Over the next few weeks, The Business of Hockey’s Mike Colligan and Jeff Angus of Angus Certified will make sense of the most pressing issues facing the players and owners in this summer’s CBA battle.
Today’s topic: What is the purpose of salary arbitration?
MIKE COLLIGAN: The owners’ aggressive initial proposal called for the elimination of salary arbitration. I found this odd, considering how few players ever make it to arbitration and how little the impact would be when other issues in the proposal amounted to hundreds of millions of dollars. Perhaps this was intentional? Maybe the owners knew arbitration would be a good chip to hand back to the players once negotiations heat up. It’s tough to say, but let’s first review the basics of salary arbitration in the NHL.
You can read the lengthy legalese starting on Page 52 of the CBA here. We’ll save you the trouble. Essentially, any restricted free agent is eligible for arbitration granted he is not finishing up his entry-level contract. The team or the player can file for arbitration, and market value typically dictates which side will file. A player can only be taken to arbitration by the team once in his career, however the player is able to file for arbitration as many times as he’d like. Between about 15 and 25 players each year file for arbitration and almost all cases are settled before they ever reach an arbitrator’s desk.
For the few that do, the only factors that can be considered are basic NHL-tracked statistics and a handful of off-ice qualities (leadership, injuries, etc). We all know there are hundreds of other metrics that more accurately impact a player’s on-ice contributions, but the CBA forbids these from being used. Both sides typically present a list of comparable players based on the allowed statistics and the arbitrator decides which are appropriate before awarding a contract value.
After a number is awarded, the team has the option of accepting the arbitrator’s decision or declining and letting the player become an unrestricted free agent.
JEFF ANGUS: I have spent some time reviewing arbitration cases on the CanLii website, and have come away quite surprised how archaic the system is. As you said, this is likely more of a chip that the owners are hoping to use in later negotiations.
Arbitration does serve a few important purposes, though. It helps both sides to establish market value, and it helps a team if a player is coming off of a big contract and a disappointing season (and conversely, it helps players who outperformed their salary significantly). It also helps players guarantee one-way contracts when they are getting offered two-way contracts. Fans often forget about the difference between these deals, but to the players they are often the difference between making $70,000 in the AHL or $500,000 or more in the NHL (or AHL, as a one-way contract guarantees an NHL salary, even at the AHL level).
Perhaps an expansion of what is allowed to be used at arbitration negotiations is the way to go? Measuring intangibles is tough, and statistics like plus-minus are limiting. Would the NHL ever think of including advanced statistics, like zone starts, Corsi, and QualComp?
COLLIGAN: The problem is most of the arbitrators aren’t knowledgeable hockey fans. Every hearing would require extensive education and explanation if we open the door to advanced statistics that aren’t universally accepted.
The current system isn’t perfect, but I think arbitration ultimately serves as a system of last resort. Hearing dates drive both parties to find common ground when talks hit a stalemate or the process breaks down. No team wants to stand in front of an arbitrator and detail all the reasons their player isn’t worth the money he’s asking for. It’s an unpleasant process and there have been a number of contentious cases in the past that have permanently ruined team-player relationships.
If the parties are $150,000 apart, oftentimes neither side wants to leave it up to a third-party because of the flaws in the system we just mentioned. In this sense, I think arbitration is necessary.
ANGUS: I agree. It is necessary, and it is also a negotiation tactic more than anything else. I don’t think removing it would have a significant impact for either the NHL or NHLPA, as it doesn’t inherently impact either side negatively or positively.
As mentioned before, it helps players early on in their career by giving them leverage, and it also helps teams if a player on a relatively big contract is coming off of a disappointing season.
The Predators took Shea Weber to arbitration and lost. The Panthers took Roberto Luongo to arbitration and “won,” although they fractured the relationship beyond the point of repair with the move. Star players very rarely make it to arbitration, because, as you said, it is an uncomfortable process for both sides.
The Canucks and Brendan Morrison and a contentious relationship after his arbitration hearing, as the club basically argued that he was little more than a third wheel to Markus Naslund and Todd Bertuzzi.
COLLIGAN: You really need to focus on building positive relationships with your star players if you’re a team that regularly spends to the salary cap or wants to compete for a Stanley Cup. Who knows what impact the Weber arbitration hearing had on this summer’s events? Weber really put the screws to Predators’ management with his offer sheet and all but declared he was interested in playing elsewhere. That’s not how you build a contender.
Some high-spending teams even refuse to go to arbitration with players. They want to avoid the uncomfortable situation and also maintain cap flexibility.
The uncertainties of the new CBA have made this summer a little different, but typically teams want to know exactly how much money they have available at the start of free agency on July 1. Stashing millions of dollars aside to make sure you can fit an unfavorable award from a hearing in early August doesn’t make sense in some situations. It also creates a potential roster hole if the award is outrageous and the team decides to let the player walk. There’s not much left in free agency to fill holes in mid-August.