Ryan O’Reilly and the Colorado Avalanche’s Club-Elected Arbitration

Ryan O’Reilly and the Colorado Avalanche’s Club-Elected Arbitration

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COLUMBUS, OH - MARCH 3: Ryan O'Reilly #90 of the Colorado Avalanche warms up before a game against the Columbus Blue Jackets on March 3, 2013 at Nationwide Arena in Columbus, Ohio. O'Reilly is playing in his first game this season with the Avalanche after signing his last contract. (Photo by Jamie Sabau/NHLI via Getty Images)

Fans of the Blue and White who have yearned for a bona fide first line centre since the departure of Mats Sundin (for a forgettable half season with the Vancouver Canucks) had their ears perk up this week when it was announced that the Colorado Avalanche filed for Club-Elected salary arbitration with Ryan O’Reilly.

In case you’re unfamiliar with O’Reilly, he’s the 6 foot tall, 200lb and 23 year old centre who put up 28 goals and 36 assists this past season playing around 20 minutes a night, while averaging just under a point per game and north of 21 minutes a night in the playoffs.

Nothing yet? He’s also the player that the Calgary Flames signed to a 2 year $10 million offer sheet that was matched by the Avalanche and that saw him earn $6.5 million this past season, with a $5 million dollar annual cap hit. Oh right, that Ryan O’Reilly.

It’s precisely that $6.5 million salary figure that brings us to the arbitration process. Thanks to Article 10.2(a)(ii)(D) of the Collective Bargaining Agreement (“CBA”), and as a Group 2 Restricted Free Agent, the Colorado Avalanche must offer Ryan O’Reilly a minimum of $6.5 million dollars next season in order to qualify him and retain his rights. Thank.you.very.much.Calgary. At 23 years old, and with improvements across almost all major statistical categories, including an improving shooting percentage, this is a player that is just coming into his own and an asset the Avalanche simply cannot afford to lose for nothing.

So why are they taking O’Reilly to arbitration and how will the process work?

A. Overview of the Arbitration Process

First things first, let’s take a quick look at how the NHL’s arbitration process shakes out. The salary arbitration system is provided by Article 12 of the CBA and states that as a 23 year old restricted free agent with a minimum of 2 years of professional experience, Ryan O’Reilly is eligible for player or club elected salary arbitration.

In Player-Elected salary arbitration the player chooses to submit his case to an arbitrator in the hope of securing greater compensation in his next contract over the next 1-2 seasons. Generally this arises where the player believes he has a strong case for a raise, and yet he is unable to secure one from his club. In Club-Elected salary arbitration, it is the club that chooses to arbitrate the player’s next contract for reasons that are very much the opposite of what you’d see in a player elected arbitration. Namely, the club believes that the player is asking for too much, and that an objective third party will award the player a salary more in-line with the club’s offer.

Specifically in O’Reilly’s case, Article 12.3(a) provides that players’ whose aggregate salary (including base and signing, roster and reporting bonuses) was greater than $1.75 million in the previous season are eligible for Club-Elected salary arbitration.

By virtue of Article 12.4, a Club may choose to proceed to Club-Elected salary arbitration as long as a written request is filed (in approved form) by the later of June 15th or 48 hours after the Stanley Cup final, and notice is provided to the player, the player’s certified agent, the NHLPA and the NHL. Interestingly, Article 12.3(c) provides that a player can only be subject to Club-Elected salary arbitration once in his career, and that any further elections in respect of that player will be deemed null and void. This is it for O’Reilly.

So what does it mean now that the Avalanche have filed for salary arbitration? Well for starters, by virtue of Article 12.3(a)(i) it means that they no longer have to qualify O’Reilly at a minimum of $6.5 million next season because the act of filing for Club-Elected salary arbitration can be done in lieu of extending the qualifying offer. In fact, if the Avalanche are successful at the arbitration the arbitrator can award O’Reilly a salary as low as $5.525 million, or 85% of last year’s salary. So there is the chance that they could retain O’Reilly next season for less than what he was actually paid last year, albeit with a greater cap hit.

As you can see, filing for Club-Elected arbitration is a fairly low-risk move (in the short-term) that allows the Avalanche to maintain O’Reilly’s rights while they continue to negotiate with him until late July when the arbitration hearing is set to take place, while not being stuck qualifying him at $6.5 million next year.

