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What to expect in the next MLB collective bargaining agreement

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Topics on the table include an international draft, league minimum salary, free agent compensation, and the luxury tax.

MLB: New York Mets at Kansas City Royals Denny Medley-USA TODAY Sports

When Major League Baseball’s collective bargaining agreement (CBA) expires on December 1, 2016, the sport will have completed 20 years of labor peace. While the details of a new agreement are unknown, one thing is fairly certain: there won’t be any work stoppage in 2017 with so much money at stake for both sides.

What is the collective bargaining agreement?

The CBA is a contract between major league owners and players that governs everything from the player drafts to salaries, arbitration, free agency, scheduling of games, discipline and a lot more. Here is the current CBA. Each player has an individual contract that incorporates the terms of the CBA. Without an agreement in the past, there has been either a players’ strike or a lockout.

The current CBA was announced on November 22, 2011, covering five seasons from 2012- 2016. The previous agreement was announced on October 24, 2006, during the World Series. The last round of negotiations resulted in expansion of the playoff format to include two wild card teams, the Houston Astros moving to the American League, a drug testing agreement, implementation of a bonus slotting system and elimination of major league salaries for all drafted players, and an overhaul of the free agent compensation system.

Here are the main issues to be addressed in the next CBA.

What the owners want

Owners want an International Draft for players who are signed from outside the United States, Canada, and Puerto Rico. A framework for such a draft is explained here, and criticism of the deal is outlined by Ben Badler of Baseball America. The quick-and-dirty of it is that MLB owners want to cut costs on international amateur free agents, who currently warrant signing bonuses into the seven figures.

Here is why an International draft will likely be implemented.

  • MLB commissioner Rob Manfred, who was the point man in negotiations in the last round of talks, now has the draft at the top of his to-do list. Provisions were made for an international draft if an agreement could be reached with the players, but that didn’t happen.
  • Current membership of the players’ association (MLBPA) has nothing to lose if they bargain away the rights of players who are not their members. For players, it’s a matter of logistics and what they want in exchange for consenting to a draft.

What the players want

Players want a greater share of revenue. As explained in great detail by FanGraphs’ Nathaniel Grow, the players’ share of baseball revenue has dropped from 56 percent in 2001 to 38 percent in 2014, as salaries have not increased at nearly the same rate as television revenues. The CBA does not tie the amount of salaries to revenues, as other sports do, but those leagues have a salary cap and a salary floor, which the MLBPA has refused to agree to. Expect players to seek a larger share of revenues as follows:

  • The minimum salary is currently $507,500 in the major leagues. This lags behind other major sports, and an increase would stand to benefit a large percentage — over 40 percent — of the players’ membership. The minimum salary in the NBA is $525,093 for rookies, and jumps to $623,000 by 2020. Veteran players have an even higher salary floor. In the NHL, the minimum salary is $575,000. Expect some increase in MLB’s minimum salary in the new CBA.
  • Arbitration eligibility currently kicks in between two years and 120 days to two years and 140 days of service time. The 22 percent of players with the most service time above two full seasons are eligible as “Super Two” players. This group is also a significant portion of the MLBPA membership. Players would like the limit lowered, making players eligible for arbitration (and more money) sooner.
  • Manipulation of service time has irked players when they see players such as Kris Bryant being sent to the minor leagues for obvious cost-cutting reasons. Nothing in the current rules expressly prohibit manipulation, and players would like this addressed.

Free agent compensation presents two distinct issues. Teams signing elite free agents who reject a one year qualifying offer are penalized a first round draft pick. Some players have been unable to get a contract because of the deterrent. Players would like this eliminated. The qualifying offer could be increased in salary or number of years, or payment of compensation could be removed entirely. This affects players at the top of the pay scale.

  • Compensation is received by teams that lose a free agent if they make a qualifying offer of $17.2 million for the 2017 season if the system remains. While evidence suggests that the compensation benefits the haves more than the have-nots, this is not as important to the players as the deterrent of clubs paying compensation.
  • The competitive balance tax, more commonly called the luxury tax, was initially implemented to “level the playing field” by penalizing clubs at the very top of the pay scale. In 2016, however, as many as seven teams could exceed the $189 million tax threshold, subjecting them to payment of a tax. Every additional dollar they spend would be hit with a 30 to 50 percent tax going forward. This affects any player who might sign with a team above the tax threshold.

The current CBA retained a $178 million tax threshold for two seasons, then increased the threshold to $189 million for the last three years. A similar increase would push the trigger to $200 million. The tax is 17.5 percent for first year offenders, then 30 percent, 40 percent, and 50 percent for second, third and fourth years above the threshold.

The current CBA also allowed teams to reset, so that all offenders were treated as first time offenders in 2012. A reset or an increase in the threshold could benefit up to seven teams immediately, including Detroit. The next CBA could adjust tax brackets either up or down, or could even add an even higher bracket for teams that far exceed the tax threshold.

Other issues that could be addressed are adjustments to the playing rules to speed up the pace of play, possible adjustments to revenue sharing arrangements to help smaller market teams, and scheduling issues to give players more time off between longer trips.