Source: https://www.lawinsport.com/topics/articles/competition-law/item/signing-new-talent-how-the-entry-draft-system-works-in-the-national-hockey-league?category_id=125
Timestamp: 2019-04-26 00:21:52+00:00

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Sport leagues around the world have instituted different processes to allow players to join member clubs. The largest sport leagues in the United States and North America including, National Football League ("NFL"), National Basketball Association ("NBA"), Major League Baseball ("MLB"), and the National Hockey League ("NHL"), all utilize an entry draft system to allocate young and eligible players to their respected clubs. This process and operates in a very different manner than European sports and in particular in European football. This blog explains the general concept of an entry draft, examines how it works in the NHL and outlines the rights of the teams and players.
The entry draft systems used by each of the U.S. major leagues differs and is articulated in their respective collective bargaining agreement. While the entry draft processes differ, the general idea is the same. The goal of the entry draft is to provide the leagues with an organized and fair way to allocate young and eligible players equally among the member clubs of the leagues.
The NHL’s entry draft process is governed by the current NHL–NHL Players Association (“NHLPA”) Collective Bargaining Agreement (“CBA”). In 1935, the United States Congress passed the National Labor Relations Act (the “Act”), which guarantees basic rights of private sector employees to organize into trade unions, and engage in collective bargaining.1 Under the Act, the terms that are agreed to during the collective bargaining process are to be codified in a CBA. The terms that are subject to collective bargaining under the Act are those items that affect or relate to the wages, hours, and working conditions of the employees.
In the U.S. sports context, the entry draft dictates which team will hold exclusive rights to a player for a defined period of time. The player has very little power to control which team selects him during the entry draft. The labor law ramifications of such a process are clear, especially if you analyze the same process outside of the sports world.
Executive Directors of the sport unions have long opined2 on the concept of an entry draft and whether or not any other industry would stand for such a mechanism. Imagine if medical doctors were subject to an entry draft, upon graduation, which would dictate which hospital they work for and how much they are to make for their first few years in the profession. Doctors, would likely find the process very not attractive, however in the North American sport context, the concept of an entry draft is well accepted. Additionally, in the medical industry or any other industry other than sports, the concept of an entry draft would likely be found to be in violation of the Anti-Trust laws of the U.S.. The sports industry has traditionally been treated differently under the Anti-Trust laws, and in some situations the industry is exempt from the regulations altogether. Please see the Lawinsport.com article “Baseball’s Anti-Trust Exemption: Is it time for a change,” by Jonathan Gordon for more information on the history of the application of the Anti-Trust laws in the U.S. sports context.
While the sport leagues, have been able to institute some potentially anti-competitive processes the leagues must still comply with the labor laws. As discussed earlier, it is clear that the entry draft has a large impact on a player's wages, hours, and working conditions, and, therefore, is clearly an important aspect of each leagues CBA.
During the draft, each club is allowed to select a player in each of the seven rounds, unless the club has traded away or acquired the rights for a particular draft selection, in agreement with another club.5 Under the NHL CBA, a club may transfer or trade the rights to a player, including any applicable playing contract, or draft choice, to another club. Trades are a very common event in the NHL, please see the complete list of trades that occurred during the 2015-16 season.
To illustrate how a trade works let’s examine one of the biggest trades that occurred during the 2015 entry draft. On June 26, 2015, the first day of the two-day draft, the Colorado Avalanche and the Buffalo Sabres agreed to a deal. The Avalanche traded two players, Ryan O’Reilly and Jamie McGinn, who were under contract, to Buffalo. In return, Colorado received three players, (Nikita Zadorov, Mikhail Grigorenko, and J.T. Compher) and a draft choice (Buffalos 2nd round pick in the 2015 draft). As this trade illustrates, teams are free to trade draft choices in exchange for current players or a combination of the two.
According to the NHL CBA,6 a team, subject to certain restrictions, is free to trade any player currently under contract with the club or who is on the team’s reserve list,7 or a draft choice allocated to the club. All trades, after they are agreed to by the teams must be submitted to the League office for approval. While the NHL reserves the right to disallow a proposed trade, the teams have a great deal of freedom to set the terms and determine the value for the assets.
Since teams are free to trade their allocated draft choices, or draft selections that they have acquired from another club in a trade, it is not uncommon for clubs to have multiple draft selections in any one round of the draft.
