SEPTEMBER 2: Jon Heyman of the MLB Network reports that the MLBPA “responded very negatively” to the league’s initial proposal. As mentioned, the full terms of the offer aren’t yet known.
SEPTEMBER 1: Major League Baseball proposed a radical altering of the league’s service time structure in collective bargaining discussions with the MLB Players Association last month, reports Joel Sherman of the New York Post. The league’s proposal included an offer to make players eligible for free agency at 29.5 years of age. It also involved a $1 billion pool (which would be tied to revenues in future seasons) that would be dispersed in an unspecified manner to replace the current arbitration system.
Both features were part of a broader package proposal the league made to the MLBPA in mid-August, which Evan Drellich and Ken Rosenthal of the Athletic reported also included the lowering of the first luxury tax threshold to $180MM and the institution of a $100MM salary floor. Much about that proposal still remains unclear, although the lowered tax thresholds alone seem likely to make it a non-starter for the Players Association, which is widely expected to push for higher tax thresholds in the upcoming CBA.
The current CBA is set to expire on December 1, leaving three months for the parties to continue to negotiate before the current deal lapses. (It’s not entirely clear what kind of impact such a scenario would have on the offseason were it to come to fruition, as teams were still permitted to make transactions the last time the CBA expired without a new agreement). It seems likely those talks will pick up in earnest the closer we move to the winter, but intervening reports offer a glimpse of how those more serious negotiations might take shape.
MLB’s offer to base free agency qualification on age is in response to players’ concerns about service time manipulation. Under the current system, players first qualify for free agency at the end of the season in which they accrue six full years of MLB service time. A full year of service is calculated as 172 days, meaning players first promoted to the big leagues in late April of their rookie seasons fall just short of that benchmark. Not coincidentally, various top prospects have been held in the minors until just after that cutoff point in recent seasons — ensuring their teams essentially gain a seventh year of control over the player.
Under an age-based system, there’d be no incentive for teams to keep prospects down past the time they’re deemed ready to play at the major league level. It’d also be a boon to late-blooming players, many of whom have to wait until they’re into their 30’s — and potentially past their physical peaks — to market their services around the league. Sherman cites Yankees star Aaron Judge — whose free agency timeline would’ve accelerated from next offseason to this winter if eligibility were set at 29.5 years — as an example of a player who would stand to benefit from such a change.
That said, setting the free agency qualifying age at 29.5 would have an adverse effect on many of the game’s top stars. It’s not uncommon for the sport’s brightest young talents to reach the big leagues in their early-20’s in spite of the existing service time structure. Those players will often reach free agency before turning 29, setting them up well to land lengthy mega-deals. For reference, three of the top four players on MLBTR’s most recent Free Agent Power Rankings — Carlos Correa, Corey Seager and Trevor Story — wouldn’t be eligible for free agency this offseason if it were only granted for players 29.5 and older.
So while an age-based system would benefit some players, it would likely depress the earning potential for some of the game’s top free agents — many of whom land market-resetting deals precisely because they’re young enough to shop around multiple seasons of prime-age performance. Young, extremely talented players who are most likely to land top-of-the-market contracts are also the ones most likely to be impacted by service time manipulation in the first place.
That makes it all the more challenging to find an age the league would find agreeable that meaningfully changes those players’ free agency outlooks. For instance, Kris Bryant — whose delayed 2015 promotion pushed back his free agency until this winter and led the MLBPA to file a highly-publicized service time grievance on his behalf — wouldn’t have reached free agency until this offseason regardless if the qualification age were set at 29.5 years. That’s not to say MLB’s proposed age threshold couldn’t be modified in future negotiations, but it also demonstrates that basing free agency eligibility on age isn’t inherently a universal benefit to players.
As with free agency, arbitration eligibility is presently determined by service time. Under the current system, players qualify for arbitration upon reaching three years of MLB service. Players in the top 22% of service among those with between two and three years will also reach arbitration as Super Two qualifiers. If the team and player can’t agree on a salary, it is decided by a panel of arbitrators, who use comparable player salaries often based upon traditional statistics.
That can lead to a bit of a disconnect between arbitration values and teams’ valuations of players, which are often based on more advanced analytical data. Arbitrators’ heavy reliance on traditional metrics can fuel non-tenders for players whose box score statistics (e.g. home runs, RBI, pitcher wins) are more impressive than a team’s ’wins above replacement’ type of formula or Statcast data.
On the surface, it does seem revamping or replacing arbitration could be a positive endeavor for players. Sherman estimates that arbitration-eligible players made approximately $650MM this past offseason, so the $1 billion pool would be a rather significant increase. But Sherman also notes that a revenue-based pool system might be viewed by the MLBPA as too closely resembling a salary cap — which the union has always rejected. It’s also not clear how that money would be distributed or how arbitration eligibility would be determined if the sides were to abandon service time considerations.
Sherman also offers one additional piece of information on the league’s proposal. While MLB’s offer included a lower first luxury tax threshold, the league was willing to remove escalating penalties for repeat tax payors. The current CBA requires teams to pay a 20% tax on the first twenty million dollars above the lowest luxury threshold. That tax increases to 30% for teams that exceed the threshold in two consecutive years and escalates to 50% for teams exceeding the threshold in three or more years straight.
The escalating penalties have led some high-spending teams to pull off a tax reset. A team that exceeds the threshold in Year One has extra incentive to dip below for a year and reset their penalty bracket before going back above the mark the following season. That seemed to be of particular import this season for the Yankees and Astros, both of whom exceeded the threshold in 2020 but appear to have narrowly dipped below the mark this season.
It bears repeating that MLB and the MLBPA remain in the very early stages of bargaining. Drellich and Rosenthal previously reported that the MLBPA made its first offer in May, and last month’s proposal was the league’s first. The full terms of both sides’ initial offers remain unclear. There should be plenty more about the sides’ back-and-forth that emerges over the coming weeks and months.