SIGNING NEW TALENT: THE NHL ENTRY DRAFT

SIGNING NEW TALENT: THE NHL ENTRY DRAFT was written for and first published by LawInSport

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.

 

GENERAL CONCEPT OF A DRAFT SYSTEM

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.

 

NHL-NHLPA COLLECTIVE BARGAINING

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.

 

NHL ENTRY DRAFT

The NHL’s entry draft, in accordance with the NHL-NHLPA CBA, is an annual gathering of the 30 NHL clubs, where each club is provided the opportunity to select eligible players, as defined within the CBA. The order in which the clubs make their respective selections in the draft is determined by a combination of the regular season standings, playoff results, and a weighted lottery.3 Generally, the best teams are not allowed to make their selection until later in each round; and the 14 teams that fail to make the playoffs are entered into a lottery to determine the draft order for the first 14 selections of the draft.4

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.

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