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MLBPA drops request to alter free agency, offer new revenue sharing ideas

Negotiations continue Tuesday, with owners’ counter proposals expected shortly.

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Pittsburgh Pirates v New York Mets Photo by Jim McIsaac/Getty Images

Major league players and owners sat down for over two hours on Monday, and the players arrived with some altered proposals, including dropping the age-based exceptions that they previously made to the service time requirement for free agency. The union also modified their proposals on revenue sharing, according to Evan Drellich of the Athletic.

The two sides agreed to resume negotiations on Tuesday, with the owners believed to be ready to make a counter proposal.

The players held firm on three core economic issues, including an increase in the minimum salary from $570,500 a year to $775,000, bumping the competitive balance tax threshold from $210 million to $245 million and instituting a draft lottery among all non-playoff teams for the first eight picks according to Jeff Passan at ESPN.

The session was their first face-to-face meeting since December 2, 2021, when the previous five year collective bargaining agreement expired and owners locked the players out and called a halt to all player transactions. That meeting lasted just seven minutes after owners set preconditions before continuing any talks- which conditions were rejected by the players.

The owners made what was largely a token proposal to restart talks on January 13. In December, owners refused to make a proposal unless players withdrew any ideas of changing the service time requirement for free agency or the revenue sharing formula.

Contested Issues:

Free agency eligibility: Owners first made a proposal to eliminate the service time requirement of six years and replace it with an age based system where players would be eligible for free agency at 29-1/2 years. This is a complete non starter, as it would delay free agency for the vast majority of players, effectively keeping them locked up for seven, eight or even ten years. It would eliminate service time manipulation since one’s age is what it is.

Players had proposed keeping the six year threshold, or five years for those who reach 30-1/2, 30, and 29-1/2 years of age. That apparently touched a nerve with owners, who stormed out at the mention. The players withdrawal of age based exceptions puts paid to the concept, although preventing manipulation is problematic with any formula that relies only on service time.

Revenue Sharing: Manfred stated that the players were proposing a $100 million reduction in revenue sharing, and that was one of the items that owners insisted by dropped as a pre- condition for any further talks. Players have said that the issue is much more complex and their proposals- which we don’t have details for- are meant to inspire smaller market teams to improve. Some reports indicate that the players now request that revenue sharing be decreased by $30 million. By itself, this makes no sense if they want to inspire small market teams to spend more. There has to be more to it.

The current CBA requires teams to spend revenue sharing dollars to “improve performance on the field”, but that term is so vague that it is easily avoided. The result is some teams receiving more revenue sharing money than they spend on their entire payroll. The MLBPA has filed grievances against four teams alleging violation of the vague agreement.

Requiring revenue sharing dollars to be spent on player salaries above $1 million would go a long way to stop tanking, but the signal from owners is that they won’t even talk about it.

Minimum Salary: Both sides have proposed increases, with owners proposing $600,000 for first year players and $700,000 for those with over a year of service time. Players reportedly asked for a minimum of $775,000 going up to $875,000 over the term of the agreement. Since improving pay for players earlier in their careers is a top priority of the union, and is relatively less expensive than other items for teams, it would seem that significant movement can be expected here.

Arbitration eligibility: Players have proposed going back to a two year service time requirement for arbitration, which was the rule for 15 years in the early days of arbitration. Owners first proposed scrapping arbitration and setting a pay scale based on an algorithm tied to fangraphs WAR. Their latest proposal was to keep arbitration for those with at least three years of service, but replace the super two exceptions which applied to several players with a fixed amount, while allowing players with any service time currently to opt out of the new scheme.

The super two designation currently allows the top 22 percent of players with between two and three years of service time to become eligible for arbitration a year sooner. That’s about 35 players per year- including those who might have had their service time manipulated by a few weeks to delay their free agency.

Although it’s a contentious issue, the fact that both sides are making proposals to tweak the current system suggests that there may be some movement here, unlike the six year free agency requirement, which won’t see any substantive changes.

