A major area newly hired NHL Seattle assistant general manager Ricky Olczyk will oversee on the team’s behalf is the collective-bargaining agreement (CBA) between players and team owners.
For this week, though, that’s on hold as Olczyk and the rest of the National Hockey League wait to see whether players utilize a clause allowing them to opt out of the current CBA two years ahead of schedule. The NHL Players Association (NHLPA) has until Sept. 15 to give owners a mandated 12 months’ advance notice it intends to terminate the CBA next fall rather than letting it run its course through September 2022.
The year of forewarning allows both sides to reach a new deal in time to prevent a work stoppage during the 2020-21 season. But avoiding even the triggering of that one-year countdown and resolving any CBA impasse right now best serves NHL Seattle.
And the only way that happens is if the NHL changes the rules surrounding an “escrow” system that sees the league annually withhold 10% to 15% of player salaries to balance revenue-sharing requirements.
More on escrow in a moment.
For now, there was optimistic talk last week a deal was close enough to possibly extend the opt-out deadline beyond next week and ultimately prolong the CBA through 2024-25. That would delight NHL Seattle, since any work stoppage next fall would hamper efforts to generate local excitement in the year leading up to its expansion team’s October 2021 debut.
Also, it’s tough for NHL Seattle to plan for a June 2021 expansion draft when there’s no guarantee it would take place if players are locked out. Not to mention, planning future payroll, player signings and contract workings would be nearly impossible without knowing what the league’s CBA landscape will look like beyond this coming season.
So, it’s better for NHL Seattle if players and owners resolve their issues. It’s especially beneficial to Seattle’s team planning if the CBA gets extended and provides cost certainty for several more years.
One positive development occurred Aug. 30, when NHL commissioner Gary Bettman announced owners wouldn’t exercise their own option to terminate the CBA early.
That wasn’t surprising, with $650 million incoming from Seattle franchise fees and perhaps billions more from sports-gaming deals and a looming new U.S. television contract. Owners have a good thing going and don’t want it to stop.
But with players, well, mention “escrow” and you’re likely to have a hockey stick swung at your head.
The current CBA, negotiated in 2013, calls for a 50-50 revenue split between players and owners. If combined salaries paid players is greater than their due half-share of revenue, a portion of annually withheld escrow money goes to owners to make up the difference.
Any leftover escrow money after that is refunded to players, though lately they’ve received little back. They had 15.5% withheld in 2016-17 and 2.8% returned, while final figures for 2017-18 and 2018-19 — when they had 11.5% and 12.91% withheld, respectively — aren’t yet in.
Escrow infuriates players, some likening it to signing a contract that isn’t honored for the full amount.
In years when player salaries fall short of their 50% revenue share, owners are supposed to pay them bonuses. But that scenario has never actually unfolded and it has contributed to a sense by players the escrow system is stacked against them.
Still, there’s a reason it’s always the players giving up escrow money rather than the other way around.
The NHL employs a salary cap with minimum and maximum spending thresholds. Each year, the league sets a revenue projection based off the prior season’s actual intake. The salary-cap maximum is set 15% above that revenue projection while the spending floor is 15% below.
Obviously, players in general want teams spending more on salaries. They can even trigger an “escalator clause” within the CBA allowing the cap threshold to be pushed up to 5% higher for any given season.
Teams also tend to spend toward upper cap limits, given they’re competitive by nature and usually trying to win.
But spending more on salaries also pushes the player money intake further beyond league revenue projections and usually increases the escrow amount withheld. The league calculates the exact amount of escrow withholding four times per season based on how revenue intake is progressing.
No other league operates this way. The NBA has a similar system but it sets a fixed amount of withholding each year that doesn’t change.
NHL players complain not only about withheld salary, but that the changing amount makes financial planning difficult. With players also paying income taxes at high levels, agent fees and union dues, some lose more than half their paycheck once escrow is factored in.
Also, the system can pit player against player, with those poised for a new contract wanting salary thresholds to increase while others on multiyear deals want escrow withholding kept as low as possible.
Proposed solutions include the NHL lowering the maximum salary threshold, or eliminating the 5% escalator clause. Others involve setting a fixed escrow amount rather than revising it. Or, changing the definition of “hockey related income” counted as revenue — such as league contributions to player benefit packages.
Some proposed changes might not even benefit players long term. After all, they’ll always wind up splitting revenue 50-50 — it’s just the mechanism for it being argued — and some player agents suggest they’d be better off keeping the current system and negotiating stronger deals in other CBA areas.
No matter. Despite other hot-button issues, such as NHL participation in the next Winter Olympics, escrow is the hill these players have apparently chosen to die on.
And that’s no idle threat in a league with three work stoppages since 1994-95. So, both sides will have to keep working toward a new escrow system in coming weeks and months — preferably making enough progress to delay next week’s CBA opt-out deadline.
Otherwise, those willing-to-die players, by this time next year, might be taking a piece of NHL Seattle along with them.