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Home Maury Brown The Good, the Bad, and the Ugly of MLB's New Labor Agreement

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The Good, the Bad, and the Ugly of MLB's New Labor Agreement PDF Print E-mail
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Written by Maury Brown   
Wednesday, 23 November 2011 12:36

Rob Manfred, Bud Selig, Michael Weiner

(L-R) Rob Manfred, Bud Selig, and Michael Weiner will have 21-years of labor peace at
the end of the new labor agreement, but is this new deal really good or bad for the game?

Labor negotiations are like a marriage: it’s a lot of give and take, and ultimately, who wins the battle is secondary to being able to live with each other.

So, is the case with the new MLB labor agreement announced yesterday; a sweeping set of changes the arguably the most dramatic in the game’s history.

Looking it over, there are clear winners, losers, and partnership between MLB and the MLBPA. The other way to put it is the good, the bad, and ugly.

Changes to the Draft (Ugly)

The Draft in baseball sees substantial change that on the face of it, seems to alter competitive balance. Bud Selig and the owners wanted cost certainty with a hard-slot for bonuses. The union said, “It sounds like a cap.” The sides went back and forth on the matter to the point that instead of having the labor agreement announced during the World Series, we were pushed out to 19 days before the current labor agreement expired.

The compromise was to say that there will be a specific bonus for each slot, but to curb the amounts given, a Luxury Tax was attached. Now, each club will be assigned an aggregate Signing Bonus Pool prior to each draft based on the first 10 rounds. In later rounds, clubs can dole out up to $100,000 in bonus, but above that they get dinged with the Luxury Tax.

Here’s how clubs get nailed with the new Luxury Tax:

  • 0-5% -  75% tax on overage
  • 5-10% - 75% tax on overage and loss of 1st round pick
  • 10-15% -100% tax on overage and loss of 1st and 2nd round picks
  • 15%+ - 100% tax on overage and loss of 1st round picks in next two drafts

So, the system then offers some flexibility in that you can shift money around. Go under-slot in lower rounds, and you can use the excess for higher draft picks. To add, the sides created a “Competitive Balance Lottery” in which clubs with the lowest revenues and in the smallest markets will have an opportunity to obtain additional draft picks through a lottery.

That all sounds well and good, but picks awarded in the Competitive Balance Lottery may be assigned by a club, subject to certain restrictions which the sides have not yet detailed. What does that mean? They can be traded.

The bottom line is, the system serves high-revenue making clubs more than it does your Rays, Athletics, and Pirates. If the Yankees poo-poo the current Luxury Tax, they likely have the knives and forks ready to dig into this new twist on the Draft. Going over slot to gain possible two-sport players that are weighing guaranteed money over going to the NFL or NBA lifts the Yankees and Red Sox’ of the league. When you throw in that picks can be traded, it has the capacity to overturn the model we’ve seen as of late which is draft well, and develop. Sure, you can say that scouting and trades can lift your boat, but scouting ultimately can favor clubs with more money to spend for staffing around the globe.

But, more concerning is if you are a club willing to go well over slot, you lose a first or second round pick. That clearly will keep low-revenue makers in line, while free spenders such as the Yankees might simply bridge the gap through free agent acquisitions, something the lower-revenue makers, can’t. Here’s that parity issue, again.

To add to all of this, international players are going to hit with slots, as well beginning in during the 2013-14 off-season. With that Luxury Tax, penalties for exceeding the Signing Bonus Pool will increase beginning with the 2014-2015 signing period if a draft or drafts is not agreed to by July 2014.

Oh, and then there’s the matter of draft pick compensation. Starting in 2012, “Type A” and “Type B” free agents and the use of the Elias ranking system will be eliminated. Now, only Players who have been with their Clubs for the entire season will be subject to compensation and a free agent will be subject to compensation if his former Club offers him a guaranteed one-year contract with a salary equal to the average salary of the 125-highest paid Players from the prior season. That equals approx. $12.5 million now.

A chief concern with all of the changes is that the recent wave of parity in the league from low-revenue makers is in jeopardy with the new model. Where the likes of the Rays and Pirates have been able to procure talent through the drafting system, there are chances now that stocking talent through the draft is greatly diminished. Since keeping talent under contract when they reach free agency is nearly impossible due to limited revenues to work from, players historically follow the money, which once again, plays into the hands of the large market, high-revenue making clubs. With all of this, the chances of adding a Luxury Tax in reverse – a soft floor for total player payroll fell off the negotiating table. Add it up, and what’s pushing low-revenue makers to feel they have any incentive to spend? Not good.

