It's free agency season, and things can get complicated. How does restricted free agency work? What is a qualifying offer? What is an offer sheet?
This primer will answer your questions.
WHO CAN BECOME A RESTRICTED FREE AGENT?
A player can only become an unrestricted free agent after he reaches age 27 or accrues seven NHL seasons, whichever comes first. Otherwise, he is a restricted free agent.
The exception is if a player is age 25 or 26 and has played fewer than 80 games if a skater.
WHAT IS A QUALIFYING OFFER?
Qualifying offers are extended to restricted free agents to retain negotiating rights. They are not contracts unless the player accepts the offer. All qualifying offers are for one season and are for the following amounts, per the CBA:
1. If the player’s prior year’s base salary is less than or equal to $660,000 for year, 110 percent of the prior year’s base salary.
2. If the player’s prior year’s base salary is greater than $660,000, but less than $1,000,000 for that year, 105 percent of his prior year’s base salary, but can not exceed $1,000,000.
3. If the player’s prior year’s base salary is equal to or greater than $1,000,000 for that year, 100 percent of the prior year’s base salary.
DOES A PLAYER HAVE TO ACCEPT THE QUALIFYING OFFER TO STAY WITH THE TEAM?
Qualifying offers must be made to retain negotiating rights, but the player is not required to play under the qualifying offer. Many players typically sign full contracts that differ from the qualifying offer with the original team. The original team can sign a player to a contract with more term or salary than the qualifying offer, they are not restricted when signing the player to an actual contract.
Qualifying offers are also subject to salary arbitration.
WHAT HAPPENS IF A QUALIFYING OFFER IS MADE AND THE PLAYER DOESN'T SIGN?
Once a qualifying offer is made, assuming the player receives no offer sheets, negotiations can extend well into the start of the regular season, causing the player to miss games
Restricted free agents have until Dec. 1 to sign a contract before they are ruled ineligible to play for the remainder of the season. If the Dec. 1 deadline passes without a contract, the player is then ineligible to sign a contract until July 1.
Example: William Nylander was a restricted free agent in 2018, and his contract holdout lasted until the day of the Dec. 1 deadline, causing him to miss the first two months of the season.
WHAT HAPPENS IF A TEAM DOESN'T MAKE A QUALIFYING OFFER?
The player becomes a full unrestricted free agent. They are free to sign with any team, and his original team receives no compensation if he does so.
Example: The Penguins did not make prospect defenseman Jeff Taylor a qualifying offer in June 2019. He then became an unrestricted free agent and is free to sign anywhere.
WHAT IS AN OFFER SHEET?
If a player does not sign the qualifying offer, other teams are allowed to tender the player offer sheets beginning July 1.
Teams are allowed to negotiate with the player and make offer sheets for a contract. If the player accepts and signs the offer sheet, his original team is notified and has the first right of refusal. The original team has seven days to either reject or accept (match) the offer sheet. Those are the only options.
Once another team has extended an offer sheet to the player and it has been signed by the player, the original team cannot trade the player's rights.
Players who elected salary arbitration are not eligible to sign offer sheets.
Offer sheets are rare. In the salary cap era, only nine players have ever signed offer sheets from another team as a restricted free agent. Only one of them, Dustin Penner in 2007, was successfully signed away from his original team.
Example: The Canadiens tendered Hurricanes restricted free-agent forward Sebastian Aho an offer sheet in 2019 for a five-year, $42 million deal. Aho signed the offer sheet, and the Hurricanes accepted the offer sheet. It was the first time an offer sheet had been extended in six years.
WHAT HAPPENS WHEN A TEAM ACCEPTS THE OFFER SHEET?
A team accepting an offer sheet means they sign the player to a contract with the exact term and salary tendered by the other team in the offer sheet.
The contract must match the offer sheet exactly, minus any no-trade or no-movement clauses. The original team is not allowed to negotiate on or change the term or salary.
Once accepting an offer sheet, the team is not allowed to trade the player for one full calendar year.
Example: The Hurricanes accepted the offer sheet tendered to Aho by the Canadiens. That means that the Hurricanes are on the hook for the full five-years, $42 million. No changes.
WHAT HAPPENS WHEN A TEAM REJECTS THE OFFER SHEET?
If the player's original team rejects the offer sheet tendered to the player, the player is then signed to a contract with the team that extended the offer, and the original team receives compensation in the form of draft picks.
Example: The Oilers tendered Penner, a restricted free agent with the Ducks, a five-year deal worth $21.5 million in 2007. The Ducks rejected the offer sheet, Penner became an Oiler, and the Ducks received the Oilers' first-round, second-round, and third-round picks in the 2008 draft.
HOW IS DRAFT PICK COMPENSATION CALCULATED?
Draft pick compensation is based on the new contract's average annual value, and is adjusted yearly based on the average league salary.
In 2019, draft pick compensation is as follows:
$1,395,053 or below: None
$1,395,054-$2,113,716: Third-round pick
$2,113,717-$4,227,437: Second-round pick
$4,227,438-$6,341,152: First-round pick, third-round pick
$6,341,153-$8,454,871:First-round pick, second-round pick, third-round pick
$8,454,872-$10,568,589: Two first-round picks, third-round pick
Over $10,568,590: Four first-round picks
The team extending the offer sheet must have all of the required draft picks to make the offer, and the draft picks must be their own original picks, not picks acquired from another team. If the team had previously traded their own pick, they can re-acquire it before making the offer sheet. The picks must be for the nearest draft, unless multiple picks are required from the same round. Then, the picks must be for the nearest drafts.
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