No mulligans allowed: How teams escape bad contracts

Most NHL General Managers will play a lot of golf after the season ends. Like most of us, they will hit some shots that go long and straight and others that will slice into the woods or plunge straight into the water. It’s a lot like the player contracts they sign. Over a career managing a hockey team, a GM will make some great player deals but will probably also want a few mulligans.

Signing some bad contracts is inevitable in the NHL. It’s very unusual to find a team that doesn’t have at least a contract or two that was shanked off the tee or landed on the fairway initially, only to roll into the rough later on. If you can find a team with no bad contracts now, just give it time. Even good contracts with a long enough term can become inefficient as seasons pass. With cap space being the most critical commodity in roster construction in the NHL, it is no wonder that, at some point, every team has to confront the reality that it has to move on from certain players because their contracts have become bad fits.

Given that NHL contracts are guaranteed, there are basically four avenues available for a team to get a player fully or partially off its books: trade, waivers, demotion or buyout. Which club you pull out of your bag to clear cap space will depend on a variety of factors. Teams will generally go through a progression where each of its avenues is considered in sequence.

Option 1: Is there a value-for-value trade to be made?

The first option is always to see whether there is trade potential that returns value or at least doesn’t require you to give anything up. Sometimes, one team’s garbage really is another team’s gold. The Vegas Golden Knights considered Evgenii Dadonov a straight salary cap dump, and yet were able to mine something valuable from the Montreal Canadiens in return, in the form of LTIR-eligible Shea Weber (a similar return to what they tried to accomplish in the attempted Dadonov for Ryan Kesler trade with the Anaheim Ducks that was voided for not respecting Dadonov’s limited no-trade rights). The Knights were fortunate – Dadonov is still a good enough player that, despite a cap hit well in excess of his current production, at least two teams with cap space thought he may still have a few birdies left in him and were willing to offer Vegas something of value in return.

If a player falls more into the double-bogey category, there is still the possibility of exchanging his contract for one that is problematic for another team. Maybe neither deal is particularly efficient, but one player could work out better for your team based on roster spot allocation. I was aware of a GM who called these ‘BOS’ deals. Sounded good, until I realized he meant, “We’ll trade our bag of….um, excrement for your bag of excrement!” Where do we sign up?!

Option 2: Hope the waiver wire lets you off the hook

Getting value in return for a contract that is considered a bad one is pretty rare. Let’s be honest, if your team considers the contract too unpalatable for its books, it’s likely other teams feel the same way. The next option you would look at is the waiver wire. It’s obviously the easiest and cleanest way to be absolved of all responsibility for a player, but having a bad contract claimed through waivers is rare. If you are waiving a player, most teams know a buyout may be the next step, and if they have any interest, they can offer a post-buyout contract at pennies on the dollar compared to the existing contract. The fact of the matter is that if you have put out the invitation to the 31 other teams and none has expressed much interest, you already know that no claim is going to be submitted. You still have to try. As much as anything, it’s a signal to the player and his agent that any options being considered by the team aren’t necessarily unfair if other teams feel likewise. If an agent has been hounding a GM to trade a player, nothing backs them off like placing their player on waivers. If the agent sees that any team could have had their guy for free and wouldn’t take them, even they will acknowledge the contract is unappealing and they will start to work with you on solutions.

Option 3: Attach an asset or retain salary in a trade

If a trade can’t return value and the player clears waivers, it might still be worthwhile to move the player in a deal where you give something up or agree to retain a portion of the salary. Teams with cap space are often willing to take on all or a portion of your “bad money” for an asset they covet. The Arizona Coyotes are the runaway clubhouse leader in accumulating contracts other teams don’t want in exchange for draft picks or other sweeteners, but lots of teams not yet ready to compete for a Cup will likely be tempted to have a look at your used driver if you throw in a new putter.

Shopping a player by attaching assets to him isn’t an option any team likes to consider, but you have to weigh the future value of the asset with the current value of the cap space you would recoup. Rightly or wrongly, many GMs and owners will choose the quick fix rather than letting an inefficient contract run its course. In 2019, the Toronto Maple Leafs were willing to offer their 2020 first-round pick (13^th overall) to the Carolina Hurricanes to incent them to take Patrick Marleau and his $6.25 million cap hit off their hands. In the short term, the Leafs used the cap space to keep their contending team intact. Long-term, though, they parted with the pick that became Seth Jarvis, now one of the Hurricanes’ brightest young stars. Of course, hindsight is 20-20, and I’m guessing the Leafs would do it again given the same circumstances. Short-term certainty often wins over long-term what-ifs.

Option 4: Demotion vs. Buyout

If you aren’t prepared to give up an asset but are still desperate for the cap space, you have to choose between demoting the player to the AHL (which buries a portion of the player’s cap hit in the minors) or buying him out. A buyout usually frees up more space but creates a problem over a longer term. The cap hit gets spread across twice the remaining term, so in some ways it just pushes problems to the future. A demotion still provides cap relief but is more of a “take your medicine now” kind of approach.

Usually, it’s just a simple case of comparing the math between the two options, but there are other factors at play as well. First, is the owner willing to pay the player to not be in the organization, or would they prefer that the player still be required to earn that money, even if it means riding the buses in the AHL? It may depend on the amount of actual dollars, not cap, that are in issue. Management’s focus is typically on cap space, but owners may desire to shave real dollars off a contract if the player isn’t living up to the deal.

Second, a team needs to consider whether demoting a highly paid NHL player will harm the prospects in its AHL system, either by taking up playing time that would otherwise go to the young players, or in some cases, because the older player will be a bitter and negative influence in the dressing room. Most players are consummate professionals and accept their fates with high character and a resolve to prove the team wrong, but there are exceptions, and the player’s attitude is absolutely a factor to be considered. You don’t want your prospects to play a round with a guy who criticizes his caddie and throws his clubs in the lake.

Finally, if the player is a veteran with a long and distinguished career in the NHL, sending that player to the AHL can be a devastating blow for him, and not all GMs (most of whom played in the league) are prepared to lower the boom on a player in that fashion, even if it will save the organization up to $1,125,000 against the cap. A buyout at least affords the player the opportunity to sign another contract to play in the NHL, so many GMs will push for that option over a demotion because they want to do right by the player. It’s like letting your guy transition to the LIV Golf tour instead of forcing him to go back to Q-school (too soon?).

The bottom line is that at one time or another, every team will have to consider what to do about one or more contracts where the player’s value falls well below his cap hit. It’s par for the course. There are several mechanisms available to free up the desired cap space, but no perfect answer as to how to address it. It just depends on whether you want to take the triple bogey and be ready to tee it up again tomorrow, or drop, take your penalty stroke and take aim for the green.

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Chris Gear joined Daily Faceoff in January after a 12-year run with the Vancouver Canucks, most recently as the club’s Assistant General Manager and Chief Legal Officer. Before migrating over to the hockey operations department, where his responsibilities included contract negotiations, CBA compliance, assisting with roster and salary cap management and governance for the AHL franchise, Gear was the Canucks’ vice president and general counsel.

Click here to read Gear’s other Daily Faceoff stories.

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No mulligans allowed: How teams escape bad contracts

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