The Implications of the Mike Richards Settlement

November 11, 2015

contract

By Nathan MacDermott – Thompson Rivers University 2L JD Student

After the Los Angeles Kings of the National Hockey League terminated his contract and his grievance was filed via the NHL Players Association, Mike Richards and the team entered into a settlement agreement on October 9, 2015. This settlement is the first of its kind, and will likely have significant ramifications going forward.

It appears that this agreement, although unique, complies with the NHL CBA and therefore all parties approved the settlement. But because it is the first of its kind, it appears that a number of owners are upset by it, as it has significant salary cap implications for the Kings going forward. Some might even suggest that it is a circumvention of the league’s salary cap although all parties, including the NHL and Kings’ President and General Manager Dean Lombardi deny this.

The original cap hit attached to Richards’ deal was $5.75 million for each of the next five seasons (totaling $28.75 million). Had they used a compliance buyout, as the team had planned to prior to the termination of his contract, the cap hit would have spread approximately $21.5 million unevenly over the next ten seasons (averaging $2.15 per season). The settlement extends the cap hit unevenly over 17 seasons and totals $17.1 million.

What about this deal is not a circumvention of the NHL salary cap? The Kings now gain approximately $4.4 million in cap space over the payout period (versus the compliance buyout), and they also get to do so over an additional 7 seasons. It is not surprising that this has upset a number of general managers around the league, but it may have also forced them to think long and hard. Although this appears to have been an option available to all GMs under the current CBA, this settlement may have given them all a new perspective on how to get out of ‘bad contracts.’ Yes the NHL and all parties involved have said that this is not a precedent, but is that really a possibility? If another team terminates a player in similar circumstances will the league not have to follow this same path? Some teams may be salivating at the idea of getting out of these ‘bad contracts’ by merely catching their players in a compromising situation.

If I were in the shoes of some of these players, and they certainly know who they are, I might find myself looking over my shoulder a little more often or maybe taking steps to be more cautious when off the ice. Due to the large scale of these contracts and the big business of sports, what is to stop a team from hiring individuals to follow these players? Say a team is looking to find a few million dollars in cap room and possesses one of these bad contracts, would it not make good business sense to keep a much closer eye on that player in hopes that he trips up and falls? There may be moral implications to this, but with the amount of money at stake for all involved those morals may just take a back seat.

In light of this the NHLPA will likely want to get to work as soon as possible to try and alter the language of the current CBA in an effort to better protect players. The NHL teams already seem to have the upper hand when negotiating player contracts, especially with the influx of young, talented players into the league. If these GMs are truly upset at the moment, now may be the best time for the NHLPA to approach them regarding possible changes to the language of the CBA. On the other hand, if these GMs are just showing their angry faces to the media while secretly scheming in the background, there may be an ugly road ahead.

I know this may all seem a bit ‘cloak and dagger’ for a professional sports league, but in case you have not seen any of the NFL’s behaviour over the years, be sure to take a look. It will be interesting to see how this all plays out in the days ahead.

 

 

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