Escrow has been a dirty word among players for the better part of a decade now, and it’s understandable knowing that they see an extra 10%, 15%, or even 18% shaved off of their every hard earned paycheck. However, it’s a necessary evil for the revenue sharing agreement in cap system to work. As it is right now, the salary cap system is set up to overpay the players from the outset of every season. The salary cap ceiling is set to create a 57.5/42.5 revenue split between the players and league. Escrow exists to redistribute the revenue so that it is split 50/50 at the end of every year, as the NHL and NHLPA agreed upon in the 2013 CBA. So every cap team in this league is an extra little bit of escrow tagged onto the players. There are also a few other well-known causes of escrow, such as the salary cap escalator, LTIR, and cap-advantaged contracts, that are explained here.
There is, however, one unique cause of escrow spiking that I have heard little of. It is something that happened in the two years after the 2013 CBA was signed and that something is also being discussed as a likelihood in the next round of labor negotiations. That something is compliance buyouts. Compliance buyouts are get-out-of-jail-free cards for teams that don’t like one of their contracts. These buyouts still require the teams to pay the player a large percentage of his contracted salary, but there is no cap hit associated with the buyout (unlike regular buyouts). Continue reading “34.5 million reasons I’d be against compliance buyouts in the next CBA if I were a player”