This episode is over. The NHL has approved Ilya Kovalchuk's(notes) contract with the New Jersey Devils. The league has dropped its investigations into four other contracts. The league and the NHL Players' Association have established more specific salary cap rules for future deals.
But the soap opera continues. When the sides signed the current collective bargaining agreement in 2005, no one anticipated the mess it would create. So does anyone really know whether this compromise will settle this issue once and for all? It was badly needed, but seems imperfect. We'll have to see what effect it has until the CBA expires in two years. More work needs to be done in the next round of negotiations.
For now, everyone can claim victory.
The NHL apparently has closed the loophole it felt teams and agents were using to circumvent the salary cap. The new rules limit how much you can reduce a cap hit by spreading money over a long-term, back-diving deal.
By grandfathering the contracts of Kovalchuk and four others, the league doesn't have to reject Kovalchuk's contract, which could have sent one of the world's top snipers to Russia and would have risked a loss in arbitration. It doesn't have to go to war with its own teams, pull contracts it already had approved and make this mess even worse.
The 2009-10 season was outstanding. The on-ice product has never been better. The league finally has some momentum again after the lockout of 2004-05. The last thing it needed was a labor battle overshadowing the excitement of a new season.
"We're pleased to be able to establish bright line rules for these contracts going forward and are happy we can turn the page on existing contracts so we're looking forward, not backward," NHL deputy commissioner Bill Daly told NHL.com.
The NHLPA looks bad in a sense, because the union – still without a leader, even though Donald Fehr is an advisor and reportedly on the verge of becoming executive director – had to sit down and amend the CBA after losing a landmark arbitration case. But it has gained plenty.
"I don't know if you want to call it a win, but it's a very significant benefit for the players," agent Ritch Winter said. "The players' association has done an extremely good job here."
Hundreds of millions of dollars in players' contracts no longer are in jeopardy. Kovalchuk, the Vancouver Canucks' Roberto Luongo(notes), the Chicago Blackhawks' Marian Hossa(notes), the Boston Bruins' Marc Savard(notes) and the Philadelphia Flyers' Chris Pronger(notes) no longer need to worry. Not that they were worried, anyway, of course.
"There is nothing that even for a moment remotely gave me a concern," said Winter, Hossa's agent. "You would have to have circumvented the collective agreement to have some concern. … The possibility of the league investigating something that would lead absolutely nowhere has now been eliminated."
When arbitrator Richard Bloch upheld the rejection of Kovalchuk's first contract with the Devils, he broadly interpreted the circumvention clause in the CBA. That appeared to give the league broad powers in determining what constituted salary cap circumvention. Teams and agents were afraid to break rules and risk being disciplined when they didn't know exactly what the rules were. Now the rules are specific.
"It takes out of the hands of Gary Bettman a huge amount of unfettered authority granted to him by [former NHLPA executive director] Ted Saskin," Winter said. "That's a real advantage, just to take that uncertainty away and that ability of the commissioner to wield a level of penalties and fines.
"The Russian and Czech players would be familiar with systems like that, because they grew up in the Communist times, but it's not something we should be familiar with. It's unbelievable the amount of authority he had in this context. So to strip him of that ability in relation to the contracts that now will be registered without question is really important."
Teams now know how they can manage their cap, and they can't use circumvention as an excuse not to strike a deal.
"Certainty's important because a lot of people don't understand how uncertainty plays out sometimes," Winter said. "How it plays out through the office of a general manager is, 'Man, I'd love to do that, Ritch, but I don't think the league would approve it.' There's this gray area that can be used by a capable general manager to his advantage to kind of chill things effectively."
Let's take a closer at the rules, though.
The main objections to the original Kovalchuk contract were his age at the end (44), the salary the last five years ($550,000) and the fact a no-movement clause became a no-trade clause. Clearly, the reason the Devils signed Kovalchuk to a 17-year contract only to reduce his cap hit. There was no way he would complete the contract. The final years were fake.
The new rules address these objections in two ways:
First, in contracts five years or longer, the cap hit will be calculated by averaging the years up to and including the year when the player turns 40. After that, the cap hit will be the salary for that year. (The sides considered averaging the years after 40.)
Second, if a contract is five years or longer and averages $5.75 million over the three richest seasons (there was negotiation over those numbers), if a player's salary is less than $1 million when the player is 36-40, it must count as $1 million when the cap hit is calculated.
Finally, some lines have been drawn, though whether they were drawn in the right place is debatable. Some contracts that take players into their 40s don't pass the smell test, but more and more players are performing well into their 40s, not to mention their late 30s. The NHL sort of set the standard of allowing $1 million as an acceptable salary at the end of a long-term deal, but it isn't much different from, say, $550,000.
Now that the rules of the game will be established, it will be interesting to see how teams and agents maneuver within them and what unintended consequences will pop up this time. Will teams with cap space have an advantage (if they're willing to spend the money)? Will someone, say, sign the Devils' Zach Parise(notes) to an offer sheet?
Maybe there won't be many contracts affected. They're inherently risky, anyway. Some in Vancouver were hoping Luongo's would be challenged. Same in Boston with Savard's. Only five contracts really raised the league's ire, and only one went so far as to be rejected. But it only takes one.
"You try to put your finger in the dyke and stop all the water," Winter said. "We just find a lot of Dutch people have trouble with that. You can't do it. This has become the internal revenue code, and if anybody seeks to do anything in the next CBA, it should be simplified."
Ideally, it should be. If both sides would agree to it, the next CBA should restrict how much salaries can rise and fall by a certain percentage each year. Age shouldn't matter. There shouldn't be complex calculations.
"The greatest lawyers of all time are the ones who are able to make complicated things simple," Winter said. "The lawyers who are a waste of time make simple things complicated."
Now we can stop listening to lawyers and start watching hockey.