Realistically, what this has done is allow the Avalanche to continue to negotiate with O’Reilly over the next month toward a long-term agreement that will likely see O’Reilly earn between $5.75 and $6.5 million over 6 to 7 seasons, all the while applying pressure by setting a drop-dead date in the form of the binding arbitration hearing. Applying this kind of pressure is a fairly classic negotiating tactic, and the smart money is on a Nugent-Hopkins type deal that sees O’Reilly take home $6 million a season for 7 seasons being completed before arbitration. This is not exciting news for Leafs fans.

B. Where it Could get Interesting

There are two wrinkles, however, that have the potential to make the O’Reilly situation interesting. The first is that, Article 12.3(a)(iv) states that by virtue of being subject to a Club-Elected salary arbitration, O’Reilly is eligible to sign an offer sheet between now and July 5th, 2014 with one of the 29 other NHL clubs. At a presumed average salary of $6 to $6.5 million, that means a club would have to be prepared to surrender a 1st, 2nd and 3rd round draft pick in next season’s draft if Colorado didn’t match the offer. In fact, Article 10.4 provides that based on current salary figures the offering team could sign O’Reilly to an average value of up to $6,728,781 per season before the compensation increases to two 1st’s, a 2nd and a 3rd. (Sorry Leafs fans, the Leafs currently do not own their 2nd round draft pick next year because of the Bernier trade).

We saw Colorado match an offer sheet that paid O’Reilly $6.5 million last season (but with a $5 million cap hit) within hours of receiving in, but do they automatically match an offer that sees him carry an average cap hit of $6.5 million+; especially when they’d ideally like to retain Statsny (their best two-way centre, and currently taking home $6.6 million) and will need to re-up super rookie Nathan Mackinnon in a couple of seasons? Food for thought.

The second way that this could get interesting is if O’Reilly and the Avalanche continue to negotiate but fail to reach a deal and this actually heads to arbitration. Article 12.9 states that Club-Elected salary arbitrations proceed as follows:

  1. The case of the club and the NHL;
  2. the case of the player and the NHLPA;
  3. rebuttal and closing of the club and the NHL;
  4. rebuttal and closing of the player and the NHLPA; and
  5. surrebuttal by the club and NHL if applicable.

In establishing their case, the club and the NHL are permitted to lead all sorts of evidence, including:

  1.  Performance as determined by official NHL statistics (does not include Corsi and Fenwick, which aren’t officially NHL maintained statistics);
  2. the number of games played, injuries and illnesses during the preceding seasons;
  3. the length of service of the player with the league and/or club;
  4.  the overall contribution to the competitive success or failure of the club in preceding seasons;
  5. any special qualities of leadership or public appeal not inconsistent with the fulfillment of his responsibilities as a playing member of his team; and
  6. the overall performance of allegedly comparable players in the preceding seasons and their compensation.

As an aside, the club and the NHL cannot lead evidence of: (i) the team’s financial position; (ii) previous unsuccessful negotiations with the player; and (iii) video, media reports and testimonials.

Admissible evidence can be presented by affidavit (written sworn testimony), live witnesses and any other relevant documents in the possession of the club.

What you should take away from the above is that in trying to reduce the compensation of the player who is the subject of the arbitration the club will lead evidence from various club officials who will downplay positive statistics, focus on propensity for injury or illness, diminish the player’s contribution to the competitive success of the club (or focus on his contribution to the club’s failure, if applicable), downplay any leadership or community involvement undertaken by the player, while simultaneously boosting the profile of comparable players in an effort to justify why this particular player should be paid less than his peers. Sound like fun?

In the worst case scenario at the end of all of that one of the NHL/NHLPA’s 8 pre-selected arbitrators may well turn around and force the athlete to play for the club (for 1 or two seasons depending on the player’s election prior to the hearing) at what might be only 85% of last season’s salary (although this is rare). Does this sound like a recipe for an enduring positive relationship between O’Reilly and the Avalanche, especially in light of how his previous negotiations have unfolded?

After the close of the hearing, the arbitrator has 48 hours to reach a decision and communicate it to the club and the player. In a Club-Elected salary arbitration, the CBA does not provide either of the club or the player with the right to walk-away from the award, so if this does proceed to arbitration O’Reilly will be with the Avalanche for next season.

If, in fact, this does proceed to arbitration I cannot see O’Reilly choosing anything but the one year deal, given his negotiation history and the likely fall-out from the arbitration process, so he and the Avalanche will likely be right back here next off-season, but without the Avalanche holding the bargaining hammer of Club-Elected arbitration. In other words, this is likely the one chance for the Avalanche to get O’Reilly signed to a long-term deal that makes sense for both sides, failing which this player will likely be on the move next off-season.

