The Danys Baez Situation: A Loophole in the CBA?

The Cleveland Indians think they have found a loophole in the CBA which will allow them to reserve Danys Baez while still cutting his salary by more than the maximum percentage allowed by the CBA.

In November 1999, the Indians signed Baez, a Cuban defector, to a four-year, $14.5 million contract covering the 2000-03 seasons, with an option for 2004. International players like Baez are anomalies in MLB’s salary structure, earning free agent money from their first day of major league service Through the 2003 season Baez has only two years and 102 days of major league service time, not even enough to qualify him for salary arbitration, yet he was paid $5,125,000 in 2003.

On November 15, the Cleveland Plain Dealer reported that the Indians were buying out Baez’ 2004 option for $500,000. This left Baez in the same position as any other unsigned player with his seniority–except for his salary. Because the CBA forbids clubs from cutting the salary of a player under reserve by more than 20%, the Indians appeared to have the choice of offering Baez a 2004 contract for at least $4.1 million or non-tendering him.

Tribe GM Mark Shapiro had another idea. First, the Indians put Baez on outright waivers, which allowed any club to claim him for $50,000. None did. The Indians then assigned his contract outright to Buffalo, their International League affiliate, thereby removing him from their 40-man roster. Three days later, they repurchased his contract and returned Baez to their 40-man roster.

The Indians now claim that because Baez cleared waivers and was removed from the major league roster, when his
contract was repurchased they became free to tender him a 2004 contract for any amount, without regard to the maximum-cut provision of the CBA.

Analysis of this situation must start with the language of the CBA and the Uniform Players Contract. Here’s Section 10(a) of the Uniform Players Contract:

Unless the Player has exercised his right to become a free agent as set forth in the Basic Agreement, the Club may retain reservation rights over the Player by instructing the Office of the Commissioner to tender to the Player a contract for the term of the next year by including the Player on the Central Tender Letter that the Office of the Commissioner submits to the Players Association on or before December 20 (or if a Sunday, then on or before December 18) in the year of the last playing season covered by this contract. If prior to the March 1 next succeeding said December 20, the Player and the Club have not agreed upon the terms of such contract, then on or before ten (10) days after said March 1, the Club shall have the right by written notice to the Player at his address following his signature hereto, or if none be given, then at his last address of record with the Club, to renew this contract for the period of one year on the same terms, except that the amount payable to the Player shall be such as the Club shall fix in said notice; provided, however, that said amount, if fixed by a Major League Club, shall be in an amount payable at a rate not less than as specified in Article VI, Section D, of the Basic Agreement.

Don’t blame yourself if reading Section 10(a) gives you a headache. Let’s translate it from legalese into English. We can start by ignoring the first clause, since Baez isn’t eligible to file for free agency. The next clause authorizes the Indians to reserve him for 2004 by tendering him a contract by December 20. If they do, and if the contract conforms to the requirements of the CBA, he’s deemed signed; the only issue is how much he will be paid. The second sentence provides that if Baez and the Indians don’t agree on a salary by March 1, the Indians can renew his contract at a salary of their choosing, so long as it complies with Article VI, Section D of the Basic Agreement.

Here are the key provisions of Article VI, Section D:

D. Maximum Salary Reduction
(1) No Player’s contract shall be renewed pursuant to paragraph 10(a) of the Uniform Player’s Contract in any year for a salary which constitutes a reduction in excess of 20% of his previous year’s salary or in excess of 30% of his salary two years previous. …

(3) In tendering a contract to a Player pursuant to paragraph 10(a) of the Uniform Player’s Contract, no Major League Club shall offer a salary which constitutes a reduction in excess of 20% of the Player’s previous year’s salary or in excess of 30% of his salary two years previous.

Looks pretty clear to me. Subsection (1) prevents a club from renewing a player’s contract for less than 80% of his previous year’s salary, while subsection (3) prevents the club from even offering a reserved player a contract for less than 80% of his previous year’s salary. If the club wants to pay a player less than 80% of his previous salary, it can’t reserve him. It must allow him to become a free agent, at which point the maximum-cut provision no longer applies.

The Indians seek to equate placing a player on irrevocable waivers with allowing him to become a free agent. Although both moves would allow other clubs to acquire rights to a player who would otherwise be reserved, it’s a false comparison because the effect on the player is totally different. Like a reserved player, a waived player still has no ability to select his employer–he must play for whoever claims him, even if another club might be willing to pay him more. The maximum-cut rule, which predates free agency, is the only salary protection for a reserved player who is not yet eligible for salary arbitration. A clever GM should not be allowed to undermine this protection by passing the player through waivers, assigning and then reacquiring his contract.

The MLBPA has made clear it will challenge any attempt by the Indians to reserve Baez without tendering him a 2004 contract worth at least 80% of his 2003 salary. It should win that grievance. Although Baez’ case can only arise in the narrow context of an international free agent whose contract expires before he is eligible for free agency, it presents an important principle. If a club believes that one of its reserved players is so overpaid that he’s not worth at least 80% of his previous year’s salary, it can non-tender him and seek to re-sign him as a free agent–but it should not be allowed to manipulate the rules to evade the maximum-cut rule.