NHL Buyout Rules - A Refresher

With buy-out season soon upon us, and the chance that the Senators will participate this year, it's time for a refresher guide to NHL Player Buy-Outs. A lot of it you may know, but there's likely something new to learn for all but the most seasoned NHL rules experts.

When can a team buy out a contract?

There are two different answers to this question.

The first is the most common - the regular buyout window. The start of this window shifts - it is either June 15th or 48 hours after the Cup is awarded, whichever is later. This window ends at 5pm EST on June 30th, just in time to let the dust settle before free agency starts.

The second is a window related to arbitration, and it carries some extra restrictions. For this window to open, the team has to have a player that filed for arbitration. This window opens on the third day after the team's last arbitration is concluded (or settled, if it doesn't make it to a hearing) and is open for 48 hours. There are also restrictions on which players can be bought out - First, the player has to have been on the reserve list as of the last trade deadline (so no buying out that off-season signing you regret until the next trade deadline). Second, there is a minimum cap value for a contract to be eligible for this - $2.75m AAV initially, but the value goes up based on the average league salary each year. The notable absence in those restrictions is that it has nothing to do with who went to arbitration, any player who meets those two restrictions can be bought out. There's one last catch, though - this can only be done three times by each team. Not three times per year - three times over the entire length of the current CBA.

The one exception to this extra window is when the only arbitration case is team-elected, and that player earned more than $1,750,000 (in 2013 dollars - it's adjusted up based on league average salary) in the previous season. In that specific case, the window does not open.

Note: There was originally a third answer mentioned here but upon further investigation, the section of the CBA it was drawn from was referring to the arbitration buyout window and not a third buyout option. We apologize for this error.

What is the process?

For both time frames, the process is the same and fairly straightforward with only two steps. The team has to notify the player in question and place them on unconditional waivers. Once the player has been notified and has cleared waivers, the deed is done.

Waivers? What if they have a no-move clause?

A player with a no-move must be presented with the option to be put on unconditional waivers when being bought out, but the buy-out still goes forward if they say no. Players have 24 hours to decide when given this option.

Can anything keep a team from buying a player out?

By all reports, you cannot buy out an injured player without their permission. There is nothing explicitly about this in the buy-out rules in the CBA, but it's something that has been widely reported over the years from multiple, reputable sources, so if there's smoke there is probably fire. It is very likely linked to the waiver requirements.

You also can't buy out a player who has a new contract that hasn't started yet.

What about cost?

The cost is either 1/3 or 2/3 of the remaining salary, averaged out over twice as many years that were left on the contract. This is determined by the age of the player at the time of the buyout - if they are under 26, they get 1/3, if they are 26 or older they get 2/3.

It is worth mentioning that any salary slide on the remaining years goes out the window. If a 26+ player has a year at $4.2m and a year at $3.6m left, they don't get $1.4m, $1.4m, $1.2m, $1.2m - they get $1.3m in each of the 4 years.

What about the cap hit?

This is a little bit more complicated than the salary. It starts with the buy-out salary (as determined in the last step), but then for the original remaining contract years you need to adjust for the difference between the original salary and the original cap hit for each of those years. You take the original cap hit, subtracting the original salary, and add that value to the buy-out salary.

This means that the buy-out cap hit would go up for a year where the original salary was below the original cap hit, and down for a year where the original salary was above the cap hit.

It is possible for the adjusted cap hit to be negative. If that happens, the team gets it as a cap credit.

Can we do an example?

Let's look at Colin Greening, a player I selected completely randomly.

For his buy-out salary, we start with how much salary and how many years are left on his contract - $5.95m over two seasons. Since Greening is 26 or older (29, specifically) he would get 2/3 of that total, spread out over twice as many years - roughly $992k per season for four seasons.

For the cap hit we start with that buy-out salary, but we need to adjust the cap hit for the next two seasons (the number of seasons left on his contract right now). For each of those years, we take his original cap hit ($2.65m), subtract his original salary ($2.75m in 2015-16, $3.2m in 2016-17) and add that number to the buy-out salary. Since for both years his salary is higher than his cap hit, the cap hits on the buy-out gets reduced - down by $100k in 2015-16, and by $550k in 2016-17. This works out to cap hits of $892k in 2015-16, $442k in 2016-17, and $992k in both 2017-18 and 2018-19.

What about Compliance Buyouts?

Limited time offer! Teams each had two of them, and they had to be used before the 2014-15 season. The buy-out salary was calculated in the same manner, but they completely wiped out the cap hit.