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MLB: JAN 28 MLB Lockout

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Where MLB labor negotiations are at, and what it would take to end the lockout

An overview of what players & owners are looking for in the next CBA

Photo by Rich Graessle/Icon Sportswire via Getty Images

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The start of spring training has been delayed, and Major League Baseball remains in a lockout, imposed by the owners just after midnight Eastern time on December 2, when the previous collective bargaining agreement expired.

Pitchers and catchers were supposed to report around February 15-16, and after that didn’t happen, MLB pushed back the start of spring games by one week, from February 26 to March 5.

Things have moved at a glacial pace, but let’s take stock of where the players and owners are at, and what it means with respect to the 2022 MLB schedule.

Timeline

The 2017-21 MLB collective bargaining agreement expired at 11:59 p.m. Eastern time on December 1, and a few minutes later, Major League Baseball locked out the players.

“We hope that the lockout will jumpstart the negotiations and get us to an agreement that will allow the season to start on time,” commissioner Rob Manfred said in a letter to fans. “This defensive lockout was necessary because the Players Association’s vision for Major League Baseball would threaten the ability of most teams to be competitive.”

The negotiations were not jumpstarted, with the next bargaining session between the two sides coming on January 13, the lockout’s 43rd day.

In total — as pointed out by John Shea of the San Francisco Chronicle — there were six meetings between players and owners in the first 11 weeks of the lockout: January 13, January 24, January 25, February 1, February 12, and February 17.

Beginning February 21, players and owners are meeting daily in Florida, face to face for the first real extended serious bargaining since the lockout was implemented.

On February 10 at the owners meetings in Orlando, Manfred said spring training would need to be roughly four weeks, and factoring in the few days it would take to ratify the collective bargaining agreement before players hit the field, that means the two sides would need to reach agreement basically by the end of February to avoid postponing the start of the regular season, which is scheduled for March 31.

“I see missing games as a disastrous outcome for this industry, and we’re committed to making an agreement to avoid that,” Manfred said.

So what are the players and owners fighting over? We touched a little bit on that in November, but it basically boils down to players salaries have not grown as rapidly as revenues in the sport over the last two decades. The rift between the two sides grew during the contentious negotiations to restart the 2020 season.

Things were exacerbated on February 3 when owners asked for federal mediation after making only one offer in the first nine weeks of the lockout, a request that was denied by the MLBPA.

“Two months after implementing their lockout, and just two days after committing to Players that a counterproposal would be made, the owners refused to make a counter, and instead requested mediation,” said the union in a statement. “The clearest path to a fair and timely agreement is to get back to the table.

Based on reported proposals from players and owners, here are some key issues at play.

Competitive balance tax

The tax threshold in 2021 was $210 million, up from $189 million in the final year of the previous collective bargaining agreement (2016). A similar 11.1-percent increase for the final year of the next CBA would mean a threshold of roughly $233 million in 2026.

A large gap exists between the two sides entering the final week of February, based on their most recent reported proposals.

Competing CBT offers

Side 2022 2023 2024 2025 2026
Side 2022 2023 2024 2025 2026
Players $238m $244m $250m $256m $263m
Owners $220m $220m $220m $224m $230m
Sources: Associated Press & The Athletic

The competitive balance tax threshold has not grown at the same rate as league revenues, no matter how far back you go.

From Ronald Blum at the Associated Press in December: “The threshold rose 18% from 2013-19, a period in which MLB has announced revenue figures with a 49% increase.”

Travis Sawchik at The Score in February went back a little longer: “From 2003 to 2019, the last full season before the COVID-19 pandemic, league revenues grew 167%, from $3.88 billion to $10.37 billion, according to data published at Statista. The base tax threshold rose 76% in that period, from $117 million to $206 million.”

Perhaps this divide is best captured in graph form, from Stephen Nesbitt, Cody Stavenhagen, and Evan Drellich’s competitive balance tax explainer at The Athletic in February, and summarized by baseball business expert Maury Brown of Forbes.

