Potential CBA negotiation issues (was: Is a lockout actually inevitable?)

[Tawnos]

Does anyone have an interview with a player or NHLPA official where they describe what problem the players have with escrow? Because I have a hard time believing that it's simply a matter of them not liking money held from their paychecks.

 

[LeHab]

Does anyone have an interview with a player or NHLPA official where they describe what problem the players have with escrow? Because I have a hard time believing that it's simply a matter of them not liking money held from their paychecks.

The problem is fairly simple. Players put into escrow more than they get back at the end of the season.
They don't like receiving less money than what they signed on paper.

 

[Tawnos]

The problem is fairly simple. Players put into escrow more than they get back at the end of the season.
They don't like receiving less money than what they signed on paper.

I doubt that's the problem, especially considering that's what they signed to do on that same piece of paper you're referring to (at least in years where they get paid more than 50% of real HRR... they've gotten more than they signed for in some years)

 

[mouser]

I doubt that's the problem, especially considering that's what they signed to do on that same piece of paper you're referring to (at least in years where they get paid more than 50% of real HRR... they've gotten more than they signed for in some years)

These guys are professional athletes, not CPA's. Even understanding it doesn't mean you can easily get over the emotional response to seeing a large portion of your paycheck disappear.

 

[MNNumbers]

These guys are professional athletes, not CPA's. Even understanding it doesn't mean you can easily get over the emotional response to seeing a large portion of your paycheck disappear.

I'm with Mouser. I don't want to take the time to find the citations, but there have definitely been complaints about escrow, and the only thing to complain about is not getting what your contract says it's worth when all the math is done.

That said, since there was a smaller escalator used last year, and again for the coming year, it seems that people are figuring it out. People meaning the players and their union. It may not be such a big deal right now.

 

[Tawnos]

These guys are professional athletes, not CPA's. Even understanding it doesn't mean you can easily get over the emotional response to seeing a large portion of your paycheck disappear.

Sorry, but I don't buy it. These guys have union reps and agents who would have explained it to them. They don't need to be CPAs themselves. I really don't think it's the fact of the "lost" money that bothers the players.

 

[MNNumbers]

Read this. From a few years ago, but clearly states that the amount of withholding is a concern to the players. Note that the escalator for the cap hasn't been used as vigorously since.

https://www.tsn.ca/upset-over-escrow-nhl-players-consider-move-to-limit-salary-cap-s-climb-1.190027

 

[Tawnos]

Read this. From a few years ago, but clearly states that the amount of withholding is a concern to the players. Note that the escalator for the cap hasn't been used as vigorously since.

https://www.tsn.ca/upset-over-escrow-nhl-players-consider-move-to-limit-salary-cap-s-climb-1.190027

That falls in line with what I’m saying. The players understand the need for escrow but are looking to maybe restructure it so less money is put into the escrow accounts. They aren’t looking for escrow to be eliminated.

“Concern with the amount of withholding” =/= “Concern with the existence of escrow”

They may very well be right. The escrow calculations may be overly cautious as far as insuring the players share ends up at 50% and are in need of a recalculation.

 

[canuckfan75]

Bill Daly saying that Seattle will not play until 2021 is a really bad sign for a lockout in 2020

 

[MNNumbers]

That falls in line with what I’m saying. The players understand the need for escrow but are looking to maybe restructure it so less money is put into the escrow accounts. They aren’t looking for escrow to be eliminated.

“Concern with the amount of withholding” =/= “Concern with the existence of escrow”

They may very well be right. The escrow calculations may be overly cautious as far as insuring the players share ends up at 50% and are in need of a recalculation.

Gotcha. I think everyone here who has commented on escrow agrees with that as well. The idea from the players is that it needs to be FIXED, not eliminated.

Eliminating would require the owners to give up what they call cost certainty, and that won't happen.

As I have said, it seems to me that the players have been more wise in their use of escalator recently, and in so long, have somewhat fixed their own problem.

 

[LeHab]

Sorry, but I don't buy it. These guys have union reps and agents who would have explained it to them. They don't need to be CPAs themselves. I really don't think it's the fact of the "lost" money that bothers the players.

Money players "lose", contributing more to escrow than what they get back, is precisely the issue. Escrow itself is just an insurance mechanism to ensure owners don't have to run after each individual player to recoup the difference at season end if there is a deficit. Cap calculations can be adjusted to virtually eliminate this from happening and even make sure players get more money from escrow than what they put in (NBA players got a surplus for the past few years). However less money will be available for new contracts something players don't want either.

