Collective Bargaining Agreement

In a recent article, I tried to make the point that MLB, in general, wants something resembling the status quo in these CBA negotiations.  But there’s one area where I was wrong and MLB’s proposals have been clearly worse than the status quo, and that’s the competitive balance tax.

Let’s look at how MLB’s proposed tax rates compare to the status quo from 2017-21.

MLB’s goal here is clear: make teams much less likely to exceed the base tax threshold at all.  However “soft” of a salary cap this was in the 2017-21, MLB is attempting to harden it.  These tax rates say, “If you go over the tax thresholds, we’re really going to make you pay.”

MLB doubled down on the goal of hardening the CBT as a cap by adding new draft pick penalties.  The status quo: any club that exceeds the second surcharge threshold ($250MM in 2021) would have its highest available selection in the next draft moved back ten spots.  If a team is set to pick in the top six, that is left alone and the second-rounder is moved back ten spots.

MLB’s latest offer is far more extreme than this: a team in the second tier (MLB proposes $234-254MM for 2022) entirely surrenders its second round pick, and a team in the third tier ($254MM+) forfeits its first round pick.

I don’t think anyone would argue with this: MLB’s current proposal is for a much more restrictive competitive balance tax, without even getting into the matter of the thresholds.  So, how would they defend it?  The answer is that MLB likely feels it’s proposing an even trade by eliminating draft pick compensation for signing free agents.

Every winter, somewhere between six and 20 players at the top of the free agency class receive a qualifying offer.  Under this system, the worst possible penalty for signing a qualified free agent is forfeiture of a second and fifth round pick and having your international bonus pool reduced by $1MM.    The Yankees, for example, made this sacrifice to sign Gerrit Cole.  MLB’s pitch may be that under their new CBT plan, teams would have forfeited fewer draft picks than they gave up to sign free agents during the most recent CBA (something I intend to explore).  I think that in MLB’s eyes, they are offering to transfer the burden that a certain number of players at the top of each free agent market bear under the qualifying offer system to the team level as a CBT penalty.

Elimination of the qualifying offer system would remove the Craig Kimbrel/Dallas Keuchel type situations, where those players waited until after the June draft to sign because of the drag caused by draft pick compensation.  It would also remove the dynamic where a player accepts a qualifying offer and ultimately earns less in his career as a result, like perhaps Neil Walker.

I would guess that the MLBPA doesn’t consider this an even trade whatsoever, and has likely told MLB as much.  The MLBPA likely takes major issue with drastically increased CBT penalties.  Consider Giants pitcher Alex Wood, who tweeted,”If penalties increase under the CBT/Luxury tax IT DOES NOT MATTER WHAT THE THRESHOLD IS MY GOD. Make the threshold a billion dollars it doesn’t matter. Teams already don’t spend bc they use the current penalties as an excuse not to. Imagine if the penalties got worse. SMH.”

In a theoretical sense, I disagree with Alex.  One could argue that the thresholds matter more than the penalties, because more teams stop right before the base tax threshold than actually pay the tax.  In recent years, only two or three teams have typically paid the tax.  To take Alex’s example to the extreme, if the base tax threshold actually was a billion dollars, and the penalty for exceeding it was that the team needed to play defense with only eight players on the field at all times, the MLBPA should take that deal because the penalty is irrelevant if teams don’t exceed the base tax threshold.

However, there’s a slippery slope concern here on the side of the MLBPA.  History has shown us that once the players surrender something to MLB, it is very hard to claw any of it back.  Case in point, the players moved arbitration eligibility from three years to two in 1980 and gave that back in 1985.  Since then they’ve only managed to win back 22% of the 2+ class, and MLB is currently drawing a hard line on a return to the pre-1985 arbitration structure.

That’s why the MLBPA will likely draw their own hard line and refuse to further increase the tax rates or the draft pick penalty for exceeding tax thresholds.  That might be one of the MLBPA’s non-starter stances.  And if the MLBPA thinks elimination of the qualifying offer system is of modest value, keeping it in place would not be a major problem.

MLB should stop proposing this supposedly even trade.  It’s like in a fantasy baseball league where a guy keeps making you the same offer over and offer, telling you it’s fair.  It’s just not conducive to making a larger deal.

MLB should take increased CBT penalties off the table entirely, and should also propose leaving the qualifying offer system completely intact from the previous CBA.  That would be, literally, the status quo.  Then, with the clock ticking, the two sides can get down to solving the $51MM gulf between where they think the CBT thresholds should land by 2026.

