Clarification on the “Make Whole” Provision

Yesterday I broke down the latest CBA proposal from the NHL. Overall it’s an in-depth proposal that addresses many areas of concern and attempts to bridge the gap between the owners and players, albeit slightly. However, I didn’t go into much detail on the “Make Whole” provision and after the fact it looks like I may have misunderstood some of the implications of it. So today I’m going to dive a little deeper into the “Make Whole” aspect of the proposal.

First off, the name of the provision was a poor choice of words by the NHL. It doesn’t so much “Make Whole” the value of existing contracts, instead it is chiefly designed to “soften” the blow of an outright drop to 50% of HRR for the players. To accomplish this it essentially shifts some of the money around, increasing the actual dollar value of the players’ share in years one and two by decreasing the actual dollar value in years three to six. James Mirtle has a good piece on this that you can read here.

However, while the article does show the effects on the players’ share and salary after escrow, it doesn’t reveal projections on what the actual take home salary will be for the example $2 million player. That’s what I will now attempt to clarify using the same data projections and the same example of a player on a $2 million annual salary with the contract lasting six seasons under the proposed CBA.

Basically, the “Make Whole” calculates the salary the player should have received over years one and two under the old CBA and pays out the difference over the term of the contract. So the $2 million player will receive an additional $35,000 at some point following each season. However, during seasons 3 through 6 the escrow is adjusted so the players pay in more to account for the “Make Whole” bonus structure. So, how would the actual amount the player receives differ if the “Make Whole” provision didn’t exist?

As you can see, the total payout to the player under either setup is the same overall dollar figure, but with the “Make Whole” mechanism the player would see a greater proportion during the initial two seasons. It’s all about shuffling the dollars around to ease the burden upfront.

Another problem with the “Make Whole” is that players who get their very first NHL contract during year three and beyond are hit with the increased escrow and do not see the benefit obtained through years one and two that the other players received. As such, they would actually receive a lesser overall dollar amount under the “Make Whole” than they would without it. Do the current players care enough about shuffling around some money for a few seasons only to hurt new players in the future? Probably not and that’s where the whole “player paying player” terminology that popped up comes from.

So the “Make Whole” provision was never intended to pay the players what they should receive under the old CBA (they’re still going to receive 7% less overall no matter how you slice it), it was purely designed to balance the payments they would receive under the proposed CBA. Obviously the wording could have been better from a technical standpoint, but the NHL clearly wanted a positive PR message and this achieved that, even though the message sent wasn’t exactly correct.

The bottom line in all of this is that the players do not want to lose this 7% piece of the pie. However, at some point they’re going to have to come to the realization that it’s a necessity to get these negotiations going anywhere and will likely come back with an offer that gradually reduces the percentage to 50 over so many years, but whether the NHL will accept that or not is anyone’s guess. Maybe some sort of “Make Whole” provision will be incorporated on top of that as well, who knows, but either way at this point it does not address the players’ concerns.