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MLB, MLBPA Close Loopholes Around Personal-Service, "Marketing" Clauses PDF Print E-mail
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Written by Maury Brown   
Friday, 20 April 2012 12:06
MLBPA

Kiss personal-service and “milestone” marketing clauses in MLB goodbye. Going forward, MLB and the MLBPA have agreed to stop allowing those aspects into contracts following  deals by Albert Pujols and Ryan Zimmerman, according to a report by Jayson Stark of ESPN.com.

In those contracts, both players were offered personal-service clauses – salary after the player retired. As detailed on The Biz of Baseball regarding Pujols’ contract:

After the 10-year deal expires in 2021 (or possibly earlier, depending on how his play goes), a new 10-year deal kicks in. The sides agree that after the expiration of the contract or Pujols' retirement as a player, they will enter into a 10-year personal services relationship and Pujols will be paid $1 million annually, or $10 million total. What is involved in the contract is not totally known, but we can assume that one possible route would be to use Pujols as a hitting coach, or possibly an emissary for the Angels in a PR capacity.

Zimmerman gets a five year, $10 million personal service contract at the end of his deal. Both Zimmerman and Pujols will be grandfathered in. No further provisions of that type will be allowed.

Also, the league and union for the players agreed that provisions that allowed for “marketing agreements” would no longer be allowed. This aspect was in the Pujols deal and prior with Alex Rodriguez. As part of the Pujols deal, he receives $3 million payment for 3,000 hits and a $7 million payment for 763 home runs.

As Stark reports, Michael Weiner, executive director of the players union, also confirmed the new rules, saying: "Both clauses raise questions under the Basic Agreement, and both parties felt they should not be a subject of individual negotiations."

While the latest CBA has not yet released to the public, the 2007-11 agreement reads on page 22 (page 10 after the Table of Contents):

(6) Other Forms of Additional Compensation

All other forms of compensation, including but not limited to the following, are not addressed herein and are to be determined according to the facts in each situation:

(a) payments for performing services for a Club in addition to skilled services as a baseball player;

Stark adds at the end of his piece:

One source also told ESPN.com that baseball is trying to close loopholes that teams might be able to use to avoid paying luxury tax, and both of these provisions fall under that heading because neither milestone bonuses nor personal-services deals are considered to be guaranteed money.

Maybe some of you are recalling the loophole that the Red Sox used on contracts with Josh Beckett and later with Adrian Gonzalez. In those deals, the Red Sox were looking to avoid having their salaries count against the Luxury Tax for the season in which the deal was reached. The loophole was that if you signed the player after Opening Day, the Luxury Tax computations rolled over to the following year.

So, what Stark speaks of in his piece today is not what this is about. That’s because that loophole was closed as part of the new labor deal. Stark touched on this as part of his piece on Cole Hamels (see blog post, Don’t discount Blue Jays’ great spring under the subheading “Strike Two – Luxury Lane Dept.”)

The rule now goes like this, according to sources familiar with the new labor agreement:

• If Hamels signs a long-term deal before Opening Day 2012 and his $15 million salary for 2012 doesn't change, he and his team would have the right to choose whether they want the luxury-tax computations to begin with his 2012 salary or with the rest of the extension, beginning in 2013.

• If he signs an extension at any point during the season, the luxury-tax stuff automatically kicks in starting in 2013.

But the moral of the story is, it doesn't matter when he signs. The Phillies can put off the luxury-tax pain until next year if they were to get a deal done this weekend, next weekend or on Labor Day weekend.

So, the league and MLBPA are firming up contract language, none of which are likely to make agents happy. Such is the cat and mouse game that’s been raging since free agency came about in MLB in 1974.

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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. He writes for Baseball Prospectus 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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