The Buy-Out; The Process of Rejecting a Professional Athlete
The following is a compilation of paragraph’s, articles and exhibits taken from the
”Collective Bargaining Agreement Between National Hockey League and the National Hockey League Players’ Association”.
I have tried to include as many specific articles regarding the treatment, function and course of the CBA mandated Buyout and Buyout Period as possible.
All information has been directly transcribed by myself from the 2005 CBA. The NHLPA provides a downloadable PDF of the CBA, it is available here:
http://www.nhlpa.com/CBA/2005CBA.asp
Buyout Period(s) Schedule
June 15(or 48 hours after conclusion of Stanley Cup Finals):
- First Buy-Out Period Begins(5:00pm NY time)
June 30:
- First Buy-Out Period Ends(5:00pm NY time)
July 20:
- First Day of Salary Arbitration(unofficial opening of Second Buy-Out Period)
August 6:
- Last Day for Issuance of Salary Arbitration Awards
48 hours after Club’s last salary arbitration award or settlement:
- Deadline for such Club’s Second Buy-Out Period(Only for Clubs with Salary Arbitration Cases)
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Definitions
”Buy-Out Period” or ”Ordinary Course Buy-Out” shall have the meaning set forth in Section 50.9(i) of this Agreement and Paragraph 13 of the SPC.
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”Buy-Out Period” shall have the meaning set forth in Paragraph 13(d) of the SPC.
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”Standard Player Contract” or “SPC” means the standard form contract attached hereto as Exhibit 1 will be the sole form of employment contract used for all Player signing after the execution of this Agreement.
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11.1 Standard Player’s Contract. The standard form SPC annexed hereto as Exhibit 1 will be the sole form of employment contract used for all Player signing after the execution of the Agreement. The standard form SPC will be considered valid and effective until their expiration, as deemed modified by this Agreement and the Compliance Rules attached as Exhibit 16 hetero, provided, however, rejected SPC shall not be deemed to be registered or approved pursuant to this accordance with Article 17 of this Agreement.
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Paragraph 13 of the Standard Player Contract
13. The Club, in addition to other rights hereunder, at its option, by written notice delivered to the Player in person, or by overnight mail to the Player’s address set forth herein, may terminate this SPC on the following conditions:
(a) The Club shall offer the Player on Unconditional Waivers, either before or promptly after the notice of intention to exercise the Ordinary Course Buy-Out option (hering called “notice of termination”) is given.
(b) Termination pursuant to this Paragraph shall be effective upon receipt by the Player of the notice of termination and the Player clearing Unconditional Waivers pursuant to Paragraph 13(a) above.
(c) The notice of termination shall be effective if given in the form attached as Exhibit 20, with a copy faxes to the NHLPA and Central Registry as follows:
(i) beginning the later of June 15 or forty-eight(48) hours after conclusion of the Stanley Cup Finals and ending at 5:00pm New York time on June 30; and
(ii) For Clubs who have Club or Player elected Salary Arbitration filings pursuant to Article 12, within the forty-eight(48) hour period beginning on the third day following the later of: (i) the Club’s receipt of its last salary arbitration award; or (ii) settlement of its last case(provided such award was received or such settlement occurred after 7:00pm New York time, awards or settlements that occurred or were received after 7:00pm New York time will be deemed to have occurred or received the following business day for purposes of this provision).
(d) If the Club elects to terminate this SPC pursuant to this Paragraph 13, it shall be obligated to pay to the Player, in equal semi-monthly instalments, to be paid in accordance with the payroll payment schedule applicable to the Club’s Active Roster, over twice the remaining term of the SPC)the “Buy-out Period”)”
(i) if the Player is under 26 years of age at the time the termination is effective, an amount equal to 1/3 of or
(ii) if the Player is 26 years of age or older at the time the termination is effective, an amount equal to 2/3 of the total fixes amount of the Player Paragraph 1 NHL Salary, for the unexpired fixed-term of this SPC, reduced by any advance payment of Paragraph 1 Salary received by the Player prior to the date the termination is effective.
(e) Upon termination, the Player shall immediately be an Unrestricted Free Agent and shall no longer be obligated to perform under this SPC.
(f) Waiver claim of Player by another Club shall pre-empt and relinquish Club’s Buy-Out obligation, due to failure to clear Waivers.