The threshold isn’t the only gap here, however. The tax rate for first-time tax exceeders under the last CBA was progressive: 20 percent for the first $20 million over, 30 percent for the next $20 million, and 50 percent for any amount more than $40 million over the initial threshold.

The Dodgers in 2021 had a payroll for competitive balance tax purposes of $285.6 million, blowing past not only the initial threshold but the highest bracket as well. That came with a tax of $32.65 million.

Players thus far in negotiations have maintained the same 20/30/50-percent tax rates going forward, while owners have instead asked for a higher rate. Jay Jaffe at FanGraphs did an excellent job explaining the tax differences in the two sides, with owners seeking taxes of 50 percent, 75 percent, and 100 percent for the three threshold to start, even more punitive than the previous CBA rates for teams in their third straight season exceeding the thresholds (50 percent, 62 percent, 95 percent).

If the current owners proposal was in place in 2021, for instance, the Dodgers’ tax bill would have been $47.25 million.

Only two MLB teams went over the initial CBT threshold last year, with the Padres ($216.5 million payroll) joining the Dodgers as tax payers. Five more teams had a CBT payroll within $4 million of the $210 million threshold.

MLB doesn’t have an actual salary cap, but the way most teams have approached the CBT in recent years effectively makes it nearly as restricting as a cap. The Yankees avoided the tax last year, and getting under the tax threshold was a major reason the Red Sox felt compelled to trade Mookie Betts rather than try to keep him for the long term.

That apprehension from teams already existed with the old rates, and the current owners’ offer only increases the threshold by 5.7 percent from 2021 to 2026. But the increases in tax rates offered by the owners make crossing the threshold even more punitive.

Minimum salary

The last five collective bargaining agreements (beginning in 1997, 2003, 2007, 2012, and 2017) have had mostly the same structure for the minimum major league salary. There was usually a large bump in the first year of the deal, followed by a few modest increases, then the final few years determined by the consumer price index.

On February 10 in Orlando, commissioner Rob Manfred touted his experience in MLB labor negotiations, beginning in 1998 first as lead negotiator for the owners to his time as league commissioner.

“In the history of baseball, the only person who has made a labor agreement without a dispute — and I did four of them — was me,” Manfred said. “Somehow during those four negotiations, players and union representatives figured out a way to trust me enough to make a deal. I’m the same person today as I was in 1998, when I took that labor job.”

So let’s take a look at the minimum salary during the four collective bargaining agreements negotiated by Manfred, beginning in 2003.

MLB minimum salaries over last four CBAs

CBA years First-year minimum Inc. over prev. yr Last-year minimum Inc. over last CBA
CBA years First-year minimum Inc. over prev. yr Last-year minimum Inc. over last CBA
2003-06 $300,000 50.0% $327,000 63.5%
2007-11 $380,000 16.2% $414,000 26.6%
2012-16 $480,000 15.9% $507,500 22.6%
2017-21 $535,000 5.4% $570,500 12.4%
minimum salary in 2002 was $200,000 Sources: previous collective bargaining agreements

The CBA that just expired on December 1 had the smallest gains in both the first year and over the life of the contract. The 2021 minimum salary of $570,500 was just 12.41 percent over the the minimum salary ($507,500) in 2016, the final year of the previous CBA.

We don’t have 2021 MLB revenue figures just yet — and even the numbers that usually trickle out are only estimated, since the league does not open its books, outside of Atlanta, which is owned by the publicly-traded Liberty Media — but we can look back through 2019, the last full season for the league. Starting from 2002, the final year of the CBA that Manfred did not negotiate, the minimum salary was $200,000, and in 2019 the minimum salary was $555,000, an increase of 177.5 percent. League revenues, using Statista, rose from $3.65 billion in 2002 to $10.37 billion in 2019, a 184-percent increase.

That growth is pretty similar, so let’s look at the offers on the table from both sides, with some figures from Jesse Rogers at ESPN.

Players want a minimum salary starting at $775,000 in 2022, which would be a 35.8-percent raise over last year. Owners have a few alternatives, with the most like the current system a rate that begins at $630,000 this year, a 10.4 percent increase over 2021.