Once a player is drafted, the player is added to the reserve list for the drafting club.8 The reserve list allows the drafting club to retain the exclusive rights to sign the player for a period of time that varies depending on several factors such as the age and playing experience of the player.9 The exclusive rights period and the effect that age and playing experience have on the time period are codified in Section 8 of the NHL CBA.
Exception (i) to Section 8.4 refers to a player being on the reserve list of an NHL club. Section 8.6 of the CBA provides clarification as to what the reserve list is and requirements for a player to be considered on the list of a particular team.
The 2016 entry draft is headlined by American Auston Matthews who plays for Zurich in the Swiss National League and Finnish player Patrik Laine who is currently playing for Tappara Tampere in SM-Liiga. Matthews and Laine are projected to be the first two selections in the 2016 draft. Please take a look at the NHL’s list of top prospects eligible for the 2016 entry draft for more information on the players who will be selected this June.
“The list of all Players to whom a Club has rights including all Unsigned Draft Choices, all Players signed to a Standard Player Contract (“SPC”) (whether or not currently playing in the NHL), and all Players who have signed an SPC but who have subsequently been returned to Juniors. A Club may have on its Reserve List, at any one time, not more than 90 Players, which shall include the following: (a) Not more than 50 Players signed to an SPC and not less than 24 Players and 3 goalkeepers under an SPC. Age 18 and age 19 Players who were returned to Juniors, and who have not played 11 NHL Games in one season, shall be exempt from inclusion in the 50 Player limit. Any Club violating this provision shall be liable to loss of draft choices as determined by the Commissioner. (b) Unsigned Draft Choices”11 (the “Reserve List”).
Players playing in the Major Juniors range between the ages of 16 and 20 and are often considered some of the most skilled players in that age group. Additionally, Major Junior players are considered by many to be professional players, and according to the National Collegiate Athletic Association (“NCAA”) rules, the player is not eligible to participate in college at the varsity level. Therefore, once a player has committed to play in the Major Juniors, their North American playing options, outside of the Major Junior leagues, become limited, and if they wish to play in a non-Major Junior league they will likely have to play in a lower level league. Since a player who leaves the Major Juniors may need more time to develop, due to a lack of high-end competition, the NHL has granted the clubs an extended exclusive negotiating rights period.
Similarly, players who are bona fide college players, may, subject to certain criteria, remain on the Reserve List of a club until August 15th in the year of the players scheduled graduation year in college.18 Again the NHL recognized that many players who play NCAA hockey either need more time to develop or wish to obtain their undergraduate degrees before signing an SPC. To account for this, the NHL has provided the club’s an extended exclusive negotiating rights period.
Whether or not European expansion would require changes to all aspects of the NHL CBA that limit the free movement of players, such as the draft, Reserve List and trade procedures, is yet to be determined. However, it is difficult to see the NHL vastly changing the current system since it allows the league to maintain parity among the teams and uniformity among the policies.
Other professional hockey leagues have adopted the European football system of acquiring players, and the adoption of this process has had the same results that are seen in European football. Many of these leagues have developed a few top level teams that can afford to buy the best players during the transfer window, while other teams are left to try to compete with homegrown talent. The NHL draft system, along with the Salary Cap which will be addressed in a later blog post, strive to ensure that each team has comparable talent. The goal behind this is to try to raise the level of competition between the teams and interest among fans. The results of these policies can be seen by the sheer amount of upsets that have occurred in this year’s NHL Stanley Cup Playoffs.
Ultimately, the NHL may be faced with the hard choice of amending the current policies and bringing the league to Europe, which would help grow the game globally, or to maintain the current level of control and maintain the league as a North American league. However, any changes to the policies will have to be agreed to by the NHLPA and the NHL and incorporated into the CBA. The Current CBA is set to expire in 2022, however these changes can be made prior to that date. It will certainly be interesting to watch how the NHL navigates any potential expansion to Europe.
National Labor Relations Act, 29 U.S.C. §§ 151-169; In the United States, the concept of collective bargaining was codified into law by the passage of the National Labor Relations Act in 1935. The passage of this act has allowed Unions to negotiate the terms, wages and working conditions of their employment. The United States Congress recognized the benefits of collective bargaining, and thus provided a statutory exemption to the anti-trust laws, in order to allow for the collective bargaining process among multiple employers. (Clayton Act, 15 U.S.C. 17) This collective bargaining process typically governs most North American sport Leagues. The NHL also utilizes this structure.
