NHL Offer Sheets Explained

The Stanley Cup has been awarded, which means hockey fans will now be turning their focus fully to the upcoming draft and free agency.

Well, except in Chicago. There’s a parade to attend.

We’ve heard a lot of talk about potential offer sheet attempts on key restricted free agents like Brandon Saad and Dougie Hamilton, since both Chicago and Boston will be tight against the cap this summer with players still to sign.

Both the Blackhawks and Bruins are virtually guaranteed to match any such attempted theft of said young star, but the notion of offer sheets is still an intriguing one across the board since we rarely see them in the NHL.

And even if the RFA’s team matches that offer sheet, the high cost of the new contract would have a damning salary-related ripple effect on other parts of the roster and that, in turn, could mean additional players will shake loose for other teams.

So with the possibility of an offer sheet coming, we’re focusing today’s edition of Nichols’ Notes strictly on the legalese behind this practice.

The entire section of the 2013 Collective Bargaining Agreement dedicated to offer sheets, which will be in effect until September of 2022, is included here.

Disclaimer: I am not a lawyer, nor am I any kind of legal expert. I did watch a lot of Law & Order and Boston Legal back in the day though, and I recently binge-watched the entire Suits series. So… I feel pretty qualified to break down these sorts of documents.

Here are some of the key points to the offer sheet:

* A team has seven days to match the offer sheet, or opt to take the draft picks.

* The team who has been offer-sheeted cannot trade that player during those seven days, or however long it takes to make the decision on the offer sheet.

* If the team matches the offer sheet put forth by their rival, the team cannot trade that player for one year from the date it matched the offer.

* (UPDATED) The dollar amounts in the offer sheet compensation chart increase annually. The figures in this article now includes the 2015 numbers, courtesy Elliotte Friedman’s 30 Thoughts.

* There are some very particular rules related to the draft picks teams must have available, including that they must come from within a certain time period and that those draft picks must be the offering club’s own selections. Again, read below for the precise details.

*If the poaching team is found by Central Registry to NOT have the needed draft picks, that offer sheet becomes null and void.

Here’s the offer sheet section wording directly from the CBA…

10.3 Offer Sheet and First Refusal Procedures.

(a) When a Restricted Free Agent receives an offer to sign an SPC from any Club (the “New Club”) other than his Prior Club, which offer the Player desires to accept, he shall give to the Prior Club, in accordance with Exhibit 3 hereto, a completed certificate substantially in the form of Exhibit 6 attached hereto (the “Offer Sheet”), signed by the Restricted Free Agent and the New Club, which shall contain the “Principal Terms” (as defined below) as well as all other terms of compensation of the New Club’s offer. The Prior Club, within seven (7) days after the date it receives the Offer Sheet, may exercise or not exercise its Right of First Refusal, which shall have the legal consequence set forth below. Once an Offer Sheet for a Restricted Free Agent has been received by the Prior Club, the Prior Club may not Trade or otherwise Assign its Right of First Refusal for such Restricted Free Agent.

(b) If the Prior Club gives the Restricted Free Agent and his Certified Agent, if any, notice, in accordance with Exhibit 3 hereto, that it is exercising its Right of First Refusal (a “First Refusal Exercise Notice”), such notice to be substantially in the form of Exhibit 7 attached hereto, to the Player’s and his Certified Agent’s, if any, e-mail address listed on the Offer Sheet, if any, within the seven (7) day period, such Restricted Free Agent and the Prior Club shall be deemed to have entered into a binding agreement, which they shall promptly formalize in an SPC, containing: (i) all the Principal Terms (subject to subsection (e) below); and (ii) such additional terms as may be agreed upon between the Restricted Free Agent and the Prior Club. The Prior Club may not Trade that Restricted Free Agent for a period of one year from the date it exercises its Right of First Refusal.

(c) If the Prior Club does not give the Restricted Free Agent the First Refusal Exercise Notice within the seven (7) day period, the Player and the New Club shall be deemed to have entered into a binding agreement, which they shall promptly formalize in an SPC, containing all of the terms contained in the Offer Sheet, and the Restricted Free Agent’s Prior Club shall receive from the New Club the Draft Choice Compensation, if any, specified in Section 10.4 below.

(d) (i) A Club may have more than one Offer Sheet signed by a Restricted Free Agent outstanding at any one time and from time to time, provided that it has the available draft picks to satisfy its obligations pursuant to Section 10.4 with respect to all Offer Sheets outstanding at the relevant time.

(ii) An Offer Sheet, once signed by the Player and the New Club, shall be irrevocable.

(e) For the purposes of this Article, the Principal Terms of an Offer Sheet are limited to the term, Paragraph 1 Salary and Signing Bonus and Reporting Bonus the New Club offers to the Restricted Free Agent (currently and/or as Deferred Compensation in specified installments on specified dates) in consideration for his services as a hockey Player under the SPC.

(f) All Principal Terms contained in an Offer Sheet shall be fixed and readily determinable amounts of cash, which shall not be subject to any conditions or contingencies whatsoever, except as to the date on which payment is to be made.

(g) Simultaneously with the giving of an Offer Sheet to the Prior Club, the New Club shall give a copy thereof to Central Registry and the NHLPA, all in accordance with Exhibit 3 hereto. Simultaneously with the giving of a First Refusal Exercise Notice to the Restricted Free Agent, the Prior Club shall give a copy thereof to the NHL and the NHLPA, all in accordance with Exhibit 3 hereto.

