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Part One on MLB's Latest Labor Agreement PDF Print E-mail
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Written by Maury Brown   
Tuesday, 29 May 2012 08:47
Baseball Prospectus

Today on Baseball Prospectus, I begin a multi-part series on MLB's latest Collective Bargaining Agreement with the focus on the addition of a Luxury Tax system on the draft. You'll want to check this (and the others in the series) as baseball's latest labor agreement is sweeping in its change from the one prior.

And, even if you don't have a Baseball Prospectus subscription (you really should, however), pop on over to BP at 3pm ET (Noon PT) today as my chat will likely focus on the CBA.

You need all of the article to get this in context, but here's a sampling:

Draft Pick Compensation Gets a Major Overhaul

The draft will continue to be conducted in June, but the signing deadline will be moved to a date between July 12 and July 18 depending on the date of the All-Star Game.

Getting a leg-up on agents, the league asked for (and got) a provision under which drafted players may now only sign minor league contracts. In other words, Stephen Strasburg-type deals are history. This, of course, hasn’t sat well with player agents. As one agent said to me, “The union threw us (agents) under the bus with this (labor) deal.”

The first big change in draft functionality has already taken place in terms of draft pick compensation for free agents. Moving forward, there will be no more Elias Rankings for A and B Types. Instead, during what is called the “Quiet Period”—the five days directly after the World Series is completed—clubs can make a “Qualifying Offer” to those players on their rosters that are deemed to be free agents.

This “Qualifying Offer” works as such:

During the Quiet Period, the former Club of a Qualified Free Agent may tender the Qualified Free Agent a one-year Uniform Player’s Contract for the next succeeding season with a guaranteed salary that is equal to the average salary of the 125 highest-paid Players each year.

A separate attachment in the CBA describes how that salary average from the 125 highest-paid players is derived:

1, The 125 highest-paid Players initially shall be derived from all Players on a 40-man roster or 60-Day Disabled List on August 31 of the most recently completed season (“Eligible Players”).

2. In determining the 125 highest-paid Players, each Player’s salary for the season at issue (“Salary”) shall be calculated by adding the following: (i) the Player’s base salary for the year at issue as set forth in Joint Exhibit 1 (adjusted pursuant to any salary escalator effective for that season); (ii) a prorated portion of any applicable signing bonus; (iii) a prorated portion of any buyout associated with the first Club or Mutual option year of the Contract (or a deduction of the amount of the buyout if the option was exercised as described in Addendum A); and (iv) any bonuses that were earned by the Player as of the conclusion of the championship season. If any portion of the Player’s earnings in items (i)-(iv) of this paragraph is deferred, his Salary shall be discounted pursuant to the formula set forth in Addendum A.

The player then has seven days to accept or reject the Qualifying Offer. If they reject that offer, the question of draft pick compensation comes into play:

(a) A Qualified Free Agent shall be subject to compensation only if: (i) his former Club tenders him a Qualifying Offer ….; (ii) the Player declines the Qualifying Offer or signs a contract with another Major League Club prior to the expiration of the Acceptance Period; and (iii) the Player signs a Major League contract with another Major League Club that is confirmed by the Players Association and the [Labor Relations Dept. of MLB] LRD before the next succeeding Major League Rule 4 Draft (“Rule 4 Draft”). A Qualified Free Agent who signs a bona fide Minor League contract shall not be subject to compensation irrespective of whether the Minor League contract is subsequently assigned to the Major League Club provided that the execution of the Minor League contract and the subsequent assignment were not the product of an agreement or understanding designed to circumvent Article XX(B)(3) and (4).

The club that signs a player subject to compensation will forfeit its first round selection unless it selects in the top 10, in which case it will forfeit its second-highest selection in the draft. If the player signs with another club as a free agent, the former club will receive a selection at the end of the first round beginning after the last regularly scheduled selection in the round. All former clubs that receive such free agent compensation will select based on reverse order of winning percentage from the prior regular season.

There is a host of miscellaneous provisions as well, such as what happens if a free agent signs a minor league deal, if a player signed goes on the DL, etc. Start on page 90, for details.


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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