When the Jack Dugan news broke via press release from the Golden Knights it was unlike anything we’ve ever seen. Instead of an announcement of a contract or trade, this press release indicated that Dugan had “agreed to join the Golden Knights organization.”
The announcement expressed that Dugan was done with college and he was set to sign a contract with the Golden Knights. However, the wording made it clear that the pen had not officially hit the paper on that contract.
As we’ve done before, we immediately started to “read into” the why behind this peculiar announcement. Why not just sign the contract? Other teams have done it with prospects leaving college, what’s different with Dugan?
The answer lies in the desired start date of the contract.
Since the league went on hiatus, 81 players have joined NHL teams. Most of them were announced with the same language we are used to hearing, “signed to an entry-level contract.” The ones that had more information all indicated that the contract would begin in 2020-21. In other words, they are signing contracts for next season, not for the one that is paused.
This is common in the NHL. When a player’s season wraps up, whether from Candian Junior, the NCAA, or overseas, a team can sign the player immediately for the following season even if that team is still playing this year. This makes the player ineligible to play in the NHL for the remainder of the ongoing season and their contract begins for the next year.
Or, a team can do what Vegas has done each of its first two seasons. They’ve signed players for the current season, brought them directly onto the NHL roster, and in the case of two (Zach Whitecloud and Jimmy Schuldt) of the three (Nikita Gusev is the other) actually played them in an NHL game right away. By doing this, it “burns” the year off the entry-level contract.
Let me show you the difference using an example.
Method 1 – Sign player for the following season
Player signs 2-year entry-level contract
Ongoing season (2019-20) – Ineligible to play
2020-21 – Year 1
2021-22 – Year 2
Contract expires on July 1, 2022
Method 2 – Sign player for the ongoing season
Player signs 2-year entry-level contract
Ongoing season (2019-20) – Year 1
2020-21 – Year 2
Contract expires on July 1, 2021
As you see, using Method 2, a player becomes a free agent (restricted in most cases) 365 days sooner even though they are signed to the exact same contract on the exact same day. The only difference is the start date.
So, let me go back to Jack Dugan. Based on the multitude of contracts that have been signed since March 12th when the league was paused, we know NHL Central Registry (the office in charge of approving contracts) is allowing contracts to be signed. However, not a single contract has been announced as signed for 2019-20.
When the NHL suspended this season March 12, the league instructed teams that no contracts for draft picks or college, junior and European free agents could be signed with a start date of this current season. All contracts had to begin in 2020-21. –Michael Russo, The Athletic
According to Jesse Granger of The Athletic, Dugan is hoping his contract will begin in 2019-20 instead of 2020-21.
Dugan’s preference is to begin his professional career immediately when hockey resumes, a source told The Athletic. -Jesse Granger, The Athletic
The Golden Knights should want that as well. (I’ll explain in a moment.)
So, if the league won’t allow a contract to be signed for 2019-20, then… don’t sign a contract. That’s exactly what Dugan did. Instead, he “agreed to join the Golden Knights organization.”
Thus, if the season resumes, and contracts are once again allowed, Dugan and the Golden Knights will sign it instantly. If the season doesn’t resume, or if contracts aren’t ever allowed for 19-20, then he’ll sign the deal for 20-21, like he would have done anyway.
It’s a work-around, and the Golden Knights are not the only ones using it. The San Jose Sharks also announced that Brinson Pasichnuk and John Leonard “agreed to join the Sharks organization.” Meanwhile, they also announced entry-level deals (to start in 2020-21) for Alexei Melnichuk and Timur Ibragimov.
Which brings us to the final piece of the puzzle; why do this?
There’s are two different potential explanations.
First, the player forced the team’s hand. Basically, the player gives the team an ultimatum. Either I sign now and “burn” up a year of the contract or I’m going back to school (or signing with another team if the player is a free agent). This benefits the player because he becomes one year closer to the becoming a free agent, or in other words, one year closer to signing the second contract which is not regulated by the NHL’s entry-level system which caps a contract at $925,000. Plus, he gets paid NHL salary for the remainder of the first season (around $5,000 a day for as long as he’s on the roster).
