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Historic Labor Agreement

Posted by Jason A. Churchill on October 24, 2006

Baseball and the players union agreed to a five-year deal this week.  That’s the good news, and for once, there isn’t any bad news to follow.

I dug up the changes that were made, and thought it’d be interesting for some to read and discuss.

Baseball is as healthy as it’s ever been, and though the game is not without it’s problems, i.e., performance enhancing drugs (HGH), salaries, etc, the game is in good shape, and that is a good sign for us fans who can’t bare the thought of another work stoppage.

I guess Bud Selig is starting to get, just a little bit.

Hooray for baseball!

ST. LOUIS — Baseball Commissioner Allan H. (Bud) Selig and Major League Baseball Players Association Executive Director Donald Fehr jointly announced today that MLB and the MLBPA have agreed to a five-year labor contract that will allow play to continue uninterrupted through the 2011 season.

The termination date of the new Basic Agreement is December 11, 2011. The five-year contract is the longest labor contract in baseball history. By the end of the contract, baseball will have gone 16 years without a strike or lock-out, the longest period of labor peace since the inception of the collective bargaining relationship.

“This is an historic agreement for Major League Baseball and is emblematic of the spirit of cooperation and trust that now exists between the clubs and players,” said Commissioner Selig. “We are in the midst of baseball’s Golden Age. More than 76 million fans attended our games this season, setting an attendance record for the third consecutive year, and we produced $5.2 billion in revenue, which more than quadruples our revenue total of 14 years ago. The new Basic Agreement assures labor peace into the next decade and gives us the opportunity to expand the Golden Age and continue to grow the game in all ways unimpeded by internal labor conflicts.”

Fehr said: “I share the Commissioner’s view that over the last ten years our game has experienced enormous growth. This new agreement will permit that growth to continue uninterrupted. We were able to conclude these new agreements before the expiration of the current contracts because the two parties brought to the table, along with serious concerns, a respect for the positions and needs of the other. As a result, the discussions were workmanlike and pragmatic, and, while difficult on some issues, the talks were conducted in a mutual attempt to get the job done.

“I want to thank all of the Players for their involvement and support during this process, especially those on the negotiating committee, without whom we would not be here today,” Fehr continued. “Nearly 100 players participated in negotiating meetings, and many times that number in internal discussions. I would also like to acknowledge the MLBPA staff for its efforts. Finally, on behalf of the players, I would like to express our appreciation to the members of the Commissioner’s negotiating team for all of their hard work.”

Commissioner Selig added: “I appreciate the effort that representatives of both negotiating teams devoted to finalizing the agreement in such a timely manner. I would also like to thank the club representatives of Major League Baseball’s negotiating team – Larry Dolan of the Cleveland Indians, Peter Angelos of the Baltimore Orioles and Andy MacPhail, formerly of the Chicago Cubs – for their hard work and for sacrificing so much time on behalf of the game.”

Summary of MLBPA-Major League Baseball Labor Agreement —

1. Five-year labor contract.
2. Termination date – December 11, 2011.

Revenue Sharing
1. Net transfer of revenue sharing plan will be the same as the current plan ($326 million in 2006). Net transfer amounts will continue to grow with revenue and changes in disparity.
2. Marginal tax rates for all recipients are reduced significantly through the use of a new central fund redistribution mechanism. Rates reduced to 31% from 40% (high revenue Clubs) and 48% (low revenue Clubs) under old agreement.
3. All Clubs face the same marginal rate for first time.
4. Commissioner’s Discretionary Fund will continue at $10 million per year, with cap of $3 million per Club per year.
5. Provision requiring revenue sharing recipients to spend receipts to improve on-field performance retained with modifications.

Competitive Balance Tax
1. Competitive Balance Tax structure from 2002 agreement is continued.
2. Rates will continue at 22 ½ % for Clubs over the threshold the first time, 30% for Clubs over the threshold the second time and 40% for Clubs over threshold the third time. 3. Clubs that paid 40% in 2006 will face 40% rate in 2007.
4. Thresholds reset to $148 million in 2007, $155 million in 2008, $162 million in 2009, $170 million in 2010 and $178 million in 2011.

The Debt Service Rule
1. The Debt Service Rule from 2002 agreement retained with modifications.

Amateur Draft
1. Clubs that fail to sign first or second round draft pick will receive the same pick in the subsequent draft as compensation. Club that fails to sign a third round pick will receive a sandwich pick between rounds three and four in the subsequent draft as compensation.
2. Period of time before a Player must be protected from the Rule 5 Draft is changed from three or four years from first minor league season to four or five years from year of signing.
3. Signing deadline of August 15 for draft picks other than college seniors.

Draft Choice Compensation
1. Type C free agents eliminated in 2006
2. Also in 2006, compensation for type B players becomes indirect (sandwich pick) as opposed to direct compensation from signing Club.
3. Effective 2007, Type A players limited to top 20 percent of each position (down from 30 percent) and Type B players become 21 percent – 40 percent at each position (rather than 31 percent – 50 percent).
4. Salary arbitration offer and acceptance dates move to December 1 and December 7.

