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The NHL’s Collective Bargaining Agreement Might Get Terminated, Or Maybe Not

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Will there be a lockout in 2020? Next month is a big step to decide that.

2015 NHL All-Star Weekend - Commissioners Press Conference Photo by Brian Babineau/NHLI via Getty Images

Collective bargaining agreements are like marriages: they last seven years or so and then people get hungry for something different. And if you’ll look at your calendar, the NHL’s current collective bargaining agreement will hit its seventh birthday in January. Ruh roh.

NHL fans have become fatalistic about the periodic labour disputes that afflict their league, and cost either half or whole seasons. Gary Bettman, the NHL’s commissioner, has the dubious distinction of having overseen three different stoppages that have cost parts or wholes of seasons. Will he make it four? Well, this September will give us a heads up if so.

Note: after I drafted this piece, and while I was waiting for the rest of the PPP Goon Squad to add their comments below, The Athletic’s Sean Gordon published an article on the upcoming issues that covers several of the same concepts around the CBA expiry. It is a good article and you should read it if you have a subscription. I have kept this article as-is because it was come to independently and for those readers who like our sense of whimsy.

What Is The CBA And Why Should I Care?

Let’s back up. The Collective Bargaining Agreement is the gigantic contract between the National Hockey League’s ownership and the Players’ Association that governs the whole operation of the enterprise. The salary cap, contract rules, drug testing, and a million other things are in there. It is the rulebook. With no CBA, there is no NHL. Everybody goes to another league or sits on the couch eating donuts.

Is The CBA Ending Soon?

Maybe!

The first chance either party has to cancel the Collective Bargaining Agreement is upon us. If the league (essentially the owners, to whom the league’s leadership answers) decides it would like the CBA to end after the 2019-2020 season, they have to give written notice to the NHLPA on or before September 1st. That would be this upcoming Sunday.

If the NHL decides it wants to go on with the CBA, but the union does not, they can serve the league notice of early termination prior to September 15th. This would have the same impact: the agreement would wrap up after this season ends.

The league and the union could also agree to a short-term extension on those termination dates depending on how things are going; they would delay their termination rights by a month or two to continue negotiations. This is the “kick the can down the road” option, but it implies some optimism about a deal getting done.

If we make it to September 16th and neither party has exercised their termination rights, nor agreed to an extension of those rights, the current CBA stays in force and the band plays on. The CBA would continue until at least September 2022, and the possibility of a labour stoppage would presumably disappear until that time unless society collapses due to global warming.

It’s worth noting the league and the union can, and do, amend the CBA over time by mutual agreement; if both sides decide a change is appropriate they can make it whenever they like. Early termination is a chance for one side to say that things aren’t working out and they’re willing to go to another stoppage to force some changes.

If Either Party Decides On Early Termination, Are We Doomed To Another Lockout?

It wouldn’t be an encouraging sign, but it wouldn’t be inevitable either. If early termination is exercised, the league and the union have a year to come to a new arrangement. Time pressure has a way of helping these deals get done; in 1995 and 2013, it was the desire to salvage at least a partial season that got something done. Hopefully we don’t get to that point this time around.

So How Unhappy Are The Owners?

The owners appear to like the current Collective Bargaining Agreement just fine. That isn’t to say they wouldn’t change anything given a free hand—I have a strange feeling all these very rich people wouldn’t mind paying their employees less—but the owners pushed very hard for particular policy goals in the 2005 and 2013 lockouts and they achieved several of them. If you wonder why Gary Bettman remains securely in the commissioner’s office, those victories are a big reason why.

The most prominent win from the 2005 lockout was the hard salary cap, as well as a massive across-the-board reduction in player salaries. Despite fifteen years of the game and revenues growing, the Detroit Red Wings had a higher payroll in 2004 than they do in 2019.

The 2013 lockout was largely a fight about hockey-related revenue (which was an issue the first time around, but came to the fore in the second.) Think of hockey-related revenue, or HRR, as a pie. A bunch of sources of income for the league are counted as part of the pie, and then the pie is divided between the owners and the union. It’s worth noting that some sources of revenue—the Vegas Golden Knights’ expansion fee, for example—are not counted as HRR, so the owners get to keep all of the money from those. But most of the ordinary sources of money for a franchise are counted as ingredients in the HRR pie. After much debate, in 2013 the two sides agreed on a fairly intuitive 50/50 split.

This is worth noting: a certain amount of the players’ salaries is held back in what’s called “escrow.” If the total money to be paid to players is more than 50% of all HRR for the season the players simply don’t get the full cash value of their contract.

Hold that thought.

This is a vast oversimplification, but, the owners won most concession from the players they wanted in the previous two disputes. They’re apparently doing well for themselves, although discerning real profit for sports teams is always a bit of a shell game. Gary Bettman has said they would like to “extend or renew the CBA with a minimum of fanfare”, for what it’s worth. We have some concrete evidence they’re happy with the current CBA, because when the union and the owners were arguing about going to the 2018 Winter Olympics, the league offered to let the players go on the condition that the agreement be locked in until 2025. The union said no.

How Unhappy Is The Union?

The players do not like escrow, and it’s not hard to see why. Having part of your salary kept away from you for potentially an extended period, and maybe not getting it at all, is not fun. It’s a natural consequence of the agreement—if you’re limited to 50% of HRR, then you have to have escrow unless the salary cap and salaries are directly tied to HRR—but it’s not fun nonetheless.

