Question: What happens to players if an NHL team folds?

[Skobel24]

Got bored in class, was reading up on expansion drafts, and this popped into my head. Hypothetically, if an NHL team folded this summer, what happens to the players who are under contract? Would teams have the option of taking on said contracts? Or do the players/franchise have something like an out clause?

 

[LadyStanley]

IIRC, all players immediately become free agents, and contracts voided.

 

[powerstuck]

Dispersion draft.

Kinda the opposite of expansion draft.

 

[Mike Jones]

Dispersion draft.

Kinda the opposite of expansion draft.

I agree that they're similar but I wonder if dispersals are more involved as there are drafted players and acquired picks and so on to deal with. Are drafted players eligible for the dispersal drafts?

What about acquired picks? Are the draft pick transactions cancelled? If a team acquires a player from a team that eventually winds up folding in exchange for a draft pick do they get that player for free?

It would also be interesting to see how the order of the draft is established. Will it depend solely on standings? Will there be a lottery involved? Can participating teams trade their picks?

With up to 50 players on a reserve list and several other drafted players at different stages of their development I could see a dispersal draft of two rounds.

 

[MXD]

I agree that they're similar but I wonder if dispersals are more involved as there are drafted players and acquired picks and so on to deal with. Are drafted players eligible for the dispersal drafts?

What about acquired picks? Are the draft pick transactions cancelled? If a team acquires a player from a team that eventually winds up folding in exchange for a draft pick do they get that player for free?

.

Well, considering they lost a pick, they didn't get the player for free...

 

[Skobel24]

What about acquired picks? Are the draft pick transactions cancelled? If a team acquires a player from a team that eventually winds up folding in exchange for a draft pick do they get that player for free?

I'd imagine the picks are just voided. If you trade a 2nd for a player, then that team folds, that 2nd round pick would just cease to exist.

 

[tony d]

Dispersal draft I think happens if a team folds.

 

[cheswick]

The last team to completely fold was the Brooklyn Americans in the early 40's so there hasn't been any recent precedent. The Cleveland Barons were the last team to cease operations, but they were merged with the North Stars. Then sort of unmerged to become the San Jose Sharks a number of years later.

 

[Buck Aki Berg]

I doubt the league has any hard-and-fast rules on how to deal with the players of a folded team (especially since it hasn't come up in 70 years). It's probably the same deal as an expansion draft - set guidelines plus negotiations of the finer details.

If you're a glass-half-full kind of guy, they're "treating each situation uniquely". Glass-half-empty, they're "making it up as they go along".

 

[Bongo]

We probably would have found out here in Atlanta if Glendale hadn't stepped up. ASG was kicking the team to the curb no matter what.

 

[TOGuy14]

The league wouldn't let that happen, they would step in and own the team in the interim until a new owner could be found (See: Coyotes, Phoenix)

 

[madhi19]

People say dispersion draft but with the cost of folding a team on the league it would probably make more sense to have a auction.

 

[Mayor Bee]

Just a guess on the multiple scenarios:

1) Auction. All players, possibly draft picks in that year's draft, go up for bidding.

To me, this is extremely unlikely because there are current league guidelines against buying players under contract on the open market.

2) All players become UFAs. This is also extremely unlikely; a player needs to miss two scheduled paychecks before being able to take this step anyway. Since a team is financial duress to the point of folding would most likely have their payroll covered (like with Ottawa and Buffalo), this is unlikely to happen.

3) Dispersal draft. This is the most likely, and would include:
- Players under contract
- Unsigned players whose rights are held
- Draft picks for that current year only
- Draft picks of that team that have been traded away for that year would probably still be honored, and random future ones that have been traded away would likely just be slotted into the middle of the draft. It's also possible that, if a player was traded to that team in exchange for a future draft pick, the team in possession of the draft pick could relinquish it and regain the player they traded.