(g) Clubs shall file their Buy-Out agreements, the form of which is attached hereto as Exhibit 21, with Central Registry and the NHLPA by facsimile or overnight mail within 24 hours of such an agreements becoming effective.
(h) The Club acknowledges and agrees that the Player may pledge. assign the Club’s payout obligation to a third party in order to enable him to receive a lump sum buyout.
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Paragraph 14 of the Standard Player Contract
14. The Club may also terminate this SPC upon written notice to the Player(but only after obtaining Waivers from all other Clubs) if the Player shall at anytime:
(a) fail, refuse, or neglect to obey the Club’s rules governing training and conduct of Players, if such failure, refusal or neglect should constitute a material breach of this SPC.
(b) fail, refuse or neglect to render his services hereunder or in any other manner materially breach this SPC.
In the event of termination under subsection (a) or (b) the Player shall only be entitled to compensation due to him to the earlier of the date such notice is delivered to him or the date of the mailing of such notice to his address as set out below his signature hereto.
In the even this SPC is terminated by the while the Player is “away” with the Club for the purpose ofplaying games the instalment then falling due shall be paid on the first week-day after the return “home” of the club.
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(i) ”Ordinary Course” Buyouts and “Compliance” Buyouts.
(i) If a Player’s SPC has been terminated and bought out by a Club pursuant to the Ordinary Course Buyout provisions set forth in the SPC(which SPC also eliminates the concept of the “lump sum” buyout), the money due and owing to the Player pursuant to the buyout shall be paid out in accordance with the terms of the SPC(e.g., one-third or two-thirds of the remaining Player Salary due and owing, to be paid over twice the remaining years of the terminated and bought out contract), and the amounts paid under such Buyout agreement shall be included in the Actual Club Salary and Averaged Club Salary(as set forth in article 50)of the Club that bought out the Player during any League Year in which the buyout is paid, and the amounts paid under such buyout agreement shall also count against the Player’s Share for an League Year in which the buyout is paid( an “Ordinary Course” Buyout). Clubs exercising Ordinary Course Buyout rights pursuant to the SPC shall endeavour to provide a Player documentation sufficient to enable the Player to “factor” the Club’s obligation with a commercial bank, if the Player so desires.
(ii) If a player’s 1995 SPC has been terminated and bought by a Club pursuant to the “Compliance Buyout” provisions set forth in Exhibit 16 to this Agreement, which “Compliance Buyout” provisions apply only to the period preceeding the 2005-06 regular season as agreed upon by the parties(and in accordance with the terms of the 1995 SPC, except as modified herein), then the money due and owing to the Player pursuant to the buyout shall be paid over the course of the remaining length of the terminated and bought out 1995 SPC, shall not be made ina lump sum, and the amounts paid under such buyout agreement shall not be included in the Actual Club Salary and Averaged Club Salary of the Club that bought the Player during any League Year in which the buyout is paid. Any moneys paid pursuant to a Compliance Buyout Agreement are excluded from the definition of League-wide Player Compensation. Amounts paid under such buyout agreement shall not be counted against the Players’ Share for any League Year in which they are paid. Moreover, a Player that has been bought out under the Compliance Buyout provisions of the Agreement shall be prohibited from rejoining the Prior Club that bought him out(via re-signing, trade Assignment or otherwise) for the 2005-06 League Year.
(iii) Clubs and Players shall not be permitted to negotiate either a different amount or different length of time over which buyout obligations may be paid.
(iv) If a Player’s SPC has been bought out by a Club prior to execution of the Agreement, the amounts paid under such buyout agreement shall not be included in the Actual Club Salary and Averaged Club Salary of the Club that bought out the Player during and League Year in which the buyout is paid. Any moneys paid pursuant to such Buyout Agreements are excluded from the definition of League-wide Player Compensation. Amounts paid under such buyout agreement shall not be counted against the Player’s Share for any League Year in which they are paid.
(v) Clubs shall file their Buy-Out Agreements with Central Registry, the NHL and the NHLPA.
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Buyout Forms
EXHIBIT 20
Form of Buy-Out Notice
BUY-OUT NOTICE
Name and Address of Player:
Name and Address of Primary Certified Agent:
Club:
Please be advised that the [Club] is hereby providing notice of its election to terminate [Player Name]’s Standard Player’s Contract (“SPC”) in accordance with Paragraph 13 of the SPC.
