Understanding Buyouts in Hockey: How They Work and Impact Teams

When it comes to managing a hockey team, there are many factors to consider. One of the most important aspects is managing player contracts and salaries. This is where the concept of a buyout comes into play.

A buyout is a contractual agreement between a team and a player that allows the team to terminate the player’s contract and remove their salary cap hit from the team’s books. However, the team must pay a portion of the player’s remaining salary over a period of time.

Understanding buyouts in hockey is crucial for any fan or analyst looking to gain a better understanding of the game. In this article, we’ll break down the basics of buyouts, explain why teams buy out players, and analyze the salary cap implications of buyouts.

If you want to learn more about the intricacies of buyouts and how they can impact a team’s success on the ice, keep reading.

The Basics of Hockey Buyouts

If you are a hockey fan, you may have heard the term “buyout” being used by sports commentators and analysts. But what exactly is a buyout in hockey? Essentially, a buyout is a tool that NHL teams can use to terminate a player’s contract early. In this article, we will explore the basics of hockey buyouts, including how they work and why they are used.

The NHL Collective Bargaining Agreement (CBA) allows teams to buy out players under certain conditions. One of the main reasons a team might consider a buyout is if they need to shed a player’s contract in order to create more cap space. Another reason could be if a player is underperforming, and the team wishes to remove them from the roster without having to pay the full amount of their contract. In either case, a buyout can be a useful tool for a team looking to improve their roster or financial flexibility.

But how does a buyout actually work? Essentially, a buyout involves paying a player a portion of their remaining contract in exchange for terminating the agreement early. The amount paid to the player depends on the player’s age, the remaining length of their contract, and the timing of the buyout. The team must also absorb a portion of the player’s remaining cap hit over a designated period of time.

It’s important to note that a buyout is not the same as a contract termination. When a team buys out a player, they still owe the player money, but the amount is spread out over a longer period of time and the player is free to sign with another team. A contract termination, on the other hand, involves completely ending the contract without any financial obligations on either side.

So why might a team choose to buy out a player instead of terminating their contract? One reason could be to avoid the “dead money” that comes with a contract termination. When a contract is terminated, all remaining salary is immediately due and counts against the team’s cap. With a buyout, the remaining salary is spread out over a designated period of time, allowing the team to avoid a large cap hit in any given year.

In conclusion, buyouts are a tool used by NHL teams to improve their roster or financial flexibility. While they may not always be the best option, they can be a useful tool for teams looking to make changes to their roster. In the following sections, we will delve deeper into the reasons why NHL teams buy out players, the salary cap implications of buyouts, and how buyouts can affect player contracts.

Definition and Purpose of a Buyout

A buyout is a mechanism in the NHL that allows a team to terminate a player’s contract before its expiry. The primary purpose of a buyout is to free up salary cap space for the team. A player who has been bought out becomes an unrestricted free agent and can sign with any other team.

Salary Cap – The NHL has a salary cap, which is the maximum amount a team can pay its players. A buyout can help a team stay under the salary cap by freeing up space.

Circumstances for a Buyout – A team can only buy out a player during specific windows. The player’s contract must also meet certain criteria to be eligible for a buyout.

Types of Buyouts – There are two types of buyouts: compliance buyouts and regular buyouts. Compliance buyouts do not count against the team’s salary cap, while regular buyouts do.

• Compliance Buyouts – These buyouts were introduced after the 2012-13 lockout as a way for teams to comply with the new collective bargaining agreement. Each team was given two compliance buyouts to use over two seasons.
• Regular Buyouts – These are the traditional buyouts that teams have been using since the 2005 lockout. Regular buyouts can be used outside of the designated buyout windows but come with salary cap implications.
• Cap Recapture Penalties – A team can be hit with a cap recapture penalty if a player retires before the end of their contract, and the team used a buyout to lower the player’s cap hit.

