Tuesday, July 03, 2007

The collective bargaining agreement
How buyouts work

Well, I started to get into how a big-time buyout of a contract like the one Daniel Briere scored in Philadelphia would work earlier today, but given how complicated the whole business is, I figured it was worth it's own post here.

Let's use Briere's contract, and it's front-loaded terms, as our example, and go with a situation that would see the Flyers buyout that deal after Year 5:

It's interesting how teams can't get away with a low cap hit in years when players' contracts dip, and with the way a buyout like this one would work, it's just the opposite. Years 7 and 8 would obviously be the most painful, although it's smooth sailing after that.

UPDATE A regular reader points out that, since Briere has a no-movement clause, he cannot be bought out unless he agrees to waive that clause. Still, this is a useful exercise in showing how buyouts work under this CBA.

UPDATE My fault for not checking the CBA personally on this one. Players with no-movement clauses can be bought out. From section 11.8 (b) of the CBA:
A no-move clause may prevent the involuntary relocation of a Player, whether by Trade, Loan or Waiver claim. A no-move clause, however, may not restrict the Club's buy-out and termination rights as set forth in this Agreement.
This Briere buyout information, therefore, is still wholly relevant.

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17 Comments:

At 5:25 PM, July 03, 2007, Blogger Kel said...

Just realized I forgot to say thanks for giving us the actual salary figures within the contract. Thanks, James.

 
At 5:36 PM, July 03, 2007, Anonymous Blake said...

James, do you think a contract like this can help a team trade a player if he or the team isn't performing well, late into the contract?

If Briere is only getting paid 2 million for his last season, is that the amount of money another team would have to absorb or is it based on the average salary?

Long time reader, first time commenter.

 
At 5:40 PM, July 03, 2007, Blogger James Mirtle said...

It might help move him a little bit (aside from the no-trade clause, that is), if only because a team only has to pay him that $2-million. But Briere will still count $6.5-million against the salary cap regardless of what year he's in his deal.

 
At 6:26 PM, July 03, 2007, Anonymous David Johnson said...

For a lot of teams the salary cap amount will be less important than the actual dollar amount as a lot of teams won't be able to afford to spend to the cap. Now you won't be able to trade Briere to the Leafs or Rangers or any team who wants to spend to the cap but you could trade him back to Buffalo as they are unlikely to spend to the cap (and Briere might waive his no movement to go there). In fact, some teams that might not even be able to spend up to the league minimum (which could be $40-45 million 6 years from now) could pick up Briere pay him $2 million but get $6.5 million benefit towards reaching the league minimum.

 
At 6:30 PM, July 03, 2007, Anonymous David Johnson said...

I should add that Yashin is an example of this. His cap hits are:

2007-08: 2,019,067
2008-09: 2,019,067
2009-10: 3,235,067
2010-11: 4,755,067
And then 2,204,000 for the following 4 years.

The actual cash payments is only $2,204,000 per year though.

Hard to believe the Islanders are going to be paying Yashin for 8 more years. What a mistake that contract was.

 
At 6:39 PM, July 03, 2007, Blogger Kel said...

As I mentioned in the older post, after year 6, he'll have received over 90% of the money. If he can't play well or isn't healthy enough, it's tempting for him to retire. If he does it, then I believe the Flyers are completely off the hook in terms of cap space after his retirement.

 
At 7:09 PM, July 03, 2007, Anonymous Anonymous said...

Kel: Would it be possible for the Flyers to encourage Briere's 'retirement' after year six by offering him the last 10% of his contract to be an assitant coach? Say an assistant coach who scouts all of the up and coming talent in the Bahamas for instance? Or does a 'staff' position still count within the team-wide cap?

 
At 7:20 PM, July 03, 2007, Blogger Kel said...

I am not sure if there's a specific rule preventing that (most likely yes), but the CBA has a whole section (article 26) named "No Circumvention" that would probably deals with what you wrote.

 
At 7:23 PM, July 03, 2007, Blogger Kel said...

Actually, I found it, on page 122, section 26.15 Examples of Circumvention (e) A Club and a Playre, during the Player's active career, agree that upon the Player's retirement, he will receive a sum of money for services to be provided to the Club after retirement.

 
At 7:40 PM, July 03, 2007, Anonymous Frank said...

Kel, that clause is easy to get around, because it refers to services back to the club.

Ed Snyder could easily offer Briere a lucrative executive position in Comcast, or any other company he owns that is not related to hockey, when Briere retires, "wink wink".

 
At 7:57 PM, July 03, 2007, Blogger Kel said...

That is an example of circumvention, frank. I am sure the rule itself is more general and in a sense vague so that it is enough to prevent anything creative like what you suggested. I am just too lazy to read the whole section. By the way, you may download the CBA from NHLPA's web site.

 
At 1:38 AM, July 04, 2007, Blogger Ebscer said...

What If he signs a new contract with the flyers after year 6, say for $13 million over 2 years. He would then be getting $60 million over the same 8 years rather than $52 million. Yet the flyers would still only have to count 6.5 against the cap the whole time instead of the actual average of 7.2 million. Is there anything to prevent a senario like that?

 
At 1:42 AM, July 04, 2007, Anonymous Anonymous said...

You aren't allowed to renegotiate contracts.

 
At 3:00 AM, July 04, 2007, Blogger Kel said...

Exactly. No renegotiation. An extension is only allowed in the final year of a contract, and the extension cannot affect the compensation of the original contract, and the extended years are considered a separate contract for cap purposes.

 
At 4:31 PM, July 04, 2007, Anonymous Peter Drake said...

A No Movement Clause does not prevent a team from buying out a player. AAMOF, the CBA explicitly says that nothing in a contract can limit a team's right to buy out players.

 
At 4:39 PM, July 04, 2007, Blogger James Mirtle said...

Peter's right; I should have checked this.

 
At 7:16 PM, July 05, 2007, Anonymous Peter Drake said...

Glad to help.

BTW, love the blog. It's my favourite in the hockey-verse.

 

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