The problem of escrow is a source of tension within the union: players on existing contracts may not actually want the cap to go up very much, because that potentially increases the amount held back in escrow. Players who anticipate signing big deals would want the cap to go up to increase their potential earnings. In recent years the union has usually elected to increase the salary cap, but not always by the maximum possible amount. Former PPP writer Clark Aitken once described the last CBA as the union choosing to get paid in “fun bucks”—basically, they get big numbers on the contracts, but with the limit of 50% of hockey-related revenue hanging over payrolls, those numbers aren’t truly guaranteed.

The league and the union could negotiate for the players to be guaranteed the dollar value of their contracts, but the league would naturally want to revise the salary cap downward as well as player salaries, and it would get a lot more concerned about the union’s ability to escalate the cap. Otherwise the union is just demanding more money, which the league is naturally going to push back against.

More pragmatically, if I’m in the players’ union, I’m a little concerned that the lockouts have generally not gone well for my side, and that we might be risking what we still have. The union, after all, has held on to ironclad contracts that are hard for teams to terminate; if there’s another all-out labour war, the owners might be expected to pursue a situation like the NFL’s, where teams cut players and terminate their contracts regularly, and, on a basic level, work stoppages tend to be harder on the players. They have less money than the owners to start with and the owners largely don’t depend on their sports teams for income, while the players do.

These aren’t the only issues, of course—the uses of tracking data, international tournaments, and a thousand other things are covered in the CBA and the league and union are capable of fighting over any of them. But escrow has gotten most of the chatter, for good reason: that’s where the money is.

So the players clearly have a sore spot. Do they want to fight over it? We’ll see.

Reading The Tea Leaves

The encouraging thing is that the signs sound like they’re good. In January of this year, The Athletic’s Pierre Lebrun was writing that both sides genuinely appeared to want labour peace. There was some incentive at the same time to try and save the 2020 World Cup, which was of interest to the ownership, but that hasn’t worked out (their sights are now apparently on 2022.) Still, the tone of the discussions was a lot closer to “let’s make a deal” than the league somberly declaring no one within a thousand miles was making any money. That’s encouraging.

I don’t think the league will exercise its early termination. The union may or may not, but I suspect that they’ll come to an agreement in time to keep next season on track. I’m just going off the vibe and the incentives here, but it seems to me like for once the situation is positive.

Roundtable

Katya: Before they ran off on holiday, both Bob McKenzie and Pierre LeBrun would look at the camera, make that “I’m telling you I know this, but I can’t say I know this” face and suggest that they didn’t foresee any lockout or labour disruption. So number one, I do not believe the NHL will opt out on Sept. 1. Nothing the NHLPA has said indicates they’re planning on opting out either. I think a renegotiated CBA is the most likely option, and rather than a major renegotiation, I think it will be an extension on what’s there with an addendum to add the World Cup as a permanent thing, with the door open to fit the Olympics back in in the future.

I think it’s either a really happy accident or good planning that the fight between the NHL and the IIHF (which is largely over who pays the insurance for Olympic participation) boiled over while the Olympics are in the most disadvantageous time zone for North American television. NBC is not going to pressure the NHL to allow players to go to the Olympics right now. NBC not only broadcasts the NHL in America, their parent company owns the Flyers. They are a major stakeholder in the NHL, and Gary takes their calls.

When it means money for NBC, then they will pick up the phone, and the Olympic stalemate will end. In the meantime, the World Cup will be entrenched in the NHL calendar, and everyone ends up with what they want.

Further to this, I think the proposed World Cup we just heard about would only be proposed if all of this was essentially a done deal minus the details being worked out. And we know that’s where the devil is, so sure, this could hit a bump in the road, but I don’t expect it to.

The NHL does not want to balls up the Seattle expansion, and the NHLPA doesn’t really seem to have any other big issues simmering beyond somehow making escrow more palatable to players. One thing that might be renegotiated is that the payback of escrow funds might be mandated to be sped up. Right now it’s taking the NHL two years to finalize the figures and pay out what players are owed. Other than that, there’s not much that can be done about it without totally reworking the cap rules.

Species: I can see the players wanting change to a few items which might irk them. The eligible data for the salary arbitration process is one. IIRC the arbitrator is still allowed to consider only “official NHL statistics,” which are mostly the legacy stats like plus-minus, PIM, and goals and assists. They can’t use any of the far more advanced analysis based on shots and shot location tracking which we now take for granted to make comparables to other players. This will become further irksome this coming season when tracking devices will be placed in the pucks and in the shoulder pads of players. It will produce an even larger amount of micro-stat data which won’t be considered. You can point out there recently has been very few players who requested salary arbitration and actually went through with the hearing and didn’t sign a contract in the interim, but that could be a result of a lack of real data. The players who really need those hearings are the ones that bring something not captured in the basic stats. Why bother with an arbitration hearing when your team can sit back and submit an counter-argument to the arbitrator equivalent to “But his plus-minus!”

seldo: This is the NHL, so either nothing happens with this CBA negotiation and no one opts out and a new one is signed in time for Seattle to take to the ice and everyone believes good things will happen, OR the players opt out one minute before the deadline, we have a year of CBA doom and gloom, but no one actually begins negotiating until September 1st 2020 and by then the players have convinced themselves they need escrow to go, so they go on strike themselves, therefore making the owners look like the good guys (because no one ever actually listens to what unions want when they go on strike; people will just make assumptions about what greedy jerks they are), We lose half a season before an internal revolt comes up (led by Drew Doughty, master self negotiator who didn’t take any signing bonuses) and players want to get paid so they settle on a deal where the season is 35 games long, the players get escrow removed, but their share of profits goes down from 50% to 30%. Way to go idiots.


Update: