Could Contract Lengths Lead to Another NHL Lockout?
TSN Insider Bob McKenzie recently suggested the length of NHL player contracts could be an issue that forces the league to opt out of the current collective bargaining agreement in September 2019.
McKenzie noted teams sign players to long-term contracts to keep their costs down and the contracts affordable. With the decline of the Canadian dollar slowing the annual increase of the salary cap, he speculated contract lengths could be a contentious issue.
Under the previous CBA, there was no limit on contract lengths except for players on entry-level deals. That led to situations where some players received deals of 10, 12, even 15 years in length. While the deals were heavily front-loaded, the annual average salary was more affordable for a team’s salary-cap hit.
For example, Florida Panthers goaltender Roberto Luongo is currently in the seventh year of the 12-year, $64 million contract he signed while a member of the Vancouver Canucks. The bulk of that money ($57 million) is paid out through the first eight seasons. His actual salary this season is $6.714 million but, because of the length of the contract, the annual average value is $5.33 million.
This was something the teams, not the players, dreamed up as a means of legal salary-cap circumvention. In order to once again save the owners from themselves, contract lengths were capped at eight years for players re-signing with their teams, and seven years if they signed with other clubs.
As McKenzie pointed out, as long as the salary cap was rising by an average of $5 million per season, the current limits on players salaries wasn’t a serious problem. But with the cap ceiling rising more slowly in recent years, it could become an issue again. The owners could seek to lower the cap on contract lengths down to four or five years.
McKenzie isn’t saying for certain that contract lengths could become a sticking point that prompts the league to opt out of the current CBA in September 2019. But if the salary cap continues to make only marginal gains over the next three years, there could be some grumbling from the league over contract lengths.
A month ago, NHL deputy commissioner Bill Daly said he didn’t see any CBA storm clouds on the horizon from the league’s point of view, “at least not yet”. At the time, I listed several issues (escrow, trading of dead salary-cap space, absence of the right to renegotiate contracts, lack of a player’s right to terminate a contract, limits on no-movement/no-trade clauses and paying the bulk of a player’s salary in signing bonuses) that could trigger another NHL labor dispute. We can now add player contract lengths to the list.
Speaking of escrow, McKenzie observed that the percentage of escrow clawbacks keeps rising. If the owners seek a cap on contract lengths, he speculated the players could seek a cap on escrow.
Two-to-three years into the previous CBA, there was some media talk of the league or the NHLPA triggering their early opt-out by 2010. That scenario failed to materialize, perhaps in part because the salary cap was making significant increases. But with the cap making only marginal growth under this CBA, perhaps it’ll be a different story this time around.