Collective Bargaining Agreement

As covered at length by MLBTR’s Anthony Franco, Ken Rosenthal and Evan Drellich of The Athletic published a relatively bleak account of the state of negotiations between players and owners yesterday. With the scheduled start of Spring Training fast approaching, the MLBPA — widely viewed among players as having negotiated the short end of the agreement that ran from 2016-2021 — views the owners’ most recent proposal as worse than the prior arrangement. Giants player representative Austin Slater summed up the union’s view when he told Susan Slusser of the San Francisco Chronicle that MLB’s present stance on questions of core economics were “disingenuous” and “a smokescreen” and implied that players viewed owners’ pre-lockout behavior as unprofessional.

Per Rosenthal’s and Drellich’s report, players and owners remain at loggerheads on most — if not all — of the core issues in play. These issues — each of which bear directly on some combination of total revenue, the way revenue is shared between players and owners, and labor conditions — include playoff expansion (a major priority for owners), an international draft (which the players have made clear they’d only agree to in exchange for a significant concession), the competitive balance tax threshold (players view it as a major hindrance to salary growth and would like to see it grow substantially), the minimum salary (which all players make at some point in their career and sets the ‘replacement’ cost for veterans), revenue sharing (players see it as supporting tanking), and draft order (players want a lottery for top picks to disincentivize tanking).

While an on-time start to Spring Training looks like a pipe dream and Opening Day seems to be in increasing jeopardy, owners and players appear to have made at least some progress on one issue: the treatment of players prior to arbitration eligibility. Under the previous agreement, the great majority of players with less than three years of service time were paid the league minimum ($570,500 in 2021) or thereabouts before becoming eligible for salary arbitration (wherein team and player could negotiate but would have a salary set by an arbitrator should they fail to reach a deal) and remain under team control for three further seasons. (Players in the top 22 percent among those with between two and three years of service time, known as ‘Super Twos,’ were granted arbitration rights a year early, giving them four years of eligibility.)

In November, owners proposed eliminating salary arbitration entirely, instead creating a performance-based (by fWAR) salary pool (a solution with the potential to pay young high-end performers a great deal more but that shifts the bulk of injury and performance risk from team to player), while players proposed lowering the arbitration eligibility bar from three years to two (thereby diminishing a year of extraordinary surplus value generated by players entering their primes). Unsurprisingly, both proposals were non-starters.

Recent negotiations appear to have yielded a potential compromise in principle, if not in monetary value. Though the union has not yet dropped its demand for an additional year of arbitration eligibility, each side has proposed the creation of a salary pool for pre-arbitration players — owners have offered $10MM, players have asked for $105MM — to be distributed according to performance, with the biggest bonuses awarded according to MVP, Cy Young, and Rookie of the Year voting results. As Rosenthal and Drellich note, owners agreeing to a pool value closer to nine digits than seven might persuade players to accept the continuation of the arbitration status quo.

Some common ground appears to exist on the related topic of service-time manipulation, an issue that rose to prominence in 2015 when the Cubs stashed consensus top-5 prospect (and eventual NL Rookie of the Year) Kris Bryant in the minors for just under two weeks in order to ensure an additional year of club control. Though Bryant’s grievance against the Cubs was ultimately denied, owners appear to agree that such manipulation is a bad look for the game, but their solution differs substantially from the union’s. Both owners and players have proposed somewhat convoluted systems. The union plan would grant a full year of service to a) any player who finishes in the top five in either league’s Rookie of the Year voting, the top three for reliever of the year, or made first- or second-team All-MLB; b) finished in the top 10 at their position in an average of bWAR and fWAR if a catcher or infielder; or c) finished in the top 30 at their position in the same average if an outfielder or pitcher. MLB’s plan would reward teams rather than players, granting a draft pick (after the first round) to any team that keeps a pre-season top 100 prospect on its roster for a full season should that player also finish in the top three in Rookie of the Year balloting or in the top five in MVP balloting in any of his first three seasons.

Owners reportedly view the players’ proposal as affecting a much wider pool of players than they’d like, and there’s no doubt that the union’s scheme would cut into teams’ ability to generate surplus value (in short, the difference between the salary of a player generating a given quantity of on-field value and the cost of that value on the open market). It would do particular damage to teams operating on the model associated with the Rays and A’s of the last several decades, whereby teams generally either lock up players early in their careers for below-market rates (a la the deal Evan Longoria signed with the Rays in 2008, which gave the team nine years of control) or trade them for a maximal return before they reach free agency (as the A’s are likely to do with Matt Olson this offseason). In the 2021 season, for instance, Wander Franco would have been granted a full year of service time under the players’ proposal despite not making his debut until late June — keeping him under team control only through the 2026 season rather than through 2027 — while under the owners’ proposal the Rays would have only received a draft pick had they kept the twenty-year-old on their roster from Opening Day.

