Commissioner Gary Bettman said the NHL is projecting the final escrow taken out of the players' contracts for the 2017-18 season to be 8 percent, which would be the lowest under the collective bargaining agreement that was implemented prior to the 2012-13 season.
The NHL and NHLPA withhold a percentage of player salaries, or escrow, during the season as a mechanism to ensure teams and players achieve a 50-50 split of hockey related revenue, per the rules set in the CBA.
Article 13 23 Nhl Cba Escrow
"A large part of our thinking is we want a [salary cap] number that keeps the escrow down," Commissioner Bettman said. "We think by only having a more modest increase last season it was instrumental in keeping the escrow down to what we project will be about 8 percent, which will have been the lowest in years. The amount of the escrow is simply a function of how high the cap is. Higher the cap, higher the escrow. There is no magic to that."
Traditionally, players have had anywhere from 4% to 16% of their salaries withheld and have only seen refunds of between 1% to 10%. However, due to the COVID-19 pandemic, and the lack of a traditional season, escrow levels have risen to around 20%.
In 2019-20, the escrow withheld was 10%. However, COVID-19 led to a stoppage of the season, and raised concerns over whether the season would be finished and whether 2020-21 would be a normal season. During the 2019-20 season stoppage, the players began to incur significant amounts of debt to the owners when HRR flatlined with players still being paid, giving players more than the 50% of HRR they were allotted under the CBA.[5] Revenue projections were off by about $1 billion during the 2019-20 season, and down $2.5-$3 billion during 2020-21, where the NHL played a shortened season of 56 games primarily with no fans or a small percentage of them.
However, because most teams spend closer to the cap, and the inherent inaccuracies in revenue projections, the average spend for teams is almost always higher than the midpoint, and HRR. This results in escrow money flowing to the owners to balance everything out.
The best path forward for both sides is to get hockey back and start earning revenue. However, escrow has become such a dirty word in the eyes of the players that the owners may have to bear a greater loss in the short term.
Waivers are discussed in article 13 of the collective bargaining agreement.[14]Unlike other professional leagues, waivers in the NHL do not always mean an unconditional release if a player clears waivers and elects free agency, unless the waivers requested were unconditional waivers. Most NHL players will need to clear waivers before they are assigned to a minor league team; exceptions are listed below. Clearing waivers means every other team in the NHL has the option to "claim" that player off of the "waiver wire", thus assuming his contract (and cap hit; this varies for re-entry waivers), and providing only minor monetary compensation to the originating team (unless the waivers requested were re-entry waivers); financial compensations are listed below. If a player clears waivers, the team has the right to either loan the player to a minor league affiliate which is generally a team in the American Hockey League (AHL), or the team can elect to keep that player with their club. Once a player has cleared waivers, they do not need to again clear them for the shorter of: (1) 30 cumulative days on the NHL roster; or (2) until they have played in ten NHL games. If a player refuses to report to the minors, the team can use that as grounds to suspend the player (i.e., not pay them).
In October, Bettman said there was a chance that the 2023-24 season would have a computational cap, and that the salary cap could rise by more than $4 million because there was "a good probability" that the players' escrow debt will be paid off this season.
"Based on current projections, there will still be an escrow at the end of the season. If that's the case, we will move the cap up by $1 million," Bettman said. "If we perform even better -- and the budgeting projections that we have now are pretty robust -- it's conceivable the escrow will go away and the cap will go up to [over] $86 million."
Bettman said the NHL would have to bring in an additional $140 million-$150 million in revenue for the players' escrow to be paid off this season. He said if the escrow isn't paid by the end of the 2022-23 season, he believes "it should be all gone" after the 2023-24 season.
The board of governors did not discuss whether they'd be amenable to negotiating a bridge with the NHL Players' Association that would allow the cap to rise higher next season given how close the players are to paying off the escrow debt.
Regardless of what the cap is for next year, HRR cratering in the 20-21 season poses some additional problems. This is the season with the highest escrow cap and therefore the most potential to lessen the existing Escrow Balance, but even with 20% escrow the balance will actually grow unless HRR reaches $4b. If the NHL only generates $2b in HRR in 20-21, an additional $1b would be added to the players Escrow Balance.
This might be confusing, but the important part is the Escrow Balance is reduced by the difference between (0.5*HRR)+Escrow Collected, and total salary paid. Initially the majority of the money comes from escrow collection, but as the escrow cap is lowered to 6% the owners get more than 50% of HRR as it outgrows the salary cap.
This introductory article will explain what the penalty is and how it is applied. Follow-up articles will give real examples of the penalty in action as well as my beliefs on how this penalty affects the league moving forward.
Now, here is where escrow comes in. The NHL will always set the salary cap for the upcoming year in the spring. This is about 16 months before it will actually know how much money it will actually bring in.
The NHL will hold a certain percentage of a players cheque and keep it in escrow until all of the revenue for the season is counted. If the NHL makes the predicted revenue for the year then the players will get the full escrow back. If the NHL makes less than predicted revenue then the players will only get a portion of their salary back.
However, a higher escalator will simply mean a higher escrow amount as the league cannot be as confident that they will earn enough revenue to cover the extra percentage the escalator raises the cap.
But now there will be labor peace for at least the next six years after the two sides agreed to a new deal that will run through the 2025-26 season with an escrow provision that could extend the deal by one year. The previous deal was set to expire at the end of the 2021-22 season.
Whenever the NHL and NHLPA are involved in CBA-related negotiations, the biggest hurdle to jump is always the one about money. And while the two sides agreed to a CBA extension over the summer, the economic realities of managing a business during the pandemic led the NHL to seek a renegotiation of sorts, where escrow and deferral amounts on player salaries were requested to be reconsidered. 2ff7e9595c
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