But, who are the real losers with the new draft system? High powered agents who have to be steaming. The biggest loser in all of this is likely Scott Boras who has been able to garner incredible bonus money for high draft picks. I imagine he’s sucking down the Pepto-Bismol today.

Expanded Playoffs (Good)

If the playoffs remained the same in the new deal as we see them now, the changes to the draft system would likely spell doom for competitive balance. Since revenue-sharing remains ostensibly the same, nothing incentivizes low-revenue making clubs to spend in order to win. As an aside, the last agreement was focused primarily on getting the clubs at the bottom of the revenue intake to increase spending on Major League talent as opposed to sitting on their revenue-sharing and fielding AAAA teams. That seems to now be forsaken.

But, with the addition of two Wild Cards per league that will play a one-game winner-moves-on format, the hope of making the playoffs for clubs that may have felt they didn’t have a chance in tough divisions such as the AL East, now have a way to get the foot in the door. As one high placed executive said to me, “Owners with teams around .500 feel they are one key move away from getting to the World Series, and those below .500 feel they are one move away from being competitive.” If that held true before, in the new system, it’s possible that everyone feels they have a shot at the playoffs.

What’s the downside? If purists bemoan the current idea of a Wild Card winning the World Series, imagine what will happen if the team with the third best record in AL or NL wins? With playoff expansion, pennant races for your division mean nothing.

With Balanced Leagues, Daily Interleague (Bad)

For years, the league has said that interleague is something that fans love, and point to attendance numbers to back it up. Well, now they really get to prove it as there will be interleague played year round to deal with the odd number (15 ea) in the leagues with the Astros moving to the AL West.

Beyond diluting interleague, you can run into some interesting scenarios that might not be the best for the game. Imagine the Red Sox are fighting for a playoff spot, and instead of playing games in division where they can quickly climb up the standings, they have to hop a plane and play the Reds. Suddenly, there’s no DH and your pitcher is a critical player in your offensive line-up. If baseball really wanted to go to the wall with all the changes, with all the interleague now being played, they needed to crap or get off the pot with the DH: make it in or out, but now, it’s a major issue for how game outcome is for not just a handful of games each year, but many.

Increased Minimum Salaries, More Players in Salary Arbitration (Good)

If you looked at the changes to the draft process, you’d have to say, the owners got one up on the players. It’s hard to say that there’s a lot of good out it in terms of increasing pay for players. With that move, the give and take did garner a few items that buoy the union for the players.

The minimum salary jumps considerably in the new 5-year deal:

The Major League minimum salary will increase from $414,000 in 2011 to: $480,000 in 2012; $490,000 in 2013; and $500,000 in 2014 with cost of living adjustments (COLA) in 2015 and 2016.

The same holds true for those players in the Minors who seem the minimum salary increase from $67,300 in 2011 to: $78,250 in 2012; $79,900 in 2013; and $81,500 in 2014; COLA in 2015 and 2016.

To add, more players will now be considered “Super 2s” for salary arbitration. These are players with between 2-3 years of major league service time. Before, the cutoff was players in the top 17% with the most MLST between 2-3 years. That will now jump to 22% or about 6 more players. Also, Article XX(B) free agents signing minor league contracts who are not added to the Opening Day roster or unconditionally released 5 days prior to Opening Day shall now receive an additional $100,000 retention bonus and the right to opt out on June 1.

It’s all “something”, but in terms of balancing these wins against the draft changes, it seems like small change.

Love and Marriage: Expanded Instant Replay, Player Safety, Maple Bats, Chew, and hGH Testing (Good)

At its core, the deal seems weighted toward owners, specifically high-revenue makers. But, if there’s one thing that having a good working relationship has done, some other elements that might seem small actually make the game better.

For one, Bud Selig seems to have gotten on-board with expanded instant replay. Now, “boundary calls” will include not just home runs, but foul balls can be reviewed. To add a little icing to the cake, trapped balls will fall under review. Or rather, that’s the hope. The changes have to be done in conjunction with the Umpires union, which technically means more collective bargaining. We’ll see.

