Gaudreau Contract

[Ford Prefect]

I'm hoping one of you gurus can help out with this question. Following the tragic death of Johnny Gaudreau, I was wondering how his salary is accounted for against the cap. I assume that the Jackets would still be liable for the balance of the contract. I'm not sure if there's a provision in the CBA or the SPC, but I'm starting with that premise. I don't know if there's any language in the CBA about what happens to the cap hit though. It's still a player related expense that needs to be paid out, whether the contract is insured or not. Intuitively, it would seem to me that the cap hit would not be erased. I would think that it would be treated similarly to LTIR where the contract is still applicable to team payroll, but they have a pool of money they can exceed the cap by if needed. Does anyone know for sure?

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[aqib]

I'm hoping one of you gurus can help out with this question. Following the tragic death of Johnny Gaudreau, I was wondering how his salary is accounted for against the cap. I assume that the Jackets would still be liable for the balance of the contract. I'm not sure if there's a provision in the CBA or the SPC, but I'm starting with that premise. I don't know if there's any language in the CBA about what happens to the cap hit though. It's still a player related expense that needs to be paid out, whether the contract is insured or not. Intuitively, it would seem to me that the cap hit would not be erased. I would think that it would be treated similarly to LTIR where the contract is still applicable to team payroll, but they have a pool of money they can exceed the cap by if needed. Does anyone know for sure?

I saw an article where it mentions that the contract is off the cap and that drops Columbus below the salary floor so I assume it comes off the cap. I think they are still going to pay it and there is probably life insurance to cover it.

 

[DomBarr]

I'm hoping one of you gurus can help out with this question. Following the tragic death of Johnny Gaudreau, I was wondering how his salary is accounted for against the cap. I assume that the Jackets would still be liable for the balance of the contract. I'm not sure if there's a provision in the CBA or the SPC, but I'm starting with that premise. I don't know if there's any language in the CBA about what happens to the cap hit though. It's still a player related expense that needs to be paid out, whether the contract is insured or not. Intuitively, it would seem to me that the cap hit would not be erased. I would think that it would be treated similarly to LTIR where the contract is still applicable to team payroll, but they have a pool of money they can exceed the cap by if needed. Does anyone know for sure?

The CBA actually does have sections related to accidental death and I think the contact is deemed to be void and is removed from cap calculations in the eyes of the NHL and NHLPA

 

[Yukon Joe]

I'm hoping one of you gurus can help out with this question. Following the tragic death of Johnny Gaudreau, I was wondering how his salary is accounted for against the cap. I assume that the Jackets would still be liable for the balance of the contract. I'm not sure if there's a provision in the CBA or the SPC, but I'm starting with that premise. I don't know if there's any language in the CBA about what happens to the cap hit though. It's still a player related expense that needs to be paid out, whether the contract is insured or not. Intuitively, it would seem to me that the cap hit would not be erased. I would think that it would be treated similarly to LTIR where the contract is still applicable to team payroll, but they have a pool of money they can exceed the cap by if needed. Does anyone know for sure?

So as just a general rule of contracts if a person dies and is unable to fulfill the contract the other party has no further obligations. So in terms of the salary cap, Gaudreau's contract is no longer on it and CBJ has oodles of cap room (in fact they're not quite at the cap floor according to Puckpedia).

In the case of a tragic death like this it becomes a question of life insurance.

Now under the CBA all players do have life insurance through the league. Now according to one source, it suggests that players get $1 million in life insurance, plus an accidental death benefit of one year's salary (up to $15 million).

So Gaudreau's widow would get $1 mil plus $9.75 mil.

Now that obviously is not the entire value of his contract. Gaudreau could have bought additional life insurance while he was alive as his future salary is certainly an insurable asset, but I suspect that would have been on him (and his agent) to arrange.

So now I'm actually curious - do many/most players get private insurance above and beyond the league-guaranteed insurance?

 

[Chileiceman]

So as just a general rule of contracts if a person dies and is unable to fulfill the contract the other party has no further obligations. So in terms of the salary cap, Gaudreau's contract is no longer on it and CBJ has oodles of cap room (in fact they're not quite at the cap floor according to Puckpedia).

In the case of a tragic death like this it becomes a question of life insurance.