Benefit Plan
1. Players Benefit Plan continued with maximum allowable benefit under IRS rules.
2. $154.5 million average annual contribution.
3. Improved benefits for some retired players.

Minimum Salary
1. Major League: $380,000 in 2007, $390,000 in 2008 and $400,000 in 2009, COLA in 2011.
2. Minor League: $60,000 in 2007, $62,500 in 2008, $65,000 in 2009.
3. New minimum for first time roster players of 50% of minor league minimum.
4. Maximum cut rule applicable to split contracts reduced to 60% from 80%.

Free Agency
1. Eliminate December 7, December 19, January 8 and May 1 deadlines for free agents.
2. Tender Date – December 12
3. Eliminate right to demand a trade for all new multi-year contracts.

1. Home-field advantage in World Series to League that wins the All-Star Game.
2. Drug program continues.
3. Settlement of 40 plus grievances and disputes.
4. No contraction during term of agreement.


20 Responses to “Historic Labor Agreement”

  1. You have to love the fact that it’s a five-year deal, rather than a three-year pact as was originally being discussed last spring. No work stoppages through 2010, at least.

    The revenue sharing remains similar, as does the luxury tax.

    The biggest changes start with the draft compensation as well as compensation for failure to sign a draft choice.

    No more Type C free agents – eliminated immediately, while Type B FA’s are now worth a sandwich pick, rather than the signing club losing a draft pick. Interesting… I like it.

    Type A FA’s, starting NEXT YEAR, will be top 20 percent at each position, rather than top 30 percent.

    Rule 5 changes are interesting, too, and I was just talking about this with a friend this week. Instead of three or four years, it’s now four or five, depending on when the player first signed a pro contract.

    The minimum salaries will jump to $380k in 2007 and will rise 10 grand in ’08 and another 10 in ’09. In 2010 and 2011, there is a cost of living raise, as has been for the past four seasons.

    Minor Leaguers also receive a minimum raise, up to 60 grand in ’07 and rising to $62,500 in 2008 and $65,000 in 2009.

    Here’s one that could effect a lot of teams…

    The minimum paycut rule is lowered from 80% to 60%, meaning, for example, the Mariners could legally offer Joel Pineiro just 60% of what he made in 2006, rather than 80… that is going to change a lot of decisions this winter on a lot of arbitration eligibles, though probably not Joel Pineiro.

    Players will no longer be allowed to demand a trade when dealt in the middle of a multi-year contract, as Delgado has the right to do this winter.

    The downer is, the All-Star Game winner still gives that league home field advantage in the World Series. But oh well.

  2. Goose said

    There’s a few things that are kinda iffy for me. But the good FAR outweighs the bad in this case. Uninterrupted baseball through 2011. Awesome.

    Nice job Selig.

  3. What’s iffy for ya, Goose?

  4. Slackman said

    Let me see if I got this straight. If a team signs a Type B free agent, it doesn’t lose a pick but the team that lost the player gets a sandwich pick? I like it, assuming I understand it correctly.
    What about Type A free agents? Does a team lose a pick for signing one? Do they get a sandwich pick for losing one?
    On a side note, I like the new deadline for signing draft picks. Hopefully that will help prevent any more of that Luke Hochevar business that took place with LA back in ’05.

  5. Yes, that is it, Slackman… Type B FA’s are now netting a sandwich pick, rather than the signing team’s first rounder.

    A Type A free agent is still going to cost the signing team their first rounder, and teams drafting in the top 15 are still protected from this rule.

    For example, if the Mariners signed a Type A free agent, they would NOT lose their first rounder, because they draft in the top 15. They would instead surrender their 2nd rounder, and a sandwich pick between the first two rounds would go to the former club.

    All of this is moot, however, if the former club did not offer arbitration to the free agent. If the M’s do NOT offer Meche arbitration, they get nothing, even if he qualifies as a Type B, which he may not anyways.

  6. Drew said

    I think the Rule 5 change is good. It keeps prospects in A+ or AA off the major league rosters longer. Is this in effect for this offseason?

  7. YES, it is. Which is awesome.

  8. Drew said

    Which prospects that would have been added to the 40 man now won’t have to be? It could really change the way rosters are built in the offseason!

  9. A lot of guys, actually. But nobody alarming.

    Not a soul that truly matters.

  10. Goose said

    I’m a little iffy on this:

    “. Clubs that fail to sign first or second round draft pick will receive the same pick in the subsequent draft as compensation. ”

    Too me, that just shouts loophole.

    Lets say this years draft class sucks(I know it doesn’t) and the 2008 draft class is supposed to be awesome. What’s stopping the Cubs(they have the 1st pick don’t they?) from picking some guy, then offering him something they know he won’t take just so that they will get the #1 pick the next time around. It’s like they get a mulligan. I’m not sure I like that.

