Kovalchuk Deal Finally Approved; New Amendment Approved
Friday, September 3rd, 2010The National Hockey League and the NHLPA have set up an amendment to the rules that govern long-term contracts and, as a result, the Ilya Kovalchuk deal has been approved.
The deal between the New Jersey Devils and Kovalchuk is a 15 year deal worth $100 million. All that is left to finalize the contract is the paperwork. The Kovalchuk deal, given the new circumstances, will be the last of its kind.
So on to the amendment:
First, the amendment deal with long-term contracts. The NHL defines long-term contracts as deals that are five years or longer.
The first issue the NHL and NHLPA have dealt with pertains to long term deals extending past the age of 40. The contract’s average yearly value for the years leading up to and including the age of 40 will be calculated by dividing the total value in the aforementioned years by the number of years leading up to and including the age of 40.
Further, for deals covering beyond the age of 41, the cap charge each year will be equal to the value of the contract in that year.
Take a player in his mid-30s as an example. Let’s say that the player agrees to a contract that is seven years in length. The deal will expire when he passes the age of 41. The NHL, with the amendment just agreed on, will average out the first five years of the seven year deal and the total becomes the dollar amount divided by five years. The annual salary becomes the cap hit the team takes on and the player’s cap hit in the final years of the deal after the magic age of 40, would be the actual value of the contract.
Now the amendment also impacts long term deals agreed on when the player is of the ages of 36, 37, 38, 39, and 40. For those ages and those deals, the amount used for calculating the average annual value of the player is a minimum of $1 million in each of those years. This minimum average annual value is even in place if the player’s actual salary pays him less than $1 million during those seasons of the contract. Go figure.
In other words, a team could be taking on a cap hit for a player in such a long term deal of $1 million even if the player isn’t being paid $1 million. This is apparently to discourage the structuring of Kovalchuk-like deals that would pay a player a pittance in an attempt to front load the deal in the earlier years.
In any event, the Kovalchuk deal is through and the other contracts the NHL was looking into, like the Luongo and Savard deals, are also good to go. The new amendment comes into play to impact any contracts signed on or before September 3.
This new way of structuring long term contracts will most assuredly have impacts in the way teams build their organizations. Have we seen the end of the top-loaded contract in the National Hockey League? Or will new ways be fashioned to secure franchise players?
Posted by Jordan Richardson.

