Arbitration

In part one of our arbitration series we looked at arbitration eligibility. This next section details the hearing process, including permissible evidence and the repercussions of the arbitrator’s decision.

Salary arbitration determines a player’s salary through a hearing governed by a third-party arbitrator. The arbitrator takes all the permissible evidence into account in deciding how much a player should be paid per year. This section outlines three key elements of that process: term, permissible evidence, and the decision.

Term

The party being brought to salary arbitration chooses whether the decision is for one or two years. If a team chooses, however, they are restricted to one year if the player is eligible for unrestricted free agent the following year.

Evidence

Parties can present witnesses, affidavits (sworn written testimony), documents, statistics, and any other relevant evidence during the hearing, subject to certain restrictions (see more below). The CBA suggests the following preferred evidence:

• the player’s overall performance in previous seasons;
• number of games played in context of injuries or illnesses (or lack thereof);
• length of service in the league or with the team;
• how much a player contributed to the success/failure of his team last season;
• special qualities of leadership or public appeal relevant to his team responsibilities (i.e. the intangibles).
• performance of players considered comparable to the player in question by either party; or
• compensation of players considered comparable to the player in question by either party.

As stated above, this list is subject to certain restrictions.  The CBA prohibits parties from introducing or using the following:

• any contract signed outside restricted free agency, including one signed after a team exercises a walk-away right;
• any contract of a player not considered a comparable by either party;
• any contract otherwise permissible that is signed less than three hours before the hearing starts.
• qualifying offers;
• the negotiation history between the parties, including any offers made;
• testimonials, videotapes, newspaper columns, press game reports, or similar materials;
• references to walk-away rights;
• any award issued by an arbitrator that preceded a team exercising its walk-away rights;
• a team or NHL’s financial condition;
• a team’s salary cap (or floor) situation;
• any salary arbitration award issued in ’05-’06; or
• compensation information for salary arbitration awards issued before July 22nd 2005.

There are three main takeaways from the evidentiary rules. One, the arbitrator’s decision is based largely on a player’s stats and intangibles, and the compensation received by players with similar stats and intangibles. Two, visual evidence such as highlight reels and game tape do not factor in to the arbitrator’s decision. This makes any determination strictly fact-based. Finally, if, during a players hearing, a comparable player signs an otherwise admissible contract, that contract cannot be used as evidence by either party.

Decision

The arbitrator’s decision comes within 48 hours after the hearing closes. The decision states:

• the contract term (one or two years as mentioned above);
• NHL salary to be paid by the team for that term;
• whether it is a two-way contract, and how much the player is paid in the AHL; and
• a statement explaining the decision.

Walk Away Rights

A team may reject an arbitration decision in a player-elected salary arbitration if the award is $3.9MM or more per year. That threshold increases by the same percentage rate that the average league salary increases.

A team does not have unlimited walk away rights. Rather, the number of times a team can reject a decision is tied to the number of decisions issued. A team facing up to two decisions has one walk away right. A team facing three of four decisions has two walk away rights. Finally, a team facing five decisions has three walk away rights.

The consequences of rejecting a decision depends on whether the club elected a one or two year term. If the decision is for a one year term, the player immediately becomes an unrestricted free agent. If the decision is for a two year term, the player and team enter into a one year contract for the salary awarded. The player becomes an unrestricted free agent at the end of that year.

Salary arbitration remains one of the more complex aspects of the NHL’s CBA. With the player-elected salary arbitration notice deadline passing this afternoon, ProHockeyRumors is here to give you a breakdown of the process.

At its heart, salary arbitration is simply asking a designated third-party arbitrator to determine a player’s salary. Both sides—the team and the player—present their case to the arbitrator. Like in court, the parties will use evidence such as graphs, statistics, and comparable players to make their case. Arbitration presents an independent and decisive way to determine a player’s salary in situations where both parties are at odds. The process, however, is inherently unpredictable, and is why most players and teams facing arbitration hearings settle before being heard.

Arbitration Basics

Two types of salary arbitration exist: (1) player-elected salary arbitration (PESA), and (2) club-elected salary arbitration (CESA). Definition-wise, they differ only in who elects the arbitration hearing. The difference lies in the procedure requirements.

Player Eligibility

A player’s arbitration eligibility is the same regardless of whether arbitration is player-elected or club-elected. A player is arbitration eligible if:

1. He qualifies as a restricted free agent;
2. He did not sign an offer sheet; and
3. He meets the minimum professional experience guidelines.

The first two criteria are self-explanatory. The third, however, requires some additional explanation. The minimum professional experience (PE) required for salary arbitration eligibility depends on when a player signed his first Standard Player Contract (SPC):

• If a player signs his first SPC at 18-20, he needs four years of PE;
• If a player signs his first SPC at 21, he needs three years of PE;
• If a player signs his first SPC at 22-23, he needs two years of PE;
• If a player signs his first SPC at 24 or older, he needs one year of PE.

As with everything in the CBA, each key word entails specific definitions. Here, both age and professional experience are specifically defined.

Age is defined as the player’s age on September 15th of the calendar year he signed the SPC. That means that if a player born in July signs an SPC in June at 20 years old, his age for eligibility purposes is 21 because he is 21 on September 15th.

Professional experience is defined as a condition of age. An 18 or 19 year old player must play in 10 or more NHL games to accumulate a year of professional experience. Players 20+, however, accumulate a year of professional experience by playing in any professional league (AHL, KHL, etc).

Additional CESA eligibility requirements

In addition to a player being arbitration-eligible, the CBA requires more for club-elected salary arbitration. A club can only elect salary arbitration for a player who has not been subject to a previous club-elected salary (any team), and either:

1. made more than $1.75MM (including bonuses) in the previous year and in lieu of a qualifying offer; or
2. received but did not sign a qualifying offer.

Finally, a team may only elect salary arbitration twice per year.

Deadlines

The deadline for PESA is 5pm EST on July 5th. The deadline for CESA is either (a) the later of June 15th or 48 hours after the Stanley Cup Finals for arbitration in lieu of qualifying offers, or (b) 24 hours after the player-elected deadline passes.

Miscellaneous

Teams can trade players with pending arbitrations up until the hearing. Teams and players can also come to a contractual agreement. Because of the unpredictability mentioned above, players and teams rarely go to hearing—most cases settle.

Part Two will address the arbitration Process, and Part Three will address the arbitration decision.