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 On Friday, we announced that MLB was on the verge of a new labor deal. Here’s the latest:
One More Day – We said that the deal between MLB and the MLBPA would be announced on Monday. Well…. now, it’s sounding like official word will go down on Tues. with an MOU (memorandum of understanding). What does that mean? The core details will be announced, but the actual legalese that is seen in the current CBA will likely be months from being released to the public.
Minimum Salary to Increase to $480,000 in First Year – The AP is reporting that the minimum salary for MLB players will increase to $480,000, up from $414,000 in 2011, a sizeable increase of 16 percent from the year prior. The AP also reports that later in the deal, the minimum salary will eventually hit the $500,000 threshold. Here is a breakdown of MLB’s minimum salary over the life of the CBA set to be retired, plus the new minimum salary that is being reported for 2012.
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Year
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Salary
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% of
Increase
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2007
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$380,000
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--
|
|
2008
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$390,000
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3%
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|
2009
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$400,000
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3%
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|
2010
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$400,000
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0%
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|
2011
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$414,000
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4%
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|
* 2012
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$480,000
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16%
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* Reported increase for first year of new CBA
Blood-testing for hGH – On Friday, I reported that testing for Human-Growth Hormone (hGH) was coming to MLB, but in some senses it wasn’t much of a surprise. For some time, there had been whispers of it coming to the Majors after being part of the Minors. What was not known as of reporting on Friday was the method for testing. For years, the Players had said that there were serious concerns, not only about testing for hGH, but that using blood-draws would be fought. Well, that seems to have changed as The New York Times is reporting that not only will hGH testing be coming to MLB, but it will be done with blood-draws beginning with entry to Spring Training for the upcoming 2012 season. The NYT is saying that a first-time violation for hGH will result in a 50-game suspension.
While it does not say, it’s likely that if that is indeed the case, hGH will likely fall under the same classification as all other PEDs (minus stimulants) in terms of penalties. If the policy holds for the league drug agreement in the upcoming CBA as is in the current one, a second violation for hGH would result in a 100-game suspension, and a third positive could result in permanent suspension from Major League and Minor League Baseball.
Slotting and a Luxury Tax for Amateur Draft Bonuses – The slotting-system for Draft bonuses was seen as the lynch pin in getting the deal completed. Commissioner Selig and the owners were pushing for hard-slots – a defined bonus depending on where a player was drafted – while the players were against hard-slots saying it was a form of a cap. The solution will be a Luxury Tax that will hit allow flexibility for the players and options for clubs. Reportedly, the slots will be set and based upon that, a total bonus number is calculated. If a club jumps over that total, they’ll be hit with a tax. If this is indeed the system, it allows flexibility for clubs go above slot as they see fit, or possibly restructure bonuses if player and agent reach a deal where one would be paid a bonus under-slot while the difference would be applied to another player to go over-slot.
International Free Agents and the new Luxury Tax Around It – According to The AP, a Luxury Tax for international free agents will also be implemented but that “there will be a separate threshold and tax with penalties, and there will be a study committee that could put a new system in place later during the agreement.”
Draft Pick Compensation – According to Ken Rosenthal of FOXSports.com, the Elias ranking will go away for draft compensation and only free agent players that see “more than $12 million in the first year of the agreement, then will rise in subsequent years” will be deserving of a draft pick compensation for the team losing the player. The AP offers a slightly different description saying:
Starting next year, teams will have to make a "qualifying offer" of a one-year guaranteed contract to their players eligible to become free agents in order to receive compensation if the player signs with another club. That amount will be at least $12.4 million and could rise by next year, depending on a formula. The new "qualifying offer" does away with the statistical formula for ranking free agents that has existed since the 1981 strike
Rosenthal adds that, “A club that signs such a player will forfeit a top pick, but, as in the past, a team that finishes in the bottom 15 of the overall standings cannot lose its first-round selection.” As noted both reports note, the changes will not be effect to impact the current Hot Stove environment, but during the 2012-13 off-season.
More Players in Salary Arbitration, Increased Number of Super Twos – If there’s one thing that has see-sawed over the years, it’s the number of players that are eligible for salary arbitration. As part of the new CBA, approx. 5-6 more players that are “Super Twos” will be eligible. These are players have the highest level of Major League Service Time that are between 2 and 3 years of MLST. The current agreement sees the top 17% of those players in terms of service time. That will rise to 22% for the upcoming agreement.
The Luxury Tax – The Competitive Balance Tax (CBT), or as it’s commonly known as the Luxury Tax that has been part of MLB, stopped at the end of the season. It’s back in the new agreement, with some undefined tweaks. In a sign that the players are happy with where the model currently is, the soft cap for the league will see no changes in the threshold from the 2011 season -- $178 million based on end-of-year salaries (see historical Final Salaries for MLB for 1999-2010).
While final player payroll numbers for the 2011 season are not released until just before Christmas, the Yankees will (yet again) break the threshold. It seems likely that the Phillies will break the CBT threshold for the first time, and the Red Sox are skirting the edge and could be in or out. Either way, the league believes the system puts a drag on overspending, citing a handful of teams outside the Yankees doing so repeatedly (See a complete history of Luxury Tax payments in MLB). What seems certain is MLB will see more than $250 million in monies collected through the tax between the 1997-99 formula and the system that has been in place since 2002 when the numbers are released before the Holiday.
No Luxury Tax in “Reverse” – We reported on Friday that there had been talk during negotiations of a Luxury Tax “in reverse” – a threshold at the bottom of the payroll scale in which clubs would be hit with a tax if they went under a certain player payroll figure. While there were discussions, that seems to have fallen off the table in negotiations and will not be part of the new agreement.
Balanced Leagues, Yearly Interleague, Additional Playoff Teams – This aspect has been known for some time, and made formal as part of the approval for the sale of the Houston Astros. The club will move from the NL to the AL for the 2013 season, and with it, balance out the leagues. Due to 15 teams a piece, interleague will be played in one form or the other during the entire regular season. The move to balance out the league was a want of not only MLB, but the MLBPA and was approved by a vote of more than 75% of the owners with consent from Jim Crane as part of the sale agreement (the vote and consent are highlighted as part of the MLB Constitution, see pages 7 and 8).
The move to a balanced league will allow the addition of two more Wild Cards to the playoffs in 2013 with a one-game sudden-death game being the format.
How Long is the Deal? – The new labor agreement will be 5-years in length. By its expiration, MLB will have seen an unprecedented 22 years of labor peace.
 Maury Brown is the Founder and President of the Business of Sports Network, which includes The Biz of Baseball, The Biz of Football, The Biz of Basketball and The Biz of Hockey, and is a contributor to Forbes SportsMoney blog.. He is available as a freelance writer. Brown's full bio is here. He looks forward to your comments via email and can be contacted through the Business of Sports Network (select his name in the dropdown provided).
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