Thoughts Ahead of the Impending NHL & NHLPA Labor Strife Likely in 2022

Today is Labor Day. It is a perfect day as any to discuss Labor Issues in hockey. They are looming and they absolutely would have an impact on the world-class phenomenon that is our favorite team, the New Jersey Devils. This has come up in the hockey media recently as this month is a crucial month for the current Contract Bargaining Agreement (CBA).

While the ten-year agreement signed in 2012 would end after the 2021-22 season, both the National Hockey League (a.k.a. the owners) and the NHL Players Association (the union that represents the players) have the right to opt out of it now which would lead to the CBA ending on September 15, 2020. The NHL has announced that they will not opt out of the CBA. What this means is that the 31 owners of the league do not want the CBA to end early. They are fine with how business is carried out. Now it is on the NHLPA to make their decision by September 15. They will decide if there will be labor strife in 2020 or 2022.

Are the players fine with how business is being handled? That is up in the air. In Chris Johnson’s report at Sportsnet, he noted some good reasons why it is unlikely that the players would opt out. The most telling is that an earlier work stoppage may not address what their main concerns would be. It will be up to Don Fehr, executive director of the NHLPA, and the executive board consisting of all 31 player representatives to make their choice when they meet later this week. Should Johnson be right and the players do not opt out, then the CBA will not become a concern until we get closer to its end date after the 2021-22. If they do opt out, then this becomes a more pressing issue.

What exactly are these issues? And why are so many fans so quick to assume a lockout would happen? Let’s figure it out together.

The Past - Or Why We Pretty Much Expect Lockouts at this Point

For those are new to the NHL or have only followed it casually, this may all seem very odd to you. The NHL added a franchise in Vegas a few years back. The NHL will add a new franchise in Seattle that will start playing in 2021-22, which is the final season of the current CBA if the NHLPA does not opt out early. The NHL’s current national television contract with NBC and NBC Sportsnet also ends after the 2021-22 season and negotiations may begin sooner; the NHL can stand to make a ton of money in their next deal. And the NHL has not regressed. Why in the world would the NHL or the NHLPA have labor issues in 2022 and undercut all this? Why is there this concern over a lockout? Why would anyone risk all of this?

This is all true. It would be very foolish for the league and the players to not come to sort of an agreement before the CBA expires after 2021-22 (or September 2020 if the players opt out). It would look bad for business and actually be bad for business since there would not be any until a new CBA is signed. Especially right after the launch of the league’s 32nd franchise and right as a new TV deal could be negotiated and established. Yet, I still expect one to happen if the two sides do not get to an agreement by this time in three years. Simply because this has happened multiple times in the past.

Gary Bettman has been the commissioner of the NHL since February 1, 1993. He effectively represents the Board of Governors that run the NHL - who are the owners of the league’s franchises. Under Bettman, there were three times where the NHL and the NHLPA could not come to terms to an agreement. In each of those three times, when the CBA then expired, the league locked out the players. This meant there were no games, no players were paid, no team activities took place. Instead of a strike, which would have been led by the players, the owners just shut it down until a CBA was agreed upon and signed off. Here’s a summary of how each one went.

1. In the Fall of 1994, the owners locked out the players over the salary structure, which was impacting small-market teams. Among many issues and proposed rollbacks, the owners wanted a salary cap. They did not get one, but after 104 days, there were agreements made about rookie contracts, arbitration, and free agency (e.g. eliminating Group I free agency) meant to curb salary escalation. As we know, the NHL did have a 48-game season and the Devils won their first Stanley Cup that Spring.
2. In the Fall of 2004, the owners locked out the players again. The main issue was again salaries and the owners claimed they were losing hundreds of millions due to rising salaries, so they wanted a hard salary cap. The players relented, later wanted a luxury tax system, but the owners stayed united on wanting a hard salary cap. At risk of losing the entire season, the union agreed to have one but they would not work out the details in time. The 2004-05 season was cancelled. In July, a new CBA was signed with a hard salary cap linked to hockey revenue, a rollback on current salaries, and unrestricted free agency starting for a player seven years into the NHL or when they turn 27. The league restarted in 2005-06, which Mike recently looked back in this very good post from two weeks ago.
3. In the Fall of 2012, the owners locked out the players after another CBA could not be agreed to. The issue was more about the details of the salary cap structure such as the player’s share of the revenue and how contracts could be structured. After 113 days, a new CBA was signed. While the owners made concessions on the kinds of contracts they could sign (example: they wanted a limit of 5 years for any contract, it is now 7 with an eighth year for a player of their own being re-signed), the player’s share of revenue dropped from 57% to 50%. Similarly to 1995, the league had a truncated season in 2013. Unlike 1995, this is not looked back upon fondly here as the Devils failed to make the postseason.

