What is the Penalty for a Cap Floor Violation?

The following piece of analysis on the potential penalty for a violation of the "cap-floor" was written by Beantown Canuck, a Canucks fan who is supposedly a lawyer. Beantown Canuck likes to bug people about the Canucks and hockey on twitter when he’s not busy bugging people about the Canucks and hockey at Nucksmisconduct, which is what he does when he’s not busy at work. Originally from Vancouver, he later lived in Boston but moved to New York a few years ago and as far as he’s concerned Boston ceased to exist as of June.

By Beantown Canuck

So a funny thing happened in the NHL on October 12th. The Dallas Stars, along with every other team in the NHL, opted to forego the opportunity to grab Eric Nystrom from the Minnesota Wild on re-entry waivers. Had they done so, Dallas would have only been on the hook for half of Nystrom’s salary and half of his salary cap hit for the remainder of his contract, meaning they would have only had to pay him $700,000 a season for the next two seasons. And yet later that very same day, Dallas traded the always coveted “future considerations” to Minnesota to acquire the very same Eric Nystrom, and as a result will be taking on 100% of his $1,400,000 per season salary and cap hit. Wait… what?

Ok, now you’re thinking this is clear evidence that no NHL team should hire players from before the Rule 49 era (e.g. Joe Nieuwendyk) as managers because all of them oldtimers’ heads have obviously turned to mush. (Too soon?) But no! This is another case of Collective Bargaining Agreement Fun! For you see, Dallas was in a unique predicament that to my knowledge has never before occurred under the current CBA—they were facing the very real possibility of falling below the “cap floor” (i.e. the minimum aggregate salary cap hit of the roster, which this year is set at $48,300,000).

The reason why they were at risk is complicated, but it has to do with the Rangers assigning Sean Avery to the AHL and certain Dallas players on injury reserve becoming healthy and necessitating other Dallas players being waived or sent down to the minors once they do. Therefore, to avoid the possibility of going below the floor, Nystrom was more valuable to Dallas with a $1,400,000 cap hit than a $700,000 cap hit.

But, but, but… what would have happened if Dallas DID sink below the cap floor? I’ve yet to see anyone provide an answer to this very important question (important in the realm of NHL CBA nerdery, that is). I saw some people asking around about this on the Twitter machine, and thought I would investigate. Below is what I’ve managed to come up with after about a moderate amount of research.

  1. This would fall under the CBA’s general concept of violation of the CBA referred to as a “Circumvention”, in this case a Circumvention by a Club or Club Actor. (Note: the CBA doesn’t actually use the terms “salary cap” or “cap floor” anywhere (I imagine because it’s a dirty, dirty, naughty expression as far as the NHLPA is concerned), but instead uses the terms “Team Payroll Range” to describe the range between what we lay folk would call the “cap floor” and the “cap ceiling”, and then calls the cap floor the “Lower Limit” of the “Team Payroll Range” and the salary cap ceiling the “Upper Limit” of the “Team Payroll Range”. (For regulars at Nucksmisconduct, you’d be aware that such dry legalese language like this tends to give me a lawyer-boner)).
  2. Anyway, Section 26.3 of the CBA states that No Club or Club Actor may take or fail to take any action whatsoever if doing so (or failing to do so) has the effect of defeating or Circumventing the provisions of the CBA, and specifically mentions that matters concerning the Team Payroll Range (i.e. salary cap floor) are included.  
  3. The Commissioner of the NHL (the right honourable Gary Bettman, full of grace) and the Executive Director of the NHLPA (Donald Fehr) each have the authority to investigate any possible instances of Circumvention of the CBA.  
  4. If the NHL side and the NHLPA side agree to a resolution to the Circumvention investigation, well then it is so resolved (and it may never be made public that an investigation has occurred).  
  5. If there is no agreement on a resolution, then an independent arbitrator (or, as the CBA calls him/her, the “System Arbitrator”) is assigned to determine if in fact a Circumvention has occurred.  
  6. If the arbitrator declares that a Circumvention has occurred as a result of a team falling below the cap floor, then Gary Bettman, king of kings, gets to don his best black leather mask and/or ass-less chaps and grab his favourite whip or whips and divvy out some delicious punishment. Potential punishment options include:
    • a. A fine of at least $1 million and no more than $5 million dollars, with an equal amount of reduction in cap ceiling for the team the next season. This punishment is mandatory for violations of the Team Payroll Range (i.e. cap floor), the only type of Circumvention that has a mandatory punishment.
    • b.Forfeiture of draft picks (Gary can decide how many, from what rounds, and in what draft years).
    • c. Suspension of Club employees (“you’ve been a naughty little GM, Joey N!”)
    • d. Spanking.  
  7. I won’t bore you with how the independent arbitrator is selected, but suffice it to say, it gave me a nice sustained lawyerboner.

Anyway, that’s the long and short of it. If my analysis is correct, If Dallas hadn’t gone through the craziness of turning down Nystrom at $0.7 mill in order to trade for him at $1.4 mill, they could have been at risk of a minimum penalty of $1 million dollars and likely more if Gary B was in an excitable mood. Also, spanking was a joke. No spanking.

Beantown Canuck is supposedly a lawyer, you can follow him on twitter.