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Diving into the Details of Ondrej Palat’s Contract with the New Jersey Devils

While the New Jersey Devils signed Ondrej Palat to a five-season contract worth $30 million, the details about the contract did not come out until Friday. Thanks to CapFriendly, this post goes into the salary structure and trade clauses Palat’s new contract now has.

2022 NHL Stanley Cup Final - Game Six
I made the same face when I saw the details too, Ondrej.
Photo by Mark LoMoglio/NHLI via Getty Images

The story of Tom Fitzgerald’s Free Agent Frenzy continues to introduce wrinkles even days after Wednesday. After all kinds of feelings, conjectures, arguments, copes, and even seethes over Johnny Gaudreau - who signed with the Columbus Blue Jackets - we got word from the General Manager himself this morning in a media session. Fitzgerald indeed talked in depth with Gaudreau and his wife on Wednesday night. He indeed made an offer. He apparently did not get a response and if he did, it clearly was not enough. So now Fitzgerald has the line about how Ondrej Palat was his main target all along. The negotiations for Palat, who reportedly was signed around midnight on Wednesday, were either incredibly arduous to take all Wednesday, or it took place late on Wednesday night as to have someone signed at wing for the Devils. Whatever version you want to believe, the fact remains: Ondrej Palat is a New Jersey Devil with a five-season contract worth $30 million.

On Thursday morning, I wrote my take on the signing. The summary is that as much as I like the 31-year old and I understand he was not going to take a pay cut, I am not a fan of the five-season term. While he has rings, intangibles, and that dawg in him, he is not really a significant producer or the beefy “power forward” that some have wished the Devils to get for their top six. Palat is a complementary winger. A pretty good one and one I think could mesh well with either Jack Hughes or Nico Hischier. But he is closer to Tomas Tatar even if he plays a more aggressive style.

At the time, all I knew that he signed for five-seasons for a total of $30 million. I did not how that was structured. I did not know if there were any no trade clauses or anything like that. We found out the breakdown in salary this morning from CapFriendly and the clauses in the evening. Here are the full details and it really does need to be explored a bit. I think it may change some opinions about the signing. It definitely will impact what the Devils do in the future with respect to Palat.

The Money or Not All $30 Million Deals are Created Equal

While the Devils will have a $6 million cap hit on the books for each season they have him, Palat will be paid a differently from season to season. In the NHL, players are given a base salary. This is what they get paid for every day they are in the NHL for the regular season. It does not carry over into the playoffs; the cliches of the postseason showing “your character” or wanting to “prove your worth” are not hollow in that sense. However, many players are also given signing bonuses. Signing bonuses are paid out in one lump sum. For seasons beyond the first one, it is paid out at the beginning of the league year, which is typically on July 1. The first bonus is paid out immediately.

Aside: Performance bonuses are relegated to entry level contracts - like the one Simon Nemec now has - and players over the age of 35 who sign a contract. But for most of the league’s players, they cannot have them.

Signing bonuses are often used to ensure some level of payment and could be constructed in exchange for accepting a lower base salary. It can also be used as a way to skew the bulk of the contract towards the beginning or end of the contract. There are rules in the NHL Contract Bargaining Agreement that control how much salary can increase or decrease from season to season, but a creative GM and agent can work within them to come up with something beneficial for their respective sides. For a veteran player like Palat, one may expect it to be frontloaded. That would be the case for Palat’s deal. Here’s the breakdown from CapFriendly:

  • 2022-23 - Base Salary: $750,000, Signing Bonus: $7,500,000, Total: $8,250,000
  • 2023-24 - Base Salary: $3,580,000, Signing Bonus: $3,320,000, Total: $6,900,000
  • 2024-25 - Base Salary: $1,770,000, Signing Bonus: $3,180,000, Total: $4,950,000
  • 2025-26 - Base Salary: $3,950,000, Signing Bonus: $1,000,000, Total: $4,950,000
  • 2026-27 - Base Salary: $4,950,000, Signing Bonus: $0, Total: $4,950,000

It is indeed a front loaded deal where Palat will get a majority of the money in his contract within the first two seasons. However, it is not exactly what you tend to see for players signed into their 30s. Generally, you would want to see the final year or few years of the deal to be the cheapest to make a buy out or trade easier as needed. Think of it as building an exit plan or hedging a bet into a move. That does not appear to be the case. From a buyout perspective, if I’m using the CapFriendly buyout calculator correctly, the net savings ranges from $4.7 million (if bought out on June 15, 2023, although that’s over a 8 season cap hit) to $1.65 million (if bought out on June 15, 2026, which would be over 2 seasons). That is not terribly pricy but hardly ideal.