Date:__________________
_________________________
Club
By:
Title:
Cc: NHL Player’s Association
NHL Central Registry
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EXHIBIT 21
Form of Buy-Out Agreement
BUY-OUT AGREEMENT
Player: Club:
Address of Player: Address of Club:
Pursuant to Paragraph 13 of the Player’s SPC, a copy of which is attached hereto, the Clube hereby agrees that it shall pay to the Player a total $_____________over the next ___ seasons(i.e.[season]), payable in equal semi-monthly instalments of approximately $_______ per each instalment (assuming ____ pay periods per season), such instalments to be paid in accordance with the payroll payment schedule applicable to the Club’s Active Roster and subject to appropriate deductions for all taxes and other withholding amounts and for any withholding of escrow as required by Article 50 of the Collective Bargaining Agreement.
The Club acknowledges and agrees that the Player may pledge/assign the Club’s payout obligation to a third party in order to enable him to receive a lump sum buyout.
Date:
Club:________________
By: _________________
Title:________________
cc: NHL Player’s Association
NHL Central Registry
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Things to Note:
Here are a few of the tid-bits that I found to be interesting while perusing all of the legal garble
August 6:
- Last Day for Issuance of Salary Arbitration Awards
48 hours after Club’s last salary arbitration award or settlement:
- Deadline for such Club’s Second Buy-Out Period(Only for Clubs with Salary Arbitration Cases)
It is very interesting to note that the NHL has a more or less arbitrary secondary Buy-Out Period. Technically it the second period begins when Arbitration hearings start on July 20 and may occur anytime within that date and then 48 hours following the final arbitration award. Essentially, making the last possible day for a Buy-Out August 8.
(d) If the Club elects to terminate this SPC pursuant to this Paragraph 13, it shall be obligated to pay to the Player, in equal semi-monthly instalments, to be paid in accordance with the payroll payment schedule applicable to the Club’s Active Roster, over twice the remaining term of the SPC)the “Buy-out Period”)”
(i) if the Player is under 26 years of age at the time the termination is effective, an amount equal to 1/3 of or
(iii) if the Player is 26 years of age or older at the time the termination is effective, an amount equal to 2/3 of the total fixes amount of the Player Paragraph 1 NHL Salary, for the unexpired fixed-term of this SPC, reduced by any advance payment of Paragraph 1 Salary received by the Player prior to the date the termination is effective.
(e) Upon termination, the Player shall immediately be an Unrestricted Free Agent and shall no longer be obligated to perform under this SPC.
- Interesting to note that it is A LOT cheaper to buy-out a younger player(under 26). Realistically that means that GM’s would be buying out an RFA for 1/3 his salary as opposed to a UFA for 2/3 his salary. Although there is no direct definition of that, there are very few UFA’s under the age of 26 who would be considered potential buy-out candidates.
- The team must notify the player in person or via mail. Only when the player has acknowledged receipt of the Buy-Out Form is the process started and the buyout is then acknowledged as legitmate by the NHL and the NHLPA.
The Club acknowledges and agrees that the Player may pledge/assign the Club’s payout obligation to a third party in order to enable him to receive a lump sum buyout.
- Last line from Exhibit 21, Form of Buyout Agreement
- I also find it interesting that a player may defer his salary to a “third party” which would then enable the “Player” to receive his buyout in one lump sum. Interesting for the player, yet I am unaware of how that works against the Cap. From my understanding the player may receive the full amount of the buyout through deferment, while the “Club” must still account the “Buy-Out” amount over the “Buy-Out Period”.
The Buyout is an interesting twist to the CBA, much like the OFFER SHEET, but that’s a story for another day.
So what do you think?
Do you like the buyout?
Do you feel that buying out a player is worth it over the long run?
Anyone on your team that you would like to see bought out?
The danger and risk of bad contracts are proven by their repercussions. If a team or a GM is willing to “bite the bullet” and Buy-Out a player, it is often an admission of poor managing. Yet, at the same time it allows the GM to relieve the burden that was created through a simple penance. By buying out the player, the GM restores the roster spot he blew on the bad contract, while slightly handcuffing his team going forward. It can work, but not without its risks.
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