Collective Bargaining Agreement

Last week, both Jeff Passan of ESPN and Evan Drellich of the Athletic reported that Major League Baseball had been preparing core economics proposals to present to the MLB Players Association. Both Passan and Drellich suggested that could ignite collective bargaining negotiations by the end of the month. Bob Nightengale of USA Today adds a bit more specificity to that timeline, writing this morning that the league is planning to make its proposal “within the next two weeks.”

Whenever the league does put its offer on the table, that’ll serve as the first notable development in CBA talks since MLB instituted a lockout in the early morning minutes of December 2. The parties have since met a couple times regarding issues outside of core economics, but there’s reportedly been no discussion on the most contentious issues since the start of the lockout.

The league and union did put forth core economics proposals prior to the expiration of the previous CBA, but neither side responded favorably to the other’s offers. That culminated in a seven-minute bargaining session on December 1. Both parties have expressed openness to returning to the table, but they’ve been in a holding pattern as the union has waited for the league to put forth a new offer.

Renewing core economics discussions by around January 21 (two Fridays from now) wouldn’t give the parties much time to bridge the gap without threatening exhibition play. The first Spring Training games are scheduled for February 26, and there’ll certainly need to be a few weeks between the signing of a new CBA and the start of gameplay for players to report, clear whatever COVID-19 protocols may be in place and ramp up physical activity.

On Monday, USA Today’s Bob Nightengale wrote that no negotiating sessions were scheduled between MLB and the players’ union.  That remains the case, but ESPN’s Jeff Passan writes today that “MLB is working on proposals to bring to the table.”  Passan’s sources believe the “earliest negotiations will ramp up this time is late January.”

Passan suggests MLB is hoping to determine what tops the players’ list of priorities: the oft-repeated “competitive integrity” anti-tanking buzzword, getting players paid earlier in their careers, or raising the competitive balance tax thresholds.

As has been reported previously, MLB’s most recent proposal had the CBT threshold starting at $214MM in 2022.  MLB’s proposal had the thresholds progressing only to $220MM by the end of a presumed five-year deal.  Going from $210MM in ’21 to $220MM in ’26 would be a 4.8% increase.  As I’ll explain, that’d represent the union’s biggest failure yet in increasing the CBT.

Last month, I documented how the CBT thresholds have changed with each new CBA, after this tax was introduced in 1997.  In 2003, the threshold was increased by 98.6% from the previous mark, jumping from $58.9MM in ’99 all the way to $117MM in ’03.  That was the first of four collective bargaining agreements where CBT increases were on the table, once it was initially set at $51MM in ’97.

That set of negotiations had the CBT ending at $136.5MM in ’06.  In the CBA spanning 2007-11, the players were able to get a 30.4% increase by ’11, jumping up to $178MM.  But in the CBA spanning 2012-16, the players had a major loss.  They succeeded only in taking the CBT from $178MM to $189MM, an increase of about 6.2%.  Compared to that $189MM point, the 2017-21 CBA ended with an 11.1% bump to get to $210MM.

The players have reportedly set their opening bid for the CBT at $245MM.  That implies they might hope to see it progress to around $260MM by the end of the deal.  A jump from a $210MM starting point to a $260MM ending point would represent a 23.8% increase, falling neatly between the player-favoring 30% increase of ’07 and the MLB-favoring 11% increase of ’17.

The CBT is a major issue, but it remains to be seen whether the players will abandon some other more aggressive asks to prioritize it.  As Passan sees it, if the two sides don’t make progress by February 1st, a spring training delay is likely.  He feels that a lack of progress by March 1st “sets off the alarm” in terms of not starting the season on time, given all that must be done to be ready to play.

Last month, Evan Drellich of the Athletic reported that Major League Baseball and the MLB Players Association weren’t expected to discuss core economics issues until after the New Year. The calendar has since flipped, but there still don’t seem to be any talks on the horizon. Bob Nightengale of USA Today reports (on Twitter) that there is currently no schedule for the next set of collective bargaining discussions.

Nightengale adds that the parties have met twice since MLB instituted a lockout in the early morning hours of December 2. Those talks, as expected, were strictly regarding issues not related to core economics. It’s those key economic issues (i.e. the game’s service time structure, the competitive balance tax and potential playoff expansion) that are of greatest importance to both sides. Finding a mutually agreeable solution on such topics figures to be the most time-consuming and difficult aspect of negotiations.

In the aftermath of the lockout, both commissioner Rob Manfred and key members of the MLBPA (including executive director Tony Clark, lead negotiator Bruce Meyer and players with leadership roles in the union) have expressed a desire to get back to the bargaining table. That hasn’t happened in earnest over the past four weeks, although it’s not clear talks would’ve achieved much regardless. Drellich wrote last month that individuals on both sides believed that December discussions on core economics would likely have only resulted in negotiators “saying the same things to each other over and over.”

Instead, it seems that there’ll need to be an approaching deadline that spurs conversation. At this point on the calendar, neither side is dealing with the level of financial pressure they’d face if the threat of game cancelations became more tangible. The league’s owners aren’t in imminent danger of losing gate revenues, while the players aren’t yet faced with the possibility of foregoing game checks.

