What Cap Circumvention Is...and What It Isn't

[mja]

Apologies in advance for the lengthy essay...

Some (many? most?) people seem to think cap circumvention has something to do with stashing "bad" contracts off the books or artificially reaching the cap floor by taking on the contract of an injured player. That is not what cap circumvention is.

Generally speaking, cap circumvention is trying to get an edge on the cap in a contract, i.e. to find a way to pay the player a higher real AAV than his actual cap-hit. The now-forbidden extremely front-loaded deals taking a player well into retirement are perfect examples of cap circumvention. For example, Luongo's got a 5.33 caphit on a 12 year contract that takes him through to 42 years old. Let's assume he beats the odds and plays until 40. That means the last two seasons - where he's only paid 1M each - are effectively just a way to artificially lower his cap-hit. Instead of a cap hit of 5.33, he should actually have had a cap hit of 6.2 million. If he retires at 38, it should have actually have been 7.1. If Kovalchuk, for example, had retired at 37, his cap hit should have been 9 million a year - not 6.7. Those deals were cap circumvention, which is why those teams got punished for it (the recapture penalties, NJ's loss of draft picks.) Now, to be clear, I personally don't agree with the punishments. Luongo's contract (along with several others signed before the NHL tweaked the rules) should have been grandfathered in and the league should have just refused the Kovalchuk contract.

I can at least understand why people have strong feelings (even if they're completely wrong) about the Philly & Arizona situation (Philly may have been trying to pull of a cap-circumventing contract like those mentioned above but didn't fully understand the 35+ clause, specifically that it started from day the contract officially went into effect, not when it was signed, and then of course Pronger gets a job with the NHL while still under contract with Philly, meanwhile Arizona trades for a contract whose only benefit to them is to help them reach the cap floor - that isn't cap circumvention btw, it is completely legitimate cap management), but a comment on the Savard trade thread absolutely perplexed me:

It's a joke that Savard can be traded.

If he can't play he should retire. Either way, that 4M should count against Boston's cap until the contract is done. LTIR is cap circumvention.

LTIR IS NOT CAP CIRCUMVENTION! IT IS SPECIFICALLY DESIGNED TO PROVIDE TEAMS CAP RELIEF IN THE EVENT OF A LONG-TERM INJURY! THAT'S THE EXACT THING IT IS SUPPOSED TO DO!

I don't get it, what is so hard for people to understand about that? Why the hell should Boston (or Philly or any team) be given an onerous cap punishment because their player suffered a legitimate catastrophic and career-ending injury?

Now, in theory LTIR could be used to circumvent the cap. A player who doesn't really have a career-ending injury but doesn't want to play anymore could have an "injury" and go on LTIR, mitigating the last few years of his contract for the teams' cap situation, though not fully. Now, not even addressing the doubtfulness of a doctor actually signing off on such a situation, neither Savard nor Pronger are such examples. Both players suffered severe injuries while still clearly wanting to play and while being a productive member of their respective teams. Heck, Pronger was Philly's # 1 dman when he went down and they still haven't replaced him.

If you don't like players going on LTIR year after year, the answer to this is not to punish teams severely for being unable to predict random career-ending injuries. The answer is some sort of mechanism that allows teams to have real cap relief (LTIR isn't even full cap relief, the contract is still on the books and it very much limits what a team can do) and for injured players to go on earning the rest of their contracts while being able to move onto other things (such as jobs with the NHL).

 

[Juicy Pop]

Apologies in advance for the lengthy essay...

Some (many? most?) people seem to think cap circumvention has something to do with stashing "bad" contracts off the books or artificially reaching the cap floor by taking on the contract of an injured player. That is not what cap circumvention is.

Generally speaking, cap circumvention is trying to get an edge on the cap in a contract, i.e. to find a way to pay the player a higher real AAV than his actual cap-hit. The now-forbidden extremely front-loaded deals taking a player well into retirement are perfect examples of cap circumvention. For example, Luongo's got a 5.33 caphit on a 12 year contract that takes him through to 42 years old. Let's assume he beats the odds and plays until 40. That means the last two seasons - where he's only paid 1M each - are effectively just a way to artificially lower his cap-hit. Instead of a cap hit of 5.33, he should actually have had a cap hit of 6.2 million. If he retires at 38, it should have actually have been 7.1. If Kovalchuk, for example, had retired at 37, his cap hit should have been 9 million a year - not 6.7. Those deals were cap circumvention, which is why those teams got punished for it (the recapture penalties, NJ's loss of draft picks.) Now, to be clear, I personally don't agree with the punishments. Luongo's contract (along with several others signed before the NHL tweaked the rules) should have been grandfathered in and the league should have just refused the Kovalchuk contract.

I can at least understand why people have strong feelings (even if they're completely wrong) about the Philly & Arizona situation (Philly may have been trying to pull of a cap-circumventing contract like those mentioned above but didn't fully understand the 35+ clause, specifically that it started from day the contract officially went into effect, not when it was signed, and then of course Pronger gets a job with the NHL while still under contract with Philly, meanwhile Arizona trades for a contract whose only benefit to them is to help them reach the cap floor - that isn't cap circumvention btw, it is completely legitimate cap management), but a comment on the Savard trade thread absolutely perplexed me:



LTIR IS NOT CAP CIRCUMVENTION! IT IS SPECIFICALLY DESIGNED TO PROVIDE TEAMS CAP RELIEF IN THE EVENT OF A LONG-TERM INJURY! THAT'S THE EXACT THING IT IS SUPPOSED TO DO!

