Tuesday, August 17, 2010

How To Structure An NHL Contract Post-Kovalchuk

On the heels of the Kovalchuk decision, a Boston Globe report is suggesting that the Bruins may want to sign the 33 year old Zdeno Chara to a long term deal that would take him into his 40s.

According to the article, Bruins GM Peter Chiarelli says signing Chara long term makes sense:

“Length of term, when you talk about someone like Z and how long he will play, is certainly something that you can’t ignore because of his body, the way he plays, and the way he takes care of himself."

Chara's agent Matt Keator notes that Chara has no immediate plans to retire:

"He wants to play a long time. He’s got the motivation on and off the ice to do so. He’s got the type of game to do so. He wants to win a Stanley Cup, two, or three. That’s his focus. He feels like this team’s moving in the right direction. He’s pretty excited about next season."

In finding for the NHL, the arbitrator Richard Bloch, in part, relied on it being unlikely that Kovalchuk would have played out his contract to the age of 44. Bloch concluded that while it was not "impossible" to play to 44, it was "markedly rare".

Here, it appears that the Bruins and Keator are trying to set the table for a long term deal by suggesting that Chara is the precisely the kind of athlete that can play into his 40s. They know, however, that there is a lot more to consider than age.

While a deal that takes a player into his 40s is an important consideration as to whether a contract constitutes a circumvention, that by itself is not determinative. The NHL will look at each contract individually and analyse their different components, and decide if the aggregate effect of these various factors equals a circumvention.

In the case of Kovalchuk, the arbitrator found that his age at the end of the contract together with the dramatic diveback after 11 years, the significant frontloading of the contract, the relatively minimal payout in the last 6 years and the transition from a "No Move" to a "No Trade" had the combined effect of supporting a finding of circumvention.

Bloch's decision strongly suggests that teams should bear the following in mind when signing a player to a long term deal:

1) Avoid a significantly frontloaded contract.

2) Avoid a dramatic drop in salary (or a diveback) toward the back end of the contract.

3) Avoid a relatively minimal payout on the back end of the contract.

4) Avoid any additional provisions in the contract that provide a team with a clear incentive to move a player in the final years of his contract with a view to getting his cap hit off the books.

The above points are particularly important if a player, like Chara, is to sign into his 40s.

Remember no one factor is determinative, but all are important.

That may sound ambiguous, but at law, that's standard and does provide reasonable guidance for teams.

1 comment:

Anonymous said...

The league needs to penalize NJ with picks and or cash as they NHL has the right to do so as NJ was found guilty of circumventing the CBA. Also, Hossa, Savard, Luongo, Franzen contracts should all be voided.