As far as a trade, the play would be for the Devils to find a team who needs to take up cap space without paying a lot in salary. On the surface, this deal would fit the bill. In fact, Palat will get paid at least $1 million less than the salary cap hit in each season of this contract. But the structure is not so favorable for the Devils to move it as Palat gets older. The second cheapest salary of the five seasons is in the third season. But I struggle to see how a team that needs to add salary cap while not paying out actual money is going to jump at that knowing they would have to pay out $9.9 million over the following seasons. Two seasons where Palat would be older and potentially not be a player worth $4.95 million in actual money to pay out. Maybe if they really like Palat? Maybe if that team’s owner would be fine with such an increase? Those are some stretches to make.

The more I look at this, the more I think this favors Palat. The only thing that is not favorable for him is that last season. He is to get paid entirely in salary for that season. The problem is that the current CBA ends on September 16, 2026. The CBA was extended back in July 2020 amid the global pandemic to run through the 2025-26 season. It is way too early to guess or worry about whether there will be a labor stoppage. It is entirely possible that both the NHL and the NHLPA will have new leadership and different concerns. Although, I would figure escrow will be a sticking point. For such seasons, it would be wise for any player to seek out a signing bonus for 2026-27. This way they will get paid at least that much ahead of any labor dispute that could cause a delay, lockout, or strike impacting the 2026-27 season.

However, there is another wrinkle at play that may even explain that oversight. Per the NHL’s announcement of the extension in July 2020, the CBA can extended automatically if the player’s escrow debt is between $125 and 250 million after the 2024-25 season. I have no idea what the escrow debt is right now or if it is on its way to being in that range. I would think that the players and their agents have a better idea of how it is going. If the debt is trending towards that range for 2025, then the CBA gets extended for another season and this all-base-salary payment in the final season is no big deal for Palat. I would still have expected his agent to provide some bonus as protection. Then again, after $15 million given out in bonuses across the previous four seasons, maybe this was a compromise with Fitzgerald and the Devils.

Ultimately, I think this structure really should have been modified beyond the . Front-loading the contract to give Palat $8.25 million is a choice, but for the purposes of getting out of the deal if or when Palat starts to decline significantly as a player, I think some adjustments to tail the salary down further in the last two seasons would have been beneficial for the Devils. So would a lack of clauses.

What, you thought Palat was not going to get some additional protection in this five-season contract?

Clauses & Challenges

Players and agents are not so foolish as to know that an older player would not want to control his own fate. They know that Father Time is not on their side. They know that their performances can decline in time, which could make the team want to move on from him instead of seeing out the whole contract. This is a key reason why they request trade and movement clauses. Again, it was initially thought that the Devils signed Palat without them. In fact, they did include them. Here are the two clauses:

  • Palat has a no move clause in all five seasons of the contract.
  • Palat has a modified no-trade clause in the fourth and fifth seasons (2025-26, 2026-27). On July 1 of that year, Palat submits 10 team list that he will accept a trade to.

The no move clause would keep the Devils from burying Palat to the AHL. Even if his play warrants it, Palat is going to be a New Jersey Devil for this contract. The no trade clause is a bigger challenge. Especially if you looked at this contract thinking that the Devils would front-load it (they did) and have the cap hit be larger than the salary in the last few years (they did, although they could have done it better) such that the Devils could just move Palat to a cap-needy team that does not want to spend a lot in salary. In the last two seasons of the contract, Palat can simply block a trade to such teams. Palat and his people are not likely to put those teams on the list. I would expect him to fill that 10-team list with organizations the Devils would not want to trade to for various reasons (lack of cap room, lack of roster space, lack of interest, divisional opponents, rivalry, etc.).