  11. Sneekes said

    I agree with Goose. Something doesn’t seem right about the slot compensation thing.
    I’d like to know what happens when a club don’t sign the player they select with a compensatory pick? Does that pick then get rolled over to the next year aswell?

    Off on a tangent – when are the free agent type’s get announced? I can’t believe Meche won’t be at least a B – surely this year has pushed him into the top 50% (is that right for B?) over the last 2 years?

  12. Loophole? It’s simple… If they draft a guy at 23 and fail to sign them, they get the same pick in the first round the following year. It’s no more a sham than it is now.

    A team NOW can draft a guy they have no plans of signing and get a pick in the following year’s draft… the only change is that it’ll be the exact same slot, rather than a sandwich pick. Not many top 10 picks go unsigned, and if you lose that kind of a pick due to a player not being willing or expecting too much dough, should the club be punished?

    The answer is no.

    Draft slotting will fix this, and can be added during the new agreement, but just wasnt wished in on time.

  13. Jerry said

    RE Meche,

    I have to think that he will be a Type B.

    This could work out well for the M’s. If Meche is a type B, clubs won’t have to worry about waiting to see if the M’s offer him arbitration, as they won’t be losing a pick for him. Some club may come in and offer Meche a big contract early in free agency, with the M’s getting the supplemental first rounder.

  14. slim said

    With the new Rule 5 rule, the following players are currently exposed to the Rule 5 Draft:

    Renee Cortez
    Craig James
    Brian LaHair
    Michael Garciaparra
    Matt Rogelstad
    Hunter Brown
    Jon Nelson
    Ryan Rowland-Smith
    Jose De la Cruz
    Byron Embry
    Joseph Woerman
    Jason Mackintosh
    Brian Schweiger
    Jason Ruchti
    Michael Wilson
    Jesus Guzman
    Chris Colton
    Ivan Blanco
    Josh Womack
    Ronald Garth
    Eddy Hernandez
    … plus a few more in the lower levels

    Of those, LaHair and Wilson should be protected. Garciaparra and James seem like fringe candidates in what will likely be a very sparse Rule 5 draft this year.

    Semi-notable players who don’t need to be protected now:

    Rob Johnson
    Andrew Baldwin
    Yung Chi Chen
    Luis Valbuena
    Marshall Hubbard
    Casey Craig
    Brent Johnson

  15. When does this take effect? Is it possible that it won’t take effect until mid-December – meaning that it won’t affect the Rule 5 until next year?

  16. C. Cheetah said

    Is it safe to assume that the Mariners get part of the $10 million Commissioner Discretionary fund?? Therefore more reason why the Mariners did not select Miller in the draft. Hopefully it was worth $3 million, and they use it to sign a starting pitcher.

  17. No, the M’s aren’t getting a dime of that fund… i don’t have much info on why that is however, but if I drag some out, I’ll post immediately.

    The Rule 5 stuff is supposed to take effect NOW.

    Re: Rule 5 exposed

    LaHair is certainly going to be protected, as is RRS, most likely. He’s that lefty who has solid stuff and that might interest some club, like he did the Twins in 2005. Wilson will probably get that nod, too.

    De la cruz is a decent candidate to be taken in the rule 5, as is James and Cortez.

  18. marc w. said

    On that note, Jason – are there any guys in the AFL that you think the m’s should take a flyer on in the rule 5 draft? BA mentioned that Chad Spann might get some interest, you’ve got James down there…. any other candidates?

  19. Willmore said

    Jason, about the compensation for failing to sign a draftee. USSMariner brought up the point that Goose was trying to make.

    Say you have a top 5 pick in a draft, and you look over the possible talent out there and, like this year, there is nothing that jumps at you. You could select a nice kid, who can be something good for you, but you’re not getting an A-Rod or a Santana out of it. The team then looks at the college and high school talent that will be available next year, and it looks really good top-to-bottom. So why not draft a kid who is guaranteed not to sign, get the pick for next year, and next year, you have a top pick in a good draft. In fact, you have 2 1st rounders in a good draft.

    That is abuse at it’s highest, because the picks bump down other teams that did sign their players last year.

    Assume the Mariners have a #5 pick in the 2006 draft, and don’t sign the player. Then next year, they make the right moves, and finish first in the division, go to the playoffs, have a successfuly season. They get the 25th pick in the 2007 draft. But now, the teams that actually did do poorly will all be bumped down by the Mariners, despite having a worse record. Where is the fairness in that ?

  20. Sneekes said

    Further to that Willmore, if a team is not sure of a kid who is “guaranteed not to sign”, they could end up low-balling a kid who did want to sign – forcing them to accept an incredibly low offer or to miss a year.
    It’s unlikely, and I’d hope no-one would mess around with a kids life like that – but the potential for the situation to arise is there.

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