A lockout is not a strike.  You probably already knew that, but in all of my in-person conversations with casual to moderate baseball fans since the lockout began, none of them knew the difference.

A lockout is a work stoppage initiated by ownership.  MLB teams locked out the players back in December, and that’s why we aren’t seeing pitchers and catchers reporting to spring training today.  If players were to show up at the stadiums, they’d literally find themselves locked out.

A strike is when employees cease going to work as a group.  Since Marvin Miller created the Major League Baseball Players Association 56 years ago, the players have gone on strike five times.  Let’s take a look at why they elected to do so.

1972 strike – 86 games lost

The union itself was only six years old.  The issue at stake is what Miller called a “modest request” of increases in the players’ pensions and health care contribution to keep up with inflation, part of which meant using an existing surplus in the pension fund.  In spring of 1972, Miller felt that an agreement was within reach.  Then, ownership surprised the players by taking a position of no increase on the pension, and a reduction on health care.  Miller saw this as an “unmistakable signal” that “management was baiting us into a strike.”

Two days prior to the expiration of the pension agreement, Miller proposed solving the dispute by using an independent arbitrator, in an attempt to avoid a strike.  The owners declined.  Miller was concerned the “still young Association” wouldn’t be able to sustain a strike, and advised the players to postpone it and negotiate during the season.  Miller found his players to be “positively militant” about going out on strike, however, so that’s what they did.  After 13 days of lost revenue, the owners folded and the first strike in professional sports was over.

1980 strike – 92 exhibition games lost

At this point, free agent compensation was the issue at stake.  Free agency had only been around for four years, and the owners felt they needed to add restrictions to it.  Specifically, owners felt that signing a free agent should require giving up a Major League player as compensation.  Faced with this issue, the players voted to cancel the final week of spring training, return to play Opening Day, and possibly strike on Memorial Day weekend in 1980.

Instead, Miller and MLB negotiator Ray Grebey settled all the other issues, including dropping the salary arbitration requirement from three years to two (something MLB considers a non-starter in these 2022 negotiations).  The two sides were able to avoid a regular season strike by kicking the can down the road on free agent compensation, forming a study committee.  As part of announcing the 1980 agreement, Grebey “poisoned the bargaining well” (in the words of John Helyar in Lords of the Realm) by telling the press the owners’ compensation plan would go into effect in 1981, which was untrue.

While the cancellation of a week of spring training makes this technically count as a strike, no regular season games were missed, and it was more of a prelude to the 1981 strike.  Helyar called it “a lull until the next battle.”

1981 strike – 712 games lost

This was the first major strike in baseball history.  The aforementioned free agent compensation study committee produced nothing of value.  Miller described ownership’s proposal thusly: “A club signing a free agent could very well lose an established player more valuable than the free agent, or lose a prospect with All-Star potential.  The scheme was designed to end free agency and would certainly had succeeded if it had gone into effect.”  After the committee issued a report with “two diametrically opposed opinions,” the two sides had 30 days to hammer out an agreement in early 1981.  That didn’t happen, allowing owners to unilaterally adopt their free agent compensation proposal.  The players were only offering a draft pick as compensation, and over this gap, they went on strike.

Miller called the 1981 strike “the most principled I’ve ever been associated with” and “the Association’s finest hour.”  He notes that the union was not making demands; it was ownership seeking what he considered excessive free agent compensation.  As the strike dragged on, federal mediator Ken Moffett “never got past first base” with his proposals, as Miller put it.  Instead, the MLBPA proposed a system where each team could protect 25 players, and all other players would become part of a pool from which teams losing certain free agents could choose.  With the owners’ strike insurance running out, this “pool” free agent compensation plan led to a settlement after 50 days.  Four years later in 1985 the owners were already asking for the pool compensation plan’s removal.

1985 strike – no games lost

This two-day strike is similar to 1980 in that it technically counts, but no regular season games were lost.  By 1985, Marvin Miller was retired “but remained a power in the union,” according to Helyar.  Still, Don Fehr was in charge of negotiations for the MLBPA.  With the union under new leadership and solidarity of the players waning, the players’ union agreed to “give-backs” for the first time, as arbitration was rolled back to three years instead of two and the pension formula was changed to the players’ detriment.  As Miller put it, “For the first time in its almost twenty years of existence, the Players Association took backward steps.”  He added, “Either you push forward or you’re going to get pushed back.”  Miller felt that Fehr’s error was “in not instilling in the players the determination to fight the good fight.”