In other words, Palat has a lot of control when he will be 35 and 36 under this contract regardless of how he ages as a player. Even if the Devils find a trade partner to offload Palat’s deal, then Palat can simply block it unless the move is made much earlier. Tom Fitzgerald or whoever will be GM in the future (I admit, I’m not confident that Fitzgerald will see the end of this contract as New Jersey’s GM.) would have to make a hard decision as to whether to move Palat before July 1, 2025. Of course, Palat could waive the clause(s) if he so chooses. Why he would want to, I cannot tell you.

Ultimately, this contract favors Palat a lot more than just a 31-year old player getting $30 million.

The Philosophical Issue

There is a larger concern I have with this kind of contract and what it means to be a fan. Ondrej Palat has yet to play one single game for the New Jersey Devils and I am already thinking about how the Devils can get out of this contract years from now. For all I know, Palat will age gracefully and be a solid hand for all five seasons of the contract. Maybe he actually does make the Devils better on the ice and in the room for an improvement the team really, really, really needs to make as soon as possible. Would that be worth $30 million? Perhaps not on its own, but on a team with heaps of cap room and owned by a multi-billionaire, then yeah, you could make that argument.

But because of what we know, I almost feel like I have to bet against Palat playing up to this contract. A player I like, even. With Palat’s age and knowing players in their 30s tend to decline, it is fair to question if Palat will be worth $4.95 million. I know the reality that while the salary cap may go up, these deals are not in a vaccuum. This contract will impact future signings both internal and external. (Aside: Jesper Bratt and his agent are probably very pleased to know Palat’s getting a total of $8.25 million next season.) It may not be my money, but it does impact how my favorite team is constructed. Should the deal blow up in Fitzgerald’s face or something else does and he’s gone, then I get to see how another GM starting another rebuild or revamp or retool or retread of the roster handles this contract that he or she will inherent. We are not even in training camp for 2022 and it is at the forefront of my mind about the team’s offseason work.

Palat’s contract is just the latest example of how teams construct their rosters and the limitations they have to work with between the salary cap and the talent available may force a fan to think about the end before it even begins. We expect the team to build in an exit strategy if or when the contract ages poorly. And here I am highlighting that - and that Fitzgerald. Yet, I cannot give a full, honest opinion about this signing without pointing this out. I cannot choose to live in ignorance.

This is ultimately a philosophical issue with how business is done in the NHL and, perhaps, with sports at large. I hesitate to call it a problem as it is the reality of things. But it is what it is and I wish I did not need to see this front-loaded contract in this way. Anymore than I wish I did not need to see that Palat was given control over a potential trade when he is 35 or 36 years old.

Your Take

Does this ultimately change my feeling about the Palat contract? Well, I think this totally-not-thrown-together-late-Wednesday night deal favors Palat a lot more than I expected. Credit to him and his representation for getting this much out of it - even if it does not benefit the Devils much. I could understand the not-so-ideal structure of the salaries, but the no-trade clause in particular makes me wonder why that had to be included. Was there really any competing interest that would have provided it? Was it given by Fitzgerald knowing that it may not be his problem? Cynical as both questions may be, I still think they are valid ones - even if we’re not likely going to get any answers until way into the future, if at all.

I also now think there’s more pressure that this signing turns out better than one may fear. Palat needs to make an impact in his first year to justify as much of the actual $8.25 million he is going to get in 2022-23. It may not be my money, but the people who are providing it may have higher expectations than me. Again, I like the player. I think he’ll help the Devils perform. I didn’t like the five-season term, now I do not love the structure and I really don’t like the modified NTC Palat will has the years where the Devils may need to get out of it. I wish I did not have to think or bet against Palat, but it is what it is.

But that’s me. Perhaps you are more positive about this than I am. Perhaps you have more faith in Palat living up to the deal than concern that the Devils can get out of it. Perhaps you do not subscribe to the philosophical issue. Do these details change your opinion about the Palat contract? Or what you expect from him? Please leave your answers in the comments. Thank you for reading.