Common Misconception About Buried Contracts

As July is well underway and August is peaking around the corner, contract signatures are just slowly trickling in. Or so it seems after a busy first day, first week of free agents, both restricted and unrestricted, putting pen to paper with NHL teams. And as teams sign contracts, their salary cap hit, their payroll is climbing. For teams who can spend to the the upper limit, it has been set to $81.5 million for next season while no teams can have a combined cap hit below the $60.2 million mark.

Fans and media alike love to keep track of their favourite team’s cap situation and thankfully for them, there’s an amazing website which allows them to have this information at their fingertips. And that is only one of the tools CapFriendly.com provides professional journalists, bloggers and fans a solution to this ever complex beast: the calculations and details of everyone’s contract as well as the impact on their respective teams and other players in the league.

Because of its complexity, mistakes or misconceptions are rather frequent. One that we’ve been reading and hearing a lot lately is how much cap space teams still have available and how they can address their issues. It seems like more than a few people think that by sending a player down to the AHL, his salary disappears from his team’s cap hit. Not so fast… But before we get into that, here are a few different important terms to understand.

One-way contracts

Means that the player will be making the same salary if he plays either in the NHL or in the AHL.

Two-way contracts

Means that the player will be making a certain amount in the NHL and a lesser amount if he’s sent down.

No-Movement Clause

Player protection as the team cannot trade them or send them to the AHL (or placed on waivers) without their consent. While the player’s contract is not protected against a buy-out, teams must protect them for the expansion Draft.

No-Trade Clause

Self-explanatory, teams can’t trade him but they can send him down, put him on waivers. Teams can, but don’t have to protect those players for the expansion Draft.

Limited No-Trade Clause

Like a NTC, but has it’s limitations already negotiated and agreed to. Example, a player can have, for limitation, that he has to submit a list of a pre-agreed number of teams he cannot be traded to. He can be traded to the other teams.

Buried Contract

Sending a player down to save cap space has been, in the past, a way for teams to fix their contractual mistakes. It’s called burying a contract and in order when richer teams were “burying” their unproductive big salaries in the AHL to clear cap space. The New York Rangers did it with Wade Redden and the Montreal Canadiens did it with Scott Gomez. Many teams simply cannot afford to bury contracts so it was an unfair practice.

Karl Alzner?

But wait. Teams can no longer do it as the NHL changed the rules. Teams no longer receive full cap relief when a player on a one-way NHL contract is sent to the AHL or loaned to a team in another professional league. The cap hit relief is equal to the minimum salary for that particular season plus $375,000. So here’s the breakdown per season:

  • 2019-20: $700,000 + $375,000 = $1,075,000
  • 2020-21: $700,000 + $375,000 = $1,075,000
  • 2021-22: $750,000 + $375,000 = $1,125,000

This is what it would look like for two often mentioned Canadiens’ players:

2019-20 Cap HitSavingsHabs’ Cap Hit
Dale Weise$2.35M$1.o75M=$1.275M
Karl Alzner$4.625M$1.075M=$3.55M
TOTAL:$6.975M$2.15M=$4.825M

If both are sent down, the Habs would only save $2.15 million of the $6.975 million combined cap hit between the two. This means that the Canadiens would still have $4.825 million counting against their cap even when they’re in the AHL. The Canadiens’ cap situation counts 24 players with just over $4.8 million available. Have fun. Send players down all you want but if you’re doing it for cap reasons, don’t forget the buried contract rule.

So folks, when you try counting the savings when deciding who to send down, take that into consideration. The most a team will save in 2019-20 will be $1.075 million per player. Go Habs Go!