What is A Restricted Free Agent in the NHL And How Does it Work?

Posted on April 15, 2024 by Dan Kent
NHL Hockey Players

The NHL's free agency system is one of the more complex systems in professional sports. It can leave even the most dedicated fans confused. It's even more challenging for new fans to learn and adapt to the slang and complex terminology.

That's precisely why I decided to create this article, primarily focused on the element of restricted free agents, as they are the concept that stumps many people. Remember, I'm solely speaking on RFA status in the National Hockey League, as most major sports leagues like the NFL do have RFAs but operate on a different system.

With that said, let's get right into it.

What is a restricted free agent in the NHL?

A restricted free agent is a player who has completed his entry-level contract but who is either not old enough or has not played enough games to justify unrestricted free agent status. 

In this situation, the player is restricted in their ability to sign with whatever team they'd like because their current team is said to own their rights, and can match any contract offers made by opposing teams.

Why does the NHL have restricted free agents?

The restricted free agent system was put in place to allow teams to retain their young talent without fear of drafting players only to lose them to free agency after their entry-level deal is up.

If there was no restricted free agent system put in place, weaker teams would likely see the younger talent they've picked in the NHL entry draft leave to sign with more competitive teams, which would realistically never allow the weaker teams to get out of the bottom of the league.

There is also the added financial element. The costs of scouting, drafting, and training players are extensive. Teams will pay millions of dollars to develop a player throughout their entry-level contract and even in their junior hockey years, and if there was no RFA system, they may not even be able to see the benefits of their financial investment in the player.

Overall, the system is designed to benefit the teams and not so much the players. But, if it didn't exist, the NHL would be very top-heavy regarding talented teams.

How does restricted free agency work?

When a player's entry-level contract runs out and they do not meet the minimum game requirements, or in some situations age to become an unrestricted free agent, they are given restricted free agent status.

From there, the player could field offer sheets from other teams, but the player's current team would have the right to match. They'd either match the offer made by the other team and keep the player or let him sign with the other team and take the draft pick compensation.

Let's go into each detail a bit further.

The qualifying offer

When a player's contract runs out and still meets the requirements of a restricted free agent, teams will have a particular amount of time to issue a qualifying offer to the player. Suppose the deadline passes and the team does not tender a qualifying offer to the the player. In that case, he becomes an unrestricted free agent.

Qualifying offers are rarely contracts that are accepted by players, but are simply issued by a team to maintain a player's rights so that they can continue to negotiate with the player to agree on a contract or even possibly trade the rights of the player to another team.

According to the Collective Bargaining Agreement (CBA), the qualifying offer must be, at minimum, a particular percentage of the previous year's salary. Depending on the size of the player's previous years salary, the minimum qualifying offer typically has to be a raise by 105% or 110%.

However, if the player earned a higher threshold of money in the prior season, the qualifying offer could just be their previous year's salary with no raise.

In many situations, a team would not qualify a player and let them become UFAs. One instance would be a younger player who signed a large contract coming off of their entry-level deal but has not performed up to par since.

Because the qualifying offer, at minimum, would have to be equal to their previous year's salary, a team may walk away rather than issue an offer for cap space reasons.

Alternatively, a team may just not qualify a player because they've decided to move on.

The offer sheet

Although the offer sheet is rare in the NHL, it happens sometimes. In this situation, another team has extended an offer to a team's unsigned restricted free agent. The player can either accept or reject the offer, and from there, the team who owns that player's rights has seven days to match the offer or let the player go.

The offer sheet almost always ends up in the player being paid more than their current market value. The reasoning is that the team making the offer will need to make it higher than the player is worth, or else the team who owns that player's rights would have a no-brainer decision to match the offer.

Although these bonuses are not available in contracts today, the Carolina Hurricanes made a massive offer sheet to Sergei Fedorov in 1998, including a $12M bonus if Federov played in the conference final.

At the time, the Red Wings were one of the best teams in the league. They had a high likelihood of getting to the conference final, so Carolina intentionally did this to make the Red Wings consider not matching, even though they did.

Over the last 25 years, there have been 11 offer sheets. Only two of them have gone unmatched, that being Dustin Penner, who was let go by the Anaheim Ducks and signed by the Edmonton Oilers and Jesperi Kotkaniemi, who was let go by the Montreal Canadiens and signed by the Carolina Hurricanes.

Offer sheet compensation

Even if a team decides to walk away from a player and not match an offer sheet, they are still compensated for losing the player. The compensation is based on the player's salary, and when you get into the higher salary levels, the compensation is quite large. Compensation is paid by the team signing the player.

Remember, the list below is compensation based on the player's cap hit (AAV), not their actual salary in that year. And when it comes to the salary cap world, those can mean two things.

