NHL rejects Kovi’s deal with the Devils

The New Jersey Devils made the official announcement today that superstar free agent Ilya Kovalchuk had committed to be a Devil for the remainder of his career by agreeing to a stunning 17-year, $102 million contract. However, the NHL had different ideas regarding the deal and recently rejected the offer just hours after the official announcement.

Kovalchuk’s contract with the Devils, which stunned the hockey world after weeks of speculation about where the prized free agent would land, would give the prized free agent $95 million over the first ten years of the contract before distributing the remaining $7 million over the remaining seven years of the deal. This nifty math helps to keep Kovalchuk’s cap hit around $6 million per season for the entire duration of the contract despite the fact that Kovalchuk will earn around $11 million at the height of his contract.

Details are still sketchy at this point regarding the NHL’s decision to reject the contract. All that is known as of now is that the NHL rejected the contract on the basis that it “circumvents the salary cap” because they believe that Kovalchuk will not play to the end of his contract, which means the years are there simple to lower the average cap hit of the contract.  It will be interesting to see how this story unfolds tomorrow when the league issues an official explanation of their decision, and then the Devils decide to fire back to that explanation because, all things considered, this deal follows the rules of the salary cap to the letter – it just exploits a glaring loophole left by the designers of the last CBA.

According to the rules of the last CBA, players’ salaries for a specific season don’t count against the salary cap. Instead, the average of the salary over the entire duration of the contract counts against a team’s salary cap. Despite the fact that Kovalchuk will earn more than $11 million per seasons for several seasons with the Devils, his cap hit is lower because he will also earn only $500,000 for several seasons at the end of the deal. That helps to bring the average of the salary down to a meager $6 million cap hit per year. In other words, $102 million divided by 17 years equals an average cap hit of $6 million per season. If that’s the case, New Jersey has done nothing wrong in their contract negotiations with Kovalchuk. The organization just took advantage of a loophole in order to make the contract work in their favor.

This isn’t the first time that general managers have exploited this loophole, but this is the first time that the league has rejected a contract agreement of this variety. The Detroit Red Wings were probably the first to wiggle around the cap rules when they signed star forwards Henrik Zetterberg and Johan Franzen to similar front-loaded, long-term deals a few years ago. While eyebrows were raised when these contracts became known, the league ultimately approved the contracts. However, more eyebrows were raised last summer when the Chicago Blackhawks signed free agent Marian Hossa to a 12-year front-loaded contract that would have Hossa playing into his forties. While the league reviewed the contract extensively, they still approved the contract and deemed it acceptable according to the rules set forth by the CBA.

More details will undoubtedly unfold tomorrow when the league prepares an official statement regarding the issue. The Devils could choose to refile the contract, and risk having it rejected again, or they could file a grievance. At that point, the contract would be considered dead unless an arbitrator determines otherwise.

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