(h) Upon receipt of an Offer Sheet, the Prior Club shall immediately notify Central Registry, in accordance with Exhibit 3 hereto, a request to encumber the New Club’s required draft picks and place them in reserve for the Prior Club. Upon receipt of either a copy of such Offer Sheet or the notice from the Prior Club, Central Registry shall immediately determine whether the New Club’s required draft picks are available and unencumbered. If such draft picks are available, the League shall encumber them in reserve for the Prior Club. If the required draft picks are not available and unencumbered, the League shall immediately notify all parties (the Restricted Free Agent, his Certified Agent (if any), the New Club and the Prior Club), all in accordance with Exhibit 3 hereto, and the said Offer Sheet shall be deemed null and void. Upon receipt of any First Refusal Exercise Notice, Central Registry shall immediately release any encumbrance it has placed on the New Club’s draft picks. (i) Subject to the restrictions set forth in Sections 11.4 and 11.6(a)(vi), in the event that any Offer Sheet is determined to be invalid by the Impartial Arbitrator as being in breach of this Agreement, the Restricted Free Agent shall, for a period of seven (7) days from the rendering of such decision by the Impartial Arbitrator, be entitled to the rights of a Restricted Free Agent hereunder, including the right to obtain an Offer Sheet and to elect, or for the Club to elect, salary arbitration (if otherwise eligible for salary arbitration in accordance with Article 12 and the Player, or the Club, as the case may be, still had such right to so elect at the time the Player executed the Offer Sheet).

(j) On or before May 15 of each League Year, the NHL will provide the NHLPA with a draft Free Agent List in its then-current form, which List shall set forth each Player’s name and the group(s) of Free Agency he qualifies for (assuming Club were to make a Qualifying Offer) effective as of that July 1. The NHLPA will review the draft Free Agent List and, on or before June 1, will provide the NHL with written notice of any potential disputes concerning the List, providing the details underlying the dispute. The NHL acknowledges that the NHLPA will review and discuss the draft Free Agent List with the Players’ Certified Agents in order to collect information relevant to identifying potential disputes. The NHLPA acknowledges that said List is only a draft and that the NHL is free to amend said List in any manner it deems appropriate (which promptly will be sent to the NHLPA) and that said List (and any draft amendments) shall not be used as evidence against, or prejudice in any fashion, the NHL in any matter whatsoever.

(k) When a final version of the Free Agent List is distributed by the League, the League will provide that List to the NHLPA within a reasonable time period after it provides the List to the Clubs, but before it issues a press release setting forth the List, and shall thereafter throughout each League Year promptly issue such bulletins correcting, amending and updating such List as may be necessary to add or delete Players to ensure the accuracy of the Free Agent List on an ongoing basis. Information shall not be selectively withheld for some Players but not others. If one or more Free Agent Lists are so circulated, copies thereof and all amendments and updates thereto shall be sent by the NHL simultaneously to the NHLPA.

(l) The draft Free Agent List and final Free Agent List discussed herein will be distributed to the NHLPA in electronic format, provided the NHLPA will distribute the Lists only to Certified Agents and Players. Certified Agents and Players will not distribute publicly any such Lists, including posting them on any website.

10.4 Draft Choice Compensation for Restricted Free Agents.

Any Club that is entitled to but does not exercise its Right of First Refusal pursuant to Section 10.3 shall be entitled to obtain Draft Choice Compensation from the New Club. The number and quality of draft choices due to the Prior Club shall be based on the average annual value of the compensation contained in the Principal Terms (as defined in Section 10.3(e) hereof) of the New Club’s Offer Sheet (determined by dividing such compensation by the lesser of the number of years of the Offer Sheet or five), based on the following scale:

GROUP 2 COMPENSATION CHART

OFFER SHEET COMPENSATION (These are the 2015 dollar amounts, courtesy Elliotte Friedman’s 30 Thoughts)

$1,205,377 or below — None

Over $1,205,377 to $1,826,328 — Third Round

Over $1,826,328 to $3,652, 659 — Second Round

Over $3,652,659 to $5,478,986 — First Round and Third Round

Over $5,478,986 to $7,305,316 — First Round, Second Round, and Third Round

Over $7,305,316 to $9,131,645 — Two First Rounds, Second Round, and Third Round

Over $9,131,645 — Four First Rounds

The dollar amounts set forth in the scale outlined above shall be increased on an annual basis at the same percentage rate of annual increase as the Average League Salary, with the first such increase occurring based upon a comparison of the 2014/15 Average League Salary to the 2013/14 Average League Salary. By way of example, if the Average League Salary for the 2014/15 League Year has increased by ten (10) percent from the Average League Salary for the 2013/14 League Year, then each of the dollar amounts stated in the table above shall be increased by ten (10) percent, and the basis for determining the number and quality of draft choices due to the Prior Club for the loss of a Restricted Free Agent signed after such date shall be adjusted accordingly. Clubs must use their own draft picks (being those awarded directly to the Club by the League for use by it in the Entry Draft, including such draft picks described in the first clause of this parenthetical that a Club has traded or encumbered, and subsequently reacquired or unencumbered).

Clubs cannot acquire picks to use as compensation (with the exception being a Club’s own draft selections that are traded and then re-acquired).

Clubs owing one (1) draft selection must have it available in the next draft.

Clubs owing two (2) draft selections in different rounds must have them available in the next draft.

Clubs owing three (3) draft selections in different rounds must have them available in the next draft.

Clubs owing two (2) draft selections in the same round, must have them available in the next three (3) drafts.

Clubs owing three (3) draft selections in the same round must have them available in the next four (4) drafts, and so on.

When a Club owes two (2) or more draft selections in the same round, the signing Club does not elect the years in which such selections shall be awarded to the Prior Club; rather, the selections next available will be transferred to the Prior Club (i.e., a Club that owes two (2) selections has them available in the next two (2) drafts – that is when they are transferred).