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Free agents: is there a hidden cost, or is this all risk-free?

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The first free agent season has fallen in the hiatus, so it’s time to examine the risks of signing players who’ve never set skate in the NHL before.

NHL: SEP 24 Preseason - Canadiens at Maple Leafs Photo by Julian Avram/Icon Sportswire via Getty Images

Right now the Maple Leafs have nothing at all to do except look for first-time free agents to sign or call up Gary Bettman to offer playoff formats in case this season does resume. Unlike many other teams, the Leafs have signed everyone to an ELC they seem to be interested in out of their prospect pool, and they aren’t rushing to deal with re-signing expiring UFAs or RFAs.

Some fans just like to worry about things, or spin a big grey cloud around the silver lining of any player signing or be mad online that the GM didn’t conjure up a famous, fabulous and oddly inexpensive top-pairing defender. But the urge to worry that signing that free agent will somehow doom the team seems to be hard to curb. Let’s see if there’s anything in the potential signing of a random player to be afraid of.

Who am I talking about?

First-time free agents, a term I just made up, are players who have never played in the NHL before. There are a small handful of current European pro players who have NHL experience, and who might return, and I’ll talk about them separately.

The pool of players that can be signed right now are all undrafted or previously drafted players whose rights have expired. They include NCAA graduates (not necessarily degree-holding graduates in the academic sense, just players who are going pro), CHL graduates (nearly always 20 and up unless they’re European loans to junior hockey), and European pros. All of those leagues have ended their seasons. AHL-contracted players are sometimes signed to NHL deals, but that kind of deal would likely wait until their season is officially ended.

One other potential pool of players is formerly drafted players who have never been signed by their NHL club, whose rights are about to expire. Those expiry dates are June 1 and August 15 for CHL and NCAA players respectively. It’s possible those dates may be changed, however, but they aren’t available yet.

When do contracts start?

The NHL has declared a moratorium on signings for the current season. Teams can, and many are, signing players for the 2020-2021 season.

What are the rules about signing these players?

Players signed now as free agents can’t be under contract anywhere else. This gets a little grey with the seasons in Europe ending before contracts have technically expired. In the past the April 30 end date for KHL deals has been strictly observed, and there were occasionally signings announced at midnight Moscow time on May 1. That’s become elastic in recent years with players simply entering into NHL deals once their season and commitment to their national team is over. With no world championships, that means now.

Most of these signings will be to ELCs*, which are structured within a very narrow set of rules. All players who are not 25 years old on September 15 of the year their contract takes effect must receive an ELC. These contracts are one to three years in length based on age. An ELC must be a two-way deal; the minors salary is capped at $70,000 and the NHL salary is capped at $925,000. Signing bonuses are capped at 10% of the total salary, paid annually. ELCs can include performance bonuses capped at $850,000 for one type and $2 million for the other. Performance bonuses are not included in the AAV (cap hit) in normal circumstances, but can come into play for teams operating in LTIR.

Players 25 and over receive regular contracts without the ELC restrictions. Those contracts cannot include performance bonuses unless they are 35+. They can include signing bonuses as long as the regular salary paid meets the minimum each year. They can be one-way or two-way.

What about waivers?

The waiver exemption rules are complex and there is a lot of misinformation about who is or is not exempt. They are not tied to the ELC or to two-way contracts. Therefore, a player not on an ELC may be waiver exempt and a player who is may be subject to waivers. Exemption is tied to age, years in pro hockey and NHL games played.

A first-time NHL player on a new contract is waivers exempt for at least part of one season. Waiver exemption is a “whichever comes first” rule, so once a player meets their games played or their years in pro hockey threshold they lose their exemption. Pro hockey played outside the NHL only counts when that player is already under an NHL contract, not before.

Players signed at 25 years or older have no games played limit and are waivers exempt for one season.

Younger players, those who would all be on their ELCs, are waivers exempt for two to six years and for 60 to 80 NHL games played. Goalies have slightly different rules. The 60 games exemption applies to players aged 21 to 24, so that’s most of the players a team might sign as a free agent.

What this means in practice is that a team can’t sign such a player, play them most of the year and then easily shunt them to the AHL when they load up at the deadline. Not without risking waivers. But there is nothing stopping a team from sending a new signing to the AHL right out of training camp or after a few NHL games played. Nothing but the European out clause, that is.

Out Clauses and Contract Termination

For European players who have opportunities to play pro hockey in Europe, trying out in the NHL is a risk for them. Miro Aaltonen, a star in the KHL, came to the Leafs, was cut to the AHL, spent a year there as a star in the AHL, and then left to return to his former life. He played no NHL games. Others in his situation choose to trigger the European out clause in their contract which allows them to walk away from their NHL deal (and unpaid salary) and return to Europe if their NHL club does not put them on the NHL roster. Those clauses usually expire in November or December.

Even if a player stays on their NHL contract past that point, sometimes things don’t work out and they want to sign somewhere else. Mutual termination of the contract is the remedy used, primarily for Europeans — drafted and free agent signings — who want out of the minor leagues and into European pro hockey.

Nothing is forever in hockey. Not even the cap hit of a player whose contract is terminated.