The actual minimum salary — which in 2021 was $570,500 — is usually reserved for first-year players. Folks with any sort of experience tend to earn a little bit more. Looking at the 2021 Dodgers for instance, Zach McKinstry with his 17 days of service time entering last year made $573,000, slightly over the minimum. Gavin Lux, at 114 days in the majors, made $580,500, while Will Smith and Dustin May, each with over a year of service entering 2021, made $590,500 apiece.

Which brings us to another system put forth by the owners, a tiered system of flat rates based on service time, with teams not allowed to give raises over the minimum. The most recent offer included a $615,000 salary for players with under one year of service, $650,000 for one-year players, and $725,000 for players with at least two years.

Since the minimum salary in CBAs under Manfred has grown more or less in line with league revenues, why is this an issue in which the players are pushing for more? There are a few reasons.

Total MLB payrolls dropped four percent last year compared to 2019, with the lowest total payroll in the league since 2015, per the Associated Press. Star players are still getting paid, with individual average annual value records set in each of the last three offseasons. But the middle class of players is lessening, with teams relying on younger and cheaper players more and more.

Per Ronald Blum at the AP in December, 1,955 players were signed to major league contracts at any point in 2021. 1,271 of them — 65 percent of all players — made $600,000 or less.

If teams aren’t going to pay much for players in the middle, it’s up to the MLBPA to get total salaries up any way they can. Since so many players in the league — well over half — are at or near the league minimum, ensuring a higher salary for that group would actually help the most members of the union.

MLBPA executive director Tony Clark answers questions about Astros sign stealing scandal
Tony Clark, a first baseman for 15 years in the major leagues, has been executive director of the MLB Players Association since December 2013.
Photo by Alejandra Villa Loarca/Newsday via Getty Images

Salary arbitration and pre-free agency

Max Scherzer is literally at the top of the payroll scale. Coming off a seven-year, $210 million contract that saw him win two Cy Young Awards and finish in the top three three other times, Scherzer signed a three-year, $130 million deal with the Mets just before the lockout, setting an MLB record for highest average annual salary ($43.3 million).

Scherzer, who is one of eight players on the MLBPA executive subcommittee, very rarely is online. He’s tweeted only 13 times in the last three years. So on February 4, when Scherzer tweeted about the current labor negotiations, this must have been important.

One way to pay younger players more is raising the minimum salary. But there are more ways to funnel money to players before they accumulate the six years of service required for free agency.

Getting players to free agency sooner than six years was a part of the MLBPA’s initial ask, but the union’s offer on January 24 dropped that request. From Drellich at The Athletic, “The players had previously proposed a system to get some players to free agency after five years if they had reached a certain age: 30½, and then eventually, 29½.”

Players also initially wanted to have all players eligible for arbitration after two years, which was the case in the first 13 years of the arbitration process (1974-86). That included a pair of memorable Dodgers cases for two-year players. Both Fernando Valenzuela in 1983 (two years after winning a Cy Young Award and Rookie of the Year) and Orel Hershiser in 1986 (after going 19-3 with a 2.03 ERA) earned $1 million, each winning their arbitration hearing.

Beginning with the 1987 season, salary arbitration shifted to players with three years. Then in 1991, Super Twos — the top 17 percent of players with at least two years but not yet three years of service — gained arbitration eligibility. Super Twos under the last CBA comprised the top 22 percent of the 2-3 class.

Players in their offer on February 17 backed off wanting arbitration for every player with two years of service time, but expanded the Super Two class to the top 80 percent of 2-3 players. Jumping up from the top 22 percent would, for this offseason, make between 79 (MLB Trade Rumors) and 97 (Associated Press) extra players eligible for arbitration.

Dodgers with two years of service time that fall into this top-80-percent category but outside of the top 22 percent are Matt Beaty, Smith, May, and Edwin Ríos. If the Super Two category ends up expanding even a little bit, that’s likely good news in 2022 for Beaty, who fell just one day short of qualifying under the previous rules.