In each of these lockouts, while they did not get everything they wanted, the owners clearly came out winners in each of them. They wanted a cap in 1994, but instead they got some control of free agency, rookie deals, and arbitration rights. They wanted a hard salary cap in 2004 and they were willing kill a season to do it (and they did kill it), they did get one and we have it to this very day. They wanted to cut the player’s revenue share from 57% to 50% in 2012 and they did it. Gary Bettman led those fights and made it happen. No wonder he has been the league’s commissioner for over 25 years. Not only has the league grown dramatically since the early 1990s, but the people he represents have came out winners in these three major labor battles. The owners have every reason to keep Bettman around. No wonder he plays up the booing at public appearances like at the NHL Draft or presenting the Stanley Cup; it is a very small price to pay for what he has accomplished.

It also probably helps knowing that there are fans to boo him so much. As bad as it looked for the NHL to lock out the players then, they really have not suffered from it. The fans that were unhappy about each all largely returned. I lived through all three of these lockouts. Was I happy at either of them? Hell no. I thought it was ridiculous, especially the 2012 lockout which was over details more than anything else. Did I go back to spending time and money supporting the Devils when they did resume playing? Hell yes. In effect, I am living proof of why the NHL sees a lockout as a viable option. There are more people like me than there are those who would walk away completely. The latter may exist, but they ultimately mean little in light of the fact that both TV ratings and attendance increased in 2013 over the 2011-12 season. Three times, the NHL shut down hockey and in all three times, the fans came back. And since revenues have been going up, we know that more and more is spent than ever before.

The harsh reality is that the NHL has not been punished for their lockouts. They will take a short-term hit in public perception, they will get what they want from the labor strife, and they know the fans will come back and spend even more because they have proven that. No matter how much of the coverage or online discussion is sympathetic to the players, the NHL has come out on top in these new CBAs and business has picked back up.

This is why when the CBA ends in 2022 (or 2020 if the union opts out), I would not be surprised if the NHL locks out the players if there is no new agreement after the 2021-2022 season. History says you should expect it. Besides, it essentially worked for them three times already. Why wouldn’t they do it again?

The Current Issues - Or At Least What Has Been Said as the Issues

The key difference this time compared to the last three is that there is more chatter from the players. That the NHL announced they would not opt out means that they are content with the current CBA. I am sure that as the CBA nears its expiration date we will learn about their issues with the current agreement. So what are the big issues for the players?

Sean Gordon’s recent article in The Athletic ($) about the lockout focuses on what the two biggest issues could be: escrow and hockey related revenue. Gordon’s piece has plenty of quotes from Marc-Edouard Vlasic about how he is willing to not play in the hopes of reducing escrow. He is upfront that he has a long term salary and he can handle being out of work. His current deal with San Jose lends more credence to being concerned about a future lockout. Per CapFriendly, his 2020-21 season has Vlasic receiving $5 million of his $7.25 million salary as a signing bonus and he has a smaller $2.25 million signing bonus for 2022-23. Unless I am mistaken, bonuses are paid out on July 1 so Vlasic will get a signifcant part of his salary in case there is a lockout in either of those seasons - which would take place in the Fall if there is no agreement.

Let us go back to the issues. Vlasic’s biggest concern is escrow and Gordon’s article notes that Vlasic is not alone in these concerns. For the uninitiated, escrow is salary withheld from the players to ensure that the 50% revenue share split is met in a season. As I understand it, this money is taken off the top of a salary and it can take years for the money to be reimbursed. Since escrow is used to maintain the 50% share of revenue, these can be substantial percentages taken away. As I also understand it, escrow has increased also in part of the player’s own actions. Every year, the NHLPA has the right to escalate the salary cap for the next season for up to 5% despite revenue growth. This artificial increase to the cap allows teams to spend more money, which is good in the short term for pending free agents. However, in order to maintain the split in revenues as determined by the CBA, escrow has to keep up and that has been a source of pain for all players.

Gordon wisely quotes some anonymous agents in noting that the other major issue is really what is behind escrow: hockey-related revenue. Gordon noted that the lucrative expansion fees received by the NHL are not considered hockey-related revenue. One could argue that it should absolutely be since they are new hockey teams and the owners get a cut of that money. One could argue it is not since the expansion fee is only for the right to be in the league and that no actual hockey has actually taken place; in place of money, the NHLPA is guaranteed at least 40 new members and up to 90 depending on how many Vegas and Seattle do/will have under contract. If the proverbial pie cannot be cut any differently, then the drive would be to increase the whole thing. Re-negotiating what is and is not hockey-related revenue would be a big way to go about doing that.

Adding fuel to this are those who remember and lived through the 2012 lockout. Vlasic is one of them and Gordon quotes an anonymous player frustrated how they felt the union did not win much in that lockout. Precisely because they really did not. Should those players make up most of the team representatives that make up the NHLPA’s Executive Board, then the NHLPA may be gearing up to bring escrow and hockey-related revenue to a head when the CBA does get negotiated more seriously. It may not be enough to opt out of it early but it could be the two big issues the NHLPA would bring to the table in 2022.