How much progress these apparent areas of agreement actually represent is a matter of some debate, and fans should bear in mind that even in these comparatively productive areas of discussion, significant and material gaps persist. Whether or not the 2022 season will begin on time remains an open question, but progress — or a lack thereof — on matters that affect the earning power of all players in the early years of their careers will go a long way toward providing an answer. In any event, the owners’ present proposals aren’t likely to cut the mustard with an MLBPA that feels it’s held the short end of the revenue stick for years.

As part of ongoing collective bargaining deliberations, Major League Baseball and the MLB Players Association have kicked around the possibility of implementing some form of draft lottery. With both sides willing to put a lottery in place, it seems likely to be included whenever the next CBA is finalized.

The precise format the lottery would take remains an open question, though. The MLBPA — of the mind that a higher draft slot for teams with worse records incentivizes already bad teams not to improve — has pushed for a lottery to determine the first eight selections. MLB has favored a narrower system, with only the top three choices to be settled by the lottery. While the sides differ on the number of picks it would impact, Ben Nicholson-Smith of Sportsnet reports (Twitter links) they are in agreement that all non-playoff teams would be eligible for the lottery. The team’s chances of winning would be weighted such that clubs with the worst record the previous year would have the highest odds of landing a high pick.

That’s broadly similar to the systems in play with both the NHL and NBA, although those leagues have some individual nuances. The NHL prohibits teams from jumping more than ten spots relative to their position in inverse standings order, effectively restricting a shot at the top pick to the league’s bottom 11 finishers. The NBA allows all non-playoff teams a chance — admittedly a very small one for the best non-playoff clubs — to get a top-four selection but doesn’t allow teams outside the bottom five in the standings to make more marginal moves up the draft order (say, from 12th to 9th).

MLBTR has learned some specifics regarding the MLBPA’s latest proposal for the draft, which MLB rejected during recent collective bargaining discussions. Under the union’s offer, teams would find themselves excluded from the lottery for finishing below certain thresholds in the standings for two to three consecutive seasons. The specific thresholds for exclusion varied depending upon market size, with larger-market clubs facing stricter requirements for lottery eligibility. Non-playoff teams either excluded from or that didn’t win selection in the lottery would select in reverse order of the previous season’s standings from Pick #9 onwards; playoff teams would select in reverse order of regular season record after all the non-playoff teams have picked, as is the case under the current system.

The possibility for lottery exclusion is doubtless a measure the union hopes to implement in response to tanking, with the lowered draft position serving as something of a punitive measure for teams that finish among the league’s worst across a multi-year stretch. Diminished draft position for repeat bottom-dwellers wouldn’t alone stamp out rebuilding, and some teams that merely underperformed rather than setting out to rebuild would be adversely affected. Yet avoiding the possibility of the same teams collecting top picks for three-plus straight years seems to be a goal for the MLBPA, with the union taking particular aim at unsuccessful large-market franchises that should theoretically have enough of a financial advantage to avoid lengthy down stretches.

On the flip side, the union has proposed measures that would reward competitive smaller-market franchises with additional draft choices. Clubs eligible for Competitive Balance picks — those among the bottom ten leaguewide in either revenue or market size — would receive a bonus pick before Competitive Balance Round A (around #31-#40 overall in a typical draft) the year after reaching the postseason. Competitive Balance-eligible teams that finish .500 or better but don’t reach the playoffs would receive a bonus pick before Competitive Balance Round B (around #65-#75 in an average year).

Much about the potential MLB draft lottery remains unclear. The number of picks subject to the lottery and the probability of moving up for each team based on their position in the standings remains to be determined. So too is the number of teams that will be involved. How many non-playoff teams will there be in the next CBA? That’s presently unknown, given the league’s desire for an expanded postseason field. It’s also not clear whether a lottery would only apply to the domestic draft, or if a draft for the acquisition of international amateurs — which MLB hopes to include in the CBA — would contain one as well.

The draft lottery is far from the most important point of contention between the league and union. The competitive balance tax, league minimum salary and path to arbitration eligibility are all among the bigger topics to iron out. Implementing a draft lottery is, however, one of the smaller yet visible ways in which the league is likely to change in the coming months.

8:24 pm: Susan Slusser of the San Francisco Chronicle writes that MLB’s proposal would also include international signing bonus pool forfeitures for teams that exceed the CBT threshold. Interestingly, Slusser adds some details on the union’s CBT proposals as well. Under the MLBPA’s proposed framework, the CBT would escalate from the $245MM mark in 2022 to $273MM by 2026.