Salary Cap, SPC and Roster Limits

NHL teams can have 50* players signed to an SPC (NHL contract) in any one season. That number gets an asterisk because it’s a little elastic. Nick Robertson, for example, does not count against that count for 2019-2020 because he’s been loaned back to his junior team. The Leafs currently have only 30 SPS for next season, at least two of which will be loans back to junior. They have nine RFAs they might sign, and they also simply need to replace expiring UFAs on the NHL and AHL roster.

Not all 50 players count against the salary cap. Any player signed and then cut to the AHL does not count against the cap. That should get an asterisk too, because that’s a little elastic. All contracts are “buriable” up to a number that grows gradually through the length of the CBA. All ELCs fall under that limit, but someone 25 or over could be signed for an amount over the limit. That number for next season is $1,075,000.

The total cap hits that count against the cap is the 23-man active roster plus all players on LTIR. The Leafs are not expecting to have anyone on LTIR next year, but no one ever expects everyone to break their foot in one season, so who knows where they’ll be once play gets underway.

What’s the biggest risk in signing a first-time NHLer?

Um.... he might be a jerk?

Most of the arguments against signing a free agent amount to misapplying the cause for an often imaginary problem.

The team can’t be “stuck with” a player who doesn’t work out. The Leafs won’t destroy their salary cap by having three choices for one roster spot in training camp because they will simply have to make a choice between them. The real risk is that the player you like might get replaced by someone the coach likes better. Or that the player signed might not seem exciting or interesting to you.

Even a more expensive free agent not on an ELC is not the cause of a salary cap problem. That honour falls on the GM who signed all of the players, and so far, “we can and we will” seems to be a lot truer than “Kyle Dubas can’t add and subtact”.

For a team with a prospect pool that is getting a little shallow, the free agent from Europe or the CHL isn’t going to hold back the prospects. If the prospect can’t beat out a 25-year old KHLer for a job in training camp, the prospect isn’t ready.

Not “playing the kids” isn’t caused by having free agents on the roster. It’s caused by not wanting to play them, and often isn’t a problem at all.

The belief in too much excess at one position misses the fact that players that don’t make the team can and will be traded, sent to the AHL, or will return to Europe. The Maple Leafs won’t be playing wingers at every position if they sign one, two or six wingers this summer. Frederik Gauthier still has his faceoff prowess getting him an NHL job, so don’t worry about that.

The free agent winger isn’t closing the door to the magical signing of the world famous, fabulous first-pairing defender on a minimum salary we know is out there. He’s just one more guy whose foot isn’t broken. Yet.

For all that the Leafs seem to have most of their roster set and few openings available (except for that first-pairing defender), their SPC count is very low. While it seems a perennial worry that the team will not be able to make a deal or grab that juicy waiver claim because of the SPC count, so far, the Leafs management has been shown to be able to count to 50.

A free agent isn’t clogging up the SPC count. If there’s players on there who aren’t adding value at some level, that’s a wider issue. And it’s not hard to solve, as it’s easy to make a trade of AHLers on NHL deals to free up spce. AHL teams always want to retool by position.

Return Engagements

The slightly more complex deals that could be made by teams now are for former NHLers who have been in Europe for a while. Mikhail Grigorenko is a handy example. He’s 25, and no NHL team has signing rights to him anymore. But unlike a first-time NHL signing, he would not be waivers exempt. He’s played far too much NHL hockey to still have an exemption.

He, like Ilya Kovalchuk last season, can sign any sort of NHL deal and may well do so.

Free Wallets are Risk Free

First-time free agents really are risk free. Even the Kovalchuk situation in LA last year was a problem for them because they overpaid him and gave him term, and he didn’t fit in on their team. That could be true of any signing, particularly by a team known for bad contracts. Even that contract went away when the deadline approached and the player was motivated to get onto a different team.

The players who get stuck on teams are young players and hold an SPC spot and use salary cap while returning no value are those who can’t crack the playing roster and aren’t waivers exempt. There is always a small pool of tweeners in the NHL on every team, cluttering up every press box, and the easiest way to solve the issue is to replace them with someone who may or may not be better, but who is definitely waivers exempt.

Dmytro Timashov, a draft pick who aged out of waivers exemption and did not crack the Leafs lineup, was “lost” on waivers in a move that cost the Leafs nothing. They can easily find a winger who is exempt, who can at least produce to Timashov’s level, and if a bad team wants to play Timashov, the swap of players works in everyone’s favour.

Losing a player like Timashov is not a failure of asset management because you simply cannot suffer a loss when you lose an asset that has no value and you can replace for free.

The Leafs have signed a host of first-time NHLers in recent years:

  • Trevor Moore
  • Mason Marchment
  • Andreas Borgman
  • Calle Rosen
  • Miro Aaltonen
  • Kasimir Kaskisuo
  • Igor Ozhiganov
  • Ilya Mikheyev
  • Joey Duszak

Some of those players have left, one came back, some are still here, and none of them have harmed the team by their tenure in the NHL or AHL.

*Update: as we learned with Barabanov’s signing, there is a provision for older European players to sign a one-year ELC. North American players, even if they’ve been playing in Europe, are not subject to that. Former NHLers who left and might return are also not subject to that.