Now under the CBA all players do have life insurance through the league. Now according to one source, it suggests that players get $1 million in life insurance, plus an accidental death benefit of one year's salary (up to $15 million).

So Gaudreau's widow would get $1 mil plus $9.75 mil.

Now that obviously is not the entire value of his contract. Gaudreau could have bought additional life insurance while he was alive as his future salary is certainly an insurable asset, but I suspect that would have been on him (and his agent) to arrange.

So now I'm actually curious - do many/most players get private insurance above and beyond the league-guaranteed insurance?

That's BS that it would not be automatically insured for the balance of it. If he was catastrophically injured and had to spend the duration of the contract on LTIR, he'd still get the money. But because he died the family doesn't? That does not sit right.

 

[Yukon Joe]

That's BS that it would not be automatically insured for the balance of it. If he was catastrophically injured and had to spend the duration of the contract on LTIR, he'd still get the money. But because he died the family doesn't? That does not sit right.

The living cost more than the dead.

My usual disclaimer: I'm a lawyer, not licensed to practice law in the US. At the start of my career I actually did some insurance law work, but not life insurance.

The thing is, let's take this accident, but let's pretend that Matt Geaudreau was alive, but horribly disabled, whereas Johnny is still dead. In a lawsuit brought in the name of both brothers I would expect Matt to get a lot more money than Johnny's estate. Matt could still be expected to live for decades more, but probably at substantially reduced income, maybe he needs regular care and medical attention, etc. All that costs a lot of money. Johnny though is dead - he doesn't need any more money for anything. So while his widow would definitely get something in a wrongful death lawsuit, it probably wouldn't be as much.

So yes, my sense of "fairness" also says that Johnny's family should get the entire value of the contract. But the way you protect that is through insurance, and insurance isn't cheap. So between the league and the NHLPA they appear to have agreed to the $1 mil plus 1 year salary.

I mean I can tell you that my own personal life insurance is for 10x my annual salary. Not at my age I hopefully won't work much more than 10 years (and hopefully less), but if I had died when I was younger my wife and kids would get a whole lot less than my total lifetime earnings.

Or why is it "fair" that Gaudreau's family gets well taken care of, since he still had many years left on his contract? Since I'm in Edmonton, let's take Draisaitl and McDavid. If the league gets insurance for full contracts, if McDavid and Draisaitl were to die in a tragic auto accident tomorrow then Draisaitl (who just signed an 8 year extension) would get $120 million (his 8 year extension plus this year's contract) while McDavid would only get $25 mil, because he can't sign an extension yet. Is that fair?

But the thing is - McDavid could easily go out and get a whopping huge life insurance plan if he wants that would cover his future earnings

 

[LadyStanley]

We've been talking about this in the stickied CBA thread. Full text of NHL/NHLPA MOU for new 2020 CBA - analysis and discussion
(Starting at post 171)

Insurance pays Johnny's estate/family $1m life insurance plus accidental death payout of $7.75m (1yr base salary).

It is assumed the remaining $10m in signing bonuses will be paid.

The unknown factors....

Was his bicycle riding considered conditioning, so he was "working"? If so, his entire contract may need to be paid.

And unknown impact on cap hit.

(A search in CBA document of "die", "death" do not provide any clarification)

And surviving spouse has life insurance and health insurance for life, if wanted.

 

[LadyStanley]

In the season opening 32 Thoughts podcast, Friedman declined to discuss Columbus team situation until after the funeral. So, I'm guessing we may have more insight in next pod drop.

 

[StreetHawk]

Everything in terms of money to the Gaudreau family will be laid out in the CBA or with Insurance provider.

Remaining signing bonus, would depend on the wording of the CBA. Players are paid their SB when it's not in their control in terms of a work stoppage or buyout. Not sure a player could pocket a SB and then retire before the season and keep that SB. Slip in LV returned the majority of his SB when he wanted out, so potentially if the player does not render services, the SB doesn't need to be paid. But, again, that should be spelled out in the CBA or with insurance in terms of both SB and salary. Like, it might be spelled out in the insurance coverage, what activities are considered "working out/conditioning" for the NHL.

There is no adjustment needed to his cap charges from the prior 2 seasons as his payments matched his cap hit of $9.75 mill. He has $ 2mill per season in SB with $7.75 mill in salary per season.