8:06 pm: Over the past two days, both the MLB Players Association and Major League Baseball have put forth proposals on some of the game’s core economic issues. While the sides have made a bit of movement towards a midpoint — the MLBPA agreed to drop its push for earlier free agency eligibility; MLB agreed to a union formulation for a bonus pool that’d award certain pre-arbitration players based upon their performance — there’s still plenty of work to be done.

Ben Nicholson-Smith of Sportsnet (Twitter links and thread) provides more details on MLB’s offer this afternoon. Notably, the league rejected the union’s recent push for a $30MM cut in revenue sharing, reiterating its desire to leave the process unchanged. (The MLBPA had initially been seeking a $100MM cut to revenue sharing but dropped the ask in yesterday’s offer). MLB also rejected a union push for players to accrue service time during postseason play.

Both Nicholson-Smith and Bob Nightengale of USA Today note that the league continues to push for more significant penalties for teams that exceed the luxury tax threshold. According to Nightengale, MLB’s most recent offer on the matter would’ve included a 50% tax on CBT overages and the forfeiture of a third-round draft pick for surpassing the threshold.

That’d mark a rather significant uptick over the penalties in the previous CBA, which contained no draft pick forfeiture and a 20% tax on overages for teams exceeding the base threshold for the first time. The sides are also divided on where such a threshold should be set. While the union has pushed for the CBT marker to jump from $210MM to $245MM next season, MLB has offered a far more modest increase to $214MM next year, maxing out at $220MM at the end of a five-year term.

With plenty of key economic issues still to be ironed out, Jeff Passan and Jesse Rogers of ESPN write that the parties are planning to turn their attention to some ancillary subjects over the coming days before coming back to the issues of greater divide. Nicholson-Smith tweets that the joint drug agreement and grievance procedures are among the forthcoming topics of discussion.

Last week, Major League Baseball presented a proposal on (some) core economics to the MLB Players Association. Among the features included in the league’s offer: the implementation of a draft for the acquisition of international amateur players.

The league’s interest in an international draft is nothing new. MLB pushed for its inclusion during negotiations on the 2016-21 collective bargaining agreement as well. The MLBPA didn’t agree to one during the last round of CBA talks, although the union did consent to a modification of the existing international signing period setup. In the last CBA, team spending pools allotted for international amateur signees were hard-capped. That proved a much tighter restriction than had been in place under the previous CBA, when teams could exceed their allotted bonus pools (and often did in dramatic fashion) so long as they were willing to accept spending limitations in each of the subsequent two seasons.

Thus far in CBA negotiations, the union has continued to propose alternatives to an international draft, report Maria Torres, Ken Rosenthal and Evan Drellich of The Athletic. However, as The Athletic covers in a lengthy and detailed piece, members of various constituencies — MLB, the MLBPA, player reps, buscones (essentially hybrid trainers/agents for Latin American amateurs), players and team officials — believe the process for acquiring amateur players from Latin America needs some form of adjustment.

Under the current system, amateur players not subject to the domestic draft (i.e. those outside the United States, Canada and Puerto Rico) are eligible to sign with clubs after they turn 16 years old. While players have to wait until that age to officially sign, however, it is common practice for teams to come to verbal agreements with prospects multiple years in advance as part of a race for talent that The Athletic writes has accelerated since the introduction of hard caps.

The league has pointed to a desire to stamp out such early agreements as justification for its desire for a draft. Those kinds of early deals can leave players out in the cold. Teams can agree to verbal deals with players that, when summed together, exceed the value of their allotted cap. With the rules prohibiting clubs from honoring all their commitments, the team may circle back to second or third tier prospects and require that they lower their bonus demand. The player often has little recourse but to do so. Unlike a domestic high school prospect, international signees don’t typically have a looming college commitment as negotiating leverage. And while they could try to shop their services to other teams, many clubs will already have verbally committed the entirety of their bonus pools to other players in the signing class.

That said, the union doesn’t seem to agree that an international draft is the optimal solution. Implementing a draft inherently removes the player’s flexibility to choose their first employer, an element which the union finds concerning. According to The Athletic, the MLBPA would prefer the league implement and stringently enforce a ban on verbal agreements with players below the age of 15. The union is also pursuing more flexibility for teams to roll over funds from their annual bonus pools, which isn’t permitted under the current system.

In addition to concerns about early agreements, The Athletic article raises myriad other problems with the current setup. Ulises Cabrera, a player representative with Octagon, claims to Torres and Rosenthal that some scouts have taken under-the-table payments from buscones to arrange deals with players from outside their assigned geographical purview. The piece also goes into detail about concerns including lesser pay for international prospects relative to domestic draftees of a similar caliber and eradicating performance-enhancing drug use. It is well worth reading in full for a picture of the numerous issues that need to be ironed out.