Competitive Balance Tax: Teams currently pay a 20 percent tax on payrolls above $210 million in a season. That serves as a de facto salary cap as every MLB team that crossed the threshold has gotten under it to reset their tax rates. Penalties presently increase up to 92 percent for a third time offender spending over $250 million.

Players want a $245 million threshold with the same tax rate, while owners last proposed a $214 million limit increasing to just $220 million over five years, but with a 50% penalty regardless of how often it is breached. MLB’s initial proposal of a tax below $100 million with a corresponding $180 million limit has been laughed off the table.

Some, including Jeff Passan suggest this may be the hardest issue to solve, but it’s not as complex as preventing tanking or service time manipulation. It’s just numbers.

Service time manipulation: Players have made a lot of noise about teams holding some of their best players in the minor leagues for a few weeks longer in order to delay their free agency for another season. Owners put forth a proposal in their latest offer to reward teams that have a top 100 prospect on their opening day roster that achieve certain awards in their firs three seasons with a supplemental draft pick. While worth some consideration, is a team willing to let a top prospect go a year earlier for the chance that they might get a supplemental draft pick?

They could begin to address this issue by inserting language into the agreement prohibiting teams from keeping a qualified player in the minors to delay his service time. We know from the Kris Bryant grievance that this practice is not barred under the current deal. Banning it would be a start, although the player would still have to prove motive in a grievance procedure.

International draft- while the hard limits on international signing bonuses mostly solves MLB’s thirst for cost control in the international market, they’d like to stop buscones from peddling the services of 15 year old kids to MLB clubs. The players might agree if they can prevent MLB teams from preying on the same kids by requiring that they pay the actual slot bonuses to the drafted players.

Items agreed or partially agreed:

Tanking/ Draft lottery: Ten MLB teams had major league payrolls below $100 million in 2021, and half of those were below $80 million, according to Forbes and the Associated Press. Total payrolls as well as the average player salary decreased by $600,000 during the term of the last CBA, while the median player salary dropped by a whopping 30 percent as teams fill their rosters with more minimum salaried players instead of veterans who finally earn the right to arbitration or free agency. This issue is a top priority for the players.

Both parties have put forth proposals for a draft lottery- the owners a three team raffle for only the top three picks and the players an eight team lottery among all non playoff teams, as well as banning teams from getting a top five pick in two consecutive years, and including market size as part of the equation to determine the draft order. As we’ve said here many times, a draft lottery won’t fix tanking.

A higher minimum salary and earlier arbitration would help to reduce the pay gap, but to truly address tanking, either a salary floor or tax on payrolls under $100 million, or forcing teams to spend revenue sharing dollars will be required. If they have to spend it to get it, they will spend. Of course that is no guarantee of winning, but isn’t it really more spending that the players want?

Expanded playoffs are known to be the owners’ greatest desire and the players’ biggest bargaining chip. MLB’s new contract with ESPN pays them an extra $100 million per season if they expand the playoffs. MLB wants 14 teams and the players have suggested 12. It’s just a question of what concessions the players can get in exchange.

The Universal DH is expected to be part of the next CBA, as long as the players don’t have to give up anything important to get it.

Free agent compensation- or at least payment by teams for signing top free agents should be gone in the next agreement, as it has applied to fewer players each year and doesn’t benefit smaller market teams.

Uniform Advertising- the players have already agreed to wear patches on their uniforms which could bring MLB an estimated $6 million to $8 million per team. It costs players nothing and could help pay for some salary increases.

The Elephant in the Room

Grievance- The players have a $500 million grievance still pending against the owners for their refusal to schedule more than 60 games in 2020. It’s a separate matter entirely from the CBA, but nothing prevents the sides from throwing this into a deal.

Manfred declared that the lockout was a “defensive” measure meant to inspire talks, but it is clear that the owners’ strategy has been to wait until the season draws closer when players stand to lose paychecks. They’ve been stalling to gain more leverage, hoping that the pressure will mount on players to settle for less. Stay tuned.