Players' obsession with escrow will lead to a new deal and another win for the owners. Here's how

There's greater hope than ever for labor peace in the NHL and the path to avoiding another lockout could be as clear as addressing escrow payments, even if it might result in a victory for franchise owners long term.
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When the NHL Players’ Association executive board meets with its constituents tomorrow in Chicago, there’s a good chance the primary message will go something like this: “Do something to mitigate escrow payments and we’ll have a deal with the NHL in record time.”

Coming on the heels of the NHL’s announcement that it will not exercise its option to opt out of the current collective bargaining agreement and speculation that the players’ Sept. 15 deadline will be extended, there has never been more optimism that the players and their employers will strike a deal that will retain labor peace, likely until after the 2024-25 season. Simply put, there is a deal to be made here. And it will almost certainly be done, largely because the players are so obsessed with escrow that they’ll be willing to hand the league another decisive victory in collective bargaining.

It is and has always been about escrow with the players. For whatever reason, the players want to retain as much of their paychecks as they can at the expense of the long game. And it’s driving most of their agents around the bend. “I don’t understand what they don’t understand about the escrow system,” one agent said. And if the league can work out a way to get it down to somewhere in the four-to-six percent range, even if it’s artificially and ultimately benefits the employer, they will have a deal. That sound you hear is the NHL gleefully tapping its fingers together, fully armed with the knowledge that the NHLPA will ultimately have to do what the membership directs it to do.

So, mitigate escrow and we’re good to go. The fact that the league can do this without giving up much, perhaps a couple million dollars per year over the life of the agreement, makes it that much more possible. Here are a couple of ways the two sides could make that work:

· There has been conversation between the two sides about either freezing the upper limit of the salary cap or, rather than tying the cap to revenues, having it rise by a pre-determined amount (say, $2 million a year) or percentage (say, two percent).

The upside is that if the league does grow revenues with a better U.S. television deal (it’s rumored the NHL will be looking for $750-million per year, three times what the deal is currently worth) and player tracking that will help bump revenues from legal gambling, it stands to reason that freezing or limiting the upper limit of the cap will almost certainly have a positive effect on bringing escrow down. One league source said the real growth in the NHL last season was two percent, so if the cap goes up by any more than that, it’s going to mean more escrow for the players.

Reducing that will make the players happy on one level, but they’d better watch what they wish for here. There will be less spendable money in the system, so those who are looking for new deals will invariably get squeezed. Not only that, it will lead to more buyouts, more players sent to the minors, more players not getting traded out of bad situations because teams don’t have cap space or players getting traded out of good situations because the team they’re currently playing on doesn’t have the cap space to keep them.

The best thing for the owners, and consequently the worst thing for the players, is that this does not net the players one more additional dollar. In fact, the teams will have even more certainty about their payrolls and will be forced to cough up more money only if revenues skyrocket.

· As it currently stands, the NHLPA has the option to impose a five-percent inflator on the salary cap number. This is really, really low-hanging fruit and will almost certainly be abolished. “The five percent is gone,” said one league source. “And now it’s a matter of needing your revenues to grow at a greater rate than the growth in the upper limit. So you either freeze the upper limit, which would bring a more dramatic reduction in escrow, or you fix the upper limit for a number of years.”

· Unless you’re intimately involved with the finances of NHL teams, it’s difficult to tell how much money this would save, but in the current CBA, the Workers’ Compensation Premium, half of which is paid by the employer and the other half by the employees, both contributions are credited to the players’ share of revenues. There has been talk that if the league’s contribution were taken out of the equation, that would lessen the players’ cut of the pie. That would obviously reduce escrow.

The important thing to remember is there is a deal to be made here where both sides would at least be perceived as not giving up too much. And once they get beyond this issue, extending the current agreement by three years will be a matter of tweaks.

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