By Dane Nolan
Dane Nolan has assisted with several NHL salary arbitration and contract negotiation situations on behalf of an NHL club. More of his work can be found at The Hockey Pulse (www.thehockeypulse.com).
As the NHL work stoppage approaches 60 days, most of the media and fan discussion has rightfully centered on issues such as player-owner revenue split, the definition of hockey-related revenue and whether existing player contracts should be grandfathered into the new CBA or suffer some sort of salary rollback. One of the issues that might not be at the top of the list but deserves more exploration is whether salary arbitration will continue to be a part of any future CBA, and if so, what form that arbitration will take.
While the mention of salary arbitration might not exactly conjure the same type of excitement as a massive trade or free-agent signing, the importance of the process is not lost on NHL players and front-office staff. NHL clubs spend months preparing briefs and sorting through thousands of statistics in an effort to pressure the arbitration-eligible player into signing a contract or, if that fails, to develop a case that will sway the arbitrator in their favor. As the hearing approaches, almost every day is a sunrise-to-sunset workday, with several staff members leaving for Toronto armed with every statistic imaginable. Need to know how many face-offs Tomas Fleischmann took in the defensive zone late in a game? Check. What if an argument hinges on Ladislav Nagy's shorthanded time on ice per game compared to a comparable player? Someone has that covered in a chart or table.
Most of the time the process is viewed by both sides as simply a part of the business that hockey has become, but there have been a few instances in which the hearing itself has taken center stage in the player-club relationship. Doug Gilmour's acrimonious departure from Calgary stemmed from bad feelings brought on by the arbitration process. Tommy Salo (best known for allowing a bizarre goal that eliminated Sweden at the 2002 Olympics) and former Islanders GM Mike Milbury (best known for climbing into the crowd and beating a fan with a shoe) combined for an arbitration hearing so intense that several reporters saw Salo head to the bathroom in tears afterwards. Needless to say, these extreme examples are not common. But the process does tend to lend itself to hurt feelings among players, and the clubs certainly use this to their advantage.
Understanding the full breadth of NHL salary arbitration is probably a mission best left to the professionals who deal with it daily. For example, the NHL CBA Section 12, which deals with salary arbitration. is 13 single-spaced pages long, and one would be forgiven if unable to understand much of it without a law degree. Regardless, to understand the importance of the issue within the CBA negotiations it is helpful to possess at least a basic understanding of the process.
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The basic premise of salary arbitration is that it is simply a process to resolve an "impasse" in contract negotiations between a player and his club. Impasse is used in this sense in its literary meaning, not necessarily in its legal form. There is no legal requirement to declare an impasse to be eligible for salary arbitration -- it is only used to mean the player and team cannot agree on the parameters of a new contract before a certain date. Arbitration is generally thought of as an incentive to force the player and team to come to a resolution on a new contract, but is used as a backup if that proves impossible before the deadline. Arbitration is seen as a "middle point" between a true reserve system and total unrestricted free agency, and is usually seen as a benefit to the players.
For a player to be eligible for salary arbitration, he must meet two conditions. First, the player must be a restricted free agent (as defined by 2005 NHL CBA 10.2). There are several technicalities involved in restricted free agency but, for simplicity's sake, it can be defined as a player whose club still has the right of first refusal in retaining his services; hence, he is restricted in his free agency. The second condition that must be met is the player must have played a certain number of years of professional hockey to be eligible for salary arbitration. The number of years varies depending on when a player signed his first standard player contract. Generally speaking, most players are eligible after three or four years of professional hockey. Although almost all arbitration is elected by the wish of the eligible player, the 2005 NHL CBA provides for club-elected arbitration in limited circumstances. However, this method of arbitration is rare and has not been employed very often.
The last major point to understand about NHL salary arbitration is the basic process that is used to determine the award. Both sides (club and player/agent/NHLPA) spend months preparing for the possibility of arbitration, while at the same time negotiating a new contract. If the player elects arbitration by July 5, the case is added to a schedule and assigned an arbitrator and a hearing time (usually in early August). If no contract has been signed by the date of the hearing, both sides submit briefs to the arbitrator outlining their case. Each brief consists of a stand-alone case as to why the player deserves a certain salary, as well as a section detailing the player's production and compensation request compared to comparable players. Each side attempts to slot the player among the comparables and provides statistical examples to explain their rationale. The arbitrator reads these briefs, listens to approximately three hours of oral arguments and then will award a one- or two-year contract at a certain salary within 48 hours. Both the team and the player are then bound to this award for the length of the contract; although, if an award is above a certain amount, a team has limited "walk away" rights that negate the award and make the player an unrestricted free agent.
Although the above explanation is a simplification of the arbitration process, this description is detailed enough to understand why arbitration is important, especially from the players' standpoint. As with any quasi-legal process, there are many caveats, rules and exceptions that come into play from time to time. Fortunately, the explanations above cover the majority of salary arbitration cases.
Although the inclusion of salary arbitration will probably not be a make-or-break point for the NHLPA in the next CBA, there are several important reasons the players would be well served to insist upon the continuation of the process in some form.
