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.

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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
  • TheCanucksnaphook

    Christ in Heaven, gotta mention CORSI in everything !!
    However, this is a FREAKIN’ AWESOME article on the process.
    Thanks very much.

  • https://twitter.com/ElliotSaccucci Elliot Saccucci

    TheCanucksnaphook Only to note that it IS NOT an “official” statistic for arbitration purposes.

  • mcloki

    Great article. Thanks for crushing our dreams. 

    Funny how I learn more about hockey on this site.

  • TheCanucksnaphook

    Elliot Saccucci I am well versed in reading comprehension 😉

    I wish I hadnt bumped my head so many times, so I could comprehend and write to a 1/10th of this level !

  • mcloki

    Elliot Saccucci TheCanucksnaphook Elliot you’re read this site .It’s not CORSI isn;t officially reconized on this site at all. Don’t make me whip out my…

  • loomx

    Teams can still trade for him despite the club-elected salary arbitration, right?

  • Anthony Petrielli

    With Duchene-potentially Stastny-MacKinnon down the middle, not sure Colorado wants to have this headache for a guy that would turnout to be a winger on their team. What we don’t know is how the bad blood here will change things. And there is a lot of bad blood.

  • mcloki

    TheCanucksnaphook Elliot Saccucci But really, this is a great article. It politely explains to the Leaf faithful, why ROR is a pipe dream.

  • mcloki

    Anthony Petrielli 6.5 milllion soaks up a lot of bad blood.

  • The Toronto Maple Leaf

    mcloki Elliot Saccucci TheCanucksnaphook I’m quite surprised that last season didn’t turn the tide towards Corsi. Certainly did for me.

  • loomx

    Anthony Petrielli He seems(or his agent) seems like a huge dick when it comes to contract negotiations. Kinda like Cody Franson. I agree, they might want to cut ties with a guy who will be a potential problem. I think they end up dealing ROR to patch up other holes and sign Stastny.

  • https://twitter.com/ElliotSaccucci Elliot Saccucci

    TheCanucksnaphook Elliot Saccucci Haha, I’ve read your stuff and I would argue you’re well above a tenth.

  • http://mapleleafshotstove.com/ DeclanK

    loomx Anthony Petrielli Newport Sports is the best of the best. They’re ruthless, though.

  • TheCanucksnaphook

    The Toronto Maple Leaf mcloki Elliot Saccucci TheCanucksnaphook You have an angry tree for an avatar. You cannot be taken seriously.

  • Anthony Petrielli

    mcloki Anthony Petrielli They are trying to get him under that though, that’s the point of club elected salary arbitration in this case. Going to send ROR through the roof, me thinks.

  • Pent_House

    I’m not even convinced this guy is a number 1 centre, if the Avs even think about trading him, unlikely that the Leafs are the ones to win the trade sweepstakes, massive long shot imo on this whole situation.

  • The Toronto Maple Leaf

    TheCanucksnaphook The Toronto Maple Leaf mcloki Elliot Saccucci You won’t be laughing when he uses his super power of shooting sap at his opponents.

  • TheCanucksnaphook

    The Toronto Maple Leaf TheCanucksnaphook mcloki Elliot Saccucci I will rue the day.

  • KingTon

    Pent_House So you wouldn’t trade for him?  Unless relatively cheap of course.

  • TheCanucksnaphook

    Pent_House He is a MASSIVE long shot, and I think he does get some benefit of solid team mates but at 23 and that point/minute guarantee isnt he WORTH a chance?

  • Burtonboy

    Excellent article Elliott. Much appreciated . This is a business and the players know full well whats involved . Fans have a tendency to be more insulted then the players over these issues . I agree you likely see a long term deal signed within a couple of weeks

  • The Toronto Maple Leaf

    TheCanucksnaphook The Toronto Maple Leaf mcloki Elliot Saccucci What lies ahead.

  • TheCanucksnaphook

    Burtonboy Players still get the ruffled feathers when they get INTO the process.  When a team has to explain WHY you arent worth your money, it can sting pretty hard.

  • TheCanucksnaphook

    The Toronto Maple Leaf TheCanucksnaphook mcloki Elliot Saccucci awesome…not one green guy getting taken down in the entire scene.

  • TheCanucksnaphook

    IF we could get back our 2nd rounder, would you Offer Sheet ROR?  Why ?

  • Burtonboy

    TheCanucksnaphook Burtonboy Arb is nasty for sure and yes some players do take it personally but not that many . They all know its part of the process

  • TheCanucksnaphook

    I would, here is why.  ROR is closer to Phils age and the time is now for Kessel.

