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How does NHL arbitration work? What to know about the process that almost never happens

Every summer, the list of NHL restricted free agents (or in fewer cases, NHL teams) to file for salary arbitration is announced. And weeks later, it’s usually announced that the player and team have come to a contract agreement ahead of that scheduled arbitration hearing.

Usually, it’s touted as a good thing that player and team could come to an agreement before the actual hearing takes place. But why is there a process for arbitration if most avoid it?

Let’s break down the salary arbitration process and what it all means.

By definition, assistant general manager of the Hurricanes Eric Tulsky explained, “salary arbitration is a process for having a neutral third party determine a fair salary for a player.”

This is a process designated for restricted free agents, only — specifically, those that meet a criteria based on their years of professional experience.

• Players who sign an entry-level contract between the ages of 18 and 20 years old require four years of professional experience.
• 21-year-olds must have three years of professional experience.
• Those who sign an ELC at 22 or 23 years old need two years.
• And anyone who signs at 24 or older needs one year before becoming eligible.

There’s a deadline each year for players to file, and typically quite a few do — this year, 24 skaters filed.

“Most NHL regulars who are eligible for arbitration elect for arbitration because it is a way to ensure that they get a reasonable salary in a timely fashion,” Tulsky said, noting that from his perspective, it’s a normal part of the process for RFAs who are eligible.

Following the deadline for players, teams get a chance to file for the process with players who didn’t opt ​​for it already. These are less common instances, seeing as so many skaters do it ahead of time. This summer’s group was limited to Calgary with Matthew Tkachuk and New Jersey with Miles Wood. While players can file for arbitration anytime they’re eligible, a team can only elect for this process once against the same player. And teams are limited to electing for arbitration with two players per offseason.

Few players actually reach their scheduled hearings. Players and teams can negotiate along the way up until the hearing starts, which is why there are often settlements beforehand. That allows both parties to be in control of the final outcome, versus the arbitrator deciding the salary. How that process goes depends on a few factors, like why arbitration was filed in the first place — was it a player with few rights as a restricted free agent trying to find some leverage, or simply part of the process to ensure there’s an end- date to these negotiations? If player and management aren’t far apart in the first place, despite that filing, then it may be a smoother process to find that middle-ground. When sides are far apart, especially when one party wants to avoid reaching the hearing, then there can be a bit more pressure in the situation which may stretch the process closer to the scheduled date.

This summer, only one case has actually reached the scheduled hearing — Yakov Trenin’s that resulted in a two-year contract carrying a $1.7 million cap hit. Every other player, to this point, has settled beforehand. Now just one player remains: Jake Walman, who is set to have a hearing on Thursday.

“Most cases do settle,” Tulsky said. “There is often common ground and room for a deal that both sides are happy with; Arbitration creates a deadline for reaching that deal and motivates both sides to find that common ground. But obviously sometimes the two sides just disagree; arbitration provides the fallback plan for getting a contract done and looking ahead to the upcoming season.”

What happens when teams actually need that fallback plan? What’s actually involved in the arbitration process?

“The team gives him a qualifying offer before his contract expires, he elects for arbitration, and they are unable to negotiate a contract. The two sides exchanged briefs two days before the hearing, laying out their arguments and their requested salary,” Tulsky said. “Then, at the hearing, each side presents their case and their rebuttal, and the arbitrator issues a ruling.”

Players and teams can After coming to an agreement, the briefs are exchanged, but not once the hearing actually starts. That’s happened quite a few times already this summer, with Jesper Bratt, Miles Wood, and Lawson Crouse, among others.

The briefs include the value the party is asking the arbitrator to award, along with an argument that supports it. “[Players and teams] arrive at that figure by selecting statistical criteria for identifying comparable contracts and making an argument for where the player falls relative to those contracts,” Tulsky said, adding that this is not a negotiation tactic, but a figure that each side prepares to defend in front of an arbitrator.

“Preparing a compelling argument for arbitration happens independently from negotiations – you work to negotiate a deal that both sides like, and in parallel you work to develop a compelling argument for arbitration in case you don’t reach a settlement,” Tulsky said.

“Offers made during negotiations cannot be discussed in arbitration, so the negotiation process and the process of building an arbitration case are almost completely separate. The only connection between them is that your estimate of where arbitration would end up might affect what offers you were willing to accept in negotiation, but the numbers presented when briefs are exchanged do not necessarily give any real indication of what either side is asking for in negotiations or how close they are to reaching an agreement.”

Only certain evidence is allowed to be used in those arguments, including games played (or time missed due to injuries), tenure with a team or in the league, statistics to define performance, leadership qualities, and comparable player compensation (only from other restricted free agents).

Most cases end up relying heavily on a statistical comparison to other players, Tulsky noted, adding that the parties give reasoning on why that player is a fair comparison.

“Each side will lay out a set of criteria for identifying players to compare to; they specify what they think are the key statistical measures for describing that player and what range of values ​​they would consider similar. Then they will list the players who signed a contract when their statistics at that time looked like the current statistics of the player in question, and will discuss how the player’s salary should be situated in light of those contracts.”

The salary cap situation of the team, however, cannot be used as evidence, nor can the players’ share of hockey related revenue.

Once the hearing concludes, the ruling is issued 48 hours later via email. The value that’s decided on must be at least 85 percent of the previous year’s salary. Whatever doesn’t This process for elect gets to decide on term (between a one or two year deal).

In team-elected arbitration, the ruling is binding. In player-elected cases, managers do have a few options — including whether to walk away from the deal entirely and send the player to unrestricted free agency.

Via CapFriendly

The decision on term varies per situation, based on their salary cap outlook, the player’s trajectory, or the next contract situation. A two-year deal in some instances, depending on the player’s age and experience, can take a skater to unrestricted free agency while a one-year deal allows them to retain control for another season.

Take Tyler Bertuzzi’s case back in 2020; the player was awarded $3.5 million and the Red Wings opted for a one-year deal. That allowed Detroit to maintain control at its expiration, while a two-year deal would have taken him to unrestricted free agency, giving the team less time (and leverage) when planning the future with the forward.

In the rare instances that players and teams do reach their scheduled hearings, it can have a ripple effect on relationships afterwards.

As The Athletic’s Craig Custance analyzed a few years ago, players who actually require arbitration generally don’t stick around with that team. In some situations, relations can sour during the process when management gets particularly harsh on a player to diminish their value. But other times, it’s less about a damaged relationship and more about the fact that a player and team got to this point in the first place. That alone can represent a difference in opinion on a player’s value or role, which can lead to an eventual split.

Electing for arbitration initially isn’t a red flag, it’s just a step in the process that most expect. Ideally, a middle-ground can be found before the situation is handed off to the arbitrator. If not, it’s a fallback that provides a conclusive end to a contract negotiation. Whether that resolution makes waves depends on the situation, and the temperature of those negotiations along the way.

(Photo of Yakov Trenin: Adam Davis / Icon Sports)

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