Negotiating a contract to avoid being Mogilny-ed to the AHL

Discussion in 'Fugu's Business of Hockey Forum' started by kurt, Nov 7, 2006.

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  1. kurt

    kurt the last emperor

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    The new cap rules and waiver rules have definitely made things interesting for overpriced players.

    Here's an idea:

    Negotiate a long term deal, though each and every year of the contract is an option year, where either the player or the organization can elect to impose the next year of the contract. That way, you have the long term cost certainty in place for a player, and for a team. However, include a clause that if that player clears waivers, and is demoted to the AHL, then only the player has the option of extending the contract. This way, the player can decide to continue in the AHL, or become a free agent and sign for less money in the NHL again.

    Thoughts?

    Guys like Mogilny, Andreychuk, Burke, etc could have continued playing in the bigs for their actual market value, rather than being handcuffed by their previous contract.
     
  2. Irish Blues

    Irish Blues Present once again

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    There's a reason option years are not allowed in the new CBA. You just explained it perfectly.
     
  3. kurt

    kurt the last emperor

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    I imagine this would only make sense for UFA age players... I don't think a GM would sign a younger prospect to such a contract.
     
  4. kurt

    kurt the last emperor

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    This is a reason for them not being allowed? I'm not sure I understand. What is the negative impact of such a contract?
     
  5. Irish Blues

    Irish Blues Present once again

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    Say Joe Schmoe signs a 5-year, $16 million contract: the first year is at $8 million, the 2nd at $4 million, the 3rd at $2 million, and the 4th and 5th years at $1 million, with years 2-5 being option years. His cap number for the contract: $3,200,000.

    If after the 1st year the option is declined by the team, the player just got paid half the value of his contract with the team getting charged less than half of his Year 1 salary. It circumvents the intention of the salary cap.

    The implication: big-market teams would be able to sign guys to huge contracts structured like this, enabling them to still spend big money on players but be cap compliant. Even if the player could void the option as you described, it would still encourage big-market teams to spend freely, snapping up talented players for a fraction of what they'd count against the cap ... once again tilting the spread of talent across the league in favor of those teams who were willing to spend like crazy; the difference here being that if a team "made a mistake", they could send the guy to the minors, have him void the option years, and have that future money freed up to go back to the well and throw a wad of cash at players.

    That's a big part of why option years are prohibited in the CBA.
     
  6. kurt

    kurt the last emperor

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    I see where you're coming from. Though you mis-interpreted what I meant with the option. I meant that either the team or the player could unilaterally elect to extend the contract. Not terminate it. Also, I don't fully understand why the cap hit isn't equal to the player's salary for a particular season.

    However, now that I've thought about it a little more, the options are actually irrelevant. Forget about options.

    What if a rule was in place so that a player could elect to terminate their contract under the following circumstances:

    • they are of UFA age
    • they have cleared waivers and been assigned to the AHL

    This would allow a player to adjust their asking price to align with their market value, to actually allow them to play in the NHL, rather than having a contract trapping them in the minors.

    I don't see a franchise getting any value out of having one of these players relegated to the AHL. Especially due to the fact that re-entry rules serve to deter the recall of a player, as a team doesn't want to be on the hook for half of the player's salary, while losing them to another team.
     
  7. kdb209

    kdb209 Registered User

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    As others have explained, the CBA does not allow for any option years.

    However, there already is a mechanism to prevent a player from getting Mogilney-ed - the No Movement Clause (NMC). NMCs were added in the new CBA and are similar to No Trade Clauses, only they prevent a team from waiving a player in addition to the prohibition on trades. NMCs (as well as NTCs) can only go into effect once a player reaches UFA eligibility. An RFA can sign a deal with a NMC/NTC, but the NMC/NTC cannot take effect until the season the player would have been elligible to become a UFA. The kicker is, though, if the player is traded before the NMC/NTC kicks in, it is NOT binding on the new team. For example - Joe Thornton signed a 3 yr deal with a NTC with Boston last offseason, but it did not become active until year two - the trade to the Sharks nullified the NTC.
     
  8. kdb209

    kdb209 Registered User

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    The cap hit of a player is NOT the same as his annual salary. For a multi year deal the cap hit is the average salary (total dollars divided by # of years). This is to prevent teams from playing salary cap games by front loading or back loading contracts.

    If a player could terminate his deal early, it would open up the same kind of cap loopholes. Sign a player to a front loaded deal ($6M - $3M - $2M - $1M, $12M/4yrs = $3M/yr cap hit) and send him down after a year and he exercises your option to terminate - the result is the team gets a $6M/yr player at a $3M/yr cap hit. This was also the rationale behind the 35+ yo (Mogilney/Malakhov) rule - so that a team could not get a benefit by signing an older vet to a front loaded, long term deal, and then have him retire after a year or so.
     
  9. Snap Wilson

    Snap Wilson Registered User

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    What I don't understand is why the league allowed the payment to be different from the cap hit. It would have made things a lot easier if they just structured it so that multiyear contracts had to be as "square" as possible, meaning the same payout (in physical dollars) per year. Would have saved the CBA a lot of language.
     
