The “Make Whole” Provision: NHL Season Saver or Sticking Point?
The Sports Blawg with the Fordham Sports Law Forum
As the NHL lockout passes the two-month mark, fans have become increasingly desperate for the return of even a shred of the season. While the standoff has eliminated the possibility of a full 82 game season and canceled the beloved Winter Classic in Detroit, many remain hopeful that recent meetings in New York between the League and Players Association signal an impending agreement. Both Commissioner Gary Bettman and NHLPA Executive Director Donald Fehr have remained tight-lipped about the content of the discussions, but the negotiations seem to be centered on the hot-button issue of the League’s new “Make Whole” CBA provision. The provision would immediately drop the NHLPA’s share of hockey related revenues from the 57% they previously enjoyed to 50%. However, the cut in salary would be returned to players over future seasons, “making whole” their promised contracts. The provision attempts to soften the blow of an unattractive immediate reduction in revenue share, and has the potential to serve as a workable compromise. The concessions both sides are willing to make on the issue will be instrumental in determining whether the season stays on ice.
The league first proposed the Make Whole provision as part of its October 17 offer to players. Among many other terms, the proposal hinged upon an immediate 50/50 split of hockey related revenues between players and owners. These revenues exceeded $3 billion last season, and players initially resisted the reduction. The NHLPA eventually agreed to the split, but was unwilling to immediately give up the higher share. The Make Whole provision intended to allay those concerns, promising players that they would still receive the value of their contracts in a different time frame. Anticipating 5% growth in revenues each season, the October 17 offer conceded that players would experience a euphemistically named “shortfall” of $149 million in Year One and $62 million in Year Two. To compensate, the provision offered payment of that amount over the span of existing contracts to compensate for the loss. After 2014, the offer predicted, league revenues would have increased by 10% and a Make Whole provision would no longer be required to ensure that current players got the full promised value of their contracts.
Just one problem – where would all that Make Whole money come from?
In the League’s original offer, the payments would come from the players’ share of profits placed in escrow at the end of each season. The NHLPA did the math, realized that the provision would actually amount to less than a 50% share of the revenues, and loudly rejected the idea. Donald Fehr shared his thoughts on the matter in an October 17 letter to players: “[The Make Whole provision]…would work like this. The Players’ share in subsequent years would be reduced so that this ‘Make Whole’ payment would be made. It is players paying players, not owners paying players.” In response, the League backtracked and offered to absorb a share of the provision to promote the two sides reaching agreement. Sharing part of the provision wasn’t enough, and Fehr criticized the move on November 9: “With their Make Whole proposal, players won’t be able to receive every dollar of their deal.”
The provision is a compromise, and active negotiation on its terms shows that at least some progress is being made. While the provision has the potential to serve the interest of both sides and foster season-saving agreement, definite changes are needed to make it acceptable to the NHLPA. The league would likely have to pay the entire $211 million required to honor the contracts – something it may agree to do, as the new revenue sharing system stands to give owners around $1.6 billion in six years. For players, Make Whole provision mitigates an immediate salary cut and preserves the value of contracts promised under the previous Collective Bargaining Agreement.
The Make Whole provision could be a far-reaching solution to many of the revenue-sharing concerns fueling this season’s lockout. As with every issue in the dispute, compromise and a certain amount of pride-swallowing is required for both sides to make it work. The league will have to put more money down to make the offer attractive; the players will have to accept some of the financial hurt from an immediate reduction in revenue shares. However, if the league can find a way to honor existing contracts, the NHLPA may decide to cut some losses and move forward. Fans can only hope that the sides will continue constructive talks and restore at least part of an increasingly short season.