Artemi Panarin’s Comments Illustrate How Coronavirus Complicates The NHL’s Escrow Issue

The NHL has a crisis on its hands. Well, two crises.

Covid-19 has dominated headlines over the last few months. It forced the NHL to pause its season and looms large as the league prepares its attempt to return to play.

However, the league’s other crisis has persisted for years. Tensions are high over the structure of the league’s financial system, specifically escrow. Blackhawks captain Jonathan Toews has consistently been an outspoken critic on the subject. Now, Rangers star Artemi Panarin has thrown his name into the ring, taking to social media to express his dissatisfaction with the league’s financial system.

“For nearly two decades, the players have protected the owners’ income with escrow, including throughout this pandemic crisis, even as owners’ equity continues to grow exponentially,” Panarin said last week on social media. “It is time to fix the escrow. We as players cannot report to camp to resume play without already having an agreement in place. We are all in this together.”

But understanding why players, such as Toews and Panarin, have a problem with escrow requires an explanation of how the system works.

As part of the league’s collective bargaining agreement, the NHL and NHLPA have a 50-50 split in place on all hockey-related revenue. The purpose of escrow is to prevent an imbalance. If one side out earns the other in a given year, the other has to provide compensation. In the case of the players, a percentage of their salary is withheld from each paycheck. When the season ends, the owners collect however much they need from the players’ pool of withheld money to bring them to their 50 percent revenue share. Any money left over in the escrow fund is returned to the players with interest.

The percentage is set and collected by the NHLPA after the league sets the salary cap and its revenue projections for the upcoming year. The rate withheld is adjusted quarterly during the season, so while players have a rough estimate, they don’t actually know how much money is coming off their checks. If the league adds a new revenue stream, the owners earn more, and the escrow percentage decreases. But if the cap, which is determined based on the previous NHL season’s revenue and projections, goes up, the escrow rate increases.

“The more money teams have, the more bidding will take place for unrestricted free agents,” said an NHL player agent.

Players are obviously unhappy to see money coming off their checks, but the alternative – chasing everyone down in the summer to collect the necessary funds – could be messier. And if a high-salary player retires or leaves the league after his own numbers pumped up escrow in the year prior, he has no obligation to pay back into it. The current players would be left to pick up the slack.

“When the escrow is about one percent up or one percent down, it’s not worth getting bent out of shape,” the agent said. “But when escrow jumps by that much, we have to review guys like Auston Matthews, [Connor] McDavid and [Artemi] Panarin and take a look at what the hell is going on. You can’t pay for those guys. Those guys should be paying for other guys. Not the other way around.”

The pandemic complicates the situation even more. Because of the shutdown, when play returns, the loss of gate revenue will create a larger gap between league revenues and player pay. In this case, players will be returned a smaller percentage of money held in escrow, or perhaps none at all. This could impact future seasons as well. If the league projects lower revenues in 2020-21, the percentage of money held from players’ checks will rise to protect against a significant difference.

ESPN reported the potential escrow percentage over the next two or three seasons could fall between 20 and 25 percent. According to DK Pittsburgh Sports, the escrow payments in 2018-19 averaged out to 9.5 percent.

The idea of losing a quarter of one’s paycheck would irk any player. But for Panarin, the next few years are the most lucrative in his contract. He’s set to earn $38.5 million of the remaining $67.5 million on his deal over the next three seasons, according to CapFriendly.com. And with a potential billion-dollar revenue shortfall from Covid-19, it’s reasonable to think a lot of the escrow money collected won’t be refunded back to the players. In April, Panarin joked about skipping the 2020-21 NHL season if the league attempted to institute salary cuts as some European soccer leagues proposed, according to ESPN.

There’s no one clear solution on how to solve the escrow issue. Dissenting opinions have given rise to different groups among the players.

“One group of players want escrow eliminated, the other wants [the] highest upper limit [on the salary cap] possible, which will bring with it higher escrow,” NHL player agent Allan Walsh wrote on Twitter. “The salary cap pits players with competing self-interests against each other.”

But the absence of escrow would mean a lower salary cap and less guaranteed salaries. Owners would inherently spend less if they didn’t have a pseudo-insurance policy, like escrow, to protect their earnings. Possibly the best compromise would be more predictability or incrementally laying out any substantial increases in escrow over a multi-year stretch.

”I don’t know if we’re going to eliminate it,” Devils NHLPA representative Cory Schneider told DK Pittsburgh Sports. “Obviously, we’ll figure that part out. But at least some way to mitigate it or control it better for us, just to know what to expect.”

The NHL’s CBA is set to expire in September 2022, and while the league is seeking an extension, the escrow issue could hold up the process. The fallout from Covid-19 only adds more pressure to the situation. Maybe a boycott, like Panarin suggested, is unlikely given the players’ association agreed to the league’s 24-team return to play format. But if both sides can’t find common ground, escrow could be at the core of the next labor dispute.


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