With Gaudreau's cap charge, does seem like he would be paid out for this season. Which does appear to be covered by insurance. If covered by insurance, logically, should then treat it like LTIR and count it against the CBJ cap.

Do wonder if the players who make big money have their own additional insurance? Does Leon have one to cover his new big contract, same with MacKinnon, Mathews, etc. down the line? If they don't might be something they decide to get.

 

[LadyStanley]

Teams have workman's comp insurance on nominally their top 5 $$ contracts (league group policy).

And loans to national federations often require those organizations have insurance to cover full value of player contracts. (See IOC/IIHF/NHL/NHLPA discussions.)

 

[Yukon Joe]

Do wonder if the players who make big money have their own additional insurance? Does Leon have one to cover his new big contract, same with MacKinnon, Mathews, etc. down the line? If they don't might be something they decide to get.

So the thing is, if you're Johnny Gaudreau - you obviously want to make sure your wife and kids are taken care of if anything should happen to you.

But when it comes to life insurance - do you want to make sure they get the full $70 mil of your contract, or is the $10 mil they'd get under the CBA enough? And how much do you want to pay to make sure they'd get that extra $60 mil?

 

[StreetHawk]

So the thing is, if you're Johnny Gaudreau - you obviously want to make sure your wife and kids are taken care of if anything should happen to you.

But when it comes to life insurance - do you want to make sure they get the full $70 mil of your contract, or is the $10 mil they'd get under the CBA enough? And how much do you want to pay to make sure they'd get that extra $60 mil?

That's the question. If the top 100 players who make say $8 mill annual or more were to get their own life insurance, what amount of premiums would be needed by a life insurance company (assuming 1 company were to cover all of them) to make it beneficial for them? $100K annually ends up at $10 mill for the company. Death of a current NHLer is rare. In the life of the salary cap era in the NHL, we have had Bourdon pass in a motorcycle accident, Matiss K. the goalie for CBJ die in a fireworks accident, and Johnny Gaudreau in a car accident. The first 2, wouldn't be part of this given that they were on elc/low cost contracts. So, at almost 20 years, that could have been $180 mill of premiums paid with 1 payout of the remaining $50 mill owed to Gaudreau. That's just putting some numbers out there. Premiums would have to be more than enough to cover the death of a player at the probabilty over say a decade for it to be worth it to an insurance company.

For Leon, at $112 mill, it might be worth putting up $250k per year to insure it (at least for the first 5/6 years).

 

[Yukon Joe]

That's the question. If the top 100 players who make say $8 mill annual or more were to get their own life insurance, what amount of premiums would be needed by a life insurance company (assuming 1 company were to cover all of them) to make it beneficial for them? $100K annually ends up at $10 mill for the company. Death of a current NHLer is rare. In the life of the salary cap era in the NHL, we have had Bourdon pass in a motorcycle accident, Matiss K. the goalie for CBJ die in a fireworks accident, and Johnny Gaudreau in a car accident. The first 2, wouldn't be part of this given that they were on elc/low cost contracts. So, at almost 20 years, that could have been $180 mill of premiums paid with 1 payout of the remaining $50 mill owed to Gaudreau. That's just putting some numbers out there. Premiums would have to be more than enough to cover the death of a player at the probabilty over say a decade for it to be worth it to an insurance company.

For Leon, at $112 mill, it might be worth putting up $250k per year to insure it (at least for the first 5/6 years).

So the thing is - even that estimate is probably too high. I'm seeing a suggestion that for a 30 year old life insurance costs $14/month for $250k coverage. So for $100 million in coverage it would cost $67k per year.

But then again, $67k is still a lot of money. If you're Leon Draisaitl, you've already earned a lot of money in your career. You're engaged, no kids, the odds of you passing away in the next 10 years are extremely low, so you may well consider it as "not worth it" to spend $670k over 10 years. Your fiancee, and any future kids, already are financially secure for life based on what he's already made.

I have life insurance because my family would not be financially secure if I were to pass away and they no longer had my income.

 

[Squiffy]

We've been talking about this in the stickied CBA thread. Full text of NHL/NHLPA MOU for new 2020 CBA - analysis and discussion
(Starting at post 171)

Insurance pays Johnny's estate/family $1m life insurance plus accidental death payout of $7.75m (1yr base salary).

