The arbitration process grants eligible Restricted Free Agents (RFAs) an avenue to receive fair salaries for their play. However, it is one of the most misunderstood elements of the NHL Collective Bargaining Agreement (CBA). While it does give players additional ways to receive fair pay, it is not a one-sided process. NHL teams do have options if the arbitrator’s eventual ruling isn’t in their favour. Cody Ceci’s arbitration case during the summer of 2018 provided one instance where the team, the Ottawa Senators, should have considered those options.
Restricted Free Agency
A free agent’s status, whether restricted or unrestricted, is governed largely by age and professional experience. Cody Ceci found himself an RFA for the second time in his career this off-season, despite having already accrued five NHL seasons of playing experience.
To retain the rights to an RFA, a team must tender a qualifying offer. These qualifying offers are based upon a player’s salary in the preceding season and the number of NHL games played. The offer cannot be less than the player’s salary in the preceding season, and if the player has played more than 180 NHL games, it must be one-way.
Ceci’s expiring two-year contract paid him a salary of $3.35 million in the 2017-18 season and he has played 366 NHL games in his career. The Senators qualifying offer to Ceci simply satisfied the CBA mandated minimums, $3.35 million on a one-year contract.
Select RFAs are eligible for salary arbitration which, as mentioned before, offers players the opportunity to argue for a higher salary based on their performance. Like their RFA status, a player’s eligibility for arbitration is governed by the age at which they signed their first contract and how much professional playing time they have accrued. Ceci is a player who qualified for those arbitration rights, and he opted for salary arbitration after receiving the qualifying offer from the Senators.
The Arbitration Process
Before an arbitration hearing takes place both sides submit written briefs that include the salary they are seeking. Just like the qualifying offer the subsequent arbitration salary amount offered by Ottawa was for the CBA mandated minimum, $3.35 million. Ceci’s camp countered with an amount of $6 million. Once the written briefs were submitted a hearing was scheduled for Aug. 1.
Leading up to a scheduled hearing, the team and player have the opportunity to reach a deal on a new contract and avoid the arbitration hearing. Despite having time to reach an agreement, the sides were not able to settle finalize a new contract before the hearing date. Because of this, the arbitrator heard the case as scheduled on August 1.
After the hearing is completed the arbitrator has 48 hours to rule on the matter. In other professional sports, like Major League Baseball, the arbitrator is obliged to pick one salary amount or the other. The NHL, however, allows the arbitrator to select a salary amount anywhere between the two salaries proposed by the team and the league. This often leads to decisions that fall exactly in the middle of the two submitted salaries, as was the case with Jacob Trouba’s new one-year deal worth $5.5 million which fell exactly between the submitted salaries of $4 million and $7 million.
On August 3, the arbitrator awarded Ceci a one-year deal for $4.3 million, slightly below the midpoint of the two proposed amounts. Had the arbitrator split the difference between the salaries, he would have awarded a salary of $4.665 million.
What Options Did Ottawa Have?
One interesting element of player-elected salary arbitration is the option for a team to walk away from the contract awarded by the arbitrator if it exceeds a certain dollar value. The amount increases each season by the same amount the average player salary increases, ie. in 2017-18 player salaries increased by 10%, therefore salary for walk-away rights would increase by 10%. According to CapFriendly.com the walk-away amount for the 2018-19 season is $4,222,941. If the team chooses to walk away from the award, the player immediately becomes a UFA.
Despite the arbitrator’s award being lower than some might have expected, this amount still exceeded $4,222,941 and therefore Ottawa had the option to walk away from the award. Had Ottawa done this Ceci would have immediately become a UFA.
Before the hearing, there were a number of Tweets and blog posts from fans and analysts discussing the idea of the Senators walking away from Ceci if his arbitration award was high enough to do so. These posts largely focused on Ceci’s on-ice performance. Arguments ranged from ones citing his poor plus/minus during the 2017-18 season to more in-depth analyses based on advanced stats to justify parting with the blueliner.
Another argument, aside from his on-ice performance, is the economic impact the contract will have on the club.
For the 2018-19 season, the salary cap is not a significant factor for Ottawa in the case of the Ceci contract, but the more important issue would be the true salary value of the contract.
Ottawa has shown themselves to be a budget team and there has been no shortage of reporting on the financial health of the organization. Their penny pinching is so well known that players, like now-former Senators captain Erik Karlsson, have spoken publicly about the challenges the team is facing.
Moreover, beyond reports and anecdotes, the Senators’ payroll also demonstrates the club’s aversion to spending. In both the 2015-16 and 2016-17 seasons they were in the bottom third of the league in terms of total cap hit. In 2017-18 they were in the middle of the pack. However, according to CapFriendly.com Clarke MacArthur’s salary was 80% covered by insurance because of his injury. If that 80% is not included their cap total for the season, their cap hit would fall again to the bottom third.
Whether teams are most concerned about the on-ice performance of a player, or financial matters, it is only prudent for teams to carefully examine all of the available options. For a team like Ottawa, there is a very reasonable argument that they would be better off exercising their rights under the CBA and walking away from arbitration awards like the one Cody Ceci received.
Wolfram Ott is new to THW, covering the business of hockey. Based in New York City, Wolfram is entering his third season as director of operations for the National Women’s Hockey League and holds his MBA from Baruch College in New York City, where his primary areas of focus were business law, labor relations, economics, and statistics. In addition, Wolfram has also completed significant coursework with Sports Management World Wide, where he was mentored by Harry Sinden of the Boston Bruins and Mike Oke of the Ontario Hockey League’s Peterborough Petes.