Spring Training games are first scheduled to begin on February 26. Players aren’t paid for Spring Training, but owners would first face lost revenues at that point. If the work stoppage lingers long enough into Spring Training that regular season games are threatened — at least some form of exhibition play, even if abbreviated, will be required for players to work their way into game shape — then the possibility of lost income for players looms larger. Of course, current free agents (and a few players in DFA limbo) are faced with ongoing employment uncertainty due to the ban on major league transactions.

For now, it doesn’t seem those scenarios are imminent enough to push the parties back to the negotiating table. It does seem, however, that significant progress will have to be made at some point during this month. Shortly after the institution of the lockout, Nightengale suggested the sides viewed February 1 as a “soft deadline” for a new CBA to be in place in order to avoid interruptions to Spring Training. He floated March 1 as a possible deadline for regular season play to proceed on schedule given the need for some form of ramp-up period. Opening Day is currently scheduled for March 31.

According to a report from the Associated Press, major league teams spent approximately $4.05 billion on player payrolls in 2021. The AP indicates that’s a 4% drop relative to 2019 — the most recent 162-game season — and the lowest full-season tally since 2015’s $3.9 billion. In raw dollars, there was a $167.69MM drop in spending on players between 2019 and 2021, writes Maury Brown of Forbes.

It’s not surprising to see team spending dip. The 2020 season was played with essentially no fan attendance as a result of the COVID-19 pandemic. A few ownership groups publicly lamented the loss of gate revenues last year, and free agent spending was chilled a bit last offseason. The value of the qualifying offer — calculated as the average of the 125 highest salaries around the league — also dipped from $18.9MM to $18.4MM between 2020 and 2021, suggesting that spending at the top of the market took a slight step back.

That said, attributing the spending downturn entirely to the pandemic feels a bit simplistic. According to the AP, the league record for player payrolls (a bit less than $4.25 billion) was set in 2017. The league saw slight reductions in spending on players in each of 2018 and 2019, although it had been slated for a new all-time high in 2020 before the season was shortened and player pay was prorated.

However much one wants to attribute the 2020-21 decrease in spending to the pandemic, those figures will no doubt be of interest to the player’s union. While spending at the top of the market took a small step back last year, there’s been a more dramatic decrease for the average player (from a salary perspective) over the past few seasons. In April, the Associated Press found that the median salary of Major League players has fallen 18% since 2019 and 30% since 2015.

That’s largely a reflection of how many teams have approached roster construction over the past few years. By and large, clubs have continued to pay big money for elite talent, but they’ve become more reluctant to invest in players with closer to average production. Star players have continued to set richer precedents and free agency was quite strong in the weeks leading up to the lockout, but the gap has widened between top-of-the-market stars and mid-tier veterans and young players. Recognizing that a roster can be built most cost-effectively by leaning on young talent, front offices in recent years have spent more heavily on premier players, knowing that they can rely on pre-arb players and non-star veterans making lower salaries to provide adequate value on the rest of the roster.

As Chelsea Janes of The Washington Post writes in a piece that’s worth checking out in full, the disconnect between stars, mid-tier veterans and young players presents a challenge in collective bargaining. The league has pointed to the top-end salaries as evidence of a robust economic system. In the letter he penned to fans following the lockout announcement, Commissioner Rob Manfred wrote “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 $300MM.”

MLB’s proposal of a salary floor in collective bargaining discussions suggests some willingness on the league’s part to incentivize spending on mid-tier players. That was contingent on drastically reduced luxury tax thresholds that’d limit spending on top-end players, though. Rather than merely redistributing salaries, the MLBPA has focused on raising the players’ overall share of revenues. “MLB’s negotiators are open to changing the way younger players are compensated but do not necessarily believe players need to receive a broader share of the revenue pie to rectify those disparities,” Janes writes. “The union, meanwhile, wants to change the way players are compensated in large part by injecting a greater percentage of revenue back into player compensation — helping those at the bottom without costing those at the top.”

Union members could have differing interests based on their financial status. Yet as Janes notes, a number of key player representatives within the MLBPA reside squarely on the top end. Gerrit Cole, Marcus Semien, and Max Scherzer are among the sport’s premier athletes advocating for a market that is kinder to their youngest and oldest peers. This advocacy isn’t lost on others on the union side, including retired reliever and self-proclaimed “middle-of-the-pack guy,” Jerry Blevins. The former big league southpaw tells Janes having players with nine-figure salaries trying to push forward salaries for lower-tier vets “makes a big difference because they represent us, the normal guy, even though at the same time they’re benefiting from the system as it’s set up.”

The AP and Forbes each provide additional data on team spending habits. According to the AP, ten teams ended the season with a payroll under $100MM, a figure not seen since 13 teams ducked under that mark in 2014. The Pirates checked in with the lowest end-of-year payroll at $50MM, the lowest figure for any team since 2013. The Dodgers and Yankees were the only teams to exceed $200MM in actual payroll; the Dodgers and Padres, meanwhile, were the two clubs whose commitments exceeded the luxury tax threshold. (CBT calculations are based on deals’ average annual values as opposed to year-by-year payouts, explaining why the Padres paid the tax while the Yankees didn’t in spite of New York having the higher actual payroll).

Eleven teams raised their payrolls between 2019 and 2021, according to Forbes. The Padres’ 77% jump from around $104MM to approximately $184MM was easily the biggest. The Guardians had the biggest decline over that stretch, dipping from $123MM in 2019 to $53MM this past season. Forbes provides the exact payrolls of all thirty teams in 2019 and 2021 for those interested.