Are NHL Contracts Guaranteed?

NHL contracts are binding agreements between players and NHL teams that state the terms and conditions of the partnership as well as the salary of the stated player. Different sports leagues have different rules when it comes to contracts. However, the topic we want to look at today is if the NHL contracts are guaranteed.

Are All NHL Contracts Guaranteed? 

First, what is a Guaranteed Contract? A guaranteed contract is a type of contract that ensures that a player is paid, in full, the stipulated amount on his contract. Guaranteed contracts assure players that they will be paid the total monetary value of their contract, regardless of the decision or actions of a team or its management. 

Contracts that are guaranteed can not be altered, changed or reverted until it expires. That brings the question – Are NHL Contract Guaranteed? The answer to that is Yes, or at least most of the time. 99% of the time, NHL contracts are guaranteed. This means that every NHL player will receive the exact amount specified while signing his contract.

Guaranteed contracts are a way to curb the actions of team owners from signing a player and cutting a player off its roster or failing to fulfil the agreement stated in the contract. 

Even though 99% of all NHL contracts are guaranteed, it leaves about 1-2% of contracts that aren’t. The only exemptions to a player getting the total value of a stipulated contract are Buyouts, Contract Termination and Escrow. 

We will discuss this and more in this article; first, let’s examine the types of contracts in the NHL. 

Types Of NHL Contracts

Before we move forward on this topic, it is essential we have a basic idea of contracts in the NHL. The NHL has three major contract types: One-way contracts, Two-way contracts and Entry Level Contracts (ELC). Each differs in its provision and requirement. 

One-Way Contracts

A one-way contract in the NHL is a type of contract that gives a contract monetary value which a player will receive whether he plays for the team in the NHL or is loaned to any affiliated league. 

For example, if a player signs a one-way contract of $1.87 million annually, he will receive his contract worth even if his team decides to send him down to a minor league like the AHL. 

One-way contracts are mostly signed for players a team deems beneficial and does not envision loaning them to a minor league. However, this is not always the case, as players with one-way contracts often get sent down to the AHL regardless. 

Two-Way Contracts

Two-way contracts work differently from one-way contracts in the NHL. These contracts provide two different monetary values, which state that a player will receive an amount if they play in the NHL and another if loaned to a minor league. 

For example, a two-way contract can give a player $1.04 million if he plays in the NHL and just $250,000 if sent to the AHL. Players with two-way contracts are more likely to be placed on waivers and sent to a minor league. This is because the team will pay less annual salary if a player is in the AHL compared to when he plays in the NHL. 

Entry-Level NHL Contracts

Entry-level contracts are NHL contracts for new entries into the league. It is the first contract given to all players new to the NHL and below the age of 25 (as of September 15). An entry-level contract is the first contract for all drafts signed into the NHL.

However, it is not limited to NHL drafts. As long as a player is under 25 and hasn’t signed any NHL contract, his first contract will be an entry-level contract. The maximum duration of an ELC is three years, depending on the player’s age.

• Players aged 18-21 will sign an ELC of 3 years.
•  Players aged 22-23 will sign an ELC of 2 years.
• Players aged 24 will sign an ELC of 1 year.

All these contract types mentioned above guarantee that a player will acquire the full stipulation of money signed in the contract regardless of where he is sent. However, there are some exceptions to the guarantee of players’ contracts. 

Exceptions To Guaranteed NHL Contracts

The exceptions to contract guarantee in the NHL are Buyouts, Contract Termination, Escrow or suspension. Let’s look at each of them and how they affect contract guarantees. 

Buyout

If a team decides it no longer wants anything to do with a player and wants to end the player’s contract before the time stipulation, it can go for a buyout. As the name implies, it involves buying out (paying off) a player from the contract with the team.

It is considered an exception to the rule because the player will not receive the total monetary agreement in the contract.

The two primary reasons for a buyout in the NHL are:

•  If a team exceeds the maximum salary cap for an NHL season and it needs to cut down players’ contracts to stay within the cap limits. 
• Secondly, when a team regrets a contract with a player and wants to end the contract of the player either due to poor performance or exorbitant contract. 

When a team wants to buy a player out of a  contract, it must pay a certain fraction of the remaining contract value back to the player. The fraction paid is determined by the age of the player, as shown below:

• If a player is younger than 26 years, he is given one-third of the remaining value of the contract.
• And if a player is 26 years or older, he is paid two-thirds of the remaining contract value. 

However, teams’ management does not buy out players’ contracts because the total contract values count against the team’s salary cap for twice the remaining length of the contract. 

Contract Termination

Contract termination is rare in the NHL, but it results from a contract breach or criminal conduct. If a player breaches the terms and conditions stated in the contract, his contract can be terminated by the franchise he plays for or even the league. 

Also, when a player is found guilty of severe criminal charges such as rape or domestic violence, it can lead to contract termination.

Escrow

The Collective Bargain Agreement between the NHL and NHLPA agreed that a team’s revenue would be shared 50/50 between its owners and players. This means that a team’s revenue will be split into two halves, one half to the team owners and the other half as the salary cap used to pay players’ salaries. 

Escrow is a financial arrangement in which a third party (league) holds a percentage of salary from players’ paychecks which players may or may not get back. The percentage is held in escrow in case the revenue does not meet up to the total salary cap of the team. 

Suppose the revenue release is less than the required amount to pay players’ salaries when split in half. In that case, the amount in escrow is used to settle the deficit. If the amount in escrow remains after that, it is redistributed back to the team. However, if the required revenue is met, then the full percentage in escrow is returned to the players. 

For example, a team meets with its player and decides that 12% of their paychecks will be kept in escrow for the season. If the teams cannot meet the required revenue at the end of the season, and 10% of the escrow is used to balance the 50/50 split, then the remaining 2% will be redistributed to the team. This means the players end up losing 10% of their salary. 

Suspension 

Suspensions, on the other hand, are given when a player commits infractions either on or off the ice. When a player is suspended, the number of days he stays on the suspension will be counted against his paycheck. 

Conclusion

Most of the time, an NHL player will collect his total contract value. However, the most common way players get less than their paycheck is through Escrow and, in a few cases, Buyouts. 

And that brings us to the end of contracts and guaranteed contracts in the NHL. Thanks for reading!