MLB owners impose lockout- now what happens?

Bless You Boys

Just as the most frantic free agent frenzy ever in Major League Baseball was going full speed ahead, everything now comes to a screeching halt as MLB owners voted unanimously to lockout the players as the collective bargaining agreement expired. And with the lockout came an end to 27 years of labor peace, and a freeze on all player transactions, and in fact any interaction between players and owners, other than negotiations on a new collective bargaining agreement (CBA).

Neither the lockout nor the transaction freeze happen automatically when the CBA expired at midnight on Wednesday night. It is a choice- a tactic by owners to increase pressure on the players during negotiations. There is little evidence that it will have any such effect.

Since the last work stoppage- a players’ strike in mid season, 1994, none of the four major sports has had another players’ strike, but each sport has had lockouts. That is because owners do not want players to be able to leverage a strike just prior to the post season, when they experience the greatest flow of revenue.

What happens during the lockout?

There will be no trades, no free agent signings, no roster movement. Team officials can’t even comment on player transactions.

Players who are in line for arbitration or contract extensions won’t have any dialogue with team officials to work out details of a new contract.

The winter meetings which were due to begin next week, from December 6- 9 in Orlando, Florida, will be canceled.

Drug testing will stop, as will player access to team facilities, even if the player is rehabbing an injury in an effort to prepare for next season.

Players and teams are due to exchange salary figures for arbitration on January 14, 2022 but that won’t happen unless the lockout has ended.

The international signing period is scheduled to begin on January 15, 2022. It had been pushed back due to the pandemic, and was being set up by MLB to accommodate a possible international draft, which could become part of a new CBA.

Pitchers and catchers are due to report around Valentine’s day- February 14, so a new agreement would need to be reached by around February 1st to avoid any delay in the start of spring training.

The two sides should want to avoid the loss of any games due to the lockout in order to avoid the loss of revenue to owners, salary pay to players, and drawing the ire of fans.

What are the issues to be resolved?

Money, mostly. Here’s a chart.

MLB CBA Issues

Arbitration eligibility 2 years service Formula based on fWAR
Free agency eligibility 5 years or age 29-1/2 Age 29-1/2
Luxury tax Bracket at $240 million payroll $ 214- 220 million
Salary floor Probably Was offered with 180M threshold
Playoff expansion 12 teams 14 teams
Alignment 2 divisions each league Home teams pick opponent
Free agent compensation Eliminated Eliminated
National league DH Included Included
Amateur draft 60% win pct/ 40% market size Weighted draft lottery
Minimum salary Higher than owners offer $600K/ $700K/ $ 825K first 3 years
Revenue sharing Modify Oppose player demand
Grievance hearing Proceeding Very upset

Free agent Eligibility

Based on reports from ESPN’s Jesse Rogers and The Athletic’s Evan Drellich, the two sides are far apart on the players’ demand to reduce the eligibility for free agency from six years- as it has been since 1970, down to five years. The owners proposed in August to change the eligibility from six years to Age 29-1/2, which would have meant some of the best players would have to play seven years or more before being eligible for free agency.

The players seem to have taken the suggestion and turned it into a hybrid proposal. The exact proposal was for two years using the current six year requirement, then two at five years or age 30-1/2, then two years at five years or age 29-1/2, which ever comes first”. This proposal so upset the owners that they demanded that the players withdraw their request to reduce the eligibility as a precondition to continuing talks. The players rejected that demand, and the meeting was finished just seven minutes after it began.

Revenue Sharing

The owners also reportedly demanded that the players drop their revenue sharing proposal, whatever that was. Players are determined to stop teams from tanking by refusing to spend on salaries. The players’ proposal was enough to get the owners to demand that it be dropped before they took their ball and went home.

Luxury Tax

A prime objective of the players is to move the threshold at which teams begin to pay a “competitive balance tax” up significantly. In the last CBA, the tax threshold barely moved while revenues soared. As a result, player salaries actually declined during the duration of the CBA. Players are determined to see it increase much more this time. They’ve reduced their proposal from $ 248 million down to $ 245 or 240 million, depending on which report you read. What the tax and/ or penalties are is also unknown, as is what higher thresholds would be in place.

The owners initially proposed an absurd $180 million tax threshold, which would have immediately put at least seven teams in a tax bracket. They also proposed increasing the tax rate from 20 percent to 25 percent in the lowest bracket. The proposal came with a salary floor- which would be a tax of unknown amount on payrolls under $100 million.

The owners proposal has come up now to $ 214 million scaling up to $220 million. More slow creep which is a non starter with the players, but the two sides are at least at opposite ends of the same ballpark. There was no mention of a salary floor in the latest reports, but that’s the one thing that players should be demanding if they want to force tanking teams to spend.

Minimum Salary

MLB owners proposed a salary scale for the first three seasons, setting the minimums at $ 600,000 in the first year, $700,000 in the second year, and $ 825,000 in the third season in the major leagues. But again, that was tied to getting rid of the super two eligibility for arbitration, which is going in the opposite direction of the players’ proposal.

The average salary in the major leagues has decreased by 6.4 percent since 2017, and the median salary is down 30 percent since 2015 according to the Associated Press.

Arbitration Eligibility

The players want to move the eligibility for arbitration back to two seasons from the current two seasons plus 116 days. They also want players who are all stars and most likely subjected to service time manipulation to become eligible for arbitration. One could easily see the two sides settle for 2.5 years (2.086) which is 30 days less than this year’s cutoff, and also allow all stars with two years of service to be eligible. This is an important issue, but they’re still in the same yard.

Playoff Expansion

We have written here several times now that the owners’ fondest wish is to expand the number of teams in the playoffs. MLB even negotiated a new contract that gives ESPN the broadcast rights for the first round if and when they expand. The owners proposed 14 teams in the playoffs, seven in each league, with the top seed getting a bye, while the two other division winners and the top wild card team would not only get all three games at home, but would get to choose their opponent from the other wild card teams.

The players offered a 12 team playoff, with two divisions in each league of seven and eight teams each. The division winners would get a bye and the wild card teams would play in the first round. The players may be willing to give further on this issue in exchange for other concessions.

Other Issues

Two changes appear to be inevitable: the owners offered to implement the designated hitter in the National League for the 2021 season if the players agreed to expand the playoffs, but the players were not about to give up their best bargaining chip for something that the owners probably wanted anyway and was worth just a little bit to them. It seems that the DH will finally be universal.

The owners offered in the last round of CBA talks to eliminate free agent compensation- or at least the payment of compensation, if the players agreed to an International Draft. The qualifying offer system applies to very few players, and the biggest beneficiaries are larger market teams who let their free agent players walk instead of trading them a year earlier. It doesn’t work except as a deterrent to those few free agents. The offer is back on the table, but whether an international draft will happen is unknown. There haven’t been any reports of it.

There is still an ongoing hearing over a grievance that the players filed against the owners for failure to play as many games as possible during the 2020 pandemic shortened season. Their request is for a cool $500 million, but the matter could be settled in the event of a new CBA.

Let the talks continue.

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