First, it is a given among both the NHLPA lawyers and clubs that the arbitration process generally favors the players. At the end of the day, even though both sides are given equal time to present their contract arguments, most would agree that the presence of the arbitrator gives the player an advantage over simply negotiating directly with the club without the possibility of a third party deciding the outcome. Due to the fact that pre-arbitration contract offers are generally not public knowledge, it is impossible to say exactly how much lower RFA salaries would be without arbitration. But it's not out of the question to hypothesize that arbitration can present an increase of at least a few hundred thousand dollars per year for the average player.
Second, arbitration is a natural bridge for most players between their entry-level standard player contract and the gold mine of unrestricted free agency. By keeping owners honest and forcing a series of bona fide offers instead of simply a "take it or leave it" small qualifying offer raise, the player has a much better chance of resolving a contract dispute in a timely manner and being on the ice for the start of the following season.
The players in the best position to benefit from this arbitration eligibility tend to be those who are just showing their potential but who might not yet be full-fledged NHL stars. A player whose preceding season was poor would be well served to sign his qualifying offer and look forward to a better season next year. After all, why go through the hassle of hearing your team tear you down if your chance of success is relatively small?
On the other hand, the very successful and very young players have such an open-and-shut case that a team will want to get them under long-term contract as quickly as possible. The club would be foolish to waste time and money fighting a losing case and possibly alienating a star player. Mike Cammalleri's 2007 arbitration case is the only recent example featuring a team's leading scorer to come to mind. However, those players who might just be coming into their own but who are not yet stars stand to gain the most from wielding the possibility of arbitration. For a 20-goal, 20-assist player, it might be worth going through the hearing if he can turn a $750,000 contract into a $2 million contract. These mid-tier players stand to lose the most if arbitration is not a part of their negotiating arsenal moving forward.
From the owners' perspective, the conventional wisdom is that arbitration naturally favors the players and it would be considered a "win" for the owners if it is not included in the next CBA. For the most part, that argument could be made simply by taking the opposite position of the player benefits listed above. However, arbitration does tend to provide a few benefits to the owners that might be easily overlooked.
The biggest natural benefit arbitration provides to the owners is a decrease in the amount of RFA offer sheets each off-season. Ever since the last CBA was ratified in 2005, the idea of a coming offer-sheet armageddon has been a popular notion in the hockey media. Ryan Kesler and Shea Weber aside, the influx of offer sheets never materialized, and it is not ridiculous to think one of the reasons has been the regularity with which players assert their arbitration rights. When a player files for arbitration, he immediately waives his ability to sign an offer sheet from a competing team. In doing so, he essentially locks himself into service for his current NHL club for the following season. If arbitration were to be eliminated, this protection would be gone for a fair number of quality players each offseason.
While the best players are generally protected from offer sheets due to the overwhelming cost in draft picks, the players most likely to elect arbitration (mid-tier, up-and-coming players) would also be those most likely to receive an offer sheet that wouldn't deplete the signing team of multiple years of high-round draft picks. For example, a team could sign an RFA player to a contract with an AAV of $3 million and only have to give up a second-round pick. Which NHL club wouldn't trade a second-round pick for a 24-year-old who scored 15-20 goals? By accepting arbitration, the clubs give the players a salary safety net that decreases the likelihood that a young player will test the RFA market.
The second, although immensely less important reason that owners should not stake the defense of the CBA on arbitration, is the limited allowance of club-elected arbitration. Granted, there have only been a few instances of club-elected arbitration in the recent years. But it is a useful tactic to again protect players from offer sheets. In 2009, the Minnesota Wild eventually settled on a last-minute contract after filing arbitration against Josh Harding. There was talk of the Vancouver Canucks doing something similar last year with Cory Schneider before both parties agreed on a contract early in the offseason.
While club-elected arbitration might have been intended as an opportunity for teams to be awarded reasonable contracts for underperforming players, the reality seems to be that it is most useful as a shield against offer sheets for easy targets -- a young backup goaltender with potential in both of the above cases. Even if arbitration survives in much the same form for the next CBA, instances of club-elected arbitration will still probably be few and far between. That being said, it would serve the clubs well in very specific instances and would be worth employing in at least one or two cases each season.
Will salary arbitration be included in the next NHL CBA? If so, what will it look like? Those questions remain to be answered. But it would not be a huge loss for the owners if the status quo is maintained. Perhaps the NHL would switch to a "final offer" system of arbitration, similar to the system used by Major League Baseball. Under that system, both teams submit their final offer and the arbitrator has to choose one offer or the other, not the middle-ground figure that is almost always arrived at during NHL arbitration proceedings.
Although this change might not favor one side, it does encourage teams and agents to arrive at realistic offers more quickly and cuts the likelihood that a case will go to a hearing by 16 percent. Final-offer arbitration does present several advantages over the current system and might be a realistic alternative, but the importance of a change pales in comparison to the other, larger issues present during this work stoppage.
Arbitration is not the issue on which the possibility of a 2012-13 season hinges, but it might determine whether your favorite young player is still with your team come 2014.