    Secondly, we would trade say Kadri and 8th (or whatever) to Edmonton for Bennett.   Bennett is 3-4 years away? ANd may never turn out to be as good as ROR.

    The 2nd and 3rd round draft picks are so inconsequential at this time, why not?  We can recoup them at a later date.

  • Pent_House

    TheCanucksnaphook Pent_House I dunno. His stats aren’t any better than Bozak’s really, if Bozak played 80 games this year he would have had more points. Their size is almost identical, and Bozak comes in way cheaper. ROR is a good player, but I don’t view him as 1C or at least not significantly an upgrade on Bozak to justify moving the assets and paying that salary/cap-hit. It’s possible but I’m sceptical at this point.

  • TheCanucksnaphook

    Pent_House TheCanucksnaphook Whats the attention to detail like in his own zone?  Faceoff percentage ?  Upside?

  • Anthony Petrielli

    Pent_House TheCanucksnaphook Where was Bozak at 23 years old?

  • KingTon

    TheCanucksnaphook I would … enough of this bullshit.  Take a risk and grab a potential #1 center.  At least he has NHL experience compared to a draft pick that can’t do a pull up.

  • mr_hanie

    O’Reilly played mostly wing and put up very good point totals. He will play wing if Stastny re-signs with Colorado.  He may turn out to be a better winger than center.

  • http://mapleleafshotstove.com/ DeclanK

    Anthony Petrielli Pent_House TheCanucksnaphook
    Undrafted, playing College Hockey.
    More importantly, Bozak shot at 21% which will come crashing down next year.

  • TheCanucksnaphook

    KingTon TheCanucksnaphook We would probably have to figure out a way to get rid of the Clarkson or Dion contract to do it right, but if we are making a run at the playoffs then Dion SHOULD stay.

  • TheCanucksnaphook

    DeclanK Anthony Petrielli Pent_House TheCanucksnaphook If somebody told me Bozie at 4.2 or ROR at 6.5, I know that I am helping Bozak pack his bags and driving him to the airport.

  • Pent_House

    TheCanucksnaphook DeclanK Anthony Petrielli Pent_House

    Would you rather have Bozak – Kadri – Bolland

    or ROR – Bozak – Bolland

  • TheCanucksnaphook

    Pent_House TheCanucksnaphook DeclanK Anthony Petrielli Dirty pool.

    Why cant I have ROR-Kadri-Bolland-Holland?

  • https://twitter.com/ElliotSaccucci Elliot Saccucci

    Pent_House TheCanucksnaphook DeclanK Anthony Petrielli ROR KADRI BOZAK

  • TheCanucksnaphook

    Elliot Saccucci Pent_House TheCanucksnaphook DeclanK Anthony Petrielli yup easy enough (and cheaper) to let Bolland walk.

  • vinoa

    mcloki Not to mention collective bargaining and contract law. Great read as always.

  • deedrag

    KingTon TheCanucksnaphook  Lol! I doubt Gretzky could do a pull up back before he got drafted and look how he turned out. It’s all in the hands man. He’s not there to climb over the glass.

  • Pent_House

    Elliot Saccucci Pent_House TheCanucksnaphook DeclanK Anthony Petrielli

    Neither of those situations will happen I’m sorry to tell you guys.

  • https://twitter.com/ElliotSaccucci Elliot Saccucci

    TheCanucksnaphook Pent_House DeclanK Anthony Petrielli I like, but I’m keeping Bozak. He developed here, his contract is something I can live with, and I don’t believe he is what ails this team.

  • TheCanucksnaphook

    deedrag KingTon TheCanucksnaphook I do have to agree to a point.  The pullup issue was well overblown.

  • TheCanucksnaphook

    Pent_House Elliot Saccucci TheCanucksnaphook DeclanK Anthony Petrielli But I just typed it out….??

  • deedrag

    TheCanucksnaphook deedrag KingTon  Even Don thought it was nuts and I don’t agree with Don on a lot of things but this one I do.

  • KingTon

    TheCanucksnaphook deedrag KingTon It was just a joke to say I’d prefer taking a risk on a young player with NHL experience than a draft pick.

  • TheCanucksnaphook

    KingTon TheCanucksnaphook deedrag Concur and point is spot on

  • https://twitter.com/ElliotSaccucci Elliot Saccucci

    loomx I’m scanning the CBA and I’m not seeing anything that would prevent it…

  • Pent_House

    deedrag KingTon TheCanucksnaphook You can’t really compare those eras though, when Gretzky was in his prime guys had beers for post-game nutrition.