For A Fair Process Where Players Are Paid Fair Market Value……..Welcome to the Owners’ Nightmare

 

In last week’s column, I introduced the concept of decertifying the NHLPA as the sole bargaining agent of the Players, and why it is worth considering after a thorough independent report is obtained.  In my view, unless the Players are willing to strike for two years (which is half the average Players’ career), it would be naïve to believe any promises made to the Players’ that their financial situation will improve in future collective bargaining negotiations.  Without drastic measures, Gary’s triple hard cap is here to stay, and it will tighten.  Admittedly, it is a big step for Players to take.....they may very well prefer to continue taking their chances with another round of collective bargaining.  Maybe the results will be different and their financial situation will improve.

 

As I explained in my previous column, the Players can vote, by a 50% margin, to decertify the NHLPA as the sole bargaining agent for the Players, at any time during the three month window prior to the anniversary of signing the current CBA.  Although it has subsequently been amended several times, the current CBA has been effective from and after September 15, 2012.  As such, this year’s ‘decertification window’ is roughly from June 15 to September 15, 2022, and annually thereafter.

 

There are a myriad of complex legal issues that govern decertification which are beyond the scope of this column, and really not of critical importance to Players at this point.  At this point Players may just want to simply consider whether they are willing to ‘make a bold move’ to improve their compensation by reviewing a comprehensive independent report on what would be the pros and the cons of decertification.

In my opinion, there is absolutely nothing wrong with deciding to forego decertification in favour staying with the current triple salary cap system. It is solely a decision to be made by the Players.  However, it would be a shame if the Players simply follow the status quo without at least making an effort to educate themselves about the pros and cons of decertification. Apathy kills!

 

If Players vote to decertify the NHLPA on, for example, Monday, August 1, 2022, the world could look like the following:

 

Welcome to the NHL’s Nightmare!!

 

1)    On July 1, 2022, all Players who are entitled to receive signing bonuses will have already been paid.  That is roughly $325 million. 

 

2)    On July 15, all surplus funds in the NHLPA treasury could be disbursed to Players.  That is also hundreds of millions of dollars from licencing fees saved since 2012.  Call it $200 million.

 

3)    On August 1, 2022, the CBA, as well as all Player contracts, would cease to exist. As such……

 

4)    On August 1, 2022, the Escrow Balance of roughly $1.0 billion that will then be owing by the Players to the NHL would cease to exist. 

 

5)    On August 1, 2022, the NHL, and its constituent Clubs, would likely find themselves in default of most, if not all, of their credit facilities with their bankers.  In particular, that would include default under the (approximately) $1 billion private placement debt facility taken by the NHL in early 2021 to finance Team operations during COVID. My understanding is that the Escrow Balance ‘receivable’, which will then no longer exist, was pledged by the NHL to the Lenders as security for that credit facility.   

 

The Players’ Dream

 

By reason of 1, 2, and 4 above, the Players would be ahead by $1.525 billion before the season starts in October, and……..

 

 

 

6)    On August 1, 2022 all Players still under contract would immediately become UFAs, including the Players who received their signing bonuses on July 1.

 

7)    Between August 1, 2022 and the start of the 22/23 season, all 32 Teams would then be ‘forced’ to sign roughly 736 Players who are then unrestricted free agents.  While this may seem difficult, with too many Players competing against each other for roster spots, it is important to bear in mind that there would also be 736 roster spots that must be filled, and with no salary caps or other contract restrictions.  

 

If one subscribes to the theory that a rising tide raises all ships, think about what an auction for the services of Connor McDavid would yield in a free market. Players like McDavid would set a new market for all Players contracts.

 

Furthermore, there would be an organizational structure which would allow the Players to preserve all of the financial and non-financial advantages Players currently enjoy including:

 

a)    Minimum salaries

b)    All Benefits such as pension, medical etc.

c)    Roster sizes (minimum 23)

d)    Agent certification program

e)    Concussion protocol and other health issues

f)     The right to negotiate no trade/no movement clauses.

 

In addition, each Player would benefit from an unfettered right to contract for whatever terms and conditions the Player and the Team agree to including:

 

A)  No maximum individual salaries or Team payrolls.

B)  No term limits

C)  No escrow deductions

D)  Olympic participation

E)   A Player could even negotiate being paid a portion of the increase in the value of a franchise over a defined period of time.  This type of contract has previously been agreed to between a Player and his team (Vancouver Canucks)…..but prior to the triple hard cap era.  It’s like owning an equity interest in the Team.

 

 

SUMMARY

"It’s no secret the players made enormous concessions to the owners in the last two negotiations. There’s a general sense that it would be appropriate for the scales to move back in the other direction……….……"

Don Fehr in a 2018 interview with The Canadian Press.

 “A. escrow and B. escrow”

Jonathan Toews told the CBC, when asked the biggest issues in the coming (2019 CBA) negotiations.  

No changes to the hard cap or escrow were made.

Unfortunately, the Players have never recovered from the shock of losing the 05/06 season, and the triple hard salary cap that followed.  Not only did the NHL succeed in breaking the union in 2006, but the NHLPA has failed to deliver any material financial gains for the Players since then.  In fact, a new Executive Director had to settle the 2012 lockout by persuading the Players to accept a 12% salary reduction, maximum contract terms and other restrictions, and a pension that the Players have to pay for out of their own pockets. 

The League justified the reduction to a 50/50 split of HRR since “the Owners take all the business risk”……yet the 2020 Memorandum of Understanding showed that the Owners really expected the Players to also share the business risk brought on by the COVID pandemic…….a ‘business risk’ that was never intended to be ‘shared’ when the CBA was negotiated…….and now the Players owe the NHL over $1 billion of Escrow Balance, a debt payment that is in addition to the normal course annual Escrow deductions that will take place.  It’s a system that is rigged against the Players….they have no leverage, no power to protect themselves in collective bargaining negotiations whatsoever.

 

So the Players have a choice at this point.  And only the Players can make that choice….nobody else.

 

Players can stick with the current triple hard cap system, and accept compensation which most fans would be happy to earn but which is far below that which would result from a fair process.  Salaries will remain ‘capped’ under an artificial system calculated on the basis of HRR, where HRR amounts to only a small fraction of the financial benefits enjoyed by the Owners.

 

Or Players can inform the NHL that the NHLPA may soon be decertified and the collective bargaining system abandoned.   It will necessarily follow that the NHL will realize that it too has to make a choice.  The NHL can unilaterally make the Players an offer than is better for them than the uncertainty that would follow decertification of the NHLPA, failing which it will be forced to conduct itself in accordance with applicable anti-trust law like every other business.