Ethics CasesSport

Cases · NHL · 2005–2026

Paying Back the Pandemic: The NHL's Escrow System

The NHL's hard salary cap is tied to a fixed split of hockey-related revenue (HRR), now 50-50. Because salaries are set before revenue is known, a share of every player's pay is held in escrow and used to make owners whole if players are overpaid. When COVID-19 halted games in 2020 while salaries kept flowing, players accrued an estimated $1.5 billion 'debt.' A July 2020 extension froze the cap at $81.5 million, set escrow at up to 20%, deferred 10% of 2020–21 salaries and tied cap growth to repayment. Revenue rebounded faster than expected, the debt was cleared, and the cap rose to $88 million in 2024–25. The case asks whether escrow fairly shares risk between labor and capital.

By Tanner Simkins, editor

Timeline

  1. After a lockout, the NHL adopts a hard salary cap linked to a share of hockey-related revenue, with escrow to balance the split.
  2. Ahead of another lockout, the players' share is 57% of hockey-related revenue.
  3. The pandemic pauses the season while players continue to be paid, creating an estimated $1.5 billion escrow debt.
  4. An extension to 2026 freezes the cap at $81.5 million, caps escrow at 20% for 2020–21 and defers 10% of salaries.
  5. The cap rises by $1 million a year as escrow falls to 10% and then 6%.
  6. With the debt cleared, the cap rises to $88 million for 2024–25.
  7. The NHL and players ratify a new four-year agreement running through 2029–30.

The ethical issues

  • Sharing revenue risk between players and owners.
  • Clawing back pay that players have already contracted for.
  • Fairness across generations of players who bear past debts.
  • Transparency in revenue accounting.
  • How force majeure events should be handled in labor deals.

Stakeholders

StakeholderInterests & obligations
NHL playersReceiving the salaries they signed for and a fair revenue share.
Team ownersCost certainty and a predictable revenue split.
NHL Players' AssociationProtecting members and negotiating fair risk-sharing.
League officeCompetitive balance and financial stability.
FansStable rosters and uninterrupted seasons.
Future playersNot inheriting debts from earlier seasons.

The case

An NHL contract lists a salary, but for most of the past two decades, players have not received the full amount. A share of every paycheck goes into escrow, and at season’s end some or all of it may go to the owners. The system exists to keep the league’s revenue split even. When the COVID-19 pandemic shut down arenas in 2020, it turned into a $1.5 billion debt that players spent four seasons paying down. The case asks who should bear the risk when a league’s revenue falls short.

Background

The deal that ended the 2004–05 lockout introduced a hard salary cap and guaranteed that hockey-related revenue (HRR) would be split between players and owners by a fixed percentage. In 2011–12, players received 57%.[4] Those two rules do not always fit. The cap is set from the previous season’s revenue, and teams do not all spend the same amount. So, as the Globe and Mail explained in 2012, “part of each player’s salary is set aside in a bank account” during the season. If owners end up with less than their share, they take what they need from that account. If revenue beats expectations, players can get it all back, plus extra.[4]

Under the collective bargaining agreement signed in February 2013, still the basis of the current system, the split is 50-50.[1][5] A fan guide described escrow as “a tax applied to all players’ paycheques during the year”: if the league does well, players get it back; if not, it goes to the owners.[5] In practice, Sportico noted, “historically, most of the escrow has gone back to the teams,” and for current players escrow “has typically been lost money.”[3]

What happened

The pandemic paused the 2019–20 season, but players continued to be paid. According to the NHL, players “accrued an approximate $1.5 billion escrow debt” as a result.[2]

In July 2020, the league and the NHL Players’ Association (NHLPA) agreed to extend their collective bargaining agreement to 15 September 2026.[1] The memorandum of understanding made several trade-offs:

  • A flat cap. The upper limit stayed at $81.5 million until revenue recovered and then rose by only $1 million a year “until the Escrow Balance is paid off.”[1]
  • Escrow limits. Maximum escrow was set at 20% for 2020–21, between 14% and 18% for 2021–22 depending on revenue, 10% for 2022–23 and 6% for each of the final three seasons. Any unpaid balance would carry forward.[1]
  • Salary deferral. Ten percent of each player’s 2020–21 salary and signing bonus was deferred without interest and repaid in three installments from 2022 to 2024.[1]
  • A debt trigger. If the balance after 2024–25 fell between $125 million and $250 million, the agreement would extend another year. Any balance left at the end “shall be due and payable to the NHL on terms to be negotiated as part of any new CBA.”[1]

The cap stayed at $81.5 million through 2021–22, then rose $1 million in each of the next two seasons.[2]

The rules and governance

Escrow is a bargained rule, accepted by the union as the price of a hard cap linked to revenue. It treats players as partners who share revenue risk. But unlike owners, players do not control spending, ticket prices or business strategy. The 2020 agreement also bound future players: anyone entering the league after the pandemic shared in repaying the debt through lower caps and escrow withholding.[1]

