Collective Bargaining Issues: Service Time, Arbitration

As covered at length by MLBTR’s Anthony Franco, Ken Rosenthal and Evan Drellich of The Athletic published a relatively bleak account of the state of negotiations between players and owners yesterday. With the scheduled start of Spring Training fast approaching, the MLBPA — widely viewed among players as having negotiated the short end of the agreement that ran from 2016-2021 — views the owners’ most recent proposal as worse than the prior arrangement. Giants player representative Austin Slater summed up the union’s view when he told Susan Slusser of the San Francisco Chronicle that MLB’s present stance on questions of core economics were “disingenuous” and “a smokescreen” and implied that players viewed owners’ pre-lockout behavior as unprofessional.

Per Rosenthal’s and Drellich’s report, players and owners remain at loggerheads on most — if not all — of the core issues in play. These issues — each of which bear directly on some combination of total revenue, the way revenue is shared between players and owners, and labor conditions — include playoff expansion (a major priority for owners), an international draft (which the players have made clear they’d only agree to in exchange for a significant concession), the competitive balance tax threshold (players view it as a major hindrance to salary growth and would like to see it grow substantially), the minimum salary (which all players make at some point in their career and sets the ‘replacement’ cost for veterans), revenue sharing (players see it as supporting tanking), and draft order (players want a lottery for top picks to disincentivize tanking).

While an on-time start to Spring Training looks like a pipe dream and Opening Day seems to be in increasing jeopardy, owners and players appear to have made at least some progress on one issue: the treatment of players prior to arbitration eligibility. Under the previous agreement, the great majority of players with less than three years of service time were paid the league minimum ($570,500 in 2021) or thereabouts before becoming eligible for salary arbitration (wherein team and player could negotiate but would have a salary set by an arbitrator should they fail to reach a deal) and remain under team control for three further seasons. (Players in the top 22 percent among those with between two and three years of service time, known as ‘Super Twos,’ were granted arbitration rights a year early, giving them four years of eligibility.)

In November, owners proposed eliminating salary arbitration entirely, instead creating a performance-based (by fWAR) salary pool (a solution with the potential to pay young high-end performers a great deal more but that shifts the bulk of injury and performance risk from team to player), while players proposed lowering the arbitration eligibility bar from three years to two (thereby diminishing a year of extraordinary surplus value generated by players entering their primes). Unsurprisingly, both proposals were non-starters.

Recent negotiations appear to have yielded a potential compromise in principle, if not in monetary value. Though the union has not yet dropped its demand for an additional year of arbitration eligibility, each side has proposed the creation of a salary pool for pre-arbitration players — owners have offered $10MM, players have asked for $105MM — to be distributed according to performance, with the biggest bonuses awarded according to MVP, Cy Young, and Rookie of the Year voting results. As Rosenthal and Drellich note, owners agreeing to a pool value closer to nine digits than seven might persuade players to accept the continuation of the arbitration status quo.

Some common ground appears to exist on the related topic of service-time manipulation, an issue that rose to prominence in 2015 when the Cubs stashed consensus top-5 prospect (and eventual NL Rookie of the Year) Kris Bryant in the minors for just under two weeks in order to ensure an additional year of club control. Though Bryant’s grievance against the Cubs was ultimately denied, owners appear to agree that such manipulation is a bad look for the game, but their solution differs substantially from the union’s. Both owners and players have proposed somewhat convoluted systems. The union plan would grant a full year of service to a) any player who finishes in the top five in either league’s Rookie of the Year voting, the top three for reliever of the year, or made first- or second-team All-MLB; b) finished in the top 10 at their position in an average of bWAR and fWAR if a catcher or infielder; or c) finished in the top 30 at their position in the same average if an outfielder or pitcher. MLB’s plan would reward teams rather than players, granting a draft pick (after the first round) to any team that keeps a pre-season top 100 prospect on its roster for a full season should that player also finish in the top three in Rookie of the Year balloting or in the top five in MVP balloting in any of his first three seasons.

Owners reportedly view the players’ proposal as affecting a much wider pool of players than they’d like, and there’s no doubt that the union’s scheme would cut