Owners will not allow players to have their cake and eat it too.

 

[Hynh]

Money players "lose", contributing more to escrow than what they get back, is precisely the issue. Escrow itself is just an insurance mechanism to ensure owners don't have to run after each individual player to recoup the difference at season end if there is a deficit. Cap calculations can be adjusted to virtually eliminate this from happening and even make sure players get more money from escrow than what they put in (NBA players got a surplus for the past few years). However less money will be available for new contracts something players don't want either.

Owners will not allow players to have their cake and eat it too.

Wouldn't that require the owners to be the ones contributing extra money? Imagine convincing Melnyk to pay his players a "bonus" because Toronto made the SCF.

 

[LadyStanley]

At least once in the cap era, owners had to pony up and pay players (who got all their $$ from escrow and then some).

 

[LeHab]

Wouldn't that require the owners to be the ones contributing extra money? Imagine convincing Melnyk to pay his players a "bonus" because Toronto made the SCF.

In the end, it is a 50-50% split no matter when the money is paid. Even under current CBA owners could end up having to cut an extra check. If players don't invoke the escalator combined with unexpected high revenues thanks to say CAD somehow going way way up vs USD.

 

[Hynh]

At least once in the cap era, owners had to pony up and pay players (who got all their $$ from escrow and then some).

In the end, it is a 50-50% split no matter when the money is paid. Even under current CBA owners could end up having to cut an extra check. If players don't invoke the escalator combined with unexpected high revenues thanks to say CAD somehow going way way up vs USD.

True but the owners want cost certainty. Designing the system so that the owners always/almost always have to be the ones contributing extra after the season isn't certainty. The way it is set right now, Ottawa is set to payout ~$72M and then get some of that back. Imagine if they had to set out $72M and then pay extra while missing the playoffs and having terrible attendance.

 

[MNNumbers]

True but the owners want cost certainty. Designing the system so that the owners always/almost always have to be the ones contributing extra after the season isn't certainty. The way it is set right now, Ottawa is set to payout ~$72M and then get some of that back. Imagine if they had to set out $72M and then pay extra while missing the playoffs and having terrible attendance.

'Certainty' to the BOG as a whole means 50% of HRR. It is not a term intended to apply to individual franchises.
In truth, the players would not want a system where they get extra at the end of the year, because that would mean that their pay which should have gone to them through the year and been available to them for investing was instead in the hands of the owners. It would be like a free loan.

The contrast in the 2 sides is this:
DURING THE YEAR: A certain %age goes into escrow, where it isn't available to anyone.
At the end of the year, if escrow was too large, the players get the amount in escrow, or a part thereof. Note, this is rightfully THEIR money, but was unavailable to them through the year. This happens the vast majority of the time
At the end of the year, if HRR exceeded expectations by a large enough amount, the players get the escrow (which they should have had earlier to invest if they wished) AND... the owners pay the players more. NOTE that this is money which was NOT in escrow, and thus the owners had it.

So, the players have a system where THEIR money is not available to them when it could be, and perhaps (although this has rarely happened) is actually in the owners' pockets.
In contrast, in NO WAY is owners' HRR ever put into escrow.

Thus, the system is unbalanced in a small way to the advantage of the owners, or, more likely, neutral to the owners and a disadvantage to the players.

 

[LeHab]

True but the owners want cost certainty. Designing the system so that the owners always/almost always have to be the ones contributing extra after the season isn't certainty. The way it is set right now, Ottawa is set to payout ~$72M and then get some of that back. Imagine if they had to set out $72M and then pay extra while missing the playoffs and having terrible attendance.

When owners talk about cost certainty, they talk about revenue sharing with players. Owners have other expenses and revenues than on players which will always be variable so they never have certainty. Don't think player salary expenses being another variable would be a significant issue. If that is raised as a concern, there are possible ways to mitigate impact on poorer teams.

Previous CBA had a provision where if there was money left from escrow for owners, teams below mid-point would share it.

any remaining Escrow Account funds shall be distributed to any Club that had an Actual Club Salary that was less than the Midpoint of the Payroll Range (measured as of the final day of the NHL Regular Season), with the amount of funds each such Club receives being sufficient to bring it up to the Midpoint of the Payroll Range

In our case a similar clause but in revers could be included if additional money is owed to players. Owners spending above mid-point would pick up the tab for everyone. Other ways could be considered such as pay based on proportion of revenues. Bottom line is spending extra at the end of the season, assuming it is reasonable, would be much less of an issue than it is for players not getting their contracted $$$.

