What the New York Islanders decide
to do with Tim Thomas after this season might provoke a legal challenge
under the new CBA. Circumvention anyone?
As we explored in Part 1 of this series, Thomas has been suspended without pay for failing to report to the
team. By rule, the $5 million cap hit on Thomas’ contract counts towards the
calculation of the Islanders compliance with the Lower Level. Technically, the
cap hit does not count towards the team’s Upper Limit.
If Thomas stays home for the entire
season the Islanders will have the right to ‘slide’ the remaining year on the
contract to 2013. If he refuses to report next season, he will once again be
suspended and the Islanders’ Lower Level will be credited with $5
million.
In a vacuum, there is nothing wrong
with this conduct. Extending the contract of a player who was suspended for
failing to report is neither new nor offensive in and of itself. However, the
precedent set by the Kovalchuk case tells us that circumvention matters aren’t
analyzed outside of their full context.
The anti-circumvention rules of the
CBA are contained in Article 26. Article 26.3(a) describes the elements of a
circumvention offence. It reads:
“No Club or Club Actor, directly or
indirectly, may: (i) enter into any
agreements, promises, undertakings, representations, commitments, inducements, assurances
of intent, or understandings of any kind, whether express, implied, oral or
written, including without limitation, any SPC, Qualifying Offer, Offer
Sheet or other transaction or (ii) take or fail to take any
action whatsoever, if either (i) or (ii) is intended or has the effect of
defeating or Circumventing the provisions of this Agreement or the
intention of the parties as reflected by this Agreement...”
This was the provision at issue in
the Kovalchuk case. In that case, arbitrator Richard Bloch determined that the
17-year $104 million back-diving contract between Ilya Kovalchuk and the New
Jersey Devils amounted to cap circumvention. Eric has a nice summary of the decision on this site.
Bloch’s decision contains a high
level analysis of the purpose of the Upper Limit of the salary range system. He
concludes that the purpose is to promote ‘competitive balance’ amongst NHL
clubs by ensuring a degree of payroll parity within the league.
Circumvention, then, can arise due
to conduct that defeats the principle of competitive balance. Following this
reasoning, Bloch concluded that Article 26 is wide enough to capture conduct
that is not explicitly prohibited by the CBA but nevertheless offends
competitive balance. As a result, Article 26 necessitates for a deep contextual
inquiry into all the relevant factors surrounding the transaction.
This reasoning trumped the NHLPA’s
argument. The union had argued that none of the terms of Kovalchuk’s contract
actually broke any explicit rules in the CBA and that by extension, the CBA and
the salary range system were not circumvented. However, since Bloch determined
that a contextual approach was the most appropriate method for analysis for
Article 26 issues, the context of the transaction became the determinative
issue in the case.
The relevant contextual factors were
the combination of a substantial drop in salary over the last 6 years of the
contract, the fact that only one NHL player has played past his 43rd birthday
(the contract would have paid Kovalchuk until he was 44) and the switch from a
‘no-move’ clause to a ‘no-trade’ clause. Together, this proved that it was
“reasonably unlikely” that Kovalchuk would or was intended to fulfill the full extent
of his contract.
Note how the standard of proof was
reasonableness. The evidence doesn’t have to be unequivocal. In other words,
the evidence must form an intelligent and logical basis for the facts its
trying to prove.
In sum, the Kovalchuk decision
determined that a wide range of conduct may be caught by Article 26. Regardless
of intent, Article 26 prevents otherwise permissible transactions that, when
examined in their full context, have the effect of offending competitive
balance.
Using the template provided by the
Kovalchuk decision, would the Islanders violate Article 26 were they to extend
his contract with the knowledge that he will not play next season?
To make a persuasive argument, the
NHLPA would first have to establish that the purpose of the Lower Level is the
same as the Upper Limit: to ensure competitive balance within the league. This
would not be a difficult hurdle to clear as the Upper and Lower Levels create a
fixed player salary range within which every team must operate. In other words,
they promote salary parity together.
The more difficult aspect of the
union’s case would be its ability to prove that the Islanders extended Thomas’
contract despite knowing that it was “reasonably unlikely” that he would play
in 2013-2014. As was the case with Kovalchuk, none of the conduct that would be
undertaken by the Islanders would violate a specific provision of the CBA. As a
result, the NHLPA would have to show that the sliding of Thomas’ contract
constitutes circumvention in the specific context.
The NHLPA would likely discharge
this burden if Thomas is publicly adamant about his intention to not play next
season or simply tells the Islanders that he will not report to the Club.
However, the NHL would point to Thomas’ has public statements of his intent to
compete for the United States at the 2014 Olympics as evidence that it was
reasonable for the Islanders to believe that he intended to fulfill the
remaining year of his contract.
It will be interesting to monitor
how Thomas’ age (39) factors into the arguments. The NHLPA would argue that his
advanced age adds to the unlikelihood of him playing in the NHL. However, the
NHL could argue that his age doesn’t help the NHLPA given the number of
goaltenders of his age or older who have recently played in the NHL. I’m not
sure how this factor would be interpreted, but it is clear that the relevance
of age would be more contentious that it was in the Kovalchuk case.
Another contextual factor might be
the upcoming changes to the calculation of a team’s compliance with the Lower
Level. As we explored recently, the new rules will prevent performance bonuses
from counting towards the Lower Level. We also showed that the Islanders will
be seriously impacted next season by this change.
Might the NHLPA argue that the
acquisition of Thomas is an attempt by the Islanders to mitigate the changes to
the Lower Level that take effect next season? It’s a circumstantial but
plausible argument and Article 26 allows the consideration of circumstantial
evidence. It’s clear that Thomas’ $5 million cap hit would significantly help
the Islanders reach the floor without actually having to spend the money.
In any event, the Islanders are
definitely a team to monitor over the next few months. The new CBA appears to close
some of the loopholes he has exploited. I’m looking forward to how he will
react to the new rules.
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