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Ask a Lawyer: If a player has a contract, how can the owners cut his salary?

Sep 26, 2012, 11:16 AM EDT

Brooks Laich Getty Images

With all the rhetoric emanating from each side of the NHL’s labor dispute, we’ve decided to bring in an actual lawyer to answer a series of questions. Hopefully it will prove useful to you, the reader, because it’s costing us $500 an hour. Please welcome to ProHockeyTalk, sports legal analyst Eric Macramalla.

PHT: Hi Eric, thanks for doing this. Brooks Laich of the Washington Capitals has been particularly outspoken leading up to and during the lockout. Here’s what he had to say about the owners demanding an immediate reduction in players’ salary:

“Where I come from, you honor your handshakes and you have your word. If you don’t have that you have nothing. If I make a bad deal, sign a bad contract that’s my fault. And I accept that, I’m a man and I work through that. That’s something I deal with. I don’t go crying foul and looking for somebody to fix my mistakes. I accept that as a man, that I made a bad decision. I think that hockey players are pretty honest people and they don’t like it when it’s coming back the other way.”

Doesn’t Laich sort of have a point?

EM: It is understandable that Laich has expressed displeasure with the NHL seeking to reduce player salaries on existing contracts. After all, when a contract is signed, the expectation is that it will be honored and not altered at some later date. We all know that when million dollar contracts are not honored, lawsuits can be threatened.

The NHL, though, is not proposing a rollback (or altering existing contracts). Rather, the league wants to drop more of player salaries into escrow. If revenue projections end up being below the league’s actual revenue totals, the players would end up forfeiting a portion of their salaries. That’s the idea behind escrow – to make sure that the sides get the right share of revenue.

Practically speaking, if the players agree to a dramatic drop in their share of revenue, they could see a significant reduction in salaries. So from the players standpoint, it doesn’t matter what you call it since the net effect may be the same. Still, increased escrow payments and rollbacks are different.

Let’s also remember that this is not your typical employer/employee relationship. It’s different because players have agreed to tie salaries directly to revenue. If the players ultimately agree to take a lower percentage of revenue, they may see a reduction in their salaries. Indeed, this is a unique business model since an individual is directly affected by the collective.

One more point: some have said it’s unlawful for the league to rollback salaries since contracts have been signed. However, that’s not the case. The collective bargaining agreement, which represents the agreement between the parties, rules the day. If the NHL and Union agree on a lower share of revenue for the players, that would be included in the CBA – thereby making it law.

Eric Macramalla is a partner at a national law firm and TSN’s sports legal analyst. He has covered the legal side of all major sports stories, including the NFL and NBA lockouts, the Saints Bountygate, Barry Bonds and Roger Clemens perjury trials, the Ilya Kovalchuk dispute and the Jerry Sandusky case. You can follow him on Twitter at@EricOnSportsLaw and his sports law blog is located at www.OffsideSportsLaw.com.

  1. brianforster - Sep 26, 2012 at 11:33 AM

    i really hope this guy didn’t cost you anything, because i learned nothing from him that hasn’t already been pointed out by anyone covering the lockout.

    his explanation was concise, ill give you that. but there really isnt anything new here.

  2. barry909 - Sep 26, 2012 at 8:17 PM

    Like this – nicely worded

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