1994 strike – 938 regular season games lost, plus cancellation of the playoffs

In 1994, as Helyar put it, “The players rejected a salary cap as repugnant at any price.”  Nonetheless, owner of the small market Brewers and acting commissioner Bud Selig was convinced a salary cap was necessary and convinced the other owners to fight for it.  Helyar explains, “The players had to go on the offensive, if only for defensive purposes. If no contract was reached by collective bargaining, the Lords could eventually shove the salary cap down their throats. Federal labor law allowed employers to declare a bargaining impasse, after a decent interval for negotiations, and impose employment terms.  The players had to try forcing a deal when they still had some leverage – during the season, when lost games meant lost money for the Lords.”

So, the players went on strike on August 12, 1994.  Ultimately the rest of the season, including the playoffs, were canceled.  Fehr and Selig wound up in court, and Justice Sonia Sotomayor granted an injunction blocking Selig’s intended use of replacement players to start the ’95 season.  The status quo was returned and the strike ended.

Why The Players Went On Strike

I worked through this little history lesson to explain the circumstances under which the players went on the three significant strikes in the 56-year history of their union.  In 1972, it was because the owners tried to test a young MLBPA by moving backwards on an issue that was key to players at the time, their pension and health care benefits.  In 1981, players went on strike because owners demanded a compensation system that would significantly devalue their newly-won right to free agency.  In 1994, players went on strike because Bud Selig attempted to force a salary cap.  The common thread: in each instance, ownership was attempting to move the players significantly backward.

How The Owners Have Justified The 2022 Lockout

Now let’s tie this into the present dispute.  MLB’s lockout is already affecting spring training and could well lead to canceled games in April, so it’s important to understand why they did it.  In his December 2 “letter to baseball fans,” Commissioner Rob Manfred provided two reasons why MLB was “forced to commence” a lockout of the players:

1.  “We hope that the lockout will jumpstart the negotiations and get us to an agreement that will allow the season to start on time.”
2.   “We cannot allow an expired agreement to again cause an in-season strike and a missed World Series, like we experienced in 1994.”

It’s pretty easy to dismiss the “jumpstart the negotiations” angle, given that MLB waited 42 days between its lockout and its next proposal.  In my opinion, some credibility is lost when you say that and then wait that long to make your next offer.

But let’s examine the second point, about how we can’t allow another strike like ’94.  I have already established that historically, MLB players going on strike has been rare, and pretty clearly provoked by ownership each time.  However, ownership has not done anything to provoke a strike in 2022.

As Manfred put it, “Baseball’s players have no salary cap and are not subjected to a maximum length or dollar amount on contracts. In fact, only MLB has guaranteed contracts that run 10 or more years, and in excess of $300 million. We have not proposed anything that would change these fundamentals.”  Emphasis mine.  This is completely true.  The MLBPA has plenty of concerns right now with various causes, but they’re not the result of something radical MLB is trying to impose.  MLB wants something resembling the status quo.  The difference of opinion is on whether the status quo is acceptable.

The Current Issues Are Not Strike-worthy

It’s my opinion that the current differences of opinion, which are mostly in in degrees and not concepts, are not compelling enough to cause the players to strike.  Sometimes the degrees of difference are large, like in the case of the competitive balance tax, but it’s still mostly haggling over numbers.  To be clear, the idea that the players wouldn’t strike is guesswork based on the historical precedent I’ve laid out in this post.  Publicly or even privately, if the players are disinclined to strike over the current differences, they cannot admit it.  To do so would be to lose their leverage.

MLB could lift the lockout today and everything would start on time, with negotiations continuing during the season.  So for them to keep the lockout in place and risk canceling games, under the justification Manfred provided, MLB really has to feel a midseason strike would have been likely.  Let’s game that out and envision a hypothetical strike announcement by MLBPA executive director Tony Clark.  For this exercise I’m using the current gaps, even though six months from now those gaps would presumably be smaller.

August 12, 2022: Hypothetical Press Release From Tony Clark On Behalf Of MLB Players

“On this the 28th anniversary of the 1994 strike, I’m devastated to say that MLB players have no choice but to go on strike due to the unreasonable positions of the owners.  Our differences are large enough to risk losing the rest of the 2022 season and the World Series if the owners don’t move significantly within the few weeks.  Here are the reasons we’re going on strike.