I don't get it, what is so hard for people to understand about that? Why the hell should Boston (or Philly or any team) be given an onerous cap punishment because their player suffered a legitimate catastrophic and career-ending injury?

Now, in theory LTIR could be used to circumvent the cap. A player who doesn't really have a career-ending injury but doesn't want to play anymore could have an "injury" and go on LTIR, mitigating the last few years of his contract for the teams' cap situation, though not fully. Now, not even addressing the doubtfulness of a doctor actually signing off on such a situation, neither Savard nor Pronger are such examples. Both players suffered severe injuries while still clearly wanting to play and while being a productive member of their respective teams. Heck, Pronger was Philly's # 1 dman when he went down and they still haven't replaced him.

If you don't like players going on LTIR year after year, the answer to this is not to punish teams severely for being unable to predict random career-ending injuries. The answer is some sort of mechanism that allows teams to have real cap relief (LTIR isn't even full cap relief, the contract is still on the books and it very much limits what a team can do) and for injured players to go on earning the rest of their contracts while being able to move onto other things (such as jobs with the NHL).

Why? People don't read and/or don't care to look past team affiliations.

Philly sure got a great deal out of "abusing" LTIR right? I mean they only lost a HOF defenseman on a relatively stacked team that was probably going to be in direct Cup contention for at least 5 to 6 years into his contract.

Great cap circumvention Philly.

People who still haven't figured out what the intent of LTIR is are just willfully ignorant at this point.

 

[KarlssonsGroin]

wait you mean putting a guy whos hurt and unable to continue to play on LTIR so that insurance will cover the rest of his contract rather than have him retire and get $0 is NOT cap circumvation???

Sarcasm aside, I do have a problem with Arizona taking Prongers contract to reach the cap floor... as its them trying to spend less money than required by the CBA as insurance will cover Prongers cost

 

[Tripod]

wait you mean putting a guy whos hurt and unable to continue to play on LTIR so that insurance will cover the rest of his contract rather than have him retire and get $0 is NOT cap circumvation???

Sarcasm aside, I do have a problem with Arizona taking Prongers contract to reach the cap floor... as its them trying to spend less money than required by the CBA as insurance will cover Prongers cost

Do you have the same problem if a team that is at the cap max acquires a player who's salary is more than their cap hit? You know, because now they are technically spending more than the cap.

In the end, AZ is required to reach the cap floor. They acquired a legal contract to help do so. They did what the CBA required them to do.

 

[Noldo]

I would like to see that next CBA would introduce on option for Disability Pension, which would allow a player that would be medically declared unfit to return to game with no change of recovery to formally retire (wiping off any cap hit unless its 35+ contract), but the player would be entitled to receive the money owned under the SPC either from a League's common insurance policy, a fund funded by teams in proportion to salaries and/or prior Disability Pensions granted.

This would take care of cases like Savard, Pronger, Hatcher etc. and let the LTIR be reserved for cases where it is expected that the player will return to play.

 

[mja]

I would like to see that next CBA would introduce on option for Disability Pension, which would allow a player that would be medically declared unfit to return to game with no change of recovery to formally retire (wiping off any cap hit unless its 35+ contract), but the player would be entitled to receive the money owned under the SPC either from a League's common insurance policy, a fund funded by teams in proportion to salaries and/or prior Disability Pensions granted.

This would take care of cases like Savard, Pronger, Hatcher etc. and let the LTIR be reserved for cases where it is expected that the player will return to play.

The 35+ clause needs to die. At this point, all it does is punish guys who are older than 35. Given that you can only front-load a contract by so much, it doesn't even serve a purpose anymore.

 

[Talain]

The 35+ clause needs to die. At this point, all it does is punish guys who are older than 35. Given that you can only front-load a contract by so much, it doesn't even serve a purpose anymore.

And you can just get around it anyway by trading the player to a team that is looking to spend as little actual money as possible to help them make the cap floor. So the signing team gets to have said player during their good years while artificially lowering the cap hit, and then when it comes time to pay the piper they can get another team to take that contract off their hands.

Suppose Pronger didn't get injured and was still playing. Suppose the Flyers got a number of good seasons out of him, paying him what he was worth but gaining the benefit of a cap hit that was a couple of million dollars less, but now he's declining due to age. So instead of now having to pay back the cap benefit that they gained during his more productive seasons they get some other team to. In the end they'd have accomplished what the over 35 rule was supposed to prevent (and helped another team to make an end run around the cap floor.)

 

[Officer Rod Farva]

Cap Circumvention is something that only the New Jersey Devils do.

No other NHL team can be accused of it.

 

[mja]

Cap Circumvention is something that only the New Jersey Devils do.

No other NHL team can be accused of it.

You are exactly who I'm talking about. So many bitter Devils fans (and I agree, you are right to be bitter about how the league handled the Kovalchuk situation) ramble on and on about cap circumvention this and cap circumvention that in cases that aren't actually cap circumvention.