C. The Bottom Line

The rising NHL cap, which is expected to hit or exceed $69 million next season means that more than a couple of NHL clubs will have the financial wherewithal to take a run at O’Reilly with an offer-sheet leading up to July 5th. Given that the likely compensation is a 1st, 2nd, and 3rd round draft pick, it would make sense from an asset maximization stand-point for one of the 29 other NHL clubs to sign O’Reilly up. However, the rising cap also means that Colorado will have the means to match the offer, which they have shown a decided willingness to do with this player. The reality is, in the modern NHL clubs simply do not let go of premier young talent, especially at centre ice, and O’Reilly is likely to be signed before this heads to arbitration, or else sign an offer sheet that is ultimately matched by Colorado.

Sorry Leafs fans; better off hoping we trade up and draft Sam Bennett.

Elliot is a litigator, media and sports lawyer working downtown Toronto at Bersenas Jacobsen Chouest Thomson Blackburn LLP. He completed his articles at the Toronto office of a national full-service firm before leaving to pursue a media, sports and litigation practice. Elliot currently teaches a negotiation course entitled “Lawyer as Negotiator” at Osgoode Hall Law School, where he graduated in the top 6% of his class, and was a recipient of the McMillan LLP Scholarship. He has written extensively on negotiation, mediation and alternative dispute resolution, and his paper on collective bargaining in the National Hockey League was published in Volume 19 of the Sports Lawyers Journal. Elliot currently represents national level amateur athletes involved in sports related disputes through the Sports Dispute Resolution Centre of Canada. Elliot can be reached at [email protected] Follow him on twitter
199 comments
billtech
billtech

If they're wanting to sign him to a 6-7 yr. deal at roughly 6 per... why not just do it? Is he wanting more?...why are you trying to save what would be likely 1/2 of the arbitration difference...1/2 mil. to piss the guy off? This seems like a bad idea by half. Is there no likelihood that anybody will put out an offer sheet? Nashville has a stud d-fence. Could be their all-star caliber goalie is up and healthy next yr. They dropped a veteran with a big pay cheque end of last yr. Coach will be changing and they have some young talent coming up. $6.7 mil if Colorado wants to match you stung the Avalanche anyway. How about Tampa. Callahan might not sign. They are a pretty good team...Reilly would no doubt love to play with Stamkos and the Drouin will be added as well. Doubtful playing in the east they could finish any worse than 10th not giving Colorado much. Only thing I can see is he... waits them out. 

Cloud09
Cloud09

I agree with @WendelGilmour very well explained, although I don't like hearing it because I think O'Reilly would be a great fit. I didn't see it mentioned but since Colorado elected for arbitration does the NHL bar the Avs from trading O'Reilly?

Xxxxxnew
Xxxxxnew

Other than the lottery wind for the player, offer sheets seem to just piss everyone else off. Although it is a tool that prevents teams from hoarding talent after a certain age. 

mikeyboy
mikeyboy

lets get real. were not having "the number one centre" next season

Beleafer29
Beleafer29

Keep DION, Work in ROR and Boyle some how...We will be fine!!

Xxxxxnew
Xxxxxnew

Duchene, Stastny, ROR, Landescog and MacKinnon all had between 60-70 points last year. Duchene and Stastny missed 11 games each.

HeatherRickAkin
HeatherRickAkin

ps Paul Stasny is odd man out. He has plateaued , whereas the sky is the limit for MacKinnon  and Duchense , and ROR is not as gifted as the big two, but  he brings  a lot to the table.  

rustynail
rustynail

Interesting all the commotion about the 4th best center on the Avs who mostly played wing last season

HeatherRickAkin
HeatherRickAkin

In spite of way too much information for this old brain to filter through, the bottom line for Elliot, myself, and other sane people, is that O'Reilly is going nowhere . Period. Moving on, to the far right of this page is a list of draftable kids , and I see Guelphs little engine that could has jumped into the number eight spot, where our Leaf brain trust hope to grab a ringer. I see that Ehlers has dropped to #11 and Richie has also dropped out of the top 10 . If the Leafs select Fabbri at #8, I shall drive from New Brunswick to Toronto, visit the ACC, go to centre ice, drop my drawers , and drop a big patty right on that big blue Maple Leaf . Having done that, I will then wait for the inevitable ....that Ottawa will grab Ehlers . I hope I am wrong , but with the Leafs, we have come to expect the ridiculous . And of course, the Ottawas are the anti Christ , no ?

Mind Bomb
Mind Bomb

Thanks Elliot.  Does not sound like they are close to a deal, I can see this going south. The Av's do not want to pay him more than Duschene, I can believe Dater, that Col see's him as a 5 mil player, now ROR, already knows, he can get what he wants from other teams, I bet more than one GM is keeping tabs on this, maybe not offer sheeting, but still trying to pry him out of Col.