We believe all 30 teams should try to win every year.  While we have agreed with MLB on the implementation of a draft lottery, we differ on how many picks should be subject to it (three vs. eight)  and whether teams should be penalized for being bad in consecutive years.

We want the best players to be promoted as soon as they’re ready for the Majors.  Service time manipulation meant MLB stars like Kris Bryant and Vladimir Guerrero Jr. had their debuts delayed past the point of readiness.  Perhaps more importantly to the union, this practice allows teams to control players for nearly seven years instead of the agreed-upon six.  MLB has proposed extra draft picks to incentivize teams to put MLB-ready stars on Opening Day rosters, but we don’t think it’s enough to move the needle.  We feel that rookies should have the opportunity to earn a full year of service time based on factors like awards voting and WAR.  We’re also seeking a $30MM cut in revenue sharing, as we feel these transfers of wealth allow small market teams to be profitable without investing in players and trying to win.

We also believe large market teams should have fewer payroll restrictions.  When we agreed in the previous two CBAs to the competitive balance tax increasing by $32MM over a ten-year period, we didn’t anticipate large market teams would treat the base tax threshold as a de facto salary cap.  MLB has proposed moving the tax threshold by only $12MM by 2026, but we feel a $63MM increase to $273MM over the next five years is necessary.  MLB has proposed increasing the tax rates on overages as well.

As teams have de-emphasized free agency, we need to get players paid earlier in their careers.  One key is the minimum salary, which we feel should increase from $570,500 in 2021 to $775,000 in ’22.  MLB has proposed $630,000, leaving us $145,000 apart.  On a related note, we’re also looking to change salary arbitration so that all players with at least two years are eligible.  This would add dozens of players into the arbitration system each year who previously would have been making a salary close to the league minimum.

The third way we’re looking to increase pay for players earlier in their careers is by the implementation of a pre-arbitration bonus pool.  MLB has agreed to this concept.  We’re proposing each team contribute $3.33MM per year to this pool (a total of $100MM), but MLB is offering only $500K per team (a total of $15MM).

Though the MLBPA is not seeking playoff expansion, we are nonetheless willing to grant MLB an increase to a 12-team field.  They’re seeking a 14-team field.  We feel that expanded playoffs, plus MLB’s proposed addition of advertising to uniforms, would bring significant additional revenue to the teams.

We find the universal designated hitter to be mutually beneficial, and MLB has agreed to implement it.  MLB has also agreed to eliminate the qualifying offer system, which we concede would benefit several players each offseason.

Collective bargaining has been ongoing for nearly 16 months, and we’ve played out the 2022 season without an agreement in place.  While we were cautiously optimistic when MLB lifted the lockout six months ago in February, we now feel that our differences are too significant to be resolved through further bargaining.  Regretfully, a strike is our only recourse, and we hope it will prompt the required movement from MLB to lead to an agreement and save the ’22 playoffs.”

A Possible Third Motive For MLB’s Lockout

Maybe you’re like me and you can’t see Tony Clark issuing a strike announcement statement similar to the hypothetical I wrote above.  Though they wouldn’t admit it, maybe MLB also finds a strike on these grounds to be unlikely.  That leads to a third, unstated possible motive for MLB initiating a lockout in December 2021: they did so mainly to gain financial leverage over the players and get a better deal for themselves.

That’s what I think is happening, and it’s MLB’s right to do so.  In that case, the current situation boils down to MLB being willing to cancel games in April to get a better agreement.

I know it’s easy to “both sides” the current labor dispute.  Feel free to choose from among these commonly-used phrases:

• A pox on both your houses
• Millionaires vs. billionaires
• Where is the fan in all of this

However, only one side can implement a lockout, and only one side can go on strike.  Currently, we’re in a lockout, and I don’t think it’s reasonable to blame the players for going on strike unless they actually do, you know, go on strike.  If the lockout is lifted and the players go on strike over these issues, then yes, the players would shoulder the lion’s share of responsibility for missed games and/or canceled playoffs.  Until then, missed games fall on ownership.

Required baseball labor reading:

• A Whole Different Ball Game by Marvin Miller
• Lords of the Realm by John Helyar
• The Game by Jon Pessah