No More Personal Service Deals & Milestone Bonuses

Major League Baseball and the MLB Players Association have agreed to put an end to personal service deals and milestone bonus clauses, ESPN.com's Jayson Stark reports. Existing contracts with these deals or bonuses won’t be affected by the changes, which were agreed to this month.

Albert Pujols and Ryan Zimmerman recently signed long-term contracts which include personal services provisions and Alex Rodriguez has milestone bonuses associated with his contract. However, MLB and the union say these bonuses violate baseball’s collective bargaining agreement. The sides have agreed that the CBA doesn’t allow players to agree to deals that include obligations beyond their playing careers.

MLB is trying to prevent teams from finding loopholes that enable them to evade the luxury tax, Stark reports. Personal service deals and milestone bonuses aren’t considered guaranteed money and therefore don’t count against the luxury tax.


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42 Comments on "No More Personal Service Deals & Milestone Bonuses"


MrBaseball29
3 years 4 months ago

Maybe they’ll cancel arods contract

wickedkevin
3 years 4 months ago

Maybe Arod didn’t do steroids. 

3 years 4 months ago

or Manny Ramirez or David Ortiz…

3 years 4 months ago

 I don’t understand why Arod is singled out like this, or all of baseball if it comes to that. Nobody who says they love football gets shouted-down at the restaurant over Leon Lett. Is it that football players are supposed to be juiced-up monsters, or is it that we love to hate people who are better than we are, and most football players (and even some baseball players) clearly don’t qualify?

jjs91
3 years 4 months ago

It’s really confusing i mean when pudge retired did you here steriods being discussed? Even though canseco said he did them. Yet bagwell who has no proof against him. 

3 years 4 months ago

He’s singled out because he was the best player in baseball, he has an arrogant, snobby persona, and he’s possibly going to break records, in part, because of steroids.

Infield Fly
3 years 4 months ago

Is it that…we love to hate people who are better than we are…?

Unless that was just poor wording and you are actually referring to sports ability specifically, how unfortunate that you think of professional athletes as “better than we are.” If anything they have shown themselves to be just as human as the rest of us; subject to the same ups and downs and flaws – particularly those who attempt to cheat to get ahead in life.

Lunchbox45
3 years 4 months ago

well said

Runtime
3 years 4 months ago

Not likely.

Ricardo Elorza del Valle
3 years 4 months ago

So… if I’m reading this correctly, every incentive based contract is next?  Or those actually count against the luxury tax?

If so, I think that’s a tragedy.

Stuart Brown
3 years 4 months ago

Milestones aren’t so much an incentive as they are an inevitability for some of these guys. If they stay healthy, that money is practically guaranteed, and therefore aids the teams in avoiding the luxury tax.

Havok9120
3 years 4 months ago

 Ehhh. “If they stay healthy” is incredibly important though. ARod, for instance, can get to the all time record without too much trouble IF that hip and that knee allow him to generate power and remain on the field. And whether or not that contract is financially worth it to the franchise will depend heavily on how far up the list he goes.

LazerTown
3 years 4 months ago

Yep, they will make a ton of money if he gets into the 700’s, making his contract worthwhile in marketing incentives alone.

Havok9120
3 years 4 months ago

 Yeah, and it would be the second time we’ve done it. You should see the attendance jump in the mid-aughts when he first showed up and then when we re-upped him. The teams were getting worse and more people were going.

baseball1010
3 years 4 months ago

Incentives are actual pay earned and count against the luxury tax.

Too Many Idiots
3 years 4 months ago

Based on what? Just because you said so? If it was that clear cut, do you not think it would be reported by the media?

baseball1010
3 years 4 months ago

Because the media doesn’t report it means what? They can’t discover the information? The MLBPA reports it as total salary for the player. That’s what it’s based upon.

Sent from my iPad

Too Many Idiots
3 years 4 months ago

Actually, I owe you an apology. I was thinking milestone, not incentives, as you wrote. You are correct on incentives.

Christopher McElroy
3 years 4 months ago

No more Personal Services? Does that mean clauses like Roy Oswalts Tractor clause?

M_Harden
3 years 4 months ago

Haha or Burnett and his limo.

Ty
3 years 4 months ago

So, will this affect things like vesting options based on plate appearances/pitching appearances/games finished/etc.? 

j6takish
3 years 4 months ago

 Those are incentives. Milestones are things like HR Plateaus and such, which were already a bit controversial

Havok9120
3 years 4 months ago

 To who? Other than the MLBPA and the League’s financial dudes, that is?

I mean, I’ve never even heard THEM grumble about it too much.

3 years 4 months ago

Incentives aren’t “guaranteed” money, either, by definition.  This whole thing is very puzzling to me.

Maybe they should assess the luxury tax on the actual salaries paid in the previous year (after incentives, bonuses, etc.).

And do playoff bonuses count????

Also, I don’t think the Nats motive in the personal services contract was to evade the luxury tax, but rather to avoid keeping an aging player on the active roster.  It seems to me that if RZ was willing to defer his money for that number of years and take it after retirement, what is the issue with that?   

jb226
3 years 4 months ago

What’s the issue with the actual service contract?  Nothing.

The problem is that it allows a team to guarantee a player money–in your words, to defer his money for that number of years–and yet not have that money counted against the team in the luxury tax.  It’s a loophole allowing a team to guarantee (luxury) tax-free money.

