'Eighteen Million Over': The National Hockey League's Long Term Injured Reserve Parity Challenge

Abstract

In 2005, the National Hockey League (NHL) moved past the “Dead Puck Era” (1994-95—2003-04) with a landmark Collective Bargaining Agreement (CBA), installing a new parity system including revenue-sharing and a salary cap. The 2005 CBA framework aspired to establish financial parity between teams of different market sizes so that––according to Commissioner Gary Bettman––"a team’s ability to compete [would be] based on its hockey, front office and team building skills, not on the team’s ability to pay.”

With Bettman’s successful financial infrastructure working as planned, NHL General Managers (GM’s) facing salary cap constraints explored the boundaries of the 2005 CBA’s team management and cap accounting rules, exposing a few loopholes. These loopholes mainly concerned the effective permissibility of putative “retirement contracts,” whereby GM’s lengthened player contracts far beyond the reasonable duration of a professional hockey career to lower that player’s Average Annual Value (AAV) and thereby increase his team’s annual cap space.

The 2005 CBA expired in 2012 and, reportedly, GM’s widely favored rule adjustments closing the loopholes. And yet, while the successor 2013 CBA retained the bedrock architecture of the 2005 CBA and constrained “retirement contract” structuring practices, it did not resolve one key problem which remains widely recognized across the NHL today: apparent or actual strategic exploitation of Long-Term Injured Reserve (LTIR) for salary cap purposes. In short, LTIR rules leave open the appearance that some teams may be signing players to long-term contracts in anticipation that once such a player reaches his mid or late thirties, the player may be cooperatively construed as “injured” (and still fully paid) while allowing the designating team to effectively recover all corresponding salary cap space.

With LTIR, the NHL faces a policy challenge: team front offices and fans widely believe that strategic exploitation of LTIR rules for cap purposes has transpired. Leaving aside whether this has occurred in fact, the mere appearance of such exploitations represents a significant PR liability for the NHL. Facing such liabilities, rather than putting itself in the lose-lose position of reviewing LTIR abuse allegations through tricky injury-legitimacy investigations, the NHL may seek to adjust the rules. A possible solution would be to reduce LTIR cap benefits for teams which designate players in their mid-thirties or older.

Keywords: NHL, National Hockey League, Salary Cap, CBA, Collective Bargaining Agreement, LTIR, Injured Reserve, Parity