Getting to Know the CBA – Episode 5: Arbitration

I was all set to skip down to exploring Exhibit 1 and the Standard Player’s Contract and then Brendan Smith happened. We’ll get down to that part later, but seeing as how it’s timely, let’s go ahead and move forward to Article 12 in our weekly series on the CBA (note to travelers of the future looking back and who don’t care about timeliness: hello!)

You can find the entire CBA here (PDF)

Article 12 – Salary Arbitration

When a club and a restricted free agent can’t come to terms on a new contract and provided other qualifications are met, either side has an option to elect salary arbitration. During this process, an independent third party hears arguments on both sides and decides what salary the player should get. Once this is decided, there are a number of different options which come available based on whether the player or the club initiated the arbitration and depending on how much salary the player is awarded. In some circumstances, the club will have the right to walk away from the award and make the player a UFA. Regardless of these circumstances, the Club and Player can’t negotiate for a different term and salary once the arbitrator has ruled.

One important thing to remember is that the election of salary arbitration and the actual hearing are two separate events which take place weeks apart. In a standard year, there are three deadlines for salary arbitration elections:

1. Later of June 15 or 48 hours after Cup Final concludes: This is for a rare form of salary arbitration where a club can take a player to arbitration who made more than $1.75M (indexing annually) without having to give him a Qualifying Offer. This does not count for players coming off their entry-level deal because performance bonuses aren’t counted toward that figure.
2. July 5th, 5:00pm – This is the deadline for player-elected salary arbitration. For this season, the deadline was moved back to July 10th.
3. July 6th, 5:00pm – This is the deadline for club-elected arbitration. After the player deadline passes, the club deadline opens, so it’s just a 24-hour window for the teams to choose. For this season, the deadline was moved back to the 11th.

Once those election periods are over, the NHL and NHLPA move quickly to schedule dates for all of the hearings based on a list of availabilities that the eight appointed arbitrators have to provide before December 5th of the previous year. Once they have the list of all hearings to be scheduled, they NHL and NHLPA take turns (by flipping a coin) selecting players and dates for those hearings. They can’t end with one team having two hearings on the same day or two players on the same day who have the same agent. They also won’t give an arbitrator two hearings on the same day unless they absolutely have to (more than 56 hearings scheduled and all available dates already taken).

In a regular league year, all hearings are to be scheduled between July 20th and August 4th. For this season, those dates have been moved back to the 22nd and 6th respectively.

Teams and players are not bound to enter into arbitration. If the team and player agree to any legal NHL deal before the arbitration starts, then the signing of the SPC which follows voids the need to go through arbitration. Teams may not trade players who are pending an arbitration hearing.

Elibility for Arbitration

Only RFAs are eligible for arbitration, but not all RFAs qualify. Here’s the chart for required years of professional experience before a player can qualify for arbitration.

As it is just about everywhere else in the CBA, 18 and 19 year olds only gain a year of professional experience by playing 10 games in the NHL. After that, 10 games at any professional level counts. This eligibility is both for player and club-elected arbitration.

Player vs. Club-Elected Arbitration

Once a player is eligible for arbitration, he’s only subject to having a club elect to take him to arbitration one time. The arbitration hearing doesn’t even have to happen in that case, just the election to file for arbitration. This holds true no matter how many times the player may be traded or switches clubs. He may elect arbitration multiple times during the short time this would matter, but he’s limited to only one club-elected filing.

For Clubs, they may only elect two players to take to arbitration in one year. In general, a club has to give a player a qualifying offer (offer him a contract pursuant to the offer sheet rules laid out in 10.2). There is one exception that I hinted at before. Let me explain the differences.

Player 1: This player earned at least $1.75M (no performance bonuses counted) in his last season. The club may elect arbitration by June 15th. The arbitrator may not award this player less than 85% of his previous salary if it gets to arbitration. The big difference here is that a player in this situation may still sign an offer sheet and cancel the arbitration filing by doing so.

