Does the NHL Have a Leg to Stand On When it Comes to its Demands?

Even though the league's bargaining gambit is "exceptional and unusual," this has more to do with financial realities than it does collective bargaining or labor law.
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As the days tick off the calendar without a return-to-play agreement in place between the NHL and its players and with a Jan. 1 starting to look in serious peril, the root of the issue comes in the interpretation of both the collective bargaining agreement and the memorandum of understanding (MOU) that the two sides agreed to before they went into the playoff bubble last summer.

Perhaps not surprisingly, the league is interpreting it in one way and the players in another. Words matter and whether or not the two sides can come to some common ground on those words will dictate whether there will be a 2020-21 season and how much of it will be played.

Short recap. The NHL and the NHL Players’ Association agreed to extend their collective bargaining agreement by four years last summer. This season called for the players to be charged 20 percent in escrow payments with a 10 percent salary deferral. The league reportedly came back to the players and asked for 25 percent escrow and 26 percent in salary deferral. The players were livid because they felt all contingencies for the COVID pandemic were covered off in the agreement they signed. The NHL coming back and wanting more concessions is seen as a bad faith move. (One observer opined that this issue is far from resolved. He believes that even once the league and the players can agree on escrow and/or deferred pay, the league will want to pro-rate the players’ pay based on the number of games that are played this season. You want fireworks? Wait to see how the players react if that happens.)

And while the legalese is being discussed by lawyers from both sides, we’re going to try to wade through it. Much of what is being discussed has to do with two things in the CBA, Article 5 of the agreement and Paragraph 17 of the standard player’s contract (SPC).

Article 5 reads in part:

“Each club, and, where appropriate, the league, in the exercise of its functions of management, shall in addition to its other inherent and legal rights to manage its business, including the direction and control of its team, have the right at any time and from time to determine when, where, how and under what circumstances it wishes to operate, suspend, discontinue, sell or move and to determine the manner and the rules by which its team shall play hockey.”

Now, Paragraph 17 of the SPC reads as follows:

“If because of any condition arising from a state of war or other cause beyond the control of the League or of the Club, it shall be deemed advisable by the League or the Club to suspend or cease or reduce operations, then:

(a) in the event of suspension of operations, the Player shall be entitled only to the

proportion of Paragraph 1 Salary due at the date of suspension,

(b) in the event of cessation of operations, the Paragraph 1 Salary shall be

automatically canceled on the date of cessation, and

(c) in the event of reduction of operations, the Paragraph 1 Salary shall be replaced

by that mutually agreed upon between the Club and the Player, or, in the absence of mutual agreement, by that determined by neutral arbitration.”

Now, finally, the memorandum of agreement between the two sides reads as follows:

“In connection with this agreement, (i) for the 2019-20 League Year, the NHL agrees to waive any potential applicability of SPC Paragraph 17 solely on account of the loss of games due to the COVID-19 pandemic on a non-precedential and without prejudice basis for future League Years, (ii) For the 2020-21 League Year, the NHL agrees to waive any potential applicability Page 7 of 71 of Paragraph 17(c) in connection with the COVID-19 pandemic on a non-precedential and without prejudice basis for future League Years, and (iii) such waivers do not affect any other rights or positions of the parties with respect to SPC Paragraph 17.”

Got all that? Great. So the league essentially agreed to waive all three provisions of the SPC for last season, but only the third one for this season, which would lead you to believe that the first two are still in play. All of this has to do with the NHL’s rights to suspend or cease the 2020-21 season if their requests are not met. So, the question remains, can the league legally leverage the 2020-21 season to get the players to meet their demands? Well, it’s not so easy. Labor lawyers on both sides of the border argue that it’s a matter of interpretation.

Take the first paragraph of Paragraph 17 of the SPC, for instance, the part about, “any condition arising from war or any other cause beyond the control of the league.” The NHL would argue that COVID-19 is indeed beyond its control. The players would argue that when the deal was signed, the pandemic had already had a significant grip on the world and that the NHL should have known that a vaccine was not on the horizon and therefore, knew exactly what the effects of COVID would be for this season.

“In Canada, generally, the threat of a lockout during the life of a collective is prohibited by law, and carries severe penalties, whether or not a lock-out is enacted,” said Wassim Garzouzi, a labor lawyer with Raven Law in Ottawa, who represents the union side. “The league will not utter the word lockout, but in practice, its actions could be construed as such. It would be one thing for the NHL to say that it cannot proceed at all because of the pandemic. It is quite another for the league to be saying that it will not proceed until it gets further concessions from the players. In this case, the league is threatening the suspension of the season to compel the players to agree to changes in the collective agreement. This is the very definition of a lockout, and the league is potentially exposing itself to liability. This is all academic at this point, and ultimately the dispute will come down to leverage. It always does.”

“The type of move the NHL is trying to do is, I would call it exceptional and unusual and it does not generally fit within the typical structure of labor relations, certainly in Canada,” said Craig Lawrence, a labor law expert with Dentons. “With the whole escrow side of it, you’re really just asking the players to carry more risk and it’s going to be a contract interpretation piece. Maybe it’s more about market realities than it is about contract law and labor law. That’s got to be the core of the NHL’s pitch. It’s not going to be rooted in labor relations principles because there aren’t going to be any that really help them. It’s going to be, ‘If you want this business to keep working, this is the hit you’re going to have to take.’ ”

Helen Drew, a sports law professor at the University of Buffalo, agreed that this has less to do with the CBA and more to do with market realities. And without fans in the seats, the reality is the NHL revenues shrink from about $5 billion to about $1.25 billion. Even with 20 percent escrow, $2 billion goes to the players and there are between $1.5 billion and $2 billion in associated costs to conduct a season.

“The bottom line is they are in it together,” Drew said. “The owners and the players have to make this work on whatever terms will get people through. At the end of the day, the league is going to bleed so much red that they can’t run a season, then they’re going to suspend the season. As much as I value language, it’s only as good as the capacity of the parties to live up to the obligations that they very well may have negotiated in good faith, even if it was only (five) months ago.”

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