Month: March 2016

The collective bargaining agreement (CBA) agreed to by the NHL and NHL Players’ Association (NHLPA) in 2013 describes how a player can be placed on the LTIR, how this status effects his team’s cap situation, and what can be done with the player after receiving this status. In this post, I will describe how the LTIR status is granted, how it interacts with the salary cap, and provide an example of it being used in the league.

How does a player get placed on the LTIR?

The LTIR is specifically defined in Article 50.10(d) in the 2013 CBA. A player is eligible to be placed on the LTIR if the player has been determined to be unfit to play by the team’s physician for a minimum of 24 days and 10 regular season games. In the league believes that a player is being placed on the LTIR in bad faith, the league can issue a challenge. In this situation (which to my knowledge has not yet happened), the NHL and the NHLPA would select a neutral physician to evaluate the player and make a ruling.

What is described above is effectively a special version of the injured reserve (IR), which only requires an expectation that the player will be out for 7 days. Another key difference between the two is that the IR can be triggered retroactively and only creates a maximum roster size exception. The LTIR cannot be deemed retroactively and it can create exceptions to both the maximum roster size and the salary cap ceiling. Both statuses for a player can be designated using the form found as Exhibit 28 in the CBA, which is shown off to the side. A team would simply need to fill out this form and submit it to the NHL Central Registry and NHLPA.

Once the NHL Central Registry has approved the LTIR status, the team is allowed to add a replacement player or players to its roster.

How does the LTIR effect the salary cap?

The trickiest thing about the LTIR is determining how it effects the salary cap for a team.  Article 50.10(d) in the CBA actually provides eight separate examples to demonstrate the “Bona-Fide Long-Term Injury/Illness Exception to the Upper Limit [of the Salary Cap].” Interestingly enough, the LTIR exception and the performance bonus cushion (another post for another day) create the only two exceptions to the salary cap ceiling during the regular season.

Perhaps the biggest misconception about the LTIR is that the player’s cap hit does not get removed from the team’s payroll. In fact, what happens is that the team is allowed to exceed the designated salary cap ceiling by as much as the cap hit of the contract for the player entering the LTIR. The value of the allowed overage is determined on the day that the player is moved to the LTIR. That player on the LTIR both continues to count towards the cap and continues to receive his salary. Article 50.10(d)(ii) specifically states

“The Player Salary and Bonuses of the Player that has been deemed unfit-to-play shall continue to be counted toward the Club’s Averaged Club Salary [….]”

The next Article, 50.10(d)(iii), states that

“The total replacement Player Salary and Bonuses for a Player or Players that have replaced an unfit-to-play Player may not in the aggregate exceed the amount of the Player Salary and Bonuses of the unfit-to-play Player who the Club is replacing[.]”

Finally, Article 50.10(d)(iv) states that

“[….] A Club may then exceed the [salary cap ceiling] due to the addition of replacement Player Salary and Bonuses of Players who have replaced an unfit-to-play Player, provided, however, that when the unfit-to-play Player is once again fit to play [including any time spent on a conditioning loan], the Club shall be required to once again reduce its Averaged Club Salary to a level at or below the [salary cap ceiling] prior to the Player being able to rejoin the Club [….]”

[emphasis in the original]

How has the LTIR been used in the league?

Thanks to Cap Friendly, I have found a resource that makes it a lot easier to show how the LTIR has been used this year by the Toronto Maple Leafs. They have engaged in some really interesting work with regard to cap and asset management through the use of a significant number of tools, including the LTIR. Below you can see a timeline of Nathan Horton’s status with the team over the course of the season. Most notably, he was moved from the Injured Reserve to the Long-Term Injured Reserve on October 27, 2015.

Now there had been little question from before the season that Nathan Horton was not planning to make any return to the ice. Unfortunately, he likely has career-ending medical issues, but he likely will not be retiring. It is neither in his interest (since he will continue to be paid on the LTIR) or in the interest of the Maple Leafs (for the reasons to come below) for Horton to retire at this time.

