Frontloading and the Men Who Love It

Another contract signed by the Chicago Blackhawks, another lesson learned for the NHL and its community.  And, with the CBA negotiations realtively close, these lessons may find their ways into a CBA near you in the not-so-distant future.  In this case, Larry Brooks of the New York Post reports that the NHL owners are likely to bring player contract term limits to the table in two years.

Frontloading American as Apple Pie?

First, Brooks states, as though it were well settled or simple, that long-term contracts with almost nonexistent late-term pay – like those of Marian Hossa or Chris Pronger – are perfectly permissible under the current NHL CBA and even compares the practice with the NHL’s waiver system, whereby teams release unwanted or overpaid players in hopes of obtaining a lighter annual cap hit if/when the player (i) is claimed by another team or (ii) clears and heads to the team’s minor league affiliate. In so doing, Brooks essentially says that such long-term contracts are as recognized and permissible a practice as a run-of-the-mill waiver transaction for lessening a particular player’s effect on the cap.

At the least, it’s a difficult comparison for Brooks to make. On one hand, the waiver process is, by the terms of the CBA itself, a legitimate way for teams to clear cap space. In other words, not only does the CBA contemplate waiver transactions, it provides a detailed process which teams are required to follow to perform such a transaction.

On the other hand, while the practice is not impermissible on the face of the CBA – a point Brooks seems to recognize – the use of long-term contracts with “out years” is certainly not contemplated by the terms of the CBA as a permissible way to ease a contract’s hit against the salary cap.

Then, one considers the Circumvention article.

As many have alluded to before, the Circumvention article serves as a “catch-all” for any agreement which has the effect of muting any clause of the CBA at large. In other words, while a particular practice may not be expressly prohibited by the terms of the CBA, it may still be considered impermissible by the NHL if the league determines the practice is an attempt to evade a collectively bargained process or rule within the CBA.

Suffice it say, not only is Brooks wrong on his contention that these contracts are perfectly permissible, but the practice is arguably exactly the kind of action made impermissible by Article 26, the article governing circumvention. Consider the following “Example” of circumvention as set forth in Section 26.15(a) of the CBA:

“A Club has a Club Salary that would exceed the Upper Limit, other than through the Bona-Fide Long-Term Injury/Illness Exception or the “Performance Bonus Cushion,” such as by virtue of an undisclosed agreement or undisclosed payment to Players on its roster.”

Thus, there is no doubt: long-term contracts accompanied by a mutual understanding that the player would retire before the contract’s term expired are prohibited, though not expressly, by the current agreement that governs the business of the NHL. Proving that teams and players came to such understandings is the tricky part.

And, though Brooks may be technically correct in his assertion that frontloading is not per se violative of the CBA, I still disagree with him.  I believe – independent of being a Blackhawk fan, of course – that one could presume an agreement between the player and the team regarding the player’s early retirement.  After all, independent of such an understanding, what reason is there to backload a contract?

One More Point on the Pending Investigation(s)

Just to clarify one other argument concerning the permissibility of such frontloaded contracts:

The NHL could still rightfully fine the Hawks – or another team, of course – even after the league first approved the contract, as they did with the Marian Hossa pact on July 1. Such initial NHL approvals are sign-offs concerning the face of the contract, which is not at issue in either the Hossa or Pronger contracts. Rather, whether there existed an agreement regarding retirement which was independent of the player’s contract is the focus of the NHL’s current investigation.

So, while it still appears there’s little chance the Hawks will face a penalty for the Hossa signing, it’s easy to see why the NHL could have, in July, approved the contract only to later launch an investigation into the circumstances surrounding it.

Term Limits? Only for the President

Brooks reports in the same piece that the league owners will fight for player contract term limits in an effort to curb contracts resembling those of Hossa and Pronger. Brooks states that the term limit is expected to be six years.

Not only is the NHL using an elephant gun to kill a flea in this instance, it’s letting some fleas escape. Using term limits to attack a problem involving the frontloading of contracts is a bulky, roundabout solution that fails to address many of the underlying issues.

For example, with six-year term limits, would the seven-year Pronger/Flyers pact look much different than it does now? I think not. While term limits would effectively eliminate long-term frontloaded contracts signed by players in their twenties, it still leaves the door open for Pronger-esque contracts signed by veterans under 35-years old (the age under which players may sign a contract, retire late in its term and still have the corresponding cap hit removed from the team’s books).

A better solution would be to mandate the percentage difference between each of a contract’s years as well as the percentage difference between the first and last year. That way teams wouldn’t be able to significantly front- or backload contracts.

Finally, setting contract term limits is antithetical to (i) the policy underlying the restricted free agency system outlined in the CBA and (ii) arguably, the business of sports in general.  As I’ve discussed in this space before, the restricted free agency system rewards teams for drafting and/or developing talented young players.  From a business perspective, helping teams keep young, successful players fosters roster stability and allows fans to create bonds with, not just teams, but individual players more easily.

Creating term limits flies in the face of these ideals.  Preventing the Capitals or Penguins, for example, from keeping Alexander Ovechkin or Sidney Crosby in town for many years with one legitimate contract will make it more likely those players will leave via free agency in their twenties.

Is that good for the league? 

What about for the Blackhawks and Jonathan Toews?

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2 Responses to Frontloading and the Men Who Love It

  1. Lou says:

    If it is two years before the CBA expires, the big question is, will there be a flurry of long term deals next year from mulitple different teams to thier players similarly situated as out big three?

    I think this push by the owners is driven by the few. I also think, that if a guy like Toews wants to play for his team for his career, regardless of the future CBA, it will still happen.

  2. Kelly says:

    Good thoughts here. I posted my thoughts on the situation as well:

    http://kellyreardon.dyndns.org/kelly/2009/08/fifth-feathers-view-of-frontloaded-contracts.html

    @Lou: I don’t see teams making these deals as much because of the threat of either investigation or nullification of these deals by the NHL. I think they’ll still be made, but more second thoughts will be had for sure. And I totally agree with your thoughts on Toews.

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