Impact of NHL Negotiations on Minor League Hockey

PHPA Press Releases

Even Some Owners Don't Like What's Under the Cap in NHL Labour Dispute

By Dave Shoalts, The Globe and Mail  Published on: Tuesday November 06, 2012

The NHL owners and players may be back at the bargaining table, with the major issue of a 50-50 revenue split complete with fully paying existing contracts in sight, but trouble looms from a couple of surprising groups on each side of the labour divide.
At issue are two changes from the former collective agreement in what goes into the salary cap, in particular the payroll floor. In his last offer, before the previous round of talks broke off on Oct. 18, NHL commissioner Gary Bettman said teams would no longer be allowed to count player bonus money on their payroll in order to get to the floor. He also proposed all player salaries above $105,000 (all currency U.S.), even those on a team’s minor-league roster, would now be included under the salary cap.
This alarmed two groups. One is a lot of NHL owners, many of whom were considered moderates, who are not happy that under this proposal they could no longer include on their payroll bonus money that would likely never be paid in order to get to the salary floor, which was $48.3-million in the 2011-12 season. This means they will have to pay real cash to get to the floor, a daunting prospect for clubs operating on razor-thin margins.
The other unhappy group is all of the players in the AHL, who would effectively see their salaries capped at $105,000 under Bettman’s offer. This is alarming because a veteran can make as much as $300,000 on an AHL contract, which is currently not included in the NHL team’s cap payroll.
The unhappy owners may or may not prove to be a breaking point because of an NHL bylaw Bettman smartly instituted before the 2004-05 lockout. While it takes only eight supporting votes from the 30 NHL owners to allow Bettman to reject an offer from the NHLPA, it takes 23 owners to overrule any offer Bettman makes to the players.
Formal bargaining is expected to resume “early this week” in the words of NHL deputy commissioner Bill Daly, who met into the early hours of Sunday morning with NHL Players’ Association special counsel Steve Fehr at an undisclosed location. The major issues of a 50-50 revenue split and how existing player contracts could be paid in full under it were discussed and both sides felt the talks were promising enough for bargaining to resume.
“We had a series of meetings yesterday and exchanged views on the most important issues separating us,” Daly said in a statement. “We plan to meet again sometime early this week.”
Fehr said in a separate statement: “I agree with what Bill said. Hopefully we can continue the dialogue, expand the group, and make steady progress.”
The ugly public-relations fallout after the NHL cancelled the Winter Classic on Friday appears to have spurred the latest talks. As the criticism built on Friday, the NHL made it known it told the players’ union it was willing to discuss ways the owners would pay more of the costs of the “make-whole” provision in its last offer. This became the biggest issue after the players agreed to reach a 50-50 revenue split at some point but wanted all existing contracts, which were signed when players received 57 per cent of the revenue, eventually to be paid in full. The owners had offered to do this by reducing the players’ share in the later years of an agreement, which was rejected by the union.
However, despite the optimism spurred by Saturday’s meeting, there are a lot of minefields in other issues, headed by the two that have a lot of owners and the minor-league players in a flap.
Sources say this owners group includes many who were previously thought to be eager to get a deal but were angered when they saw Bettman’s offer to exclude bonus payments from the cap. The clubs in this group include the usual small-revenue teams such as the Florida Panthers, Nashville Predators and New York Islanders but others, such as the Dallas Stars, St. Louis Blues, Washington Capitals, Anaheim Ducks and Colorado Avalanche, are unhappy as well. While clubs such as the Stars and Blues have reaped big revenue in the past and have new owners, their gate receipts took big hits in recent years.
Under the old agreement, a club such as the Islanders routinely made sure there were several entry-level players on its roster whose cap hit was much larger than their actual salary thanks to several bonuses. For example, in the 2011-12 season, rookie Nino Niederreiter’s entry-level contract paid him $900,000 in actual salary but nearly $2-million in bonuses brought his cap hit to just under $2.8-million. The 20-year-old was on the NHL roster for 55 games and scored exactly one goal, which meant almost all of that bonus money was never paid, a huge saving for the cash-strapped Islanders.
But under Bettman’s proposal, that would no longer be allowed. Instead of declaring $2-million they wouldn’t spend, the Islanders and other teams would have to cough up that cash in player salaries.
The owners want Bettman to find a way to make the salary floor lower in a new deal. While this will happen to some degree once the league goes to a 50-50 split, the cap is skewed by the fact the league has some clubs raising the overall revenue, on which the cap is based, with huge profits while a larger number of clubs make much less or lose money.
In the case of the minor-league players, the NHL could find itself in court. Following the 2004-05 lockout, the Professional Hockey Players’ Association, which represents minor-league players, sued the NHL because the labour agreement decreed any team that had a player with a salary of $75,000 or more claimed by another team on NHL re-entry waivers would have to pay half of the salary, which would count against their own payroll. This effectively capped salaries for AHL veterans at $75,000 and the PHPA managed to have the limit scrubbed.
Now that Bettman proposed to include all salaries above $105,000 in a team’s cap count, the PHPA could move again. At present, NHL teams often like to pay some veterans as much as $300,000 to serve on their AHL teams as mentors for the young players but this means teams would not be willing to pay more than $105,000. It would also mean the AHL would quickly lose those players, who are often fan favourites, to Russia’s Continental Hockey League or the European leagues