Thus the question should be asked why the Maple Leafs did not place Nathan Horton on the LTIR at the start of the season. That can illustrated with the graph below:

The black line represents the salary cap ceiling for the Maple Leafs. The blue line is their daily cap hit and the green line is a projected cap hit for the team at the end of the year. A team’s final salary cap number at the end of the year is actually the average of all their daily cap hits. The projected cap hit is that running average assuming that the current day’s cap hit were to be maintained through the end of the season.

Under normal cases, neither the blue nor the green lines are permitted to go over the black line at any single point during the season. So a team cannot operate at 150% of the salary cap ceiling for half the year and 50% of it the rest of the year to even out at 100%. No, teams must remain below the salary cap ceiling at all times. Unless they have one of two exceptions: an LTIR exception or a performance bonus cushion exception.

As mentioned above, the Maple Leafs can receive a salary cap ceiling exception equal to the overage created by the Horton contract after putting replacement players on their roster (whose total contract values cannot be greater than that of Horton’s contract), which occurs immediately after Horton is placed on the LTIR. At the start of the season, the Maple Leafs were operating at a projected $70.48m cap hit. If they had placed Horton on the LTIR at that point and fully replaced him, they could have created a maximum allowed overage of $4.38m. Instead, the Maple Leafs waited. Then on October 27, 2015, they called up Casey Bailey from the AHL (at a time when they had three players on the regular IR and needed a call-up), which put an additional $0.91m against the cap. This put the Leafs’ projected cap hit only $93,306 beneath the salary cap season. So they placed Horton on the LTIR at that point, granting them an allowed overage of up to $5,206,694 for as long as Horton is on the LTIR. (Note: Horton’s contract lasts through the 2019-20 season.) Thus, the Maple Leafs effectively have a salary cap ceiling of $76.6m while almost every other team can only spend up to $71.4m this year. (Note: Casey Bailey was back in the AHL after only two days up with the Maple Leafs. He arguably was only called up for this LTIR move.)

And so it can be seen that the Maple Leafs have used this allowed overage four separate times this year:

1. On October 29, 2015, they returned Casey Bailey to the minors, called Byron Froese up to the NHL, and signed Richard Clune. Overall, those moves put the Leafs at $71.5m, just slightly over the normal salary cap ceiling. This only lasted for a single day.
2. From December 30, 2015, to January 10, 2016, the Maple Leafs were at $71.7m in salary after an emergency call up of Mark Arcobello and Antoine Bibeau. (Both were sent back to the minors on January 3, 2015, for some reason but promptly returned to the NHL on the next day.)
3. From February 8, 2016, to February 22, 2016, the Maple Leafs were well above the normal $71.4m salary cap ceiling. One of the main factors was the trade that sent Phaneuf out of town (along with four other players in the AHL) in exchange for four Senators players. The exchange ultimately added $1.8m to the Maple Leafs’s salary cap. Around that same time frame, Tyler Bozak, Joffrey Lupul, and Jared Cowen (from the aforementioned trade) were all placed on the IR and required roster replacements. The Leafs ultimately carried a maximum salary cap of $75.9m on February 13, 2016. This used up $4.5m of the LTIR exception. Had Horton been placed on the LTIR at the start of the season, these roster moves could not have been done this way.
4. Not pictured above (because I made the image before all roster transactions were completed) is the Maple Leafs ending February 29, 2016, with about $440k above the normal cap ceiling. This is mainly related to them calling up a large number of their minor league prospects including Kasperi Kapenen and William Nylander.

Finally, it should be mentioned that sometimes the contract of a player on the LTIR can itself become a good asset. We saw that happen this past summer when Marc Savard was involved in a trade that sent him from the Boston Bruins to the Florida Panthers. The thing is: Savard has not played a single game since 2010-11, when he received a career ending concussion. So he had spent his entire time in Boston after his injury on the LTIR, which makes cap management a bit more complicated for the reasons described in detail above. However, Florida found his contract attractive as a cash-strapped team because it added $4.0m to their cap while only costing them $575k in real money each year. This helped Florida reach the salary cap floor. It was a move beneficial for both sides because now Boston has that $4.0m unlocked without having to do tricky movement of their assets.

So what next?

Well if you made it this far, you’re clearly interested in how the intricacies of the CBA. Consider taking a look at my three-part series covering the cap advantage recapture penalty. It’s just as good of a read and it covers an equally important but obscure mechanism described in the 2013 CBA.