The Future - Or Kicking the Can Down the Road May Be Best

I do hope that the NHLPA does agree to keep the current CBA until its initial expiration date in 2022. As Johnson indicated from what he’s heard, that is expected. But why?

From my perspective, it could be as simple as that the players may not on the same page. And why would they be? Vlasic knows this and has a contract structured in anticipation for some kind of labor strife. How many are in Vlasic’s skates? There are hundreds of players who have joined the NHL since 2013-14. They were not around for that lockout, those negotiations, or the immediate aftermath. Most of the top stars in the league today are younger players, not necessarily veterans who may have more of an understanding about how important this all is. As Gordon noted from an anonymous agent, those players are more concerned about sticking the league, working to get that next contract, and/or hitting their bonuses in their ELC than they would be with the CBA or escrow or hockey-related revenue. It will be a challenge for Fehr and the NHLPA team reps to educate their teammates about the history of the union, why escrow and hockey-related revenue are significant issues, and why they need their support. And even after that they may not as they may think business is fine, the timing is not good, or they be more concerned about their own goals than the union’s.

Why this is the case is the CBA itself. The CBA has effectively divided the players. The rules of new contracts to players over 35 have resulted in fewer players over the age of 35 playing in the NHL. Older players are not just more experienced in the game but also in the business of the NHL and that is to the detriment of a union. The advantages inherent in entry level contracts have given teams more incentive to play younger players. So much incentive even to tank seasons to hopefully draft a star they can re-build around while on a cheap contract and can convince to a long-term second contract (this has worked for Pittsburgh and Chicago, not so much for Edmonton and Buffalo). And those young players have bonuses they could hit on top of knowing they need to get that next, more lucrative contract. And combined with separate rules about arbitration eligibility, waiver eligibility, and different groups of free agents, a lot of the players are not on the same page from a contractual standpoint. They are not on the same page with what they would prefer or need and that makes the NHLPA’s job of uniting the players (either to work for an agreement or stand up to the NHL) that much harder.

Therefore, it may be wiser from the union’s perspective to not opt out of the CBA and start taking the time to bring people together.

The PA would need to be somewhat fluid on what they do want they want to focus for those eventual CBA negotiations. In my view, escrow and hockey-related revenue are the major sticking points right now. There could be more issues developing over the next few years. For example, the current situation of so many restricted free agents currently not having a contract may raise the ire of some in the NHLPA (and maybe the owners too) in time. It is September 1 as I write this and there are 25 players yet to be signed including the likes of Marner, Point, Ratanen, Connor, Laine, and to a lesser extent, Zacha. I understand that if you have time, you should use it. However, should this practice continue of taking arbitration ineligible players this long before anything is signed could lead to changes with how RFAs are handled. Do not forget that contract length and salary structure were big parts of what was negotiated out of the 2012 lockout. Something like that could be on the table.

There could be other, smaller issues brought up. Olympic involvement might be one, although I am doubtful as it does not really impact the majority of the players. Only the best would be involved and I do not know if they would have enough representation or if the larger group would push that ahead of other issues. Since Johnson brought up in his Sportsnet article that both sides are interested in a World Cup in 2021, that would make it even less of issue. Another issue may be with how the NHL deals out punishment. Gordon’s article in The Athletic did bring up Nate Schmidt’s automatic 20-game suspension for testing positive for a trace substance of a banned substance last September that bothered plenty in the union. How the league has automatic suspensions for some violations and more arbitrary ones for others could be another plank for discussion.

Going back to the main point. The best case for the moment would be for the NHLPA to also not opt out of the CBA and so the agreement can run to after the 2021-22 season. This would give them more time to prepare, collect their issues and demands, and make a case to the owners. Of course, based on the last three times, I would not hold my breath. Nor would I hold my breath for any agreement ahead of the CBA expiring.

Your Take

As a final point about the impending labor strife, I think the cynicism about the process still holds. I would love to have no talks of lockouts or any actual lockouts. I would love to have no interruptions to seeing and following the Devils. I would love to tell you here is why you should not worry about this in the future and why we should be more concerned about amazing the Devils are with Nico and The Big Deal in their primes. The good news is that should the NHLPA decide to not opt out of the CBA by September 15, then you will not need to worry about it for a couple of years. The bad news is that it will still come and, based on history, you can expect to lose part of the season and we will do it all over again whenever that CBA ends.

Perhaps you have a different opinion about all of this. Do you expect the NHLPA to not opt out of the CBA? If they do, why do you think they will? What do you think the next CBA argument / focus of the next lockout will be about? Does it matter if we all come back after it ends? I don’t know. Please let me know your answers in the comments. Have a Happy Labor Day.