Ultimately, the league has a vested interest in maintaining something resembling the status quo. Freeing a bunch of players into the UFA pool, letting 18- and 19-year-old unsigned prospects go into the open market, and turning everything into a huge auction would be well outside of this goal.

 

[Mike Jones]

Just a guess on the multiple scenarios:

1) Auction. All players, possibly draft picks in that year's draft, go up for bidding.

To me, this is extremely unlikely because there are current league guidelines against buying players under contract on the open market.

2) All players become UFAs. This is also extremely unlikely; a player needs to miss two scheduled paychecks before being able to take this step anyway. Since a team is financial duress to the point of folding would most likely have their payroll covered (like with Ottawa and Buffalo), this is unlikely to happen.

3) Dispersal draft. This is the most likely, and would include:
- Players under contract
- Unsigned players whose rights are held
- Draft picks for that current year only
- Draft picks of that team that have been traded away for that year would probably still be honored, and random future ones that have been traded away would likely just be slotted into the middle of the draft. It's also possible that, if a player was traded to that team in exchange for a future draft pick, the team in possession of the draft pick could relinquish it and regain the player they traded.

Ultimately, the league has a vested interest in maintaining something resembling the status quo. Freeing a bunch of players into the UFA pool, letting 18- and 19-year-old unsigned prospects go into the open market, and turning everything into a huge auction would be well outside of this goal.

Good post. Here's another question the league would have to struggle with: What would the league do about players with NMC's? A dispersal draft could be interpreted by the player's association as a "move".

 

[Mike Jones]

People say dispersion draft but with the cost of folding a team on the league it would probably make more sense to have a auction.

I think the league would have a problem with rich teams swooping in and grabbing all the top assets.

My bet is that there would be a draft where everyone participates fairly. One small move could be attaching a lottery so that nonplayoff teams could have a chance at the top spot in the draft.

 

[LadyStanley]

IIRC, all players immediately become free agents, and contracts voided.

(This is the way things work in ECHL, etc. Those players who are assigned from NHL/AHL get "recalled" to parent to determine where they'll go. Those with contract from team are SOL.)

 

[powerstuck]

(This is the way things work in ECHL, etc. Those players who are assigned from NHL/AHL get "recalled" to parent to determine where they'll go. Those with contract from team are SOL.)

I doubt that would be the case in NHL.

Lets say Oilers folded tomorrow morning. NHL would want to control who gets dibs at McDavid instead of letting him go for the highest offer he can get.

 

[mouser]

Simple answer to the OP's question: it's the League's decision. The League has the right to re-assign contracts to other teams or to let them be voided and the players become UFA's.

 

[Bongo]

The league wouldn't let that happen, they would step in and own the team in the interim until a new owner could be found (See: Coyotes, Phoenix)

Kind of funny when you consider that was never an option here.

 

[Mike Jones]

Lets say Oilers folded tomorrow morning. NHL would want to control who gets dibs at McDavid instead of letting him go for the highest offer he can get.

This is where a dispersal draft would come in. McDavid would probably go to the team with the first choice and that would probably be based on standings. The league could add a lottery component for the higher teams in the draft order but that's splitting hairs at this point.

 

[kdb209]

Simple answer to the OP's question: it's the League's decision. The League has the right to re-assign contracts to other teams or to let them be voided and the players become UFA's.

Yup. Long answer - it is covered in Paragraph 12 of the SPC (Default).

The League has the option but not the obligation to cure the default, assume any or all of the SPCs and guarantee all remaining salary owed. If an SPC isn't assumed the player becomes a UFA. The League may later assign those SPCs to other NHL Clubs through whatever mechanism it chooses (dispersal draft, en masse to expansion team(s), merger with another Club a la the Barons/North Stars, etc)

Now, what say the NHLPA has in this matter is uncertain. They could potentially file a grievance if for example some but not all of the SPCs are assumed - some players assigned to another team and some made UFAs.

