Why the Luongo rule makes no sense

Ezra Shaw

If early reports about one particular provision in the new CBA are accurate, the implications of the rule are puzzling to say the least.

Details are finally beginning to trickle out regarding the new collective bargaining agreement between the NHL and its players' association, set to be ratified later this week before training camp opens. Elliotte Friedman and Pierre LeBrun, the Crosby and Ovechkin of hockey's mainstream media, are all over one particular aspect of the new deal that has been dubbed the Luongo Rule but could just as easily be called the Kovalchuk Clause, the Pronger Provision or, as Cam Charron referred to it on Twitter, the "Bettman is angry that NHL GMs ruined his perfect CBA rule."

According to Friedman, it's officially defined as a "cap-recapture system" designed to penalize teams for signing players to front-loaded contracts with several years of minimal salary payout tacked on at the end to bring down the average cap hit. You know, the kinds of deals that won't even be legal anymore once this new CBA is in place. Despite that, it makes sense that with the number of star players that will remain inked to those types of deals into the next decade and beyond, the NHL would address it in the bargaining agreement. Sharks ownership in particular reportedly urged the league to crack down on this and other contractual loopholes during negotiations. After reading the details of the rule the league came up with, though, I'm not at all convinced that they thought this through.

Essentially, using Roberto Luongo's contract as an example since everyone else is, the Canucks have thus far paid their goaltender $16,716,000 through two years of his deal but only spent $10,666,666 in cap space on him. That's a cap savings of $6,049,334 that, under the new CBA, Vancouver will be penalized for if Luongo retires prior to the expiry of his contract on July 1st, 2022 should they trade him this season as expected. What's mindboggling is that the fewer of his "cheat" years he actually plays, the lesser the penalty to the Canucks. The team's $6,049,334 savings will be divided by the number of years of his contract Luongo fails to fulfill, and that will be the penalty assessed to the team's cap each of those seasons. Here's a comparison of the penalties Vancouver would suffer if Luongo retired in 2019, three years prior to the end of his contract and in 2021, one year before the deal ends:

Cap penalty In 2019-20 In 2020-21 In 2021-22
Retires in 2019 $2,016,445 $2,016,445 $2,016,445
Retires in 2021 N/A N/A $6,049,334

Neither of those scenarios is all that palatable to me if I'm Mike Gillis but it's clear that a massive, $6 million cap penalty in a single season will have a greater impact on a team's competitiveness than a penalty evenly distributed among several seasons. Granted, it's impossible to know what the salary cap will actually be in 2021 (or if there will be a salary cap at all for that matter...that's still two or three lockouts away) but preventing a team from spending $6 million of it seems severe. And, more importantly, it's ludicrous that this system punishes the teams whose players play out a greater portion of their contract more harshly than those whose players walk out on the extra bullshit years. Shouldn't the goal be to achieve the opposite? The effect is even more dramatic when you look at the cap penalty Minnesota will be levied if they trade either Zach Parise or Ryan Suter after the 2019-20 season and the player skips out on his deal four years early compared to one:

Cap penalty In 2021-22 In 2022-23 In 2023-24 In 2024-25
Retires in 2021 $4,923,076 $4,923,076 $4,923,076 $4,923,076
Retires in 2024 N/A N/A N/A $19,692,304

That's right, the Wild would be fined nearly $20 million against their cap in the 2024-25 season if either Parise or Suter walks away from the final year of his contract after being traded. If, for whatever reason, Minnesota traded them both and they both opted to do so, that's almost $40 million the Wild won't be allowed to spend that year. They might have to ice an even worse roster than they did in 2011-12.

Thankfully, this shouldn't affect the Sharks since none of the players either on their payroll or that they've signed before trading in the past are inked to the type of contract this rule would punish. Still, I'm starting to think that maybe drawing up this CBA at 5AM wasn't the greatest idea.

EDIT: Apparently writing blog posts at midnight isn't the greatest idea either. Screwed up some of the math on the Wild chart, but it's (hopefully) fixed now.

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