Buyouts can be a valuable tool for NHL teams looking to manage their salary cap and improve their roster. However, they can also have significant financial and strategic implications, which teams must carefully consider before making a buyout decision.

Buyout Terms and Structure

A buyout is a contractual agreement between an NHL team and a player, which results in the termination of the player’s contract. In a buyout, the team pays a percentage of the player’s remaining contract value as a lump sum to terminate the contract early.

The amount paid to the player in a buyout is calculated based on their age at the time of the buyout and the percentage of the contract remaining. If the player is younger than 26 at the time of the buyout, the team must pay one-third of the remaining value of the contract. For players 26 or older, the team pays two-thirds of the remaining value.

The salary cap implications of a buyout depend on the structure of the player’s contract. If the contract was signed before September 15, 2012, the team can use a one-time “amnesty” buyout to remove the player’s cap hit entirely. If the contract was signed after September 15, 2012, the cap hit is reduced by a certain percentage over a number of years, depending on the player’s age at the time of the buyout.

The NHL allows each team to use a maximum of 3 buyouts during a specific time window, which typically falls in June or July. A player who is bought out becomes an unrestricted free agent and can sign with any other team, but the team that bought them out is not allowed to re-sign them until the contract term is completed.

It’s worth noting that a buyout can have long-lasting implications for both the player and the team. The player may have difficulty finding a new team willing to pay them a similar salary, while the team may still have to pay a significant portion of the player’s salary over several years, impacting their ability to sign new players in the future.

Consequences of a Buyout for Players and Teams

Players and teams face consequences when a buyout occurs, as both parties must consider the financial and contractual implications. The team will have to pay the player a percentage of the contract value remaining, spread out over a period of twice the remaining length of the contract. This means that the team will have to pay more than what they would have paid the player had they not bought out the contract.

For the player, the buyout will mean they receive a percentage of their contract value remaining, but they will also become an unrestricted free agent, which means they can sign with any team. However, the player may not receive as much money as they would have if they had stayed with their original team, especially if their performance has declined in recent years.

Additionally, a buyout can affect a team’s salary cap space. The team may have to carry a portion of the player’s contract value for a certain number of years, which could limit their ability to sign other players or make trades. However, a team may be able to save some salary cap space in the short term if the player’s contract had a higher annual average value than the buyout amount.

Why NHL Teams Buy Out Players

There are a variety of reasons why an NHL team may decide to buy out a player’s contract. One common reason is underperformance. If a player is not living up to expectations and their contract is too expensive, a team may choose to buy them out in order to free up salary cap space for other players.

Long-term injuries are another reason why a team might buy out a player’s contract. If a player is unable to play due to a long-term injury, their contract will still count towards the team’s salary cap. By buying out the player, the team can remove the contract from their salary cap and use that money to sign other players.

Teams may also choose to buy out a player if they are looking to rebuild. If a team is not performing well and wants to make significant changes to their roster, buying out one or more players can be a way to free up salary cap space and make room for new players.

Off-ice issues can also lead to a team buying out a player’s contract. If a player is causing problems in the locker room or engaging in inappropriate behavior off the ice, a team may choose to buy out their contract in order to get rid of the player.

Underperformance and Injuries

Underperformance is one of the primary reasons why NHL teams buy out players. When a player does not perform up to the expectations set by the team or fails to meet the requirements of their contract, the team may choose to buy out the player’s contract. This allows the team to remove the underperforming player from their roster and free up cap space to sign other players.

Injuries can also be a factor in a team’s decision to buy out a player’s contract. If a player suffers a significant injury that affects their ability to play, the team may choose to buy out the player’s contract to free up cap space and sign a replacement player. In some cases, the team may also buy out a player who has a history of injury and is seen as a liability.

Cap Space and Flexibility

Cap space refers to the maximum amount of money that a team can pay its players in a given season while remaining under the salary cap. A team that is struggling to stay under the salary cap may consider buying out a player’s contract to free up cap space.

