Why NHL players hate the escrow
It might be necessary, but it could lead to another labour battle
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NHL players might soon move us closer to another work stoppage
Hockey is getting closer. NHL teams opened training camp yesterday with physical exams, and today players are hitting the ice for the first time. Exhibition games are only a few days away. The regular season starts exactly three weeks from yesterday.
The start of the following season, though, is not set in stone. There's the possibility of another NHL work stoppage at this time next year.
We'll get a better idea of the chances of that happening sometime before midnight this Sunday. That's the deadline for the players' union to decide whether to opt out of its labour agreement with the league. If they do, the deal will end in September 2020. If they don't, it runs through September 2022. The owners have already declined to trigger their own opt-out clause. They're making a lot of money, so they're good with the status quo.
The players' feelings seem a little more complicated. Their salaries keep going up, but they're not pleased with everything. For one, they'd like the NHL to commit to allowing them to play in the Olympics — something the league isn't interested in anymore because it can't make money off it.
But the players' biggest beef is with escrow payments. Here's how those work: Players and owners split the NHL's "hockey-related revenue" 50/50 (players get their share in salaries). At the end of the playoffs every year, both sides get together and count up how much money the NHL made that season. They then use that number to estimate how much it'll make the next season (a five per cent bump is a typical ballpark guess). The salary cap, which is designed to make sure the players get 50 per cent of the revenue and no more, is then set based on that number.
But because it's impossible to predict exactly how much revenue will come in, a percentage of every player's paycheque is held in escrow until the money is counted at the end of the season (it isn't always the same, but 15 per cent is a good ballpark number). If the NHL does really well and exceeds the revenue projection by a significant amount, all that money is returned to the players. But if it doesn't, the owners get to keep however much they need to ensure they end up with exactly 50 per cent of the revenue.
Why does the revenue projection have to be exceeded in order for the players to avoid paying escrow? Because the 50/50 split is based on the assumption that a good amount of teams will spend below the midpoint between the salary cap and the salary floor (the minimum teams are allowed to spend on their players). Lately, the vast majority of teams are spending more than the midpoint, and a lot of teams spend right up to the cap. That's helping to result in the owners keeping a big chunk of the money in those escrow accounts every summer.
You can see why players would hate this. It's probably the best way to ensure both sides get the 50/50 split everyone agreed to — the alternative is going around in the summer and asking hundreds of players to write a cheque, which isn't happening. But no one likes deductions on their paycheque — especially if they're expecting that money to be returned in a few months and it isn't. And that's exactly what's been happening lately because the NHL hasn't been pulling in enough money to cover the escalating payrolls on most teams.
That means the league gets to keep a big chunk of those escrow payments — at least 10 per cent in each of the last six years, and sometimes a few percentage points more. Let's take Chicago captain Jonathan Toews as a example. His contract is supposed to guarantee him an average of $10.5 million US per season, but he's losing more than a million bucks of that every year. No wonder he's been a vocal critic of the escrow.
Everyone seems optimistic at the moment, but we'll see. League and union officials have been meeting off and on for a few months already, and those preliminary talks were characterized as cordial. But hockey fans have reason to be skeptical. The NHL's collective bargaining agreement has expired three times since Gary Bettman became commissioner in 1993, and all three resulted in long lockouts. The 1994-95 and 2012-13 seasons were both cut from 82 games to 48, and the 2004-05 season was lost altogether — including the Stanley Cup playoffs. By the end of the weekend, we'll at least know whether the next potential work stoppage is one year away or three.
Note: The section above has been updated for more clarity on the relationship between the NHL's total revenue and players' escrow payments.
The U.S. basketball team sunk even lower. Yesterday, the world's best hoops country lost in the quarter-finals of the FIBA World Cup, snapping its 58-game winning streak in major tournaments with NBA players. That defeat ensured the U.S. would leave one of those events (World Cup or Olympics) without a medal for the first time since 2002. Today, the Americans phoned in a meaningless placement game against Serbia and lost 94-89. This means they can finish no better than seventh — their worst showing ever in a major tournament. And it could be as low as eighth. That'll depend on the outcome of Saturday's matchup vs. host China — yes, another meaningless placement game. Hard to believe so many NBA stars didn't want to play in this tournament.
The horse Justify failed a drug test before winning the Triple Crown — and it seems like officials tried to sweep it under the rug. According to a New York Times report, the colt tested positive for a performance-enhancing drug after winning a race in California a month before the 2018 Kentucky Derby. He went on to win that race, then the Preakness and Belmont Stakes. Under normal protocol, Justify should have been removed from the Kentucky Derby. But, according to the Times, California regulators dragged their feet and didn't confirm the positive test with a second sample until three days after Justify won the Derby. Then it did nothing until two months after the horse completed his Triple Crown run. At that point, the California Horse Racing Board's commissioners voted unanimously to drop the case, deciding the positive test could have been triggered by contaminated food. Two months later, the board changed its penalty for testing positive for the drug in question from a disqualification to a fine and positive suspension. Read more about the case here.
The Winnipeg Jets gave a big contract to their No. 2 defenceman. Josh Morrissey signed an eight-year extension worth an average of $6.25 million per year — about double his current salary. The 24-year-old, who had 31 points in 62 games last season, is now the Jets' third-highest-paid player. Last season's scoring leader, Blake Wheeler, makes $8.25 million. Star defenceman Dustin Byfuglien makes $7.6M. Winnipeg's best player, forward Mark Scheifele, makes $6.125M.
The New York Jets are imploding already. In last Sunday's season opener, they blew a 16-3 lead heading into the fourth quarter to lose to Buffalo. Today, the team announced second-year quarterback Sam Darnold will miss this week's game against Cleveland (and maybe more) because he has mono. Meanwhile, the Jets' two biggest free-agent signings — running back Le'Veon Bell and linebacker CJ Mosley — both have injuries that caused them to miss practice.
It's officially the Year of the Home Run. When Baltimore's Jonathan Villar went deep last night, it was the 6,106th homer of the major-league season. That broke the record set in 2017 — and there are still 18 days left. Five teams have already set their franchise record for homers, and that's on pace to reach 16 by the end of the season. To show you how much the game has changed, remember how powerful the Blue Jays' offence was in 1993 when they won their second straight World Series? That lineup featured Roberto Alomar, Joe Carter, John Olerud, Paul Molitor and Tony Fernandez. Rickey Henderson (the greatest leadoff hitter of all time) was added late in the season. The Jays scored the third-most runs in baseball that season, so it's not like nostalgia is playing tricks on us. They were really good. Well, that team hit 159 homers. This year's Minnesota Twins already have 277 — on pace to almost double the '93 Jays.
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