  10. Bear of Bad News

    Bear of Bad News HFBoards Escape Goat

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    To prevent teams from circumventing the intent of the cap.

    The CBA could have been much, much, MUCH shorter if the league didn't have to worry about teams trying to take advantage of the rules. But there you are.
     
  11. Snap Wilson

    Snap Wilson Registered User

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    I think you misunderstood my post.
     
  12. kdb209

    kdb209 Registered User

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    The NHLPA would never have agreed to flat multi-year deals. Escalating multi year deals (besided being the precedent in the NHL) have tangable benefits for the players. They increase the size of RFA Qualifying Offers when the deal expires - a player coming of a 3 yr $1.5M / $2.0M / $2.5M deal gets a $2.5M QO instead of the $2M of the flat deal. Escalating deals also boost arbitration comps.

    And from the point of view of the team, an escalating deal can actually reduce the real cost of a contract by defering the actual payments - the NPV of a $1M/ $2M / $3M deal is less than the flat deal - they defer payment on $1M for two years and earn interest or have other use for that capital for those two years. Also, front-loaded or back-loaded contracts help a team manage it's real cash flow - a separate issue from the cap, but still an important issue to some teams.
     
  13. discostu

    discostu Registered User

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    Can a player negotiate a contract that sees him get paid more money if he's sent in the minors. It would discourage teams from hiding underperforming players to avoid the cap hit. To teams with really deep pockets, they would still do it, but, I imagine most owners wouldn't be happy with a GM asking for more money to avoid a bad contract on their books. There is the risk of teams using the minor league salary as a way to pay someone more money that what appears on the cap, but, because of re-entry waivers, they can't do it with any player that holds any value whatsoever, as another team would poach.

    I remember the CBA having a maximum minor league salary of $80K in some circumstances, but, I'm not certain.
     
  14. kdb209

    kdb209 Registered User

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    There is nothing in the CBA that prevents a team from signing a two-way SPC where the minor league Paragraph 1 salary is actually greater than his NHL Paragraph 1 salary.

    There are no limits on minor league salary in the CBA - other than the limits for Re-Entry Waivers.
     
  15. Irish Blues

    Irish Blues Present once again

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    The CBA doesn't expressly prohibit it, but I suspect the league office would look at such a contract *very* suspiciously, especially if there's any possibility that the team could be attempting to circumvent the intent of the cap with such a move.
     
  16. kdb209

    kdb209 Registered User

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    Re-Entry Waivers (as well as regular waivers) would make it pretty hard to circumvent the cap this way. The only exception would be ELS deals, since the players could be waiver exempt, but that is a moot point since Article 9.4 puts a $62.5K-$70K cap on the minor league salary of two-way ELS SPCs.
     
  17. Irish Blues

    Irish Blues Present once again

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    I'm thinking about the whole "stashing talented guys in the minors so no one else can have 'em" angle, and I didn't have ELS guys in mind.

    Regardless, discostu was correct when he said that it's unlikely an owner is going to put up with a GM paying someone more to play in the minors than to play in the NHL.
     
  18. discostu

    discostu Registered User

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    Just to bring it back here though,

    My reasoning for doing this was not to circumvent the cap, but, as an assurance for a player to avoid ending up in the minors. Could a player demand this, if the want to avoid being Mogilny-ed?
     
  19. Snap Wilson

    Snap Wilson Registered User

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    Ah, okay. That makes sense.
     
  20. Schitzo

    Schitzo Registered User

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    I was about to lecture you, but then read your post twice, and I agree with you completely.

    I can only assume it makes a difference when you apply a team of lawyers to the situation, but yeah - I look at what we signed Hemsky for, 6 years @ 24.6 million. Do they pay him 4.1 a year like his cap hit should be? Nah, it's more like 3 at the start and 4.5 at the end. Does it help the owners sleep at night? Hell if I know!

    Edit: One other concern is that a flat-rate can really screw with arbitration results. Basically, UFA contracts cannot be used as comparables when you're arguing your case, but RFA contracts can. Havlat signed for 3 years, $18 million, and Chicago is actually just paying him a nice simple $6 million per year. The problem is that the first year he is still an RFA, so now any RFA can go in and use "Havlat, $6 million as an RFA" as a comparable. If Chicago would have stacked it as 4-7-7, that would have been avoided, since by year 2 he's a UFA

    Edit 2: This is why Sakic is only signing one year deals at this point. It's not that he has any plans of leaving Colorado, he just wants to be able to decide, guilt free, if he wants to play another season. This way he doesn't hurt the Avs by retiring under contract or playing out of loyalty when he can't keep up anymore.

    Edit 3: I really do think the CBA needs a clause where if both the team and the player want to renegotiate, it's possible. Look at Todd Marchant - he signed a bigass contract before the lockout, and then ends up in the minors for part of the year when (even after a 24% rollback) he was getting paid too much to be a 3rd liner for Columbus. It's not like Marchant saw the salary cap coming, why couldn't he sit down with management and say "ok, things have changed, and I'm willing to play for $2 million if you think that's fair"?
     
    Last edited: Dec 2, 2006

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