12. Default. If a Club defaults in the payment of any compensation to the Player provided for
in his SPC or fails to perform any other obligation under his SPC, the Player may, by notice in
writing to the Club and to the League and the NHLPA, specify the nature of any and all defaults
and thereafter:

(a) If the Club fails to remedy the default within fourteen (14) days from receipt of
such notice, except as hereinafter provided in Paragraphs 12(b), (c) and (d), the SPC shall be
terminated, and, upon the date of such termination, all obligations of both parties shall cease,
except the obligation of the Club to pay the Player's compensation to that date, provided,
however, that;

(b) the Player hereby irrevocably offers the League an option to cure said default
within the seven (7) days next succeeding the fourteen (14) days within which the Club may cure
the default upon the condition that, in the event the League may accept this offer, the League
would then guarantee payment of that portion of the Player's compensation, as set forth in the
Player's SPC, as may become due for a period of twenty-one (21) days from receipt by the
League of any notice of default. The League may accept this offer by notification to the Player
and the NHLPA in writing of such acceptance and of its guarantee of said twenty-one (21) day
compensation period as soon as possible following receipt of notice of default from Player but in
no event later than fourteen (14) days following receipt of such notice. This offer will be deemed
rejected if not accepted as set forth above;

(c) said option may be assigned by the League to any other Club and, upon such
assignment, the assignee Club shall inure to all of the rights of and assume all obligations of the
League under this Paragraph 12;

(d) the Player further agrees that, if the League has given due notice as set forth in
Paragraph 12(b), he will continue to perform all of his obligations under his SPC for the full
twenty-one (21) day period and, in the event the Club does not cure the default within the
fourteen (14) day period, as set forth in subsection (a), the League, or any Club to which its
option has been assigned, may cure the default within the seven (7) days following the first
fourteen (14) days next succeeding receipt of notice of default; and

(e) the Club agrees if it does not cure the default within the fourteen (14) day period,
as set forth in Paragraph 12(a) above, and the League, or an assignee Club, cures said default in
accordance with Paragraph 12(b), (c) and (d) then, in such event, all rights and obligations of the
Club under this SPC shall be transferred to the League, or such assignee Club, provided,
however, that no obligation with respect to a default or defaults claimed to exist at the time of
notice of default, as provided above, but not specifically included and set forth in said notice
shall be assumed by the League or such assignee Club and the League or such assignee Club
shall have no liability with respect thereto.

(f) The Club and/or the League may dispute the Player's assertion of a default
through an expedited arbitration proceeding in which case the Arbitrator shall be directed both to
hear and decide such case within fourteen (14) days of receipt of notice from the Player pursuant
to this Paragraph 12 absent a showing of good cause by the League and/or the Club as to why it
requires additional time in order to adequately investigate and try such case. In such event, it is
nonetheless the intention of the parties that the case be heard and decided as expeditiously as
possible. During the pendency of the Grievance concerning the existence of a default, the
Player's SPC shall remain in full force and effect.

 

[rojac]

Kind of funny when you consider that was never an option here.

Keeping the team in Atlanta was never an option. But the league taking ownership and putting the team somewhere else (perhaps temporarily) would have been an option. For example, maybe the NHL moves the team somewhere that is interested in the NHL and they play in an older less-than-ideal arena while the NHL gives the area so long to come up with an arena plan and local ownership. Not all that different from MLB's handling of the Expos.

 

[Bongo]

Somebody official finally admitted what we all knew here.

http://thecomeback.com/puckdrunklov...sses-expansion-rips-thrashers-management.html

 

[Tadite]

Most of you are missing the real point. If a team is financially dead then the league takes it over and keeps it running with a cap min salary. They'd never allow a full bankruptcy in 2016.

This is the Yotes. They haven't been financial viable in years.

 

[yukoner88]

Most of you are missing the real point. If a team is financially dead then the league takes it over and keeps it running with a cap min salary. They'd never allow a full bankruptcy in 2016.

This is the Yotes. They haven't been financial viable in years.

But they didn't file bankruptcy to fold and cease operations. It was a whole other can of worms