Is Major League Baseball It's Own Worst Enemy?
Can baseball afford a work stoppage right now?
On December 1st, 2021, the collective bargaining agreement between the Major League Baseball Players Association and the Major League Baseball Owners expired and the owners locked out the players. That means that right now there are no organized baseball activities happening around the country. No free agent signings, no trades, no winter GM meetings, no winter workouts at team facilities, no meeting between coaches and front office staff to discuss team goals for 2022 and no player development activities. Why has this happened, what is the history of it and is there a solution so the season can be saved?
The agreement that expired December 1, had been signed by the owners and players on November 30, 2016. It addressed a number of issues ranging from All-Star game payouts, draft rules, clubhouse nutrition, translation services, drug testing and hazing issues to playing games outside the US/Canada and travel expectations. Of course the big issues revolve around money.
The agreement raised the minimum salary for Major League players as well as Minor League players that were on a MLB team's 40 man roster. The MLB minimum salary in 2016 was $507,300 and went up to $570,000 in 2021. For the minor leaguers it went from $82,700 to $89,500. These numbers apply to individual players, both rookies and average players but a team has to consider all their players as a whole and that is measured by team payroll.
While, there isn't a hard salary cap in MLB like there is in the NBA, NHL and the NFL, there is a tool to regulate payroll. It’s called the Competitive Balance Tax (CBT) but more commonly it is known as the luxury tax. It starts when the owners and players set a team payroll target in talks. If a team goes over that threshold, they are “taxed” on the amount they are over the limit. If the team is a first time offender they are taxed 20%, second offense is 30% and 40% for the 3rd offense. If a team was between $20 million and $40 million over the threshold an additional 12% of the overage amount would be added. If a team goes over the limit by more than 40% then the tax would be 42.5% more. However, if you are a high dollar repeat offender that goes up to 45%.
For example, in 2021 the tax threshold was set at $210,000,000. The 2021 payroll of the Los Angeles Dodgers was $258,380,523 or $48,380,523 over the limit. The Dodgers are first time offenders but are more than $40 million over the limit so their tax is 42.5% of the $48 million or $20,561,722.28. The money collected by the luxury tax is distributed to the small market teams to bolster their payrolls. It is a way for the small market teams like the Brewers and Royals of the world to compete with the big market teams like the Dodgers and Yankees of the world.
The CBT affects the signing of free agents in another way as well. currently, teams can extend their departing free agents a one year offer worth the mean of the top 125 players’ salaries. This is the “qualifying offer” you hear about. Of course conditions apply. A player can only have the offer extended to him, once in his career, and he has to be on the team’s roster for the whole season. The team cannot trade him, buy him out or send him down to the minors. If a player declines the qualifying offer and signs with another club, his original team gets a compensatory draft pick high in the draft, and his new club loses a pick around the same spot. If the new club had exceeded the CBT last year, it loses two picks, plus $1 million from its international bonus pool, a pool of money used to pay signing bonuses for first year non-North American players. (The pools are usually around $4 million to $6 million per team, so that’s a significant penalty.) If a non-CBT compliant team signs two such free agents, it loses four picks plus $2 million dollars.
So that's where we are right now, that is the agreement that has expired, causing the first work stoppage since 1994. Now we will look at what both sides want to get out of the new agreement, players first.
The number one item of the list of the Players Association is “competitive balance”. That means the players are sick of teams tanking in whatever form it takes. According to the players and their defacto lead spokesman, super-agent Scott Boras (talk about a fox in the hen house), too many teams in any given year just aren’t trying to win. If small market ‘Team A” doesn’t have the talent to contend for a top spot in the standings or has made bad free agent or contract signings, they can't compete with the teams with really deep pockets, that can spend their way out of those kinds of messes. The only choice Team A has is to go into “Rebuilding Mode” a very ill-defined term that always starts with Team A shedding as much payroll as possible, as fast as possible. They will trade all their high-priced but highly talented players for young minor league players and/or draft picks. If Team A can be bad enough to lose 90 or so games, they will be rewarded with a high draft pick and can trade that player for even more youngsters once he shows some promise in the league. It’s a lot easier to lose that many games with a roster stripped to the bare bones, plus it will save payroll too. Now this “rebuilding” doesn't take just one year, so a team has to do that for multiple seasons. Just look at the Detroit Tigers, they have been rebuilding since 2017 and are just now, for the 2022 season, starting to sign big name players. At least they were, before the lockout.
As an example let’s take a look at the Washington Nationals in 2021. The Nationals lost their best player, Anthony Rendon, to free agency, after winning the World Series in 2019 and stumbled in the COVID shortened 2020 season. In 2021 they were losing frequently and badly and Mark Lerner (the owner) and the GM, Mike Rizzo, decided it was time for a rebuild. At the end of July their record was 48-56 and in a span of three days they traded two of the five pitchers in their starting rotation, their starting right fielder, starting shortstop, starting second baseman, starting catcher and and three of their bullpen pitchers. They filled those spots with rookies or players with little Major League experience, but those moves saved them $71,018,980 in payroll. They ended the season with a record of 65-97 fifth worst in Major League Baseball, therefore they have the fifth pick in the 2022 draft.