It is assumed the remaining $10m in signing bonuses will be paid.

The unknown factors....

Was his bicycle riding considered conditioning, so he was "working"? If so, his entire contract may need to be paid.

And unknown impact on cap hit.

(A search in CBA document of "die", "death" do not provide any clarification)

And surviving spouse has life insurance and health insurance for life, if wanted.

Doesn't 50.5(ii)(B) kind of address it in a backwards fashion?

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"For any period during which the Player under a Long-Term Contract is no longer playing in the League during the term of that Long-Term Contract by reason of retirement, "defection" from the NHL or otherwise (but not death) (such that he is not playing and is not receiving Salary pursuant to that Long-Term Contract), an amount attributable to that Player shall nonetheless continue to be included in his Club's Averaged Club Salary as described below."

-----------​

Logically, if a player no longer playing in the league for every reason under the sun, excepting death, continues to have a contract contributable to a Club's cap, is the inference not that in the case of death it shall not be?

Beyond that, I suggest that if not specifically addressed within the CBA, common sense will prevail and the NHL and PA will move swiftly to agree to not punish a clubs cap structure in the event of untimely death right?

 

[LadyStanley]

As we concluded/assumed, there would be no cap hit for JG. (To reiterate, the CBA does not EXPLICITLY state what the impact is to cap hit for team if player dies.)

And PuckPedia has removed him from their calculations.

https://puckpedia.com/team/columbus-blue-jackets

Which leaves the team ~$3m under cap floor. (With 41 contracts signed.)

Conceivably, they could acquire essentially-retired LTIR hit (say VGK's Robin Lehner); or perhaps guys out for the season (on expiring contracts). Or they could sign/acquire via waiver 1-2 NHL capable guys for $3m+ cap hit.

CBJ has until 10/3 (or so) to finalize a roster to be cap compliant.

 

[CheckingLineCenter]

So as just a general rule of contracts if a person dies and is unable to fulfill the contract the other party has no further obligations.

Question and it may be dumb.

Are NHL contracts with the player or with player controlled special purpose entities, trust/trust-controlled LLCs, etc?

 

[Yukon Joe]

Question and it may be dumb.

Are NHL contracts with the player or with player controlled special purpose entities, trust/trust-controlled LLCs, etc?

I'm pretty sure it's directly with the player, but can't say with certainty. There's too much room for cap evasion otherwise (and tax evasion as well).

But also - does it really matter? Let's say CBJ had a contract with Johnny Geadreau Hockey LLC, and not Johnny himself. But the contract fundamentally is "JG LLC will ensure that CBJ gets the hockey services of Johnny Geadreau, and in exchange CJB will pay JG LLC millions of dollars".

Johnny Geadreau is dead. His holding company, JG LLC, can no longer comply with the contract.

 

[CheckingLineCenter]

I'm pretty sure it's directly with the player, but can't say with certainty. There's too much room for cap evasion otherwise (and tax evasion as well).

But also - does it really matter? Let's say CBJ had a contract with Johnny Geadreau Hockey LLC, and not Johnny himself. But the contract fundamentally is "JG LLC will ensure that CBJ gets the hockey services of Johnny Geadreau, and in exchange CJB will pay JG LLC millions of dollars".

Johnny Geadreau is dead. His holding company, JG LLC, can no longer comply with the contract.

Yeah I’m not sure if it matters was more for curiousity’s sake.

 

[theVladiator]

...

It is assumed the remaining $10m in signing bonuses will be paid.

...

Makes perfect sense, since they are called "signing bonuses". However, I became curious about Gaudreau's signing bonuses because of the recent thread about Tavares signing bonuses. Apparently, signing bonuses for Tavares had some additional conditions imposed on them, triggering tax implications. Made me wonder if Gaudreau's contract similarly could have conditions attached as well, leading to them not being due anymore.

 

[StreetHawk]

Makes perfect sense, since they are called "signing bonuses". However, I became curious about Gaudreau's signing bonuses because of the recent thread about Tavares signing bonuses. Apparently, signing bonuses for Tavares had some additional conditions imposed on them, triggering tax implications. Made me wonder if Gaudreau's contract similarly could have conditions attached as well, leading to them not being due anymore.