Player 2: The more-common happenstance, this player has to be given a qualifying offer and has to have refused it. Once arbitration has been chosen, the player may sign with the club right up until the arbitration actually starts, but may not sign an offer sheet with another club. The club must offer to pay an amount at least equal to the player’s salary in the last year of his contract in this case.

Election of Term

The side which didn’t elect arbitration is the side which gets to select the term of the deal the arbitrator will decide. It will be only a one or a two-year deal. For example, in Brendan Smith’s case, he elected arbitration, which is why Ken Holland is the one talking about how the Red Wings will elect a two-year deal if it comes to that. A team or player is limited to only a one-year deal in cases where the player is only one year away from becoming a Group 3 (UFA) player. There are some rules here regarding Group 5 players, but since that’s an impossible-to-attain status right now, I’m not going to cover them.

Procedures

To get the whole process started, both sides send a brief to the arbitrator and each other two days before the hearing. This lays out their plan of attack, including the amount each side will be requesting the player be awarded. The hearing is kicked off by the side which filed for arbitration. Once the hearing starts, each side has a 90-minute clock which they can use to make their arguments and rebuttals to the other sides’ arguments. There can be a special 10-minute extension in cases where the second side brings new information to the table, but that has to be used only in discussing the new info. If this is an arbitrator’s very first NHL salary arbitration, both sides get an additional 15 minutes.

In presenting their cases, both sides may present statistical evidence, comparable players, witnesses, affidavits, documents, and other relevant information. The arbitrator has sole discretion to choose how fitting any evidence is and how much weight to ascribe to each piece. Here’s the list of allowed and disallowed evidence.

Obviously, some of these things would be more beneficial to the league to bring up and some would be better for the player.

As far as statistics are concerned, the CBA says those kept by the league, the clubs and the NHLPA are all applicable. While the current popular set of stats (Corsi, Fenwick, QualComp, etc.) aren’t mentioned, there’s really only a set of generalized habits and innuendo which state they’re not used. There was an arbitration which allowed RTSS stats to be used for arbitration hearings back on 2003. There’s not really a reason to believe extended stats can’t be used in arbitration, but it seems as though they aren’t.

Once the arguments are made, the arbitrator has 48 hours to render a decision on how much the player will be paid and reasons for coming to that decision. Neither side may talk about the hearing until after the decision is made.

Walk-Away Rights

If a player elects arbitration, the club may actually choose to walk away from the award and make the player an unrestricted free agent under certain circumstances. For one, the arbitration award has to be $3.5M per year or more. As with every other number like this, the $3.5M figure will index annually at the same percentage as the League Average Salary changes.

If it’s a one-year election, the player becomes an unrestricted free agent immediately.

If it’s a two-year election, then the walk-away actually turns that into a one-year contract at the end of which the player becomes a UFA.

As long as the club has a walk-away right, they have 48 hours after the end of all their arbitration hearings to elect to walk away from a player. The amount of walk-aways a team may carry out in one year depends on how many players take them to arbitration.

In no case may a club walk away from an arbitration award arising from a hearing for which they filed. Walk-aways are only permitted in player-elected arbitration cases.

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So this is how the process works. With the club election period having ended Thursday at 5:00pm, the clock has started on the NHL and NHLPA to put together the list and get the hearings scheduled before the weekend is over.

In general, we’ve heard stories of arbitration hearings potentially doing irreparable damage to a relationship between a team and a player and it seems to make sense on the surface. The player’s agent gets up and gives an argument as to why he’s worth what he’s asking for and the team with whom he’s asking to play has to give all of their reasons why that guy isn’t worth what he thinks he is.

Things like this have the potential to hurt the feelings of players much more mentally tough than Kris Letang. In the case of Brendan Smith, I would expect that he and the team will reach an agreement before his hearing takes place.

Up next, we’ll jump into the SPC; after that we’ll tackle Article 13.