Additionally, buying out a player’s contract can provide a team with more flexibility to sign other players or make trades. Teams that are in a rebuilding phase or looking to make significant changes to their roster may find it necessary to buy out a player’s contract to create the cap space needed to pursue other opportunities.

Salary Cap Implications of Buyouts

Reduction of Cap Hit: One of the most significant implications of a buyout is the reduction in a team’s cap hit. When a player is bought out, the team’s cap hit for that player is reduced, providing much-needed relief for teams that are tight against the salary cap.

Spread of Cap Hit: The cap hit that a team incurs from a buyout is spread over a period of twice the remaining length of the player’s contract. For example, if a player has three years remaining on his contract, the cap hit from his buyout will be spread over six years.

Dead Cap Space: Although a buyout can provide immediate cap relief, it also creates dead cap space. Dead cap space refers to the portion of a team’s salary cap that is being used to pay players who are no longer on the roster. This can limit a team’s flexibility in the future.

No Movement Clauses: If a player has a no movement clause in his contract, he cannot be bought out without his consent. A no movement clause prohibits a team from trading, waiving, or loaning a player without the player’s consent.

Bonus Implications: The cap implications of buying out a player with signing bonuses are slightly different. The team will still be responsible for paying the bonuses, but they will be spread out over the buyout period.

Cap Hit Reduction and Dead Cap

One of the main reasons why NHL teams buy out players is to reduce their cap hit. When a player is bought out, their cap hit is spread out over a certain period of time, usually twice the remaining length of the player’s contract.

The cap hit reduction is significant for teams that are looking to free up cap space to sign other players or improve their roster. However, there is a downside to buying out players, and that is the creation of dead cap.

Dead cap refers to the amount of money that counts against a team’s salary cap for a player who is no longer on their roster. In the case of a buyout, the dead cap is the remaining amount of the player’s contract, minus the amount saved by the cap hit reduction.

Teams need to carefully consider the impact of dead cap on their roster before deciding to buy out a player. In some cases, the dead cap may be too high to justify the cap hit reduction.

Overall, while buying out a player can be a useful tool for teams looking to manage their salary cap, it is important for teams to weigh the pros and cons of a buyout before making a decision.

Buyout Limits and Timing

Buyout Limits: The NHL has specific rules in place regarding the number of buyouts a team can make and the impact on the team’s salary cap. Each team is allowed up to two compliance buyouts following the 2012-2013 lockout, and after that, they are allowed up to three regular buyouts. A buyout of a player’s contract can be for one-third or two-thirds of the remaining contract value, depending on the player’s age when they were signed.

Timing: Teams have a limited window in which to buy out players, which is typically in June after the end of the season. If a player is bought out, they become an unrestricted free agent and can sign with any team. Additionally, the buyout is spread over a number of years, depending on the player’s age when they were bought out, which can impact the team’s salary cap for several years.

Impact on Teams: The timing of a buyout can impact a team’s ability to sign free agents or re-sign existing players. If a team waits too long to buy out a player, they may miss out on the opportunity to sign key free agents. Additionally, if a team has multiple players with large cap hits, they may need to time their buyouts to avoid overloading their salary cap in a single season.

Buyout Recapture: In certain situations, if a player who was bought out signs a new contract with a different team and then retires before the end of that contract, the original team may be subject to buyout recapture penalties. These penalties can result in significant cap hits for the team that bought out the player, even years after the original buyout occurred.

How Buyouts Affect Player Contracts

Modification: A buyout will modify a player’s existing contract, either reducing or terminating the remaining value of the contract.

Cap Hit Calculation: The cap hit for a bought-out player is calculated differently than for an active player. The team must pay a portion of the player’s salary over a period of twice the remaining length of the contract.

Free Agency: Once a player is bought out, they become a free agent and are free to sign with any team in the league, subject to the conditions of the Collective Bargaining Agreement.

Re-signing: A player who is bought out can re-sign with the team that bought them out, but only if the terms of the new contract meet certain requirements set out in the Collective Bargaining Agreement.