As for the players with under three years of service time who don’t qualify for arbitration, players and owners have at least agreed on the basic structure of a bonus pool system for high-achieving players in this group, as described by Blum at the Associated Press, “based on WAR, appearances on an all-MLB team and recognition such as best position player, best pitcher and best rookie.”

This seems to be a theme among most of these sticking points. Players and owners have mostly agreed to the system, but are far apart on the money. Before the lockout began, the MLBPA asked for $105 million in this pre-arb bonus pool, then in January the owners offered $10 million. The players countered by asking for $100 million, and the owners continued the incremental movement in February by offering $15 million.

In the players’ February 17 offer, they asked for a larger bonus pool of $115 million, but that was tied to them reducing the number of players eligible for arbitration. As noted by The Athletic, “The pool of money would now be distributed to 150 players rather than 30.”

On February 21, the owners’ offer upped this bonus pool to $20 million for “30 top players,” per the Associated Press.

MLB Owners Meetings
Rob Manfred was MLB’s lead negotiator for collective bargaining agreements that started in 2002, 2006, and 2012. He’s been MLB commissioner since 2015, covering the last CBA (2017-21) and the current negotiations.
Photo by Julio Aguilar/Getty Images

Expanded postseason

There are other gaps between players and owners, perhaps most notable changes to revenue sharing and how to disincentivize teams from manipulating service time. But in the case of those areas, or the points addressed more extensively above, the lever for all of this is likely playoff expansion.

MLB added a second wild card team, and by extension a (usually intense) wild card game in each league, in 2012, making for 10 teams reaching the postseason. One third of MLB teams qualifying for the playoffs is the smallest number of any major North American professional sports league.

With the cobbled-together truncated 2020 season came a one-off change to the postseason, with 16 teams making the playoffs. The single wild card game in each league was replaced by eight wild card series of three games each. Seven of the eight series were televised by ESPN, and with that network’s new MLB television contract that runs from 2022-28 gives us an idea of how much the expanded playoffs are worth.

From John Ourand at the Sports Business Journal last May:

That payout could drop even further if the MLBPA fails to agree to an expanded Wild Card round, sources said. If MLB is not able to expand the postseason, ESPN’s payout will drop to $450 million per year. In that case, ESPN would carry one of two Wild Card games and get eight exclusive regular-season games each year.

The league’s plan for expanded playoffs could involve a 14-team scenario with six best-of-three series, with the top teams from each league getting byes. If that’s the case, ESPN would carry the series and its average annual rights fee would climb to $550 million. It is far from certain that the players’ association would agree to such a move.

If MLB has an extra round of wild card series instead of just two games, it makes $100 million less each season from ESPN.

Both sides have included some level of postseason expansion in their offers. From AP: “Owners want to expand the playoffs from 10 teams to 14, while players are offering 12.”

It’s unclear what the exact format of a full 14-team postseason will be, but if it’s anything like the proposal that’s been floated for over two years, it could involve one team in each league getting a bye, and the other two division winners in each league getting to pick their wild card opponent.

In February 2020, I wrote that such an expansion in October would reward mediocrity: “It gives an incentive among the very best teams to vie for the top spot, but at the cost of letting in a bunch of middling teams.”

In the nine full seasons under the current, 10-team format, six teams with at least 90 wins missed the playoffs, including both the Blue Jays and Mariners in 2021. But retroactively applying a 14-team format back to 2012 would have also allowed four teams with losing records into the playoffs.

Expanded playoffs are coming, in some form. If I’m a betting person, I’d wager the owners get the 14-team postseason format they want, in exchange for moving in a few of the above areas.

If you want hope for a new collective bargaining agreement being reached in time for the regular season to proceed as scheduled, it’s this.

Deadlines, even soft ones, tend to spur movement in negotiations. If there’s to be a spring training of any reasonable length, plus the few days required to ratify an agreement, a new CBA agreement probably has to be in place in the next week or two for the regular season to start on time.

We’ll see if the owners are as committed as Manfred has said, or if that was just lip service before, in his words, “a disastrous outcome.”

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