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Q&A: NHL Free Agency Explained

CHICAGO —  The National Hockey League is under one month away from opening up the doors of its’ free agency market. Officially, the first day of July marks the begining of which unrestricted free agents can negotiate and sign a contract with any NHL team.

Before we get into greater detail, it is important to understand the NHL free agency process which heavily involves the rules established in the 2013 Collective Bargining Agreement between the NHL and the NHL Players’ Association. The CBA is 540-page agreement that features guidelines and rules that protect and govern both the NHL and the NHLPA until September 15, 2022.

The following is what you need to know, right from the CBA, in order to better understand the offseason free agency process throughout the NHL:

LEAGUE YEAR

This is the effective date that begins the new league year in which contracts expire, free agency opens, compensation sliders are set, and the salary cap for the league year is established.

The period from July 1 of one calender year to and including June 30 of the following calender year or such other one year period to which the NHL and the NHLPA may agree. 

UNRESTRICTED FREE AGENT 

These players are no longer bound by their expiring (June 30) contract with the team and are free to negotiate and sign with any team in the NHL (July 1).

A Player who: (a) has either never signed an SPC or whos SPC has expired, or has been terminated or bought by a Club; and (b) who otherwise is not subject to any exclusive negotiating rights, or a Player who becomes an Unrestricted Free Agent as a result of a Club exercising its walkway rights. 

RESTRICTED FREE AGENT

These are player’s that are no longer considered “Entry-Level” but do not qualify as unrestricted free agents become restricted free agents when their contracts expire. These players are subjected to the rights of their current clubs ability to submit a qualifying offer sheet.

A Player whose SPC has expired, but who is still subject to a Right of First Refussal and/or Draft Choice Compensation in favor of his prior Club.

27-OR-7

Any players whose contract has expired by the June 30 deadline, can declare himself an unrestricted free agent if he is at least 27 years old or has at least seven years of service as an NHL Player.

Any Player who either has seven (7) Accured seasons or is 27 years of age or older as of June 30 of the end of a League Year, shall, if his most recent SPC has expired, with such expiry occuring either as of June 30 of such League Year or June 30 of any prior Leagye Year, become an Unrestricted Free Agent. Such Player shall be completely free to negotiate and sign an SPC with any Club, and any Club shall be completely free to negotiate and sign a SPC with such Player, without penalty or restriction, or being subject to any Right of First Refusal, Draft Choice Compenstation or any other compensation or equalization obligation of any kind.

QUALIFYING OFFERS

Teams must extend a qualifying offer to a restricted free agent to retain negotiation rights. If the player rejects the qualifying offer, they will remain a restricted free agent and their rights are retained by the team. If the player does not receive a qualifying offer, the player then becomes an unrestricted free agent.

Each salary bracket requires a perecentage of last season’s salaray to tender a qualifying offer.

(A) if the Player’s prior year’s Paragraph 1 NHL Salary is less than or equal to $660,000 for that League Year, 110% of the prior year’s Paragraph 1 NHL Salary.

(B) if the Player’s prior year’s Paragraph 1 NHL Salary is greater than $600,000, but less than $1,000,000 for that League Year, 105% of his prior year’s Paragraph 1 NHL Salary, but in no event to exceed $1,000,000. 

(C) if the Player’s prior year’s Paragraph 1 NHL Salary is equal to or greater than $1,000,000 for that League Year, 100% of the prior year’s Paragraph 1 NHL Salary.

(D) if a Player is eligible to receive a Two-Way Qualifying Offer, the Paragraph 1 Minor League Salary component shall not be less than the higher of the Player’s prior year’s Paragraph 1 Minor League Salary, if any, or the minimum Minor League Salaray.

OFFER SHEETS

An Offer Sheet is a contract that is negotiated by an NHL team and a restricted free agent on another team.  The offer sheet includes all the terms of a standard player contract (SPC). Once a player has signed a qualifying offer or is going to salary arbitration with his original team, they cannot sign an offer sheet.

When an offer sheet is signed, the player’s current (original) team is notified. That team can either keep the player under the terms of the offer sheet, or decline and let the player join the new team under those terms.