Player Salary and Term Adjustments

When a player is bought out, their contract is essentially terminated by the team. However, the team may still be responsible for paying a portion of the player’s salary, which will count against their salary cap.

The amount of the player’s contract that is bought out will depend on the timing of the buyout and the structure of the contract. Generally, the player will receive a portion of their remaining salary over a period of time, with the remaining amount counting as dead cap against the team’s salary cap.

In some cases, a team may also negotiate a restructuring of the player’s contract rather than a buyout. This may involve a reduction in salary, a change in the length of the contract, or other adjustments to the terms of the deal.

Overall, a buyout can have significant implications for a player’s contract and career, as well as for the team’s salary cap and roster management strategy.

Impact on No-Trade and No-Movement Clauses

Players with no-trade clauses (NTCs) or no-movement clauses (NMCs) in their contracts have some control over their fate if their team tries to buy them out. If a player has an NTC or NMC and is bought out, the clause is still in effect, and the player cannot be traded or waived without their consent. However, if a player has an NTC or NMC and is not bought out, they can be traded or waived only if they waive their clause.

Players with modified no-trade clauses (MNTCs) can also be impacted by a buyout. If a player with an MNTC is bought out, the team must still protect the player in the upcoming expansion draft, but the player can be exposed in future drafts.

It is essential to note that a buyout does not affect the player’s contract’s salary and term if they have an NTC or NMC. However, if a player has an MNTC, their salary and term may change if the player agrees to waive their clause as part of the buyout agreement.

Buyout Window and Process in the NHL

When it comes to the buyout window in the NHL, it is a brief period of time in which teams can buy out the contracts of players who are underperforming or who have large contracts that are no longer feasible for the team. The buyout window typically occurs in the offseason, after the Stanley Cup playoffs have concluded.

The process for a buyout involves notifying the player, and then placing them on unconditional waivers for 24 hours. If the player is not claimed, the team can proceed with the buyout process. The player’s contract will then be terminated, and the team will be responsible for a portion of the remaining salary.

It’s important to note that there are restrictions on which players can be bought out, and when. The player must have a contract that is longer than two years, and they cannot have been signed to the contract within the past year. Additionally, there are limits to how many players a team can buy out each year.

During the buyout process, the team is responsible for a portion of the remaining salary, which is spread out over twice the remaining length of the contract. This means that a player with three years remaining on their contract will have their salary spread out over six years.

Overall, the buyout process can be a useful tool for teams to improve their cap situation and make roster changes. However, it is important for teams to carefully consider the long-term implications of buying out a player’s contract before proceeding with the process.

Annual Buyout Period and Deadlines

The NHL has an annual buyout period that usually opens in late May and runs for about two weeks. During this period, teams can buy out contracts of players to create salary cap space.

It is important to note that the buyout period has specific deadlines that teams must adhere to. The first deadline is for teams to submit a notice of their intent to buy out a contract. This deadline typically falls a few days before the actual buyout period.

The second deadline is the actual buyout deadline, which is usually a few days after the buyout period opens. After this deadline, teams are no longer allowed to buy out contracts until the next buyout period.

Waivers, Notification, and Settlement

Once a player is bought out, they are placed on waivers, giving other teams the opportunity to claim them and assume the remaining portion of their contract. If the player is not claimed, they become an unrestricted free agent and can sign with any team.

Teams must provide written notification to the NHL league office of any buyout decision, and the player must be notified in writing within 24 hours of the announcement. The NHL also provides a written notice to all other teams in the league.

Buyouts are considered a settlement of the original contract and can be subject to negotiation between the team and the player’s agent. A player may agree to a reduced buyout amount or an extended payment schedule, for example.

It’s worth noting that the salary cap implications of a buyout can be complicated, as teams must factor in any potential cap recapture penalties, dead cap space, and the timing of the buyout.