As of the 2023-2024 season, here are the compensation requirements for teams who sign another teams restricted free agent:

$1,415,740 or less: No compensation

$1,415,741 to $2,145,061: 3rd round pick

$2,145,062 to $4,290,125: 2nd round pick

$4,290,126 to $6,435,186: 1st and 3rd round picks

$6,435,187 to $8,580,250: 1st, 2nd, and 3rd round picks

$8,580,251 to $10,725,314: Two 1st round picks, a 2nd round pick, and a 3rd round pick

$10,725,314 or more: Four 1st round picks

A team must have their draft picks to make a qualifying offer. For example, if a team gives an offer sheet requiring a 1st, 2nd, and 3rd, they couldn't use another team's 2nd if they were missing their own.

Arbitration

When an unrestricted free agent cannot come to a deal with the team that owns their rights, there is the possibility a player or team could file to have a third-party arbitrator come in and make the final decision on what the worth of the player is.

Players need a particular amount of NHL experience and be a certain age to be eligible to file for arbitration. Still, if they do, they will submit their case to the arbitrator on their worth, and the team will do the same. Often, players in the league that play the same positions as the players are used as comparables.

These cases are often solved before the case gets to the arbitrator. It's not exactly the most comfortable situation for the player or team to have the situation escalated to a full hearing and what feels like a "forced" contract. Once the arbitrator decides, the team can either walk away from the player or sign him to the contract the arbitrator has determined is fair.

With player arbitration, the contract is always a one-year deal. However, a team can file for salary arbitration as well, and in this case, they can request either a one or two-year contract. The overall process is almost identical to player-filed arbitration. 

Does a restricted free agent have to sign with their team?

Ultimately, even though an NHL team owns your rights as an RFA, you don't have to sign with them. However, the system does make it so that a player's alternative options are anything but appealing.

You could hold out on a contract. In this situation, a player would not attend training camp or play games for the team. If they wanted to skate to stay in shape, it would have to be on their own. Holdouts are often never good for the player, resulting in them not being in game shape despite the season starting.

You could demand a trade. For younger players just getting into the league, it doesn't necessarily represent the best look in terms of character demanding a trade from a team as an RFA. So, this is one that rarely happens but still does.

Alternatively, a player could call it quits in the National Hockey League and go overseas to play. However, this would be drastic, and you won't see this often with North American born players. European players, however, are more likely to head home and play. 

Remember, if they do this, that NHL team still owns their rights. If they decided to come back a few years later, they'd still be forced to sign with that team or demand a trade.

What makes a player a restricted free agent?

The actual act of a team issuing a qualifying offer is what makes a player a restricted free agent. If they are not given an offer by July 1st when their contract expires, the player will be an unrestricted free agent.

What determines if a player is a restricted or unrestricted free agent?

In terms of what guidelines a player has to meet to be considered a restricted free agent, it is often gauged by the number of seasons you have in the league (seven) or the player's age (27).

In contract negotiations, long-term deals signed that "eat up" unrestricted free agents years often come with higher premiums. For example, if a player is 26 and only has one more year of restricted free agency, he will likely be able to command a higher salary than a 21-year-old coming off their first entry-level deal.

What is the difference between restricted and unrestricted free agents?

The team that issued them the qualifying offer owns restricted free agent rights. Although they can field offers just like an unrestricted free agent, the team that owns their rights can match the contract and force the player to stay with their current team. 

On the other hand, an unrestricted free agent is free to sign with whatever team they wish with zero restrictions.

Can a restricted free agent be traded?

Restricted free agents can be traded, yes. Because their rights are owned by the team who issued the qualifying offer, that team can trade the rights to that player to another team, in which that team can sign them to a contract.

You could see this in a variety of situations. For one, if a restricted free agent is holding out on the team and doesn't want to play there, the team may trade their rights away. There may also be a situation where a team doesn't want to continue pursuing a player but knows they have value. In this situation, they'll qualify them and trade them to another team for assets rather than letting them go to unrestricted free agency.

How long is a player a restricted free agent?

A player is a restricted free agent until they've accrued seven seasons in the NHL or are over 27.

Remember, an accrued season doesn't have to be an entire season played. It is only forty games for a player and thirty for a goaltender.

In terms of how long a player is actually a restricted free agent, as in qualified but not signed, they would stay this way until they are given a contract. Although it is relatively rare, holdouts do exist and players can end up still having the status of an unsigned restricted free agent even when the season begins.

Dan Kent

About the author

Growing up in a hockey hotbed (Calgary, Alberta. And yes, I'm an Oiler fan), I decided to put my love and knowledge of the game to work. I started at five and am still playing today into my early 30s. By acquiring Brave Stick Hockey and rebranding it to Big Shot Hockey in 2023, I plan to teach people about this great game and educate them on the best equipment and history of the game. On a career level, I am in finance, running one of the largest financial websites in Canada, Stocktrades.ca.

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