Michael Russo has covered the National Hockey League since 1995. He has covered the Minnesota Wild for the Star Tribune since 2005, after 10 years of covering the Florida Panthers for the Sun-Sentinel. He uses “Russo’s Rants” to feed a wide-ranging hockey-centric discussion with readers, and can be heard weekly on KFAN (100.3 FM) radio and seen weekly on Fox Sports North.

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Sources: NHL offering 50/50, willing to honor all contracts plus interest

Posted by: Michael Russo under Wild off-season news Updated: November 9, 2012 - 5:50 PM

Talks between the NHL and NHL Players' Association broke up very quickly this afternoon after a fourth consecutive day of meeting.

The league is waiting for the NHLPA to have a conference call with its executive board and negotiating committee before letting them know when they'll reconvene.

But talks did not end well today, I am told.

The NHL was perplexed by a memo that NHLPA Executive Director Don Fehr sent his 725 constituents on Thursday night that stated there’s a “significant gap” between the two sides, according to multiple NHL sources close to the negotiations.
 
The league feels the memo isn't a fair portrayal of what the owners offered.
 
The memo was obtained by NBC Sports’ Pro Hockey Talk and TSN, and has since been authenticated by the Star Tribune. It can be read below or at the above hyperlinks.
 
The league has been under the impression that the majority of players are ready to get back onto the ice if revenues are split 50/50 and all contracts are honored in full. Several players have told the Star Tribune that in recent days.
 
That’s exactly what the owners have offered the players, the sources say, something Fehr did not spell out in his memo. I have an email into the NHLPA asking if I can talk with Fehr or confirm what I'm about to report below.
 
The league has promised to honor all existing contracts and guarantee players their $1.883 billion share – or 57 percent of last year’s revenue, the sources say.
 
In exchange for going to 50/50 immediately, players would have the reduced part of their salaries (12.3 percent) deferred one or two years, “and the owners will pay them back, plus interest, and it would not go against their share and the league is guaranteeing it no matter where the revenue of the league goes,” said one of the sources.
 
In Year 1, players’ salaries would be reduced about $150 million. The players who have their salaries reduced would get every cent back in a lump payment in Year 2, the source says, plus interest. In Year 2, the players’ salaries would be reduced $61 million. Those players would get that money back plus interest in a lump payment in Year 3, the source says.
 
By Year 3, they'd be "equal" as long as revenues go up by 5 percent.
 
The league also feels "we're there" on revenue sharing, with a source saying that the league is basically willing to go with the NHLPA’s proposal other than a couple issues that need to be talked about.
 
The sources also say it’s untrue that the NHLPA must agree to all the league contract demands. That is negotiable, with the one area the league feels must be stopped are the back-diving contracts.
 
Theoretically though, this should be a somewhat simple bridge to gap because a player would still get his money; he just would no longer get contracts like, "$9 million, $9 million, $9 million, $8 million, .... $1 million," an intent to artifically lower the salary-cap hit.
 
Year by year salaries would be spread out with slight variances if the NHL gets its wish.
 
I'm told one of the NHLPA's demands that the league is not willing to do is pay 100% of the salaries this season no matter how many games are played. If there's a shortended season, the league will want to prorate that, not pay players in full.
 
But it's clear the league is getting very concerned that the players have not been told the nuts and bolts of their 50/50 proposal. And from the players I've talked to, they feel 50/50 plus honoring all contracts is fair once the other contractual issues are negotiated as well.
 
We are at a critical juncture even though many want to point out games started Jan. 20 in 1994-95 and the season wasn't canceled in 2005 until Feb. 16.
 
This is (was actually) a $3.3 billion business. If Fehr is not willing to go to 50/50 at $3.3B, think he will when it's $2.2B, $1.8B? He has spent his entire career fighting the salary cap. There comes a point where revenues become so damaged, it makes it awfully difficult to proceed with a cap. And if that becomes the end game, we're in for a long, long hiatus with no hockey
 
As for pensions, NHL and NHLPA lawyers met for much of the day on that issue, but the league was left waiting for the Fehr Bros. and a handful of players until 4 p.m. ET after originally expecting to meet at 10 a.m.
 
Here is Fehr’s memo to his players Thursday night:
 
Today, we met with the NHL off and on over several hours. A number of matters were discussed, including our proposal for a new pension plan, revenue sharing, the players’ share and salary cap issues, and the owners’ “make whole” concept. Present today were Chris Campoli, Mathieu Darche, Ron Hainsey, Johan Hedberg, Manny Malhotra, and Kevin Westgarth (David Backes was present for part of the day), as well as Mathieu Schneider, Joe Reekie, Steve Webb and Rob Zamuner.
No new proposals were exchanged on pension issues, but we will discuss this issue again tomorrow (Friday). We did receive a proposal on revenue sharing in response to the proposal we made this week, but this subject still needs considerable work.
In addition, we received a revamped proposal covering players’ share and cap issues, their so-called “make whole”, and player contracting issues. The owners finally did formally give us their “make whole” idea, which in dollar terms is similar to the discussions Bill Daly had with Steve Fehr a few days ago. While a step forward, a significant gap remains. Moreover, at the same time we were told that the owners want an “immediate reset” to 50/50 (which would significantly reduce the salary cap) and that their proposals to restrict crucial individual contracting rights must be agreed to. As you know, these include – among other things – losing a year of salary arbitration eligibility, allowing the team to file for salary arbitration in any year that the player can file, extending UFA eligibility to age 28 or 8 seasons, limiting contracts to 5 years, and permitting only 5% year to year variability in player contracts. Individually each is bad for players; taken together they would significantly reduce a player’s bargaining power and give the owner much more leverage over a player for most if not all of his career.
In short, the concessions on future salary we have offered (at least $948 Million to $1.25 Billion over five years, depending on HRR growth) are not enough. We are still being told that more salaries must be conceded, and that very valuable player contracting rights must be surrendered. So, while we are meeting again, and while some steps are being taken, there is still a lot of work to be done and bridges to be crossed before an agreement can be made.
We will review today’s discussions over night and tomorrow morning before meeting again with the owners. Following our meeting tomorrow with the league, we will be able to provide a broader update.
As always, please contact us if you have any questions or comments.
Best regards.
Don

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