Arbitration and Dispute Resolution

Disputes may arise between players and teams regarding the buyout process or other issues related to player contracts. If a resolution cannot be reached through negotiation, the parties may turn to arbitration as a means of resolving the dispute.

Arbitration is a process in which a neutral third party hears arguments from both sides and renders a decision. In the NHL, arbitration is available to players who meet certain eligibility requirements, such as being in the league for a certain number of years or having a certain type of contract.

Players can also file grievances with the NHL Players’ Association (NHLPA) if they believe their rights have been violated. The NHLPA can assist players in resolving disputes with teams or the league, including those related to buyouts.

Ultimately, if a dispute cannot be resolved through negotiation, arbitration, or the NHLPA, it may end up in court. However, the NHL and the NHLPA generally try to avoid court battles, as they can be costly and time-consuming for all parties involved.

Examples of Successful and Unsuccessful Buyouts

Brad Richards: In 2014, the New York Rangers bought out the final six years of Richards’ nine-year contract, saving the team $6.67 million in cap space. The buyout was successful as Richards struggled with injuries and his production had declined significantly.

Mikhail Grabovski: The Vegas Golden Knights bought out Grabovski’s contract in 2017, but it was considered an unsuccessful buyout due to his injury-prone nature. The buyout resulted in a $2.55 million cap hit for the Golden Knights in each of the next two seasons.

Ryan Callahan: In 2014, the Tampa Bay Lightning bought out the final two years of Callahan’s contract. The buyout was successful as Callahan had been struggling with injuries, and the Lightning saved $3.1 million in cap space.

Ilya Bryzgalov: The Philadelphia Flyers bought out Bryzgalov’s contract in 2013, but it was considered an unsuccessful buyout due to the significant cap hit that resulted from it. The buyout cost the Flyers $23 million over 14 years in total.

Vincent Lecavalier: The Philadelphia Flyers bought out the final four years of Lecavalier’s contract in 201While Lecavalier was still a productive player, the buyout was successful as it allowed the Flyers to clear $4.5 million in cap space each year.

Successful Buyouts: A Look at Past Examples

Tim Gleason: The Carolina Hurricanes used a buyout on defenseman Tim Gleason in 2014 to free up cap space. The buyout allowed the team to avoid the final two years of his four-year contract and saved them $1.833 million in cap space per year.

Brad Richards: The New York Rangers bought out Brad Richards in 2014, freeing up $6.67 million in cap space. The move was successful, as the team went on to make it to the Stanley Cup Finals that year.

Vincent Lecavalier: The Tampa Bay Lightning used a compliance buyout on Vincent Lecavalier in 201The move allowed the team to avoid paying him $45 million over the final seven years of his contract, freeing up cap space to sign other players.

Scott Gomez: The Montreal Canadiens used a buyout on Scott Gomez in 2013, freeing up $7.357 million in cap space. The buyout allowed the team to avoid the final two years of his contract and move on from an unproductive player.

Simon Gagne: The Philadelphia Flyers bought out Simon Gagne in 2010, allowing the team to avoid paying him $5.25 million in the final year of his contract. The move allowed the team to allocate those funds towards signing other players and ultimately led to a successful season.

Unsuccessful Buyouts: Lessons Learned

Timing: One of the most important lessons learned from unsuccessful buyouts is that timing is critical. A team must consider the player’s age, skill level, and contract status before deciding to buy them out.

Salary Cap Management: Salary cap management is another factor to consider when attempting to buy out a player’s contract. A team must plan for the future and ensure that they have enough cap space to sign other players.

Future Performance: Buying out a player’s contract is not only about getting rid of a poor performer. A team must also consider the player’s future performance and whether they are likely to improve or decline in the future.

Player Relations: Buying out a player’s contract can be a delicate matter, and it is essential to consider the player’s feelings and potential impact on team morale. Teams should communicate effectively and maintain a good relationship with players to avoid negative consequences.

