The NHL’s Mistake In Rejecting Kovalchuk’s Deal

Last night, the Devils organization and its fans received some shocking news – that the NHL had rejected the 17 year, $102 million contract of Ilya Kovalchuk. The rejection came after a press conference to announce the signing, and it seemed both sides were moving on. Someone dropped the ball, whether it was the league or the Devils, but the situation raises a huge question – why reject the Kovalchuk deal while allowing similar deals to pass?

 

Kovalchuk Press Conference 2The two reasons given by the NHL for rejecting the contract was the last six years, which they called “bogus,” and the belief both Kovalchuk and the Devils understand he won’t play out those final six years. Therefore, the NHL believes the last six years only serve to drive down the cap hit, meaning the contract attempts to circumvent the cap. For all we know, that may be true. Maybe Kovalchuk would decide to retire before the end of the deal, and the Devils would save some money.

Tom Gulitti of the Bergen Record published the official quote from Deputy Commissioner Bill Daly.

“The contract has been rejected by the league as a circumvention of the Collective Bargaining Agreement. Under the CBA, the contract rejection triggers a number of possible next steps that may be elected by any or each of the NHLPA, the player and/or the club. In the interim, the player is not entitled to play under the contract, nor is he entitled to any of the rights and benefits that are provided for thereunder. The league will have no further comment on this matter pending further developments.”

This isn’t the first time a player has received a long-term, front-loaded contract where the back end drives down the cap. These deals are becoming more and more common, and while the NHL may want to ban them in their next collective bargaining agreement, the league shouldn’t be setting that precedent now. Below are two modern-day long term deals, which the NHL passed, to show that Kovalchuk’s contract should not be exception to the rule. All contract information can be found on CapGeek.com.

Marian Hossa – 12 years, $62.8 million ($5.275 million cap hit per season)Marian Hossa

 

After signing a one-year deal with Detroit in 2008-09, Hossa received a long-term deal from the Blackhawks in the summer of 2009. The right-winger inked a 12-year deal, and subsequently won his first Stanley Cup championship after losing two straight. An important thing to note is Hossa’s age when he signed the deal. The right-winger was 30, meaning the contract would expire when he turned 42. For the first seven years of his deal, Hossa makes $7.9 million. That number drops significantly in the eighth year, with Hossa only making $4 million. In the last four years of the deal, Hossa makes $4 million combined.

Clearly, the Blackhawks front-loaded the contract to “circumvent” the cap. There may not be as many millions as Kovalchuk, but the Blackhawks used the same strategy as the Devils. Hossa will be 42 when his contract expires, and those last four years of $1 million drive down the cap hit. Yet the deal was allowed to stand by the NHL. Theoretically, the last four years of Hossa’s deal can be “bogus” years, because he may not play at the age of 38. Hossa’s contract structure is similar to Kovalchuk’s new deal, but was allowed by the league.

Henrik Zetterberg – 12 years, $73 million ($6.08 million cap hit per season)

Zetterberg is another example of these long-term, front-loaded contracts. Zetterberg re-signed with Detroit after a four-year contract expired in 2008. Remember to look at the age of the player. Zetterberg makes over $7 million for the first nine years of the deal, amassing the bulk of the contract. But in the last three years, Zetterberg will only make $5.35 million. When Zetterberg signed his deal, he was 28 years old, meaning the deal would bring him to the age of 40. Once again, one can argue that the last few years of the deal are “bogus,” and that Detroit used those last three years to circumvent the cap. Once again, the structure of the deal is similar to Kovalchuk’s deal, but the NHL had no issue with this specific contract.

Continue after the jump for the rest of my analysis on why the NHL was wrong in rejecting Kovalchuk’s contract.

 

I believe that the NHL is trying to set a precedent with Kovalchuk’s contract. The two deals above are similar to the Kovalchuk deal, but one could argue they don’t drastically differ from this deal. Yes, the years of the contract are longer, so the back-end of the deal drags out. But averaging those six years together – where Kovalchuk will make $7 million – serves the same purpose as the back-ended contracts of Hossa and Zetterberg. They all operate to drop the cap hit, and each contract circumvents the cap in some way or the other. I don’t understand where the Kovalchuk deal crosses a line where the Hossa and Zetterberg contracts are fine.

The one issue I see the league having with the contract would be the years. Yes, Hossa and Zetterberg have low back-ends, but each player is only signed for 12 years. The shorter terms means the back-end doesn’t get dragged out, and the cap hit could be seen as fair. With the Devils tacking on five more years, that back end drags out longer than the other two players. It seems like this is the argument from the NHL. If the Devils signed him to 15 years or lower, I believe this deal passes no problem. But the team dragged out the back end, and this is the NHL’s point of contention.

So what can the Devils do to fix the problem. If the NHLPA decides to fight the case, they will take it to a “systems” arbitrator, who will decide whether the contract should be void or not. If the arbitrator rules in favor of the Devils, the league will need to approve the deal immediately. If it rules with the league, then the contract is void and Kovalchuk becomes an unrestricted free agent. As per  Gulitti, the league doesn’t have a current “systems” arbitrator, which could drag out that process. Instead, I believe the Devils will attempt to re-structure the deal. Maybe take a few years off the back-end. It will increase the cap hit, but in the end the NHL will deem necessary for the deal to go through.

The NHLPA released a statement earlier today, but it didn’t indicate any future action.

“The NHLPA is currently analyzing the basis upon which the NHL rejected the contract between the New Jersey Devils and Ilya Kovalchuk. We are evaluating the options available to us under the terms established in the CBA. The NHLPA will have no further comment at this time,” said Jonathan Weatherdon, NHLPA Spokesperson

This deal should be done today, because it in no way violates the league’s CBA. But the ruling has been set, and the Devils will probably re-structure the deal. This shouldn’t be the straw that breaks the camel’s back, but the league is attempting to set a precedent. It’ll be interesting to see the outcome of this ruling.

Ilya Kovalchuk Photo Credit: Jennifer Brown/The Star-Ledger

Marian Hossa Photo Credit: The Associated Press

 

 

Quantcast