National Hockey League Collective Bargaining Agreement 2012-2022, §8. (2013).
National Hockey League Collective Bargaining Agreement 2012-2022, §8.4 (2013).
National Hockey League Collective Bargaining Agreement 2012-2022 (2013).
National Hockey League Collective Bargaining Agreement 2012-2022, §8.6 (2013).
National Hockey League Collective Bargaining Agreement 2012-2022, §8.6(a)(i) (2013).
National Hockey League Collective Bargaining Agreement 2012-2022, §8.6(e) (2013). A "Bona Fide Offer" is an offer of an SPC which is for a period corresponding to the Player's age as required under Section 9.1(b) of this Agreement, is to commence at the start of the next League Year, offers at least the Minimum Paragraph 1 Salary as set forth in Section 11.12 of this Agreement for each League Year covered by such offer and remains open to the Player for at least thirty (30) days after receipt of the offer by the Player. A Bona Fide Offer may be conditioned upon acceptance by the Player within thirty (30) days and carries no right to salary arbitration.
National Hockey League Collective Bargaining Agreement 2012-2022, §8.6(a)(ii) and (iii)- section (a)(iii) (2013). “Notwithstanding anything set forth in subsections (i) or (ii) above, if a Player is drafted for the first time at age 20 and re-enters the Entry Draft at age 22, the Club that selects him as a re-entry may retain the exclusive negotiating rights to the Player for only one (1) year and may not acquire exclusive negotiating rights to the Player for a second year by extending a Bona Fide Offer; provided, however, this provision shall not apply to a Player drafted from a club outside North America for the first time prior to the 2013 Entry Draft whose rights, under all circumstances, shall continue to be governed by Section 8.6(a)(ii).
National Hockey League Collective Bargaining Agreement 2012-2022 §8.6(d) (2013). Drafted Players who Leave the Major Juniors prior to age 20. Notwithstanding any provision of subsection (a) to the contrary, Clubs shall have additional rights set forth in subsections (i), (ii) and (iii) below with respect to Players who either: (i) were drafted while playing in the Major Juniors or (ii) other than college players described in Section (c) below or Players drafted from a club outside North America described in Section (d) below, play in the Juniors during the period of time that a Club holds their exclusive negotiating rights and, in either case, cease to play in the Juniors and play in a league other than Juniors prior to age 20.
If a Player, who is drafted as an 18-year-old, ceases to play in the Juniors in the first League Year after he has been drafted, his drafting Club shall have the exclusive right of negotiation for his services until the fourth June 1 following his initial selection in the Entry Draft.
If a Player, who is drafted as an 18-year-old, ceases to play in the Juniors in the second League Year after he has been drafted and the Club has tendered to such Player a Bona Fide Offer pursuant to 8.6(a)(ii), his drafting Club shall have the exclusive right of negotiation for his services until the fourth June 1 following his initial selection in the Entry Draft.
If a Player, who is drafted for the first time as a 19-year-old ceases to play in the Juniors in the first League Year after he has been drafted, his Club shall have the exclusive right of negotiation for his services until the third June 1 following his initial selection in the Entry Draft. His selecting Club may retain exclusive rights of negotiation for a fourth year by tendering the Player a Bona Fide Offer in accordance with 8.6(a)(ii), provided that such Bona Fide Offer may be made at any time prior to the third June 1 following his initial selection in the Entry Draft.
With the exception of the rights described in subsections (i), (ii) and (iii) above, a Player ceasing to play in the Juniors shall have no impact on his selecting Club’s exclusive negotiating rights as set forth in 8.6(a).
National Hockey League Collective Bargaining Agreement 2012-2022 §8.6(c) (2013). (c) College Players.
If a Player drafted at age 18 or 19 is a bona fide college student at the time of his selection in the Entry Draft, or becomes a bona fide college student prior to the first June 1 following his selection in the Entry Draft, and remains a bona fide college student through the graduation of his college class, his drafting Club shall retain the exclusive right of negotiation for his services through and including the August 15 following the graduation of his college class. The Club need not make a Bona Fide Offer to such Player to retain such rights.
