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May 29, 2012

Bizball

Inside the 2012-16 CBA: The Luxury Tax Meets the Draft

This is Part 1 of a multi-part series on the latest Collective Bargaining Agreement

On November 22 of last year, Major League Baseball and the MLBPA did something that the NFL and the NBA could not: reached a new labor agreement without a work stoppage. For those that follow baseball’s labor history, it has become a miraculous run. By the time the current five-year Basic Agreement (read here) expires on December 1, 2016, it will have been 21 years of uninterrupted labor peace.

As mentioned, the league and union for the players made their announcement on November 22 of last year, but that was just a memorandum of understanding, not the finalized agreement. It took 183 days for the 2012-16 CBA to be released, and with it, we can now begin digging through the 311 pages of details.

This CBA sees a series of sweeping changes from realignment, changes to interleague play, two additional Wild Card teams, and much more. The biggest change, however, comes to how the Rule 4 Draft: a possible International Draft and with details on how those are to be conducted, namely around the allocation of signing bonuses and draft pick compensation.

Draft Pick Compensation Gets a Major Overhaul
The draft will continue to be conducted in June, but the signing deadline will be moved to a date between July 12 and July 18 depending on the date of the All-Star Game.

Getting a leg-up on agents, the league asked for (and got) a provision under which drafted players may now only sign minor league contracts. In other words, Stephen Strasburg-type deals are history. This, of course, hasn’t sat well with player agents. As one agent said to me, “The union threw us (agents) under the bus with this (labor) deal.”

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21 comments have been left for this article.

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mrdannyg

This is a fantastic summary. Love the detail - a perfect article for BP. Can't wait for the next parts.

May 29, 2012 05:21 AM

rating: 3

amazin_mess

21 years of labor peace is great, but that still doesn't asbolve anyone in regards to 1994. That will always be a joke.

May 29, 2012 06:18 AM

rating: 0

Maury Brown

BP staff

I agree, but will say this:

The pain of 1994-95 enabled the league and PA to get where they are today. When you look at how the relationship is between say the NFL and the NFLPA, baseball is light years ahead.

May 29, 2012 07:54 AM

amazin_mess

No doubt.

May 29, 2012 08:50 AM

rating: 0

Charles Dahan

BP staff

Which, I'd argue, has led players to still be getting a very raw deal...while the FA 'quiet period' and quiet offers shouldn't necessarily hurt players, the new draft rules are an unmitigated disaster for the sport. While the MLBPA hopes to have labor peace until 2016, Boras is going to find a way to blow this thing up.

May 29, 2012 11:58 AM

gpurcell

"Unmitigated disaster"? Hardly. Simply the elimination of the sandwich picks--and as a result the large increase in value of the top of the second round--is a major step in the right direction.

May 29, 2012 18:14 PM

rating: 0

Maury Brown

BP staff

By the way, pop on over at 3pm ET to my chat today here on BP if you want to discuss this article or anything else, for that matter

May 29, 2012 08:02 AM

BillJohnson

I'll be there (and thanks for doing the chat), but first, one dumb question that may fend off similar dumb questions then and replace them with more interesting ones: just what IS a "Qualified Free Agent"? That wasn't clear from the article. Any whose salary, subject to the definitions you cite, places them in that top-125 category? ANY free agent who gets that way as a result of playing past the last year of a contract, regardless of what salary they got in the previous year? What?

May 29, 2012 09:36 AM

rating: 0

Maury Brown

BP staff

For those wondering, I addressed Bill's question as part of my chat.

Maury Brown Chat Transcript (5/29/12)

May 29, 2012 13:37 PM

lmarighi

It looks to me like a "Qualified Free Agent" is simply a player who formally files for Free Agency, but I could be wrong.

May 30, 2012 00:54 AM

rating: 0

lmarighi

Whoops, I should read what was already written before commenting.

May 30, 2012 00:56 AM

rating: 0

gpurcell

Great summary.

It's fantastic to see the horribly flawed sandwich pick system vanish.

May 29, 2012 09:25 AM

rating: 2

Maury Brown

BP staff

Thanks. This one was a bit longer than I wanted. Next week, I'll dive into stuff like the Luxury Tax on total player payroll, and likly revenue-sharing. Wooo exciting, eh?

May 29, 2012 13:36 PM

doncoffin

I'm probably going to make a number of comments as I go along, so don't shoot me.

First: "The luxury tax on signing bonuses is designed, in theory, to allow for competitive balance. It also is a way for the league to police clubs from overspending, and it’s a way for clubs to have a true sense of cost certainty."

No, it's designed in theory to force teams to pay newly-signed amateur free agents less (as is the ban on signing them to major-league contracts). This--holding down player compensation--was the point of the institution of the draft in the 1960s, and all the various tweaks to it continue to have this purpose. and it is possible only because federal labor law allows the Union to enter into such agreements, agreements that affect people who are not members of the Union, and thus have no current voice in Union decisions.

May 29, 2012 16:22 PM

rating: 3

gpurcell

All ML contracts help are agents, not players. They screw with 40-man roster management and can disrupt player development (see Porcello, Rick.)

May 29, 2012 18:16 PM

rating: 0

doncoffin

One more on this installment. Given the ban on signing drafted players to major league contracts...how long does a team have to wait, after signing a draftee to a minor league contract, to re-sign hom to a major league contract? And what restrictions, if any, will there be on the terms of a major league contract to which a recent draftee/signee can be re-signed?

May 29, 2012 16:27 PM

rating: 1

Drew

It sounds like forfeited picks just disappear and that all compensation is in the form of sandwich picks. Did I read that correctly?

May 29, 2012 16:28 PM

rating: 0

doncoffin

I think I want to call this possibility the "Scott Boras Loophole."

May 29, 2012 16:29 PM

rating: 0

Pomona

"On how those clubs will be penalized, an additional wrinkle is in the mix, which may or may not happen for next season…"

Care to delve into more detail?

May 29, 2012 16:55 PM

rating: 0

John Carter

What is the intention of disqualifying a player for compensation if he is offered only a Minor League contract? I didn't read how they intend to plug up that loophole, but if the player's old team offered him a top 125 player salary, it seems pointless to deny them compensation if he signs with another organization no matter what the type of contract.

May 30, 2012 06:30 AM

rating: -1

harderj

Thanks for this. If I understand correctly, rather than the Type A/Type B free agent system, with draft consideration varying accordingly, *any* signing of a qualified free agent by a new team will result in the loss of an early draft pick (assuming they have received a qualifying offer from their current team)?

Of course, ensuring a draft pick won't be cheap, as the top 125 players in 2012 (without counting bonuses earned, etc.) averaged $12,838,000.

Jun 02, 2012 04:33 AM

rating: 0

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Bizball: Inside the 20... (06/04)

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Future Shock: Top 30 D... (05/29)

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