The league and players also looked around at other leagues in terms of player safety and decided to try to not only protect players and fans, but give themselves some PR. By 2013, all Major League players will wear a new batting helmet developed by Rawlings that protects against pitches thrown at 100 miles per hour. This development was done side-by-side with the league and players union and Rawlings. The new version of the helmet is significantly less “bulky” than prior versions of the more protective helmet that the likes of David Wright tried out and were deemed the “Great Gazoo” helmet, a reference to the helmet that the Flintstones character wore that was over-sized.

Another safety change is a bit more controversial in that agreed that no new players will be permitted to use a low density maple bat during the term of the agreement. That means that players currently in the league will be “grandfathered” in – allowed to still use them until they leave the game. If the policy remains over the life of the next agreement set to begin at the end of 2016, maple bats as we know them will be gone from the game. The argument has been that these bats shatter more easily and when that happens, shards could impale players and fans. At the Winter Meetings in 2008, a comprehensive study was released by the league that found that inconclusive. Stuck in the middle is an entire industry of maple bat makers that may have to close shop or switch to ash. It will be interesting to see how they react, and The Biz of Baseball will be looking for feedback from them when they are at the Trade Show at the upcoming Winter Meetings.

One thing that seems to smack of hypocrisy in baseball is that MLB is a cornerstone sponsor of Stand-Up to Cancer and yet when commercials are done airing for the non-profit during games and we return to the game, players are shown with massive wads of chewing tobacco.  Now, players, managers, and coaches will be prohibited from using smokeless tobacco during televised interviews and club appearances. In addition, at any time when fans are permitted in the ballpark, players, managers and coaches must conceal tobacco products (including packages and tins), and may not carry tobacco products in their uniforms or on their bodies. Individuals who violate the policy will be subject to discipline (although, the parties haven’t yet said what that will be). And league and MLBPA say extensive program of education and public outreach regarding the dangers of smokeless tobacco. On the latter, we’ll see how well that is received. The biggest thing is, the changes don’t say that players can’t use – just that they can’t during interviews and club appearances. Somewhere, Raul Ibanez just breathed a sigh of relief.

Another big item will be the introduction of human-growth hormone (hGH) testing by blood draw. While MLB isn’t the first to agree to this, they may be the first to actually implement the program. The NFL and NFLPA agreed to such testing as part of their labor deal, but have yet to actually begin the process after the players cited concerns. The move is more PR than anything. Congress is pushing for it in all sports leagues, and that certainly works to Bud Selig’s advantage. In addition, during each year, all players will be tested during Spring Training. Starting with the 2012-2013 off-season, players will be subject to random unannounced testing for hGH. .For the players, the fact that hGH testing is still suspect and has a short detection life in the body means that if players want to mess with the stuff, they probably can feel like they can get around the system. But, in a win for the league, the MLBPA also agreed on a process to jointly study the possibility of expanding blood testing to include in-season collections. That’s not a “yes”, that’s just agreeing to study, a much different thing.

The Bottom Line (Not Good for Low-Revenue Clubs)

The bottom line with the new deal, it appears on the face of it to be a step back from giving the Rays, Pirates, and A’s a chance to be competitive. We may not get back to the pre-drug testing days where some clubs simply felt they had not chance to make the playoffs, but that may be a by-product of artificially making it easier to make the postseason by the addition of more Wild Card teams.

The agreement is for 5-years, and some of the changes will not begin for another year. Clubs that have been able to do well in the draft in years prior will likely just now see some of those players maturing to MLB levels. In other words, the impacts of the draft changes may not be fully felt until the end of the labor agreement. That’s good and bad as clubs can take advantage of expanded playoffs in the near-term, but it will nail them at the end of the agreement when negotiations for a new CBA are underway. In that, there may not be a definitive pulse on how poorly the system we’re about to embark on functions.

Either way, it’s a massive, sweeping change. If Bud Selig truly is retiring at the end of next year, this agreement is likely his push to leave a lasting stamp on the game. Either way, baseball is going to be different both on and off the diamond for years to come.
SEE ALL THE DETAILS OF THE NEW MLB LABOR AGREEMENT


Maury BrownMaury 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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