The other reason would be that the team wants the player to hit free agency earlier. Aside from the rare exceptions (like Gusev), when a player leaves college, junior, or a Euro league, they are not ready to contribute majorly at the NHL level. For example, Whitecloud spent a season and a half in the AHL, and Schuldt spent the entirety of 2019-20 with the Chicago Wolves. So, year one of the entry-level deal was “burned” and year two is spent in the minor leagues. Then the contract expires and the player has little to no bargaining power as they are now tied as an RFA to the team.
Look at Zach Whitecloud. Per the entry-level system (it’s based on age), Whitecloud was forced to sign a three-year contract. He did so on March 8th, 2018, but his contract was signed using Method 2, meaning it began instantly.
Year 1 (17-18) – Played 1 NHL game, not used during playoff run (Cap hit: $149,194 / Actual salary: $149,194)
Year 2 (18-19) – Spent entire season in AHL (Cap hit: $0 / Actual salary: $70,000)
Year 3 (19-20) – Might have made NHL out of camp, got hurt, spent most of season in AHL before making a minor impact in NHL before the pause (Cap hit: $293,414 / Actual salary: ≈$432,500)
RFA – Signs two-year one-way contract at $725,000 AAV
Now, what if he had done it using Method 1.
Year 1 (18-19) – Spent entire season in AHL (Cap hit: $0 / Actual salary: $70,000)
Year 2 (19-20) – Might have made NHL out of camp, got hurt, spent most of season in AHL before making minor impact in NHL before the pause (Cap hit: $293,414 / Actual salary: ≈$432,500)
Year 3 (20-21) – Probably going to be on NHL roster most of season (Projected cap hit: $925,000 / Projected actual salary $925,000)
RFA – ??? (But it can’t be lower than the league minimum)
Dugan will likely be in a similar spot but with one less year necessary on his entry-level deal. He’s not going to be a major part of the 19-20 team if/when the season resumes. He’s probably not going to make the roster out of training camp for 2020-21, which means he’s playing in the AHL (no cap hit and lesser actual salary), and then his contract expires and he becomes an RFA. He’ll have very little bargaining power to extract more money out of the Golden Knights as he’ll have little to no NHL resumé.
If the contract is signed for 2020-21, after a season in the AHL, maybe he breaks through and becomes an impact player in 2021-22. If that were to happen, and then he hits free agency that summer, Vegas is likely to have to spend a little more to keep him from holding out.
From the Golden Knights perspective, burning up a year of Dugan’s contract will benefit them against the cap in every situation except one, that being if Dugan has an impactful season in the NHL in 2020-21. Looking at the roster coupled with Vegas’ continued desire to “overcook” prospects, that seems highly unlikely. Thus, they’d rather see Dugan become an RFA in 2021 rather than 2022.
It goes against conventional wisdom, but Dugan should not be looking to sign the contract for 2019-20. Yes, he’d receive NHL compensation for 2019-20, which is always great, but he’d be setting himself up to have little to no leverage when his contract expires.
Yet again, the Golden Knights are showing off their shrewdness in navigating the muddy waters of the NHL’s salary cap. Assuming the league resumes and Dugan is indeed allowed to sign for 2019-20, they’ll be reaping the rewards of that decision down the road.
I must say that was quite a thorough & good explanation. I never would have understand this situation without it. (Even though I have little to no interest in future players). Good job! Oh how that hurts me to say! 🙂
Way to go, DOC !!
Juan Merrill’s Stalker
Why don’t you have any interest in future players?
Juan … You don’t know my health situation, so I understand why you might ask that,
Ken great explanation on Jack Dugan becoming a Vegas Golden Knight. Personally I can’t wait to see him play.
Well I guess there’s another Tim now posting which is confusing but fine. Ken this was a great article good job.