Aftermath

Revenue recovered faster than expected. On 8 June 2024, the league announced that the cap would rise to $88 million for 2024–25, a $4.5 million increase.[2] Commissioner Gary Bettman said: “Obviously, with the number of years we had with flat or modest increases, it was necessary to recapture how much was overpaid and how much the escrow built up during COVID, but I believe we’re going to continue to see robust growth in the cap.”[2] An agent told Sportico: “Revenues grew much faster than anybody anticipated, and so the escrow debt was paid off much faster than anybody anticipated.” HRR was expected to top $6 billion that season.[3]

In July 2025, the two sides ratified a new four-year agreement through 2029–30, more than a year early.[6] The NHLPA’s executive director, Marty Walsh, said rising caps of $104 million in 2026–27 and $113.5 million in 2027–28 would help ensure that players are “actually getting their contracts that they signed and not having money taken back.” He added: “For years, players paid the escrow, and they never got the money back.”[7]

The core dilemma

Escrow keeps a promise: a fixed split of league revenue. But it also breaks a different one, the salary printed on each contract. When the pandemic struck, the system put a large share of the loss on players, including those who had not yet entered the league. Is escrow a fair way to share risk between labor and capital?

Competing values

  • Partnership vs. contract: sharing revenue risk against honoring agreed salaries.
  • Cost certainty vs. income certainty: owners’ predictability against players’ stability.
  • Collective vs. individual fairness: a fair overall split against fairness to each player.
  • Present vs. future: solving today’s crisis against burdening tomorrow’s players.

Strongest arguments

Escrow is fair. Players agreed to a revenue split. Escrow simply enforces it, and players benefit when revenue grows faster than expected. In 2020 it let the league resume play without a lockout.[1][4]

Escrow shifts risk unfairly. Players have no control over business decisions but bear the downside. The pandemic debt was repaid partly by players who were not in the league in 2020, and for years escrow “never” came back.[3][7]

The real issue is transparency. If players are partners, they need full insight into how revenue is counted and spent.

Applying the frameworks

Justice

Distributive justice asks whether risk and reward are fairly shared. Behind a veil of ignorance, not knowing whether you would be an owner, a veteran or a rookie arriving in 2021, would you choose this system?

Kantian

A Kantian focus on promise-keeping asks whether withholding agreed salary treats players as means. The answer may depend on whether players freely consented to the rule through their union.

Utilitarian

A utilitarian weighs the benefits of avoiding lockouts and keeping teams solvent against the costs to players. The quick recovery after 2020 suggests the system helped the sport survive the crisis.

Walk it through: the Simple Decision Model

  1. Spot the issue. You are bargaining for players in 2020, facing a $1.5 billion gap. Stakeholders include veterans, future players, owners and fans.
  2. Gather facts. What are revenue forecasts? How will the debt affect future caps? Beware of optimism bias in revenue projections.
  3. Test options. Accept high escrow; seek deferrals instead; ask owners to absorb more loss; or let the agreement expire.
  4. Check codes and law. Review the existing CBA, labor law and force majeure clauses.
  5. Decide and document. Choose the option that spreads the burden fairly and protects future players.
  6. Communicate and follow up. Explain trade-offs to members and monitor revenue and escrow each year.

What’s settled and what’s contested

Settled

  • The NHL splits HRR 50-50 with players, enforced through escrow.
  • The pandemic created an estimated $1.5 billion escrow debt.
  • The cap stayed flat and rose slowly until the debt was paid, then jumped in 2024.

Contested

  • Whether players should have borne so much of the pandemic loss.
  • Whether escrow makes contracts misleading.
  • Whether future players should share past debts.

Why this case matters

Revenue-sharing systems promise partnership but can hide how risk is allocated. This case shows how labor rules shape who pays when a sport faces a shock. Compare it with MLS’s pandemic renegotiation and MLB’s salary cap fight.

Key terms

Distributive justice
Fairness in how scarce opportunities, resources, benefits and burdens are shared.
Stakeholders
Everyone with something at stake in a decision: athletes, coaches, parents, officials, fans, employees, sponsors, media, communities and regulators, including the less visible ones.
Trust
The public’s belief that what they are watching is real. Integrity failures are ultimately failures of trust.
Moral hazard
When someone takes more risk because others will bear the cost.
Veil of ignorance
Rawls’s test for fair rules: design the policy as if you did not know which position you would end up in.
Commercialization
The process of turning sport into a product and a business enterprise, with profit pressures that can compete with principle.

Definitions from the Ethics Cases glossary.

Discussion questions

  1. Is it fair to withhold part of a salary a player has already agreed to? Why or why not?
  2. Should players or owners have borne more of the pandemic's losses?
  3. Is it fair for players who joined the league after 2020 to help repay the escrow debt?
  4. Does a 50-50 split make players partners, and if so, what information do they deserve?
  5. How should labor agreements plan for future crises?

Sources

  1. National Hockey League/National Hockey League Players' Association Memorandum of Understanding (2020) — NHLPA
  2. NHL salary cap will rise to $88 million next season — NHL.com
  3. NHL Salary Cap Rises 5.4% as COVID-19 'Debt' Extinguished — Sportico
  4. Understanding the NHL's escrow system — The Globe and Mail
  5. Escrow 101: A guide to NHL escrow in the salary cap world — The Win Column
  6. NHL, NHL Players' Association ratify 4-year Collective Bargaining Agreement — NHL.com
  7. NHLPA Executive Marty Walsh Talks in-Depth About New CBA — RG