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MLB owners propose WAR on arbitration system

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Proposal would scrap arbitration in favor of a formula based on Fangraphs’ WAR

Baseball Lockout Photo by Ronald C. Modra/Getty Images

Major League Baseball’s owners have proposed replacing the current arbitration system with one that uses FanGraphs’ version of WAR (wins above replacement) multiplied by a dollar figure determined by service time to determine salaries for players who have accrued more than three years, but are not yet eligible for free agency. The proposal, which is a variation of their August proposal as part of collective bargaining negotiations, was immediately rejected by the MLB Players Association (MLBPA).

The proposal, according to The Athletic, is a variation on the owners’ August proposal and does not address a number of core economic issues. They would scrap the arbitration system entirely in favor of a pool of money to be somehow tied to revenues, divided among arbitration eligible players according to an algorithm based primarily on service time and fWAR. Players view the proposal as a type of salary cap.

The owners’ proposal would set a fixed budget for all teams to pay players who are eligible for arbitration. No hearing on the player’s market value. They would also require that a player wait until age 29-1/2 before he would be eligible for free agency. For example players like Carlos Correa, Cory Seager and Trevor Story would not have been eligible, despite having over six years of service time. There is no chance of the players’ union agreeing to any of that.

The proposal would also eliminate “super two” status which currently makes 22 percent of players with more than two, but less than three years of service eligible for arbitration. The players have proposed reducing service time eligibility for arbitration to two years. Player agents, who are often the primary source of advice for many of their clients, would be cast out of the process due to elimination of arbitration.

The current arbitration system would remain in place for this off season, and players who have entered the arbitration process could opt to continue that process through their careers.

Radical Changes

Over all the years of collective bargaining, players have achieved two things that are most valuable to them. One is free agency after six years of service time and the other is arbitration for players with three to six years in the major leagues. Players have been eligible for free agency after six years of service since 1976, and arbitration has been a part of every CBA since 1970. MLB has now proposed radical changes to both.

As the December 1st CBA expiration nears, the players’ association has made two proposals for a new agreement. The owners have made one - plus recent adjustments, but the owners’ proposals are complete non starters. The proposals would reduce the luxury tax threshold from $210 million with a 20% tax to $180 million with a 25% tax. That would immediately put five teams above the tax threshold before they sign a single free agent, or contract extension. Players have proposed an increase in the tax threshold.

Less than three weeks from the expiration of the collective bargaining agreement (CBA), major league baseball owners have yet to make a serious proposal to players that would result in a new agreement. And when no agreement is reached by December 1, the owners are poised to impose a lockout, and then unilaterally freeze all player transactions including free agent signings, contract extensions, trades, and arbitration settlements. It’s all about money, timing and leverage.

The Formula:

The formula to determine player salaries, according to Jeff Passan at ESPN ($);

  • Players with three to four years of service time would multiply their career fWAR by $580,000,
  • Players with four to five year players have a $770,000 multiplier and
  • Players with five to six years $910,000 times their career fWAR.
  • There would be some adjustment to skew towards recent performance
  • The major league minimum would increase from $ 570,500 to $600,000 for first- year players, $700,000 for second year players, and $825,000 for third year players.
  • Some high level performers would earn $2.5 million in their third season.

Players could probably work with the minimum salary levels- as a starting point, but they will want them to increase as revenue continues to rise.

Anti-Tank weapons

Both sides have made proposals to prevent teams from getting the top draft picks every season, in an effort to address tanking. The players proposed factoring in market size and barring a team from getting a top five pick in two consecutive seasons. The owners have suggested prohibiting three consecutive top five picks. The owners have proposed a salary floor- albeit a soft floor but only in exchange for the absurdly low tax threshold.

A game of tactical chicken

A lockout is a bargaining tactic. It’s about leverage, and it’s about timing. The last player strike in any of the four major sports in the USA was in 1994, when players went on strike in August, resulting in cancellation of the rest of the season and the entire post season, when revenues are far greater than during the season. Every work stoppage since then, in any sport, has been the result of a lockout. Owners will never again allow a mid season strike to threaten their post season revenue, even if it means a delay or cancellation of part of the regular season.

MLB commissioner Rob Manfred is no stranger to slow walking negotiations. The owners made a series of proposals that were complete non starters as the chances of playing any meaningful season circled the drain in 2020. Eventually, Manfred unilaterally imposed a 60 game season with expanded playoffs, held in venues that allowed maximum attendance- and revenue to owners. There is an ongoing grievance filed by the players seeking half a billion dollars in damages, claiming that the owners failed to bargain in good faith.

The one thing that the owners want in a new agreement more than anything else is expanding the playoffs, reportedly up to 14 teams. Players have balked at the idea, with concerns that making it easier to make the playoffs would disincentivize spending on player salaries. Other than expanding playoffs, owners would be quite content to continue the current deal. They’ve even offered to do so. If they can stall increases in minimum salaries, tax thresholds and player compensation, it’s not a bad deal for them.