The players say this tactic prevents veteran players who can still contribute from being signed. On the other hand, since the majority of those traded players will move on to another team at the end of the season they’re traded, it actually drives up player salaries, since more big name players will be entering free agency. It’s also a soul crushing nightmare for fans of those teams but the owners and the players have shown time and time again they don’t care about the people that keep their game alive.
The other main issue the players are concerned about, is changing the age at which players enter free agency. Right now, a player earns the league minimum for the first three years of a rookie contract. The next two years, the player's salary is decided by a arbitration process where an outside entity determines the salary based on the average salary for their position. In the sixth year the player enters free agency and can explore what the open market will offer.
The players want the free agency to start after three years. They also want some kind of verbiage in the agreement stating that the teams aren't allowed to hold a player in the minor leagues just to prevent the six year clock from starting. The rules state that if a players doesn't start the season on the Major League roster then the six year time frame doesn't start until the next season.
The prime example of this is Kris Bryant of the Cubs. Bryant was drafted second overall in 2013. By 2014 he had been promoted to AAA, had played in the MLB All-Star Futures Game and been named the Number One Prospect by Baseball America. The Cubs invited him to spring training in 2015 and in 49 at bats, hit .425 with nine home runs. However the Cubs elected to send Bryant back down to AAA Iowa, service time was the biggest influence on the team's decision. So Bryant went to Des Moines for 12 days before being promoted to the majors and the six year clock didn't start ticking for the Cubs until the end of that season. The Cubs made another common decision in regards to Bryant. When faced with a player entering free agency, a player that a team knows they won’t be able to resign, most teams will trade him before he gets to the free agent point. That way a team will at least get some kind of return on the player leaving. in 2021 the Cubs did just that, trading Bryant to the Giants in 2021. They got two minor league players in return and the Giants did not try to resign him after the season so he is currently a free agent.
Those are the major issues occupying the players union. You will notice that there are no rules or pace of play issues on this list. That's because the union doesn’t care about anything that doesn't have a dollar sign in front of it. Now we'll look at what the owner’s response to these concerns.
The short answer is, the owners would be more than happy to negotiate another agreement just like the 2016 one. They definitely had the upper hand in that meeting and another CBA like that would be first prize for them.
In regards to the issue of competition, the owners have proposed a salary floor. A salary floor means that every team would have to spend no less than a set amount on team payroll to discourage teams from just shedding salaries in order to tank. The owners propose a $100 million floor and they’d pay for it by lowering the Competitive Balance Tax threshold to $180 million which would increase the money available for teams to use on payroll. The MLBPA is unlikely to go for lowering the ceiling for all 30 clubs in order to raise the floor for the seven teams whose payrolls came in below $100 million. The union has already said that the payroll floor is a non-starter. They don’t want to limit the number of teams that might pay players in free agency.
This fall, owners suggested an age-based, rather than service time-based, system for free agency. They offered to make players free agents at 29.5 years old. This is a non starter for the union for a couple of reasons: First, 29.5 years old is after most players’ peaks. Second, because many Latin players sign with clubs at 16 years old, this proposal would lead to a system in which those players would be under team control for 13 or 14 years, nearly half their lives. Meanwhile, their American-born counterparts, who generally sign at 18 or 21, would owe their teams only between eight and 11 years.
However, the union’s real priority is star players, not your “average” Major League player. They are particularly concerned about ones like Nationals right fielder Juan Soto.
Soto is due to reach free agency after the 2023 season, and with his offensive numbers, he could command half a billion dollars on the open market. The union would never agree to a setup that would limit his earning power. They believe that as long as the best players get paid as much as the market will allow, the second and third tier players will earn their share. (This has not always been the case, but it is what the union believes.). In fact the union has, on a number of occasions, told players they can't sign deals that aren’t for max money, because it would limit the earning power of other players.
The prime example of this is Alex Rodriguez in 2008. He wanted to leave the Texas Rangers and play for the Boston Red Sox. The Red Sox asked A-Rod to restructure his $25.2 million per year deal. He did that and the Rangers and Red Sox were all set to complete the trade. At the last minute the union stepped in and blocked the trade. Union officials said they nixed the trade because his contract was restructured and that essentially making it less valuable even though that wasn't true. Rodriguez was going to get every penny of that contract it was just going to be payed out differently. He was deferring money from the first few seasons, to the end of the contract. It was the union's position was that if A-Rod took less money it would have a detrimental effect on other player’s contracts in the future. They stated that if he chose to take less money to go to a team he wanted to play for, it would eventually lead to players being forced to take less money to play anywhere. That logic doesn’t seem sound to me but that is the union line, every time a player wants to choose a team over money.
Neither side is really all that interested in growing the game or even “fixing it” because they don’t see those efforts as money makers. It is disappointing to think that the owners, otherwise savvy businessmen, can’t see that putting the best product on the field is the best way to keep the greatest sport in the world alive.
As for ongoing negotiations to settle this and get back to regular activity. At the time of publication there have been exactly zero minutes of talks between the two sides and there are no current plans to meet. The day after the lockout began, Baseball Commissioner Rob Manfred said that the two sides would meet “sometime in early 2022”. Wow, that's specific, and so very encouraging.
There you go, this is the easiest way I can think of to explain the history and current state of the baseball labor strife. I hope this clears it up for everyone. If you want to know what I would do to “fix” baseball you’ll have to wait for a future post because I don’t have enough room to list all the things I’d do.
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