil. The team makes a deal with the player that his contract will be bought out after 4 years. I believe to pay out buyouts the NHL team has to pay 2/3 of the remaining contract over double the time of the remaining contract.

    Because of the CBA the player ends up getting the following salary with these cap hits.
    Year 1 9 mil Cap Hit 4.3
    Year 2 9 mil Cap Hit 4.3
    Year 3 8 mil Cap Hit 4.3
    Year 4 8 mil Cap Hit 4.3
    Year 5 .499mil Cap Hit .499mil
    Year 6 .499mil Cap Hit .499mil
    Year 7 .499mil Cap Hit .499mil
    Year 8 .499mil Cap Hit .499mil
    Year 9 .499mil Cap Hit .499mil
    Year 10 .499mil Cap Hit .499mil
    Year 11 .499mil Cap Hit .499mil
    Year 12 .499mil Cap Hit .499mil
    Year 13 .499mil Cap Hit .499mil
    Year 14 .499mil Cap Hit .499mil
    Year 15 .499mil Cap Hit .499mil
    Year 16 .499mil Cap Hit .499mil

    The player ends up getting paid 34 mil over 4 years and can go play anywhere else after being bought out. He also gets a nice little savings plan for the next 12 years.

    The team gets a cap hit of 4.3 for the four years they had this player even though he made an average of 8.5 mil a year. They then have to carry a cap hit of only .499 mil over the next 12 years. Money is not an issue to this team, but the cap hit is.

    Have I screwed up somewhere, i don't know the CBA as well as alot of you.
     
  2. boredmale

    boredmale Registered User Sponsor

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    Player plays 4 season for Team X, team buys out Player after 4 years.

    caphits would be


    5 2.8M
    6 2.8M
    7 2.8M
    8 3.8M
    9 3.8M
    10 3.8M
    11-16 0.5M

    I know this because Yashin's contract in the last 2 years he makes less then the first 4 and we really get hit those 2 years hard.
     
  3. Brent Burns Beard

    Brent Burns Beard DontTouchMyDonskoi!

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    so how does the formula work to come up with your #'s?
     
  4. boredmale

    boredmale Registered User Sponsor

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    http://www.geocities.com/rmccleary97/cap_faq1.htm#buyouts

    1. Take the actual salary due for each remaining year.
    2. Take the Averaged Player Salary (cap hit) for the current contract
    3. Calculate the buy-out amount (as described above)
    4. Spread the buy-out amount evenly over twice the remaining years of the contract
    5. Take the number in #1 and subtract the number in #4. This is the “buyout savings”.
    6. Take the cap hit from #2 and subtract the buyout savings from #5. This is the cap hit of the buyout for the remaining years.

    basically
    Step 1: 2 M (seasons 5-7)
    Step 2: 4.3M
    Step 3: 6 M
    Step 4: 0.5M
    Step 5: Step 1 - Step 4 = 2M - 0.5M = 1.5M
    Step 6: Step 2 - Step 5 = 4.3M - 1.5M = 2.8M

    Step 1: 1M (season 8-10)
    Step 2: 4.3M
    Step 3: 6M
    Step 4: 0.5M
    Step 5: 1M - 0.5M = 0.5M
    Step 6: 4.3M - 0.5M = 3.8M
     
    Last edited: Jun 20, 2007
  5. kdb209

    kdb209 Registered User

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    Ditto what they said about the buyout cap hits.

    In addition, the salary structure of that proposed contract is illegal - it violates the 100% rule (CBA Article 50.7). With a $9M/yr salary in years 1 & 2, the maximum year-to-year deacrease in salary would be $4.5M. This contract violates that between years 4 & 5.

     
  6. william_adams

    william_adams Registered User

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    what about if a player who is 34 signs a 10 year contract where the player is paid a total of 30mm bucks: 11mm, 11mm, then 1mm for each of the remaining 8 years. If the player retires, is "sent to the minors" or is bot out, the team is on the hook for little or no money after the first two years. During those first 2 years, the player gets higher than the ceiling...
     
  7. Walzy

    Walzy Registered User

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    just read the post before yours and it should be clear ;)
     
  8. Wetcoaster

    Wetcoaster Guest

    Two flaws.

    It is difficult to predict that far into the future.

    Secondly if there was such an agreement regarding a buy out (actual or that could be inferred) then it could be treated as cap circumvention by the league and subject to penalties to the Club and the player and agent involved. Such an agreement would have to be reported before the contract was registered or that would also be a circumvention.

    The penalties can be draconian if it is determined there has been a circumvention.