Everything will have been spelled out in the cba. SB are due to the player in the event of a buyout or work stoppage.
Ship in LV had to return SB when he left the team to return to the KHL.

So if you are not able or willing to provide service, is trh SB still due? Should be in the cba as that’s an important condition for contracts.

 

[Yukon Joe]

So if you are not able or willing to provide service, is trh SB still due? Should be in the cba as that’s an important condition for contracts.

So that's the thing about contracts - they get litigated all the time. Just because there's a CBA doesn't mean there's a clear answer.

 

[mouser]

Doesn't 50.5(ii)(B) kind of address it in a backwards fashion?

-----------​

"For any period during which the Player under a Long-Term Contract is no longer playing in the League during the term of that Long-Term Contract by reason of retirement, "defection" from the NHL or otherwise (but not death) (such that he is not playing and is not receiving Salary pursuant to that Long-Term Contract), an amount attributable to that Player shall nonetheless continue to be included in his Club's Averaged Club Salary as described below."

-----------​

Logically, if a player no longer playing in the league for every reason under the sun, excepting death, continues to have a contract contributable to a Club's cap, is the inference not that in the case of death it shall not be?

Beyond that, I suggest that if not specifically addressed within the CBA, common sense will prevail and the NHL and PA will move swiftly to agree to not punish a clubs cap structure in the event of untimely death right?

No. 50.5(ii)(B) is irrelevant to Gaudreau because the entire clause only applies to Long-Term Contracts. Gaudreau was not on a Long-Term Contract.

For those wondering what a “Long-Term Contract” means: it’s a CBA definition for the long term, mostly backdiving cap circumvention contracts like Weber, Hossa, Crosby, Luongo and others signed prior to the 2013 CBA.

 

[Squiffy]

No. 50.5(ii)(B) is irrelevant to Gaudreau because the entire clause only applies to Long-Term Contracts. Gaudreau was not on a Long-Term Contract.

For those wondering what a “Long-Term Contract” means: it’s a CBA definition for the long term, mostly backdiving cap circumvention contracts like Weber, Hossa, Crosby, Luongo and others signed prior to the 2013 CBA.

Thanks @mouser, I was wondering reading it what the term “Long-Term Contract” referred to. Where is it defined?

 

[mouser]

Everything will have been spelled out in the cba. SB are due to the player in the event of a buyout or work stoppage.
Ship in LV had to return SB when he left the team to return to the KHL.

So if you are not able or willing to provide service, is trh SB still due? Should be in the cba as that’s an important condition for contracts.

One of those legal nuances which I’m not sure has been settled. In the NFL for example signing bonuses are exactly that, you get the entire bonus upon signing, not split across multiple years. (Or at least I believe that’s how it works).

The NHL allows signing bonuses to be spread across multiple seasons.

There is an expectation when signing a contract with signing bonuses that the player is going to fulfill the entire contract to earn the bonus. There have been examples of NFL players who retired while under contract and had to refund a % of their signing bonus for the unserved seasons.

As mentioned earlier, Shipachoyov had to return most of his signing bonus to Vegas and retire from the NHL to have his contract terminated by the Knights. But I haven’t seen a clear answer whether Shipachoyov had to return that signing bonus money due to a NHL league-wide policy similar to the NFL’s, or whether Vegas independently forced Ship to return the bonus money.


All of those cases where signing bonuses were returned involved a player voluntarily refusing to fulfill their contractual obligation.

Does the same standard apply to NHL or other league’s signing bonuses if the player like Gaudreau is involuntarily unable to fulfill their contractual obligation through no misdeed of their own?

 

[mouser]

Thanks @mouser, I was wondering reading it what the term “Long-Term Contract” referred to. Where is it defined?

Long-Term Contract is defined in the 2013 CBA here on page 265. To be considered a Long-Term Contract it must be both

A) Seven+ seasons, and
B) Signed in 2012 or earlier.**

**Technically this rule applies to any contract signed before the 2013 CBA execution date of Feb 15th 2013 when the new 2013 CBA was approved. But the NHL didn't allow any new contracts to be filed between Sep 15th 2012 when the old 2005 CBA expired, and Feb 15th 2013 when the new 2013 CBA was approved. Meaning effectively contracts from 2012 and earlier.