MLB Player Contracts In A Shortened Or Canceled Season

It seems there’s still a good deal of confusion out there surrounding just what will happen to player contracts given the disruptions to the 2020 MLB season. We’ll do our best to explain the situation in this post, based upon what has been reported to this point.

Background

In the wake of the suspension of Spring Training and the 2020 season, MLB and the MLB Players Association wisely engaged in immediate bargaining to address the massive and sudden changes to the expected state of affairs. The sides have already agreed upon modifications to the Basic Agreement governing league affairs. The full agreement hasn’t yet been released, but the key parameters are largely known (see here and here).

Related Matters

Numerous player salary determinations have been reached that do not specifically bear upon MLB contracts as typically covered here at MLBTR. The union has authorized stipends to certain players and the league has announced team payments to minor-league players. Other employees and contractors have also been addressed, if not fully accounted for on an ongoing basis: league staff, salaried team employees, and hourly employees. At least some teams have also provided some manner of financial assistance to independent contractors that have lost anticipated wages. There are numerous changes afoot to the 2020 amateur intake process (draft and international signings).

MLB Service Time

The key union bargaining priority, by all indication, was to preserve the anticipated player movement through arbitration and into free agency. That was secured in the aforementioned agreement, which assured players of the chance to accrue a full year of MLB service in 2020.

In the event of a shortened season, players will be awarded service time on a pro-rated basis. Players that accrue service for the entirety of the truncated campaign — those on the active roster and/or MLB injured list — would still get a full year of service. In the event of a canceled season, players will be credited MLB service in the same amount they accrued it in 2019.

The agreed-upon system is obviously far from a perfect approximation of what would theoretically have occurred had the 2020 campaign been played as planned (to the extent that can even be guessed at). But it does largely preserve what we’d have anticipated before the pandemic arose, at least in terms of the overall volume of service that will recognized. And while the distribution of service time will differ, it was surely necessary to utilize some sort of crude-but-objective mechanism.

As a practical matter, then, we will still see the same 2020-21 free agent class that had been expected — with Mookie Betts leading the way, even if the Dodgers never see him play a game in their uniform. Those that missed time in 2019 on the 10-day or 60-day MLB injured list will still get full credit for another year of service. Players will qualify and move through arbitration as normal, with Walker Buehler and Juan Soto among the potential Super Two qualifiers.

The major impact, in the event of a cancellation, will be on certain recently arriving big leaguers that had less than a full service in 2019 and on prospects who had expected to debut in 2020. Keston Hiura may actually not be hurt at all — with 114 service days last year, he wouldn’t have been a likely future Super Two qualifier and will still go into the 1+ service class. But Bo Bichette logged only 63 days in 2019, so he’d end up well shy of a full season if there’s no 2020 campaign. That would push back his eventual arbitration and free agent qualification by a full year. Top prospects such as Jo Adell wouldn’t have a chance to break into the majors in 2020.

MLB Player Salaries

Under the very same agreement that sorted out the service-time issues, the players gave up an immense amount of potential earnings in the 2020 season. In the event of a season cancellation, MLB players will receive just $170MM in total from teams — less than one-twentieth what their contracts would otherwise call for.

Should a partial season take place, players will earn on a pro-rated basis. Whether that’s based upon days of the season or games played isn’t entirely clear; that would make a difference if a compressed schedule is attempted. Regardless of the details, the main point stands: a player’s actual 2020 earnings will be quite a bit lower than expected if the season is shortened. But players would still earn a typical check for that portion of the campaign that is staged — if, at least, fans are in attendance. Since this post was originally published, a disagreement between the league and union has emerged. The league claims that the original agreement does not cover a situation in which games are played without spectators; the union contends that the pro rata system should hold regardless.

Future Earnings

There are some initial agreements already in place that will impact the near future. The word on 2021 arbitration salaries remains ambiguous. ESPN.com has reported that “The arbitration system will be adjusted to consider lessened counting statistics because of the shorter season, and salaries secured during the 2021 offseason through arbitration won’t be used in the precedent-based system going forward.” It sounds as if there’s an anticipation of a reduction in raises, though precisely how it is expected to work just isn’t evident.

There’s greater clarity with respect to the luxury tax. No penalty payments will be owed if the season isn’t played. If there’s a partial season, competitive balance payments will be prorated. But the luxury tax system will not automatically reset in the event that the 2020 season is canceled. We recently explored the ramifications of that here.

Of course, the competitive balance system operates primarily to constrain player spending by large-market teams … in a typical market setting. There’s little question that the immediate and long-term economic impact of the pandemic will have an even greater impact on free agent spending. Precisely how the coronavirus will impact the future is still largely unknown, both broadly and with respect to Major League Baseball.

As more is learned about the virus and the international response to it, that information will surely impact negotiations. The sides have much to discuss — not only about 2020 and 2021, but beyond, as the Basic Agreement expires after the 2021 season. At this point, there is no indication of an effort to reduce previously guaranteed salaries for future seasons, but they represent a major future liability to teams and could play an interesting role in the bargaining to come.