NHL And NHLPA Accept Kovalchuk's Deal As Part Of Amending CBA Rules For Future Long-Term Contracts

The saga that started almost a month and a half ago has finally reached its conclusion (pending the completion of paperwork expected to hammered out very soon.) TSN's Darren Dreger has reported that Ilya Kovalchuk is on his way to becoming a New Jersey Devil for the next 15 seasons as part of an agreement between the NHL and NHLPA to amend the rules of the collective bargaining agreement regarding long-term contracts from here on out. Kovalchuk's deal, valued at $100 million over those 15 seasons, will be the last of its kind and any further contracts will play by new rules.

According to Dreger, long-term contracts are now clearly defined as those consisting of five or more years. The new rules essentially target the ages of 35 and 40 when it pertains to player contracts.

The first change calls for any contract signed by a player beyond the age of 40 years old to have his annual average salary (i.e., cap hit) only calculate for those years up to and including the season in which he is 40 years old.

For long-term contracts extending beyond the age of 40, the contract's average annual value for the years up to and including 40, are calculated by dividing total value in those years by the number of years up to and including 40. Then for the years covering ages 41 and beyond, the cap charge in each year is equal to the value of the contract in that year. (credit: Darren Dreger)

As an example, let's say that Tomas Kaberle sets the world on fire this upcoming season but Brian Burke still allows him to reach unrestricted free agency next summer. By the time July 1, 2011 rolls around, he will be 33 years old. San Jose Sharks General Manager Doug Wilson has yet to find a permanent replacement for Rob Blake and chooses to knock Kaberle's socks off with an eight-year proposal for $27.8 million that has a year-by-year breakdown like this:

2011-12: $5 million
2012-13: $5.75 million
2013-14: $5.75 million
2014-15: $4.25 million
2015-16: $3.5 million
2016-17: $2 million
2017-18: $1 million
2018-19: $550,000

Pending Wilson doesn't lose his job, this contract would have originally counted as a $3.475 million annual cap hit against the Sharks' payroll and expire when Kaberle is just turning 41 years of age.
Under the amended rules of the CBA, things would work out a bit differently. The first seven years would be counted separately from the final season because Kaberle would be 40 and under during those campaigns. As a result, Kaberle's total earnings through 2017-18 would be $27.25 million. Averaged out over seven years, that would count as a $3.89 million cap hit in each of those years. If Kaberle was to play in the eighth and final season of the contract, his cap hit in 2018-19 would be the same as his actual salary - $550,000.

The second aspect of these amended rules pertains to  players when they are between the ages of 36-40. In any of those years during a long-term contract in which a player is 36, 37, 38, 39 and 40, his salary figure for the purpose of calculating the cap hit cannot be any lower than $1 million. This is the case even if his actual salary is less than $1 million.

Let's say Kaberle signs a seven-year contract with the Sharks through 2018 for a total of $24.85 million. A year-by-year breakdown would look like this:

2011-12: $5 million
2012-13: $5.75 million
2013-14: $5.75 million
2014-15: $4.25 million
2015-16: $3 million
2016-17: $550,000
2017-18: $550,000

Under the old rules, every one of those salaries would be added together to meet that $24.85 total compensation mark, divided out by seven to get an average annual salary and result in a $3.55 million in each of the seven seasons. However, this contract includes years in which Kaberle will be between the ages of 36 and 40, and he is earning under $1 million in annual compensation during the final two years. That is the case in 2016-17 and 2017-18. Under the new rules, those numbers are automatically counted as $1 million strictly for calculating the hit to San Jose's cap. That makes Kaberle's theoretical total value $25.75 million over seven years and his annual cap hit $3.679 million. Kaberle will still earn $550,000 in the final two years of the deal. It is just rounded up to $1 million for the purpose of calculating the cap hit.

These new rules are to be enforced for all contracts signed past Sept. 3. They will not count retroactively to deals signed on or previous to Sept. 3. Thus, contracts like the ones handed out to Roberto Luongo, Marian Hossa, Marc Savard and Henrik Zetterberg are grandfathered in from the old system and considered legal.

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I would like to apologize to any San Jose Sharks fans offended by the notion that their team would look to sign Tomas Kaberle to a long-term contract. Honestly, it's not as bad as it sounds. He can be a productive offensive defenseman when he wants to be. However, he might not be everybody's cup of tea and he was only used as an example.

Also, I was not a math major in college. Any instance in which numbers may be incorrect throughout the examples shown above, I certainly do apologize. I do hope, however, the basic idea of the new rules was made clear - 1) Long-term contracts have separated cap hit calculations for players locked up beyond 40. All yearly salaries are added together up until a player is 40 and averaged out to determine the cap hit for those particular seasons. Any year in which a player is 41 or older, the cap hit is equal to that player's actual salary during those seasons. 2) During contract years in which a player is 36-40 years of age and has a salary under $1 million, his salary figure is considered $1 million strictly for the purpose of calculating his cap hit. The player will still earn whatever salary was agreed upon in the contract.