Was removing the ability to make those deals at all a ham-fisted solution?  Probably.  I don’t see why they couldn’t just amortize it over the life of the contract since a personal services deal IS guaranteed money — it’s just not for playing.

Ty
3 years 4 months ago

Yeah, but it seems like there’s not necessarily a clear line that separates “incentives” from “milestones” – so if they’re going to disallow one but not the other, they’re going to need a strict definition of what makes a “milestone” different from an “incentive”. I’d be interested to see where that line is drawn.

For example, let’s say in Hypothetical Land that A-Rod is a free agent and is exactly 30 HR away from Bonds’ record. Does this new rule mean that a team couldn’t sign him to a contract that says “We’ll pay you $6 million extra if you tie Bonds’ record,” because that constitutes a “milestone” clause, but they COULD sign him to a contract that says “We’ll pay you $6 million extra if you hit at least 30 HR this year,” which would be an “incentive”? They’d both mean the exact same thing, but would one be allowed? It’s pretty murky to me.

3 years 4 months ago

This was my question also.  Our pitcher, Wang, has an incentive-loaded contract due to injury-history.

Encarnacion's Parrot
3 years 4 months ago

I don’t think removing incentive-laden deals is the right move. Making all money count against the luxury tax makes some sense to me though.

Ty
3 years 4 months ago

Totally agree with this. If they want to prevent these clauses from being used to cheat the luxury tax, I think it’d be more effective to just say that ALL money spent on players counts against the luxury tax rather than limiting the ways in which teams can offer money to their players.

Havok9120
3 years 4 months ago

Eh. That’d be ideal, sure, but how  can you argue that a team has “spent” money when its a clause that won’t kick in for 8 years IF IT EVER DOES.

If you do it that way, you have to start doing luxury tax refunds when the incentives don’t kick in.

Gary
3 years 4 months ago

He admitted to using steroids to Peter Gammons

jb226
3 years 4 months ago

Hmm.  My understanding is that any money that gets earned counts toward the luxury tax.  I do wish I’d see something authoritative on the luxury tax; I think it would make a really nice MLBTR feature.  

That said, the personal services thing definitely avoids the tax so I understand where that ban came from.

I was trying to figure out what the difference would be between milestones and incentives from the luxury tax perspective.  At first I didn’t see one; it seems like they both should have the same effect on the luxury tax.  As I  thought about it though, one difference might be the time frame.  Incentives are typically for a season.  IE, you make 30 starts and you get $X more.  The exception would be complex options that can vest based on multi-year performance, but that still ends up with a single number getting added to a single season.  Milestones, by contrast, are things in the future.  As such, they have no bearing on the current year’s luxury tax but present a problem if they get earned: Do you charge luxury tax based on (milestone value) / (total years of contract)?  Do you charge based on (milestone value) / (years left on the contract when earned)?  Or maybe (milestone value) applied to the next luxury tax period after it is earned?  Those options all have vastly different effects.

It’s a bit of a stretch, honestly, but that’s the only non-semantic difference I could come up with in terms of affecting the luxury tax.  It does seem that milestones allows a team to directly pay for success, which is typically not allowed in baseball–that’s why we see incentives for things like plate appearances or games closed yet not hits or saves–but that is more of an issue with adhering to the rules than it is avoiding the luxury tax.

baseball1010
3 years 4 months ago

Vesting options are salary. Example-Krod with the Mets/Brewers. If he had x amount of games finished his option for the 2012 season vested.

boomer1344
3 years 4 months ago

what about the award and all star appearance bonuses? might as well include signing bonuses

3 years 4 months ago

how’s this for a scenario: Albert Pujols fnishes his career as an Angel and five years later goes straight in the HOF.  Since he started his career as a Cardinal, spent his prime years there and spent more years there there is an StL logo on his plaque. But, because of his personal services contract with Anahiem he’s IS NOT allowed to appear in St. Louis in a ceremony honoring is induction.  How’s that for a slap in the face to the people the made him hundreds of millions of dollars.

NickinIthaca
3 years 4 months ago

 I thought STL only paid him one hundred million dollars – the Angels are the ones paying him hundreds of millions of dollars

Too Many Idiots
3 years 4 months ago

If he retires after his current contract, he would have 11 seasons with St L and 10 with the Angels. When time is split that evenly, the player has the choice of which hat to wear. As far as the personal services contract prohibiting him from appearing, well, that’s just absurd and wouldn’t be allowed by MLB.

MB923
3 years 4 months ago

I could have sworn that this was done a few years ago

3 years 4 months ago

A-rod has “marketing” clauses in his contract for 700, 750, and 800 homers.

Too Many Idiots
3 years 4 months ago

Those numbers are not even close. Do not state facts unless you know the facts.

graham montgomery
3 years 3 months ago

This is a clear case of the media confusing terms.  Milestone bonuses do not count against the CURRENT year (say, 2012 instead of a milestone that *may* happen in 2014 or 2015), because generally the entire contract is averaged on a yearly basis.  However, whenever any amount of money is actually earned, it DOES count against that year’s luxury tax number.  The CBA has always been clear on this:

(4) Performance, Award and Other Bonuses

(a) Any amounts that are actually earned by a Player as Performance Bonuses, Award Bonuses or any other bonuses properly
included in a Uniform Player’s Contract shall be included as part of
the Player’s Salary in the Contract Year in which the service or per-
formance giving rise to the Bonus was provided. 

3 years 4 months ago

Incentives can’t be based around performance, only things like IP and such that signify staying healthy.