Collective Bargaining Agreement

In August, Major League Baseball made its first core economics proposal to the MLB Players Association. That would’ve involved a radical restructuring of the game’s economic system, first granting players free agency at age 29 1/2 (as opposed to after six years of MLB service) and replacing the current arbitration structure with a pool-based system attached to revenues.

This week, the league proposed an unexpected wrinkle in CBA talks. While the new proposal contains the same age threshold for free agency qualification, Evan Drellich, Ken Rosenthal and Eno Sarris of the Athletic report that this offer would tie pre-free agency pay directly to a player’s Wins Above Replacement tally. Under this structure, a player’s service time and career WAR marks (weighted to emphasize the most recent seasons more heavily) would set the player’s salary. While multiple websites calculate WAR totals in different ways, MLB’s proposal would base salaries on FanGraphs’ WAR tabulations.

Earlier this afternoon, Ben Nicholson-Smith of Sportsnet reported (on Twitter) that MLB had offered to replace the arbitration system with salaries based on an algorithm. Nicholson-Smith added that the MLBPA was not enamored with that idea, and the Athletic trio quotes one player representative as saying that such an offer has “zero chance” of being approved.

That’s not at all surprising. MLB’s proposal to set free agency at 29 1/2 years has always looked to be a non-starter for the players. The league’s top prospects typically reach the majors in their early-mid 20’s. Those who live up to their promise will often pass six years of service and hit free agency in advance of their age-28 or age-29 seasons. Marketing as many prime-aged seasons as possible is what often allows players to land contracts that push free agency forward, and the league’s proposal could tether that elite group to their original teams for longer than the current system does. (For example, neither of this offseason’s top two free agents — Carlos Correa and Corey Seager — would be eligible for free agency were the age set at 29 1/2).

Certainly, the age threshold would impact some players positively as well. Players like Aaron Judge and Willson Contreras would’ve reached free agency this winter as opposed to going into their final year of arbitration. A late bloomer like Cubs third baseman Patrick Wisdom would’ve been on the open market instead of making the league minimum salary, and he’d have likely made a few million dollars in 2022 coming off a 28-homer showing over just 375 plate appearances. Overall, though, the union likely sees the 29 1/2 year age threshold as too old to be more desirable than the current service structure.

Fixing player salaries to a statistical formula comes with its own challenges. Past performance will, of course, always be relevant to player pay. The existing arbitration system awards players salaries based on their combination of service time and prior salaries of statistically-comparable players. There’s a case to be made that MLB’s proposal would modernize that process.

Arbitration can lean a little more heavily than most modern teams do on traditional box score statistics like pitcher wins, saves, and hitters’ home runs and RBI totals. While arbitrators will also consider newer, WAR-like metrics, their comparative reliance on old-school stats has led to arb salaries for closers and defensively-limited sluggers tending to skew higher than teams have been willing to pay. On the other hand, arbitrators haven’t generally placed as much value as clubs have on glove-first players and high-leverage setup relievers. Basing pre-free agency salaries off WAR would probably help to close that gap.

That said, the MLBPA seems likely to take issue with tying salaries to WAR directly. As the Athletic scribes write, using that metric is particularly challenging with regards to relievers. Both the free agent and arbitration markets have valued bullpen arms more highly than WAR totals typically do. Advanced defensive metrics — a key component in WAR calculations — can be unstable on a yearly basis. Over the long run, those metrics tend to align with general evaluations of a player’s defensive acumen. Fixing salaries weighted heavily on single-season defensive metrics, though, seems suboptimal.

WAR naturally involves making imprecise adjustments for different parks, which could pose problems when teams adjust playing field dimensions. And WAR metrics differ on how to separate a pitcher’s contributions from those of his defense; FanGraphs, upon which MLB’s proposal would be based, evaluates pitchers essentially off their strikeout, walk and home run rates. That strips out ball in play luck but also creates some seemingly odd results. For instance, Aaron Nola — who threw 180 2/3 innings of 4.63 ERA/3.37 FIP ball — had a higher 2021 fWAR than Robbie Ray, who tossed 193 1/3 frames of 2.84 ERA/3.69 FIP pitching.

None of this is meant as an indictment of WAR models generally or of FanGraphs’ choices specifically. Most or all MLB teams rely on similar calculations in making player evaluations. That’s with good reason, since advanced metrics of that nature can offer insights into players not found by typical box score stats. Still, these limitations highlight the potential pitfalls of tying player salaries directly to this one statistic.

MLB’s proposal looks unlikely to make much headway ultimately, and both sides will continue negotiations as we near the expiration of the current CBA on December 1. Nicholson-Smith reports that the two sides are scheduled to meet next on Monday.

Last week, the MLB Players Association made its second proposal on core economics in collective bargaining discussions with the league, report Evan Drellich and Ken Rosenthal of the Athletic. The new proposal contained only minor adjustments compared to the PA’s first offer, which was made back in May.

Drellich and Rosenthal reported in August that the MLBPA’s first offer included an emphasis on earlier arbitration for young players, but other details on their vision remained sparse. The Athletic now shines more light on that initial offer, suggesting that an alteration to the draft order, a higher league minimum salary, elevated luxury tax thresholds, alterations to the revenue sharing system, and an unspecified change in how service time is calculated were all included in that opening proposal. The union’s initial proposal also included scenarios where certain players could qualify for free agency without reaching a full six years of major league service. Whether all of those goals remained in the union’s second offer is not clear.

Major League Baseball made one counteroffer in August — a radically different setup that would’ve included lowered luxury tax thresholds with an accompanying salary floor, an age-based system in which players first reach free agency at 29.5 years old, and a revenue-based pool system to replace the current arbitration structure. Given the massive differences in what’s publicly known about each side’s offers, it’s no surprise the MLBPA reportedly considered the league’s offer a non-starter.

Drellich and Rosenthal also shed a bit more light on MLB’s first proposal. The league’s proposed salary floor, which was to be set at $100MM, was a “soft” floor, featuring unspecified penalties for teams that don’t reach that mark in annual payroll rather than a firm mandate to do so. To address players’ concerns about rebuilding teams, MLB’s offer included a provision that would prevent teams from picking in the top five of the amateur draft in three consecutive seasons.

MLB’s proposal also included a provision to overhaul the system for teams to acquire international amateur prospects, per Drellich and Rosenthal. Currently, teams are annually allotted a hard-capped bonus pool to sign amateur players from outside of the U.S., Canada and Puerto Rico. While deals can’t formally be signed until the player turns 16 years old, teams and player representatives often come to verbal agreements a year or more in advance. According to the Athletic, MLB proposed to replace the current system with an international draft, the details of which remain unclear.

The potential for a collectively bargained international draft has long been bandied about. Were it to come to fruition, it’s generally expected that draft would be a separate entity from the current Rule 4 draft for acquiring domestic amateur talent. An international draft would foreclose the potential for advance verbal agreements  for incredibly young players, but it’d also obviously restrict those players’ abilities to choose their preferred destination.

It’s clear that MLB and the MLBPA remain far apart on core economic concepts, but Drellich and Rosenthal report that the sides have made progress in ancillary bargaining areas and are slated for in-person talks at next week’s general managers meetings. The current CBA expires on December 1, and Drellich wrote earlier this week it’s expected that failure to agree on a new CBA by then would result in a lockout and accompanying transactions freeze. Commissioner Rob Manfred and MLBPA executive director Tony Clark have continued to express hope they’ll reach agreement before that point, but the general tenor on the situation has seemed to skew more pessimistic.

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.