Wednesday, July 21, 2010

Kovalchuk's Rejection

The absurdity of contracts has become something sports fans have been forced to deal with, not unlike herpes or athlete’s foot.  They are commonplace in the NBA and NFL, but in the NHL where we are generally shielded from egos, we are also generally shielded from complete craziness in terms of money.  They have less money to spend. Alex Ovechkin, the highest paid player in the league, makes 9 million a year and is arguably the best player in the world.  On the flip side, well-known hissy fit-er and megalomaniac Albert Haynesworth of the Washington Redskins was given 42 million dollars last season.  So in general, we really never had to worry about NHL contracts. Until now.

In the last couple of years, organizations have figured out how to circumvent the salary cap by exploiting a loophole in the Collective Bargaining Agreement.  Because the cap hit of a contract is the average amount of money that player is paid per year in his contract, teams began adding years to contracts at an extremely discounted price.  These years would come towards the end of the player’s career, and there would be an unspoken understanding that said player would retire during those years and the team would no longer have the cap hit.

Players like Roberto Luongo, Marian Hossa, and Chris Pronger signed these kinds of contracts, essentially agreeing to remain with their respective clubs for the remainder of their careers.  The NHL frowned on the cap manipulation, but since teams were only adding on a couple of these silly years, they let it go. And it got shoved down their throat yesterday when Ilya Kovalchuk, the 27 year-old grand prize of free agency this season, signed a 17 year, 102 million dollar deal with the New Jersey Devils.  He was set to earn $550,000 the final five years of the contract, and he would be 44 by the time it expired.

This was a slap in the face to the NHL, and they responded in kind.  Yesterday, the league rejected the contract, as is their right in section 26.3 of the CBA.  The league always had this option, but they never used it until now.  They allowed other cap circumventing contracts to stand, which set the precedent for Kovalchuk’s deal.  It leaves many in the hockey world asking, “Why now?” and with good reason.  However, this deal is different, and those extra years at the end give the NHL more ammunition to take it to court.

First, let’s take a look at the previous deals.  Roberto Luongo signed a 12 year, 64 million dollar extension with the Vancouver Canucks last September.  He will be 43 when the deal expires.  However, it is different than Kovy’s deal because his lowest salary is 1 million, and it is only for the final two years of the contract.  Goalies are also more likely to play longer. 

Marian Hossa signed a 12 year, $62.8 million contract with the Chicago Blackhawks.  This deal is more suspect, with Hossa making $750,000 the final two years, and just 1 million the two years before that.  He will be 42 when his contract expires.  The NHL investigated this deal, and the contract Chris Pronger signed with the Philadelphia Flyers.  He signed a seven-year deal last summer that will expire when he is 42, making just $525,000 in the final two years.

The Pronger deal is also different because Pronger turned 35 before the extension kicked in.  This means that the Flyers will have a 5 million dollar cap hit for the remainder of the contract, regardless of whether or not Pronger retires.  That makes the contract easier to swallow because we know the already cap-strapped Flyers are going to get theirs in the end.

While the NHL investigated these contracts, nothing ever came of it.  They chose not to exercise their right to reject the deals.  The previous inactivity is what makes the Kovy decision a classic example of league inconsistency, and the is what some are saying will save Kovalchuk nad the Devils in the end.  They are wrong.

The league never pursued any retribution for these contracts because, frankly, they didn’t have enough evidence.  There were only a couple of years of low salary, and that was around 1 million.  The players are set to play into their early forties, which isn’t completely insane.  There was little to indicate the purpose of the deal was to circumvent the cap.

Kovalchuk’s deal is clearly meant to get around the salary cap.  The extra six years of salary below 1 million is absurd, and it is also highly unlikely that a forward would play into his mid-forties.  That shows a clear implication that the player will not play out the contract.  It at the very least “reasonably appears to indicate circumvention”, which is considered circumvention under the CBA.

What might be the most prized piece of evidence for the league and the Devil’s biggest dagger is what General Manager Lou Lamoriello said at the press conference the Devils held to announce the deal.  He stated that he “might agree” that contract’s like Kovalchuk’s are a flaw.  He continued, “But there is nothing that we have done wrong. This is within the rules. This is in the CBA. There are precedents that have been set. But I would agree we shouldn’t have these.”

This implies that he realizes that the contract circumvents the cap.  That would not only show they understood what they were doing, but also that they knew there was circumvention and did not inform the league, as is require in section 26.7 of the CBA.  This should be enough for the NHL to get the deal stricken down in court, if it comes to that.  If there are no grievances filed by the Devils or the NHLPA, Kovalchuk will go back to being a free agent.  If they file, there will be a hearing and potential arbitration if the NHL wins the case.

The NHL finally took a stand and sent a clear message that this has gone too far, and they’re right.  The league had given an inch and the Devils took a mile, and now they are being punished for it.  This will without a doubt be a main point of contention during the next CBA negotiations, and with the league finally taking a stand, changes will have to be made to the way contracts and the salary cap work.

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