In any case, its Duschene I want anyway lol

Xxxxxnew
Xxxxxnew

Good work by the way Elliot. I tend to like legalish stuff anyway. During the lockouts i was fascinated reading how different legislative jurisdictions, like Quebec, could have inflfuence over lockouts and player replacements etc. 

ShiftyD
ShiftyD

Excellent and informative write up on the process Elliot. Thanks.

Lonsmos2
Lonsmos2

Colorado needs D more than anything so maybe Dion and franson

Great Dane
Great Dane

ROR, Boyle, Thornton, trading Phaneuf, not trading Phaneuf:  I would appreciate if and hopefully when the Maple Leafs clearly states in which direct they will move the organization.

So far we haven't seen any indication of the slightest change of course of the franchise and that I find really worrying.

 

Xxxxxnew
Xxxxxnew

With the ROR stuff, arbitration, the draft and buyouts coming up, i would really like to see more of a blueprint of what the Leafs have in mind going forward before I get behing any of these moves. I'd like to hear just a framework of what the plan is before we start bouncing offer sheets off Colarado.

Ydargo
Ydargo

That seems like the most likely outcome

Cameron19
Cameron19

@HeatherRickAkin Don't think that's really the issue with O'Reilly. They may both be odd men out if things go badly for them over the next two weeks. Or it could be neither of them. 

Mind Bomb
Mind Bomb

@rustynail Well when you put it that way lol, but then is the 4rth best Center on Colorado better than any center we have ?

billtech
billtech

@HeatherRickAkin Don't see Fabbri on Leafs..you should get a bit more up to date..Ottawa doesn't have a 1st. Ottawa are less the anti-christ now that fredo is gone. Took him having the Leafs rub his nose in losing for so many yrs. before he became a leader they said he was. 

Elliot Saccucci
Elliot Saccucci

@Xxxxxnew The fusion of labour law and sports is my passion, so I'm happy to put this stuff together for the site. I'm just as happy to read the insightful commentary that comes in.

I will say this, I need a raise since this stuff takes a good chunk of non-billable hours... ahem, Alec ;)

Cameron19
Cameron19

@Lonsmos2 If we move Dion for O'Reilly, we'll be embarrassingly bad again next year. But that might be okay, as we need another couple high picks. 

LN-093
LN-093

@Lonsmos2 Adrian Dater's mentioned Dion.  The avs are looking for a stud defenseman.

Alec Brownscombe
Alec Brownscombe moderator

@Great Dane They're not going to come out and tell us what trades they're working on.

I agree on not knowing what the direction is, though. We'll find out in the next two weeks and change.

Bruffins
Bruffins

@Xxxxxnew

if they shared their plan they would get taken advantage of by other teams. It sucks not knowing but it's probably for the best

TML__fan
TML__fan

@Xxxxxnew Well, Leafs have never been the type of team to offer-sheet anyone.  Heck BB opted to trade with Bruins rather than offer-sheet a cheaper deal.  As far as the Leafs showing a blueprint, well that's never happened either, and many would question whether they've had a blueprint at times.

billtech
billtech

@Mind Bomb @rustynail 4th best on a team with those other 3..not bad...also you don't move a rook out of his natural position and Stastny wouldn't have been a good option at wing.

Cameron19
Cameron19

@Zeus_WilliamMapleLeafs @Lonsmos2 Barrie played part of the season at wing, and they got insane over-achievement from guys like Holden and Guenin. I think they know they can't expect that again. They are kind of in the position Ottawa was in last summer, where a lot of guys stepped up and carried the team further than it should have, and changed expectations. Except the Avs have much higher quality in their top six. 

Burtonboy
Burtonboy

@Alec Brownscombe @Great Dane They won't revel anything until the draft is over . Even coming out and telling everyone the style of play would be revealing too much info to other teams right now 

Xxxxxnew
Xxxxxnew

@Bruffins @Xxxxxnew Im thinking just in general terms. Like "we'll be looking to get younger." or "we hope to bring a veteran or two."  Mayve it does work against them.

Bruffins
Bruffins

@Xxxxxnew @Bruffins

yeah it does really suck having no idea, at least we can be surprised by moves (hopefully positive ones)

Xxxxxnew
Xxxxxnew

@Bruffins @Xxxxxnew I was reading a Tallon statement from a month ago where he stated specifically about how he can spend to the cap for the first time and other details about what he's doing for next year. Got my hopes up