 

[LeHab]

'Certainty' to the BOG as a whole means 50% of HRR. It is not a term intended to apply to individual franchises.
In truth, the players would not want a system where they get extra at the end of the year, because that would mean that their pay which should have gone to them through the year and been available to them for investing was instead in the hands of the owners. It would be like a free loan.

This is already the case today. Escrow retention is calculated in such a way that there is enough money to cover shortcomings. When escrow is set at 15% and say after the season players are returned 5% this means the 5% (accumulated throughout the year) was a "free loan".

Of course interest could be set, if that is already not the case, both ways to offset "free loan" concern.

 

[MNNumbers]

This is already the case today. Escrow retention is calculated in such a way that there is enough money to cover shortcomings. When escrow is set at 15% and say after the season players are returned 5% this means the 5% (accumulated throughout the year) was a "free loan".

Of course interest could be set, if that is already not the case, both ways to offset "free loan" concern.

Correct. And, that is perhaps one reason that the players would want to eliminate escrow altogether. It's a free loan, or least a pile of money hidden, doing nothing. And, it's not reciprocal. There is no owner money hidden away until later. So there is imbalance in the system right now.

 

[mouser]

This is already the case today. Escrow retention is calculated in such a way that there is enough money to cover shortcomings. When escrow is set at 15% and say after the season players are returned 5% this means the 5% (accumulated throughout the year) was a "free loan".

Of course interest could be set, if that is already not the case, both ways to offset "free loan" concern.

The escrow accounts accumulate interest, which belongs to the player.

That’s why if you’re an aficionado of following the escrow system since 2005 it can be difficult at times to know whether the media reported escrow refund % is before or after interest. It’s not as big of a gap today with lower interest rates, but was more pronounced in the early days of the salary cap when the rates were higher.

 

[Tawnos]

This is already the case today. Escrow retention is calculated in such a way that there is enough money to cover shortcomings. When escrow is set at 15% and say after the season players are returned 5% this means the 5% (accumulated throughout the year) was a "free loan".

Of course interest could be set, if that is already not the case, both ways to offset "free loan" concern.

Well, except that a “loan” implies the money was provided to someone who uses it. In reality, it just sits earning interest. Also, I don’t really think it matters that the owners don’t technically pay into an escrow fund, considering how much more financial leverage they have to begin with.

I really think the bigger issue is with the calculation, which the NHLPA has gotten savvier at working with. However, in a league where every team spending to the cap would be 15% over the midpoint league wide, it’s hard to believe that 14% escrow withholding is really necessary. Especially given that not every team in the league spends to the cap.

I’m aware that’s an oversimplification of the way those numbers work, but I’m more talking about the optics of it.

 

[gstommylee]

Bill Daly saying that Seattle will not play until 2021 is a really bad sign for a lockout in 2020

Thats not what he said. He never said team will not play until 2021 as if its a sure thing he left it open as a possibility that it could happen due to various of things not necessary a lockout. He's not guarantee anything.

 

[MNNumbers]

The escrow accounts accumulate interest, which belongs to the player.

That’s why if you’re an aficionado of following the escrow system since 2005 it can be difficult at times to know whether the media reported escrow refund % is before or after interest. It’s not as big of a gap today with lower interest rates, but was more pronounced in the early days of the salary cap when the rates were higher.

I did not know that the escrow accrues interest, Mouser. Can you quote the section of the CBA which affirms this? Thanks. I always enjoy the input from people more knowledgeable than myself.

Since that is the case, then one objection I imagined the players might have is gone. If the escrow accrues interest, then the only objection left is the math-related one in which the final yearly salary does not match the number on the contract.

Interestingly and Curiously, the article I quoted above has a statement from the players which suggests that at one time they felt that increasing the cap, and the owners thus paying more salary (in theory) would force the owners to market better so that league-wide HRR would be enough to pay the salaries. I don't understand that theory, given that...
1- There is actually NO such motivation because escrow limites salaries anyway, and
2- There is a big limit to how much the owners can force an increase in HRR. In stands to reason that, no matter what the salary cap/floor/ceiling situation is, the owners are motivated to increase HRR all they can, because 50% of that goes to them.

 

[Sensung]

One more lockout and I will have to seriously consider not watching anymore for a few years in protest, this is becoming ridiculous now.

For every lockout I withhold my money for a year.

Fans have the power to stop this nonsense, they just refuse to exercise it.

 

[jj cale]

For every lockout I withhold my money for a year.

Fans have the power to stop this nonsense, they just refuse to exercise it.

Truth.

No more for me, I will be exercising it next time