If a Player drafted at age 18 or 19 is a bona fide college student at the time of his selection in the Entry Draft, or becomes a bona fide college student prior to the first June 1 following his selection in the Entry Draft, and does not remain a bona fide college student through the graduation of his college class, his drafting Club shall retain exclusive rights for the negotiation of his services until the later of: (a) the fourth June 1 following his selection in the Entry Draft, or (b) thirty (30) days after NHL Central Registry receives notice that the Player is no longer a bona fide college student; provided that if the Player ceases to be a bona fide college student on or after January 1 of an academic year and the Player: (1) is in his fourth year of college and has commenced his fourth year of NCAA eligibility, or (2) is in his fourth year of college and is scheduled to graduate from college at the end of his fourth year, then in the circumstances described in (1) or (2), the Club shall retain the exclusive right of negotiation for such Player's services through and including the August 15 following the date on which he ceases to be a bona fide college student. The Club need not make a Bona Fide Offer to such Player to retain such rights.
If a Player drafted at age 18 or 19, who had received a Bona Fide Offer in accordance with Section 8.6(a)(ii) above, becomes a bona fide college student prior to the second June 1 following his selection in the Entry Draft and remains a bona fide college student through the graduation of his college class, his drafting Club shall retain the exclusive rights of negotiation for his services through and including the August 15 following the graduation of his college class.
If a Player drafted at age 18 or 19, who had received a Bona Fide Offer in accordance with Section 8.6(a)(ii) above, becomes a bona fide college student prior to the second June 1 following his selection in the Entry Draft and does not remain a bona fide college student through the graduation of his college class, his drafting Club shall retain exclusive rights for the negotiation of his services until the later of: (a) the fourth June 1 following his selection in the Entry Draft, or (b) thirty (30) days after NHL Central Registry receives notice that the Player is no longer a bona fide college student; provided that if the Player ceases to be a bona fide college student on or after January 1 of an academic year and the Player: (1) is in his fourth year of college and has commenced his fourth year of NCAA eligibility, or (2) is in his fourth year of college and is scheduled to graduate from college at the end of his fourth year, then in the circumstances described in (1) or (2), the Club shall retain the exclusive right of negotiation for such Player's services through and including the August 15 following the date on which he ceases to be a bona fide college student.
If a Player drafted at age 20 or older is a bona fide college student at the time of his selection or becomes a bona fide college student while his drafting Club retains exclusive rights, then his drafting Club shall retain those rights until the later of: (a) the second June 1 following the date of his selection, or (b) thirty (30) days after NHL Central Registry receives notice that the Player is no longer a bona fide college student; provided that if the Player: (1) is in his fourth year of college and has commenced his fourth year of NCAA eligibility, and the Player ceases to be a bona fide college student on or after January 1 of an academic year, or (2) is in his fourth year of college, is scheduled to graduate from college at the end of his fourth year and the Player ceases to be a bona fide college student on or after January 1 of an academic year, or (3) remains a bona fide college student through the graduation of his college class, then in the circumstances described in (1) or (2) or (3), the Club shall retain the exclusive right of negotiation for such Player's services through and including August 15 of that calendar year.
For purposes of the above provisions, the term "graduation of his college class" shall mean the class with which the Player is scheduled to graduate during his final semester of attendance (as opposed to his matriculating class (the class with which he is expected to graduate as of the date of his original enrollment)). For purposes of clarity, a Player's graduating class may change during his tenure in college.
Furthermore, a Player shall be deemed to be scheduled to graduate from college if, at the conclusion of his fourth year of college he would have been within five percent (5%) of the minimum number of credits required to graduate, provided, such determination shall be made assuming that in such fourth year of college Player earned at least the number of credits equal to the average number of credits for which he had been enrolled during his first three years of college. It shall be the Player's responsibility to provide promptly evidence (i.e., official school transcripts and requirements) that he was or was not scheduled to graduate. Absent evidence to the contrary, NHL Central Registry shall treat a Player as if he was scheduled to graduate or remained a bona fide college student through the graduation of his college class. Furthermore, a Player who is removed from his Club's Reserve List as a result of the operation of the above provisions shall be a draft-related Unrestricted Free Agent effective upon such removal.
Any Club that retains the exclusive rights to a Player, who is a bona fide college student may request, at any time, that such Player promptly provide a current official school transcript and the school's graduation requirements. As a general matter, the above provisions were not intended to cut off, and shall not have the effect of cutting off, a Club's exclusive negotiating rights during the period that a Player remains in college.

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