When a Restricted Free Agent receives an offter to sign an SPC from any Club (the “New Club”) other than his Prior Club, which offer the Player desires to accept, he shall give the Prior Club, a completed certificate, which shall contain the “Principal Terms” as well as all the other terms of compensation of the New Club’s offer. The Prior Club, within seven (7) days after the date it receives the Offer Sheet, may exercise or not excercise its Right of First Refusal. Once an Offer Sheet for a Restricted Free Agent has been received by the Prior Club, the Prior Club may not Trade or otherwise Assign its Right of First Refusal for such Restricted Free Agent.

After the offer sheet has been signed by a player, the original team cannot negotiate a new contract under different terms or trade the player’s rights. The team can only accept or decline the offer sheet.

COMPENSATION 

If the original team declines the offer sheet and loses the player, it receives draft picks from the player’s new team as compensation. Compensation for losing a restricted free agent is on the sliding scale; it flexiuates each year depending on how much the contract is worth.

Any Club that is entitled to but does not exercise its Right of First Refusal pursuant to section 10.3 shall be entitled to obtain Draft Choice Compensation from the New Club. The number and quality of draft choices due to the Prior Club shall be based on the average annual value of the compensation contained in the Prinicpal Terms of the New Club’s Offer Sheet based on the following scale:

OFFER SHEET                                                   COMPENSATION

$1,110,249 or below                                  None

Over $1,110,249 to $1,682,194                3rd Round

Over $1,682,194 to $3,364,391                2nd Round

Over $3,364,391 to $5,046,585                1st Round and 3rd Round

Over $5,046,585 to $6,728,781                1st Round, 2nd Round, and 3rd Round

Over $6,728,781 to $8,410,976                (2) 1st Round (1) 2nd Round (1) 3rd Round

Over $8,410,976                                         (4) 1st Rounds

SALARY ARBITRATION

Any team or player can file for salary arbitration as a mechanism to settle contract disputes. A team can only take a player to arbitration once in his career with them; a player can ask for salary arbitration as often as they’d like.

Player Elected Salary Arbitration eligibility:

  • Player must meet the Pro Years of Professional Experience requirement.
  • Player electing for Arbitration must do so by making a written request.
  • Player must notify the Central Registry, NHLPA, and Team by 5:00pm EST on July 5th.

Club Elected Salary Arbitration elgibility (first window):

  • Club electing for Arbitration in the first window must do so in writing by the later of June 15th OR 48hrs after the Stanley Cup Final by 5:00pm EST.
  • Player had a AVV (Base Salary, Signing Bonus & Perf. Bonuses) > $1,953,297 in 2016.
  • Club electing for Arbitration in the first window can be made in lieu of a Qualifying Offer.
  • Player cannot be awarded less than 85% of his previous years AVV (Base Salary, Signing Bonus & Perf. Bonuses).

Club Elected Salary Arbitration eligibility (second window):

  • Club electing for Arbitration in the second windown must do so in writing between July 5th at 5:00pm EST & July 6th at 5:00pm EST.
  • Club has to have made valid Qualifying offer to the Player which not yet been accepted.
  • Club offer for Arbitration in the second window equal to or higher than the Players previous year AVV (Base Salary, Signing Bonus & Perf. Bonuses).
  • Player can only be subject to one (1) Club elected Salary Arbitration in his career.
  • Club can only elect to have two (2) Salary Arbitrations per league year.

Arbitration Ruling:

  • Player & Club can settle on a deal at any point prior to the official ruling.
  • Once the hearing has taken place, the Salary Arbitration decision must be issued by email within 48 hrs of the closing.
  • Arbitration awards can only be 1 or 2 years in length.
  • Players who are in their final year RFA are only entitled to 1 year term.
  • Player elected Arbitration Settlements of 1 year & > $3,906,595, Club can walk away from the awarded salary, making the player a UFA
  • Player elected Arbitration Settlements of 2 years & > $3,906,595, Club can walk away from the second (2nd) year of the awarded salary, making the player a UFA at the end of year 1

 

It’s a lot to take in, I know. However, now you’re ready to understand the free agency process. This Wednesday I’ll be bringing you my Top 30 NHL Free Agents that will hit the open market on July 1st when the new league year opens up.

NOTE: If you have any questions, or comments, please email me at jay.williams.undhky@gmail.com

Categories: All Articles, Draft

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