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Getting to Know the CBA - Episode 4, Part 2: Standard Player Contracts (Continued)

Stevie Roxelle - @stevieroxelle - Biscuit Fox

When we last left off, we were trucking through Article 11 relating to Rules and Procedures Governing Standard Player's Contracts. We got all the way through 11.13 on the rules which govern how contracts between players and teams work. We covered minimum salaries and the clause which explains why players with no-movement clauses don't have to be put on waivers before being bought out.

Today, we'll get through the remainder of this article. We've got 8 more sections to get through.

You can find the entire CBA here (PDF)

Article 11 - Rules and Procedures Governing Standard Player's Contract

11.14 - No Liability for Compensation

This section states that neither the league nor any club in the league is liable to pay somebody else's contracts just because they're a part of the NHL. This leads us nicely into the next section, where the reason for having this laid out is made clear.

11.15 - Default

The six subsections of this explain what happens if a club fails to meet its contractual obligation to the player (either failing to pay him or failing to provide a benefit guaranteed in some way by his contract). In the event a player legally notifies both the league and club in writing that they are in default of a payment owed, there can be an expedited arbitration process which should happen within two weeks, during which the player's SPC is still valid and enforceable (and he will be expected to honor it).

When a default happens, the club has 14 days to remedy it or his SPC is void. The club still owes the player what was owed and anything that they would have owed him in the 14 days it took for them not to remedy the default.

[quick aside, while it's a nice concept that a club could simply go into default and refuse to pay a player and be done with his contract, that's not how the real world works. The league and the NHLPA would make sure the club would get absolutely hammered for this. Termination of the SPC is something built in to give the player some options to deal with the fact that an entire hockey team is about to be destroyed for intentionally breaching his contract.]

The added wrinkle is that this section gives the league the option to cure the default and keep the SPC in effect by assigning the player to another club. They have the same 14 days to decide whether to do this, but if they do decide to, they get an extra week to come up with the funds. The one thing I honestly don't know is what kind of effect a no-movement clause would have on a situation like this. I would imagine the player may have some right to block the league from assigning him to a club he doesn't want to play for, but I don't know.

11.16 - Sale of SPCs

In the last CBA, this was a completely outlawed practice. No team could take cash in a trade nor could they promise to retain any part of a traded player's salary. This section explains that SPCs may still not be "sold", but the language about a team not being permitted to retain any obligation to to reimburse another club for a portion of his salary has been amended to include Section 50.5(e)(iii) - this section lays out that up to 50% of a player's salary may be retained in a trade. A real-world example of this is how the Leafs kept a total of $500,000 worth of salary obligations to Ben Scrivens and Matt Frattin when they traded the pair to Los Angeles in the Bernier deal.

11.17 - Currency

All SPCs must provide for compensation in U.S. Currency for Paragraph 1 Salary and Bonuses. (You can't come back and say you meant to sign a guy in some bullshit made-up currency like sand-dollars, bottlecaps, or loonies.)

11.18 - Ordinary Course Buy-Outs Outside the Regular Period

Buy-outs are covered in much more detail elsewhere in the CBA. This section says that teams during the entirety of this CBA can use no more than three buyouts outside of the "ordinary buy-out period" which changes based on whether the club has salary arbitration scheduled with any players. Basically, the regular period runs from Jun 15-30 (starts later if the 48 hours after the end of the SCF extends past the 15th). The regular period extends for a team to a 48-hour window following 3 days after their last arbitration is settled. However, if a club has only 1 arbitration in a league year, they're not allowed to use an ordinary-course buy-out outside the regular period for that year (this prevents something of a screw job loophole for individual players who may find themselves bought out specifically for the benefit of another player.)

You also can't use a buy-out outside the regular period if the player wasn't on the club's reserve list at last season's trade deadline or if the player's AAV is less than $2.75M. This salary number indexes the exact same way league minimum salary indexes: At the same percentage rate that the Average League Salary changes year-to-year.

11.19 - Loan to Clubs Outside North America

SPCs may have a clause in them which allows teams to loan players to foreign leagues (subject to transfer agreement rules) without having to pay the player's salary or deal with his cap hit. The player doesn't have to accept being loaned, but if he is, he may sign a contract with the club to which he's loaned and be paid by them.

11.20 - Registration of SPCs for Players with Possible Contract Obligations Outside North America

If the league has any reason to believe a player has a valid contract to play outside North America, they may choose to refuse to register the contract, following all the same timelines as with any other refusal to register one, except that after the league gives notification that this is the reason they're refusing to register the deal, the player, club, or NHLPA will have 5 days to prove that either the player isn't currently under contract or the foreign club/league/federation doesn't have a problem with him playing in the NHL.

If there's any disagreement, the same arbitration rules apply as if this were any other refusal to register a deal and the player won't be able to play under his contract until either the league allows it or the arbitrator forces them to allow it.

11.21 - Deferred Compensation-Related Amendments to SPCs and this Agreement.

Deferred Compensation is allowed in SPCs under specific rules, and is covered elsewhere. This 3+ page section simply works as a legal reminder that the NHL isn't interested in getting themselves in trouble for players creating tax loopholes that were closed in response to things like the Enron scandal.

Basically, a player can't claim a deferred payment in any tax year other than the one in which the deadline to pay such a payment occurs and the club won't pay a future promised payment early. Furthermore, a player can't pledge or assign that payment to any third party (for example, Rick DiPietro can't take his structured payout to JG Wentworth and get a bunch of cash up front). Expense reimbursements are also covered in that they can't be timed to screw with tax deadlines either.

There is a specific subsection that speaks to the entire purpose of this section having the intent to comply with section 409 of the tax code, meaning that a club (or anybody else) can't interpret this in any manner so as to say they don't owe a player money he would contractually be owed or use this anti-loophole as anything of a cap loophole, if there were to so find a way.

To close, there's a nice page's worth of ass-covering in here which says this is not the end-all of tax consideration in regards to contracts and that there won't be any grievances or even lawsuits which say that section 11.21's failure to cover something created a grievance or liability. They also make it perfectly clear that this doesn't constitute tax advice nor is anybody required to do that. As somebody who has to say "this doesn't constitute tax advice" on a semi-regular basis in real life, I can appreciate that the CBA contains this language.

- - -

I thought that if I could rip through those 8 sections, I might be able to jump down to Exhibit 1 and actually go through the Standard Players' Contract to lay out a lot of the rules, but the word count is already climbing and that area might be a two or three-parter anyway.

I'll leave a question of ordering up to the comments here. the SPC is most-closely-related to this article and now might be a good time to go into this one in-depth, but timing of free agency starting leaves article 12 a more-timely consideration (since Article 12 covers arbitration and we're about to see filing deadlines for that open as well). Which would you prefer I get into next week?