    The Club and the player can both be fined up to $5 million and $1 million/25% of salary respectively, the participating agent could be bared from representing NHL players, the Club could lose draft choices as many for and aslong as the Commissioner determines in his absolute discretion), games be declared forfeit, void the SPC, and "suspend any Club employee, Player, or Certified Agent involved in such a violation for a period of time determined in the sole discretion of the Commissioner, the System Arbitrator, or the NHLPA, respectively."

    In these circumstances such an arrangement as you have proposed in not likely to occur.
     
  9. Resolute

    Resolute Registered User

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    The celing is a hard cap, not averaged over the length of the contract. The NHL would reject any contract that attempts to pay a player greater than the max.
     
  10. Irish Blues

    Irish Blues Present once again

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    The other thing of note: any fine assessed under Article 26 is also applied to the team's cap - so a $2 million fine counts as $2 million in dead cap space.

    Considering in the last year of the CBA the cap will be an extremely hard cap in that the 7.5% bonus provision will not be in effect, that could wreak havoc on a team's ability to put together a roster.
     
  11. Fugu

    Fugu Guest


    Typical Oiler fan. All the league's woes are due to the Wings (who btw aren't the richest of the rich by far). :)
     
  12. Fugu

    Fugu Guest


    Doesn't this presume that a similar system will be in place after the current CBA expires? One would hope that the NHL and NHLPA would have a new CBA in place before the expiry of the existing agreement, however if history is any kind of example, then you can't really plan on it.
     
  13. Irish Blues

    Irish Blues Present once again

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    If a new CBA is in place, then it might amend this; if not ... :help: - and that's not just for teams trying to wedge everything in under the cap.
     
  14. Wetcoaster

    Wetcoaster Guest

    General labour law rule is that previous CBA continues in force to the extent possible (disregarding expiry dates, etc.) as long as the business continues to operate without job action.
     
  15. friction

    friction 5-14-6-1

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    Also, decreasing contracts can only do so by an amount 50% of the maximum year.

    so if it's 9mil in 1, 2 and 3, the least that year 4 can be is 4.5, and then it can be league minimum.

    Just some trivia. :)
     
  16. TheDanceOfMaternity

    TheDanceOfMaternity Registered User

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    Oh, god! Honestly how many players are going to make arrangements with their teams to have their contracts bought out several years in advance? It's just not going to happen. Even in baseball there are very few of these situations.

    The only flaw in the CBA that helps the rich teams is the rising salary cap.
     
  17. Irish Blues

    Irish Blues Present once again

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    For the 42nd time ... the salary cap system was not designed to enable all teams to spend to the cap - it was designed to help get all teams to the midpoint via revenue sharing.
     
  18. kdb209

    kdb209 Registered User

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    Not quite true - unless the maximum year is the firts two.

    See the 100% Rule post I made above. The maximum year-to-year decrease in salary is 50% of the lower of the year 1 or year 2 salary.
     
  19. FissionFire

    FissionFire Registered User

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    Exactly. The entire lockout and current CBA was about establishing a type of revenue sharing for certain teams in smaller and non-traditional markets (teams in larger cities are not eligible). Based on that, the CBA has been a complete success.
     
  20. Enstrom39

    Enstrom39 Registered User

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    I have to say that I've been pleasantly surprised that few loopholes have been created regarding the salary cap so far. Considering how quickly this agreement was written it has proven rather robust.

    The only real loophole that I can recall is the DiPietro style long contracts where a team can send down a player and absorb off-the-cap losses if a long term deal doesn't work out.
     
  21. Wetcoaster

    Wetcoaster Guest

    The NHL and NHLPA had the experiences of the NBA and NFL to look at in drafting the cap provisions and defining HRR. Much of the language was cribbed from those CBA's. In law we call it "using precedents".:D
     
  22. Trizent

    Trizent Registered User

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    That is my understanding. In a multi-year contract, the lowest year salary can't be less than 50% than any other year in the contract.
     
  23. kdb209

    kdb209 Registered User

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    Not true - just look at Article 50.7, "The 100% Rule", that I posted earlier in this thread.

    There are no limits on the minimum or maximum salary over the life of the contract (other than the league minimum and the max salary - 20% of cap at the time the contract is signed).

    There are limits on the year-to-year increases or decreases in salary:

    - Year-to-year salaries can increase by no more than the lower of the salaries in year 1 or year 2.

    - Year-to-year salaries can decrease by no more than 50% of the lower of the salaries in year 1 or year2.

     

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