Legal Look: Less courtesy, more concession in new buyouts

Eric Macramalla, TSN Legal Analyst

1/17/2013 9:45:05 AM

This past Sunday, Montreal Canadiens general manager Marc Bergevin announced he was sending Scott Gomez home, with pay, for the entire season. Gomez is slated to make $5.5 million this season, while his contract carries a cap hit of $7.357 million.

Gomez was being sent home so the Canadiens could preserve its option to exercise an amnesty buyout on his contract next season. Under the terms of the new CBA, teams are provided with a total of two amnesty buyouts ahead of the next two seasons. Once bought out, the player's cap hit won't count against the salary cap. This is new. Under the old CBA, a buyout counted against a team's salary cap. So the amnesty buyout is designed to act as a relief valve for teams, particularly with the salary cap dropping from $70.2 million this season to $64.3 million next season.

The catch, though, is that an injured player can't be bought out. So that's why the Canadiens sent Gomez home. They wanted to avoid a situation where he got injured, thereby precluding the amnesty buyout. He was effectively being bubble-wrapped in advance of next season's amnesty buyout.

And the Canadiens had good reason to be prudent. With $60.2 million already allocated to just 16 players next season (including Gomez), that left just $4.1 million to sign seven players to fill out its 23 man roster. That's an average of $585,000 per player (the league minimum next season is $550,000). And that doesn't include P.K. Subban, who hasn't signed yet. So disposing of the Gomez $7.357 million cap hit before next season by way of an amnesty buyout would provide the club with much needed breathing room.

For the Canadiens, there was also the option of trying to trade Gomez next season to a cap-hungry team. With his salary at $4.5 million in 2013-14, and a cap hit of $7.357 million, a team acquiring Gomez would have enjoyed a net gain of $2.86 million on his salary. So a team looking to get to the salary floor may have found him to be an attractive option. However, this option lacks the certainty of a buyout, so for the Canadiens, buying out Gomez makes more sense.

However, the proposed move of sending Gomez home was not without risk. There was a possibility that the NHLPA and Gomez's agent, Ian Pulver, could have challenged the move by filing a grievance with an arbitrator. The NHLPA could have argued that a full season away from the game would adversely impact Gomez's market value next season as he wouldn't be able to showcase his talents. That would affect his ability to get a new deal next season, thereby undermining his earning potential. Sending home a perfectly healthy player with no off-ice issues with a view to simply preserve an amnesty buyout is not in keeping with the spirit of the contract. Gomez was being banished not because he failed to discharge his contractual obligations, but rather, because of a newly implemented CBA system issue.

On the flip side, the Canadiens and NHL could have argued that an NHL contract only guarantees a player his pay – but not a roster spot. There is nothing in the CBA that expressly precludes a team from sending a player home with pay.

Still, in light of the potential harm caused to Gomez, the NHLPA was carefully considering all of its options, including the possibility of heading to arbitration by way of a grievance. That would not have been a pleasant experience, particularly coming out of the lockout. As well, the outcome would have been uncertain.

So that brings us to Tuesday January 15. The NHL and NHLPA announced a deal permitting each team to buyout one player before this Saturday. The buyout would count as one of the two amnesty buyouts. Players who are bought out before the season starts become unrestricted free agents, eligible to sign with any team. The player's full cap hit for the 2012-13 season still counts against the team's cap.

This was all captured in a letter from Deputy Commissioner Bill Daly to the NHLPA on Tuesday. Here are the details from that letter:

(a) All teams are eligible to exercise a maximum of one buyout before the season starts, and that buyout would count against the allotted two amnesty buyouts per team.

(b) In order to be eligible to be bought out now, the player must have a cap hit of at least $3 million.

(c) Before a player can be bought out, he must be placed on waivers by Thursday January 17, 2013 (Both Gomez and Redden have been placed on waivers).

(d) The player has to consent to being bought out by Friday, January 18, 2013.

(e) A player being bought out gets paid his salary for this season (pro-rated to account for the compressed schedule).

(f) The player's cap hit still counts against the team buying out the player. So the Gomez contract for this season will count against the Canadiens salary cap. If the player is sent to the minors before the buyout, the team enjoys a $900,000 discount on the cap hit. Both Redden and Gomez were sent to the minors first, so their cap hits have been discounted to $5.6 million and $6.5 million, respectively.

(g) All buyouts will count against the player's share of revenue.

(h) The NHL and NHLPA settlement has been agreed to on a 'without prejudice' basis. That means that either side can't use it against the other side in any future legal proceedings or as a precedent of any kind. The legal effect of this deal is restricted to this subject matter – and that's it.

Some have characterized this deal as a favor or goodwill gesture on the part of the teams to the players. However, that may not be the case.

The Canadiens may not have been on firm legal footing when it sent Gomez home and that appears to be reflected in Tuesday's agreement. The benefits flow to the players. They get their entire salary for this season (as opposed to a two-thirds buyout amount generally reserved for these types of buyouts), while also getting a chance to sign on with a new team this season. Gomez and Redden can effectively each take home four paychecks over the next two seasons.

There's more. Both Gomez and Redden can play against their old teams this season. With their salaries and cap hits still on the books of their former teams, this isn't an ideal situation for the Canadiens or Rangers.

So the new deal isn't perfect for the teams. However, given the legal uncertainty associated with sending a player home, the league might have thought it was a good idea to give a little so as to avoid the possibility of a grievance.

And that's why this deal, from the perspective of the teams, looks less like a favour to the players and more like a concession.

Eric Macramalla is TSN's Legal Analyst. He can be heard each week on TSN Radio 1050 and seen on SportsCentre and That's Hockey. You can follow him on Twitter @EricOnSportslaw.