NHL Salary Cap Issues: Circumventing the Cap?

With Jack Eichel making his long awaited Vegas Golden Knights debut last week, Vegas’s efforts to get below the salary cap raised a familiar issue: the use of Long Term Injured Reserve (“LTIR”) to navigate the cap. The salary cap exists to limit the amount of money a team can spend on players and is tied to league revenue.[1] It helps protect a competitive balance among the teams in the league by preventing large market teams from signing all of the top players. Without a salary cap, large market teams would have a significant advantage over small market teams because they would be able to spend more money on player contracts. The salary cap protects small market teams by setting a maximum amount of money a team can spend on players. Further, the maximum percentage of the salary cap one player’s contract can be is 20%.[2]

The current salary cap in the NHL is $81.5 million and with so many large contracts on the books, Vegas struggled to get under the limit.[3] Up until this point, Eichel spent the season on LTIR as he recovered from neck surgery. LTIR allows a team to exceed the salary cap by the amount of the player’s cap hit.[4] However, once the player is set to be activated from LTIR, the team must clear cap space so that it falls below the limit, and thus complies with the NHL’s set cap ceiling. 

Eichel’s current salary cap hit is $10 million, which is about 12% of the total cap. When Vegas was ready to activate him from LTIR, it had $5,738,333 available in LIT Salary.[5] In order to activate him, Vegas needed at least $10 million available. Therefore, Vegas needed to trade away $4.3 million in cap hit, place another $4.3 million on LTIR, or terminate $4.3 million in cap hit. Insert Vegas’s contentious solution. Forward Mark Stone has been in and out of the lineup this season as he has dealt with a back injury. His cap hit is $9.5 million. Just two days before Eichel was rumored to be making his debut, the Vegas Golden Knights announced it would be placing Mark Stone on LTIR.[6] As a result, Vegas was able to clear enough cap space for Eichel with one singular move.

This act by Vegas has led to criticism from many that the team is attempting to circumvent the salary cap. Stone has been in and out of the lineup three times since his original back injury. It is expected that he will remain LTIR for the rest of the regular season. What’s most interesting about this is that the salary cap is not enforced in the playoffs. This would effectively allow Vegas to activate Stone in the playoffs without having to comply with the regular season salary cap. Many within the league have compared the use of LTIR in the playoffs to building a super team in the salary cap era. Although on its face it appears the use of LTIR in the playoffs may affect the integrity of the game, it is within the rules of the current Collective Bargaining Agreement. 

While nobody questions the severity of Stone’s injury, the timing of this is suspicious to say the least. As of now, it is not speculated that Stone will require surgery on his back. To most, it appears that Vegas is shutting Stone down for the remainder of the season to rest, while simultaneously letting Eichel work his way back into game shape before the playoffs. Assuming Vegas is able to make the playoffs, as the team is currently second in its division, it will be able to field a playoff team with a cap hit of approximately $89.2 million, which is about $8 million over the salary cap. As a result, Vegas would have an $8 million advantage over cap-compliant playoff teams.

A similar situation occurred just one year ago with Tampa Bay forward Nikita Kucherov. In 2021, months after winning the Stanley Cup in 2020, the Tampa Bay Lightning placed superstar Nikita Kucherov on LTIR.[7] He missed the entire 56 game regular season and was activated before the first playoff game. Kucherov carries a salary cap hit of $9.5 million, and the absence of the cap hit during the season allowed the Lightning to build a strong roster from top to bottom that went right up to the salary cap limit.[8] The Lightning were then able to activate Kucherov from LTIR with no penalty for the playoff run. Fast forward through the playoffs and Kucherov was the team’s leading scorer as it won another Stanley Cup. 

While back to back Stanley Cups is a huge success for the organization, not all within the league were thrilled with the way the Lightning built the team. Carolina defenseman Dougie Hamilton said, “We had a great season. We lost to a team that’s $18 million over the cap or whatever they are, unbelievable goalie and all that stuff.” Further, when asked about the Kucherov situation, Florida Panthers coach at the time Joel Quenneville stated, “It’s the way it is. That’s one of the rules, and you deal with it.” 

The use of LTIR as a way to navigate the cap dates back even farther. In 2015, about a week before the trade deadline, Chicago Blackhawks forward Patrick Kane broke his clavicle and the estimated recovery time frame was 12 weeks.[9]Placing him on LTIR allowed the team to get $6.3 million in cap space. As a result, the Blackhawks used the trade deadline to acquire players that would help improve the depth of the team at the exact cost of Kane’s deal.[10] Kane returned for the first game of the playoffs, and like Kucherov, led the team in points as it went on to win the Stanley Cup. 

As this technique has become more commonly used, it has begun to gain more attention and criticism. The NHL has also begun to more closely monitor the teams that are taking advantage of LTIR cap advantages, particularly where a player is activated just before Game 1 of the playoffs.[11] It will be interesting to see if the NHL looks to change the rules governing LTIR in the near future. Maybe it will attempt to use the same hard salary cap in the playoffs as the regular season. Another option could be to examine medical records more closely if a player is to be activated before Game 1 of the playoffs. If Stone is activated before Game 1 of the playoffs and Vegas goes on to win the Stanley Cup, could we see a proposal to change LTIR and salary cap rules before next season?

[1] https://theconversation.com/nfl-and-nhl-salary-caps-have-worked-out-well-for-players-165739

[2] https://bleacherreport.com/articles/2478437-the-biggest-pros-and-cons-of-the-nhls-current-salary-cap-system

[3] https://nhl.nbcsports.com/2021/08/06/nhl-salary-cap-reportedly-projected-to-rise-in-2022-23/

[4] https://dkpittsburghsports.com/2021/08/17/penguins-schultz-ltir-cap-relief-tlh

[5] https://www.reviewjournal.com/sports/goldenknights/how-golden-knights-can-fit-jack-eichel-under-salary-cap-2527561/

[6] https://zonecoverage.com/2022/wild/vegas-is-circumventing-the-cap-so-why-are-the-wild-being-punished-for-it/

[7] https://www.usatoday.com/story/sports/nhl/2021/06/15/lightning-benefit-from-exploiting-cap-loophole-with-kucherov/45952769/

[8] https://www.spotrac.com/nhl/tampa-bay-lightning/nikita-kucherov-11249/

[9] https://www.pensionplanpuppets.com/2020/1/14/21065188/salary-cap-loopholes-and-well-timed-injuries-can-the-toronto-maple-leafs-pull-off-the-chicago-gambit

[10] https://www.tsn.ca/gms-would-like-answers-about-patrick-kane-loophole-1.454158

[11] https://www.sportsnet.ca/nhl/article/nhl-closely-monitor-teams-taking-advantage-ltir-cap-advantages/

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