Current Buyout Candidates in the NHL

As the NHL enters the off-season, several teams are considering utilizing the buyout option to clear up salary cap space. Keith Yandle of the Florida Panthers, who has three years left on his contract, is a potential buyout candidate due to his declining performance.

Jake Virtanen of the Vancouver Canucks is another possible buyout candidate due to his inconsistent play and off-ice issues. He has two years left on his contract.

• James Neal of the Edmonton Oilers may also be bought out due to his disappointing performance since joining the team in 2019.
• Zach Parise of the Minnesota Wild is another potential candidate due to his declining production and the team’s need to free up cap space.
• Ryan Johansen of the Nashville Predators could also be bought out due to his underwhelming performance and high salary.

It remains to be seen which players will ultimately be bought out, but these candidates have been identified as potential options for their respective teams.

Potential Future Changes to Buyout Rules

Salary Cap Increase: One potential change to buyout rules in the NHL would be a future increase in the salary cap. This could allow teams to retain more players and reduce the need for buyouts.

Modification of Buyout Formula: Another potential change would be to modify the current buyout formula to make it more favorable for teams. This could include adjusting the length of the buyout period or reducing the cap hit for bought-out players.

New Amnesty Buyouts: In the past, the NHL has implemented amnesty buyouts as part of a new collective bargaining agreement. This would allow teams to buy out players without any cap hit. A new amnesty buyout period could be implemented in the future.

Increased Player Protection: Finally, there could be potential changes to buyout rules that increase player protection. This could include limiting the number of buyouts per team or increasing the percentage of a player’s salary they receive during the buyout period.

NHLPA and CBA Negotiations

• Collective Bargaining Agreement (CBA): The CBA is a contract between the NHL and NHLPA that outlines the rules and regulations of the league, including buyout rules. Negotiations between the NHL and NHLPA take place every few years to renew the CBA.

• NHLPA Priorities: The NHLPA’s priorities in CBA negotiations include player safety, fair revenue sharing, and protecting players’ rights, including buyout provisions.

• Recent Negotiations: In the most recent CBA negotiations in 2020, the NHL and NHLPA agreed to no changes to the existing buyout rules due to the financial impact of the COVID-19 pandemic on the league.

Impact of COVID-19 Pandemic

The COVID-19 pandemic has had a significant impact on the NHL and its financial situation, which has in turn affected the league’s buyout rules. Here are some of the ways in which the pandemic has impacted the NHL and its buyout rules:

• Revenue Loss: Due to the pandemic, the NHL lost a significant amount of revenue, which has led to a decrease in the salary cap for the 2020-21 season.
• Shortened Season: The 2020-21 season was shortened to 56 games, which impacted the number of games that teams had to evaluate their players and make decisions about buyouts.
• Bonus Payments: Many players have performance-based bonuses built into their contracts, but the shortened season has made it difficult for players to meet those bonuses, which has led to increased buyout considerations.

As a result of these impacts, the NHL and NHLPA agreed to make some changes to the buyout rules for the 2020-21 and 2021-22 seasons. These changes included an increase in the percentage of the buyout amount that can be paid over twice the remaining term of the player’s contract, as well as changes to the timing of buyout windows.

Emerging Trends in Player Contracts

As the NHL evolves, so do player contracts. Here are some emerging trends:

1. Longer-term deals: More and more players are signing long-term contracts, some lasting 8-10 years. This gives teams more stability and can help players secure a larger payday.

2. Performance bonuses: Incentives based on player performance are becoming increasingly popular. These bonuses can be tied to individual or team performance and can help teams manage their salary cap more effectively.

3. Signing bonuses: Many contracts now include signing bonuses paid out in a lump sum. This can provide players with more financial security and make contracts more attractive to potential free agents.

4. Front-loaded contracts: Some teams are structuring contracts so that players earn a higher percentage of their salary in the early years of the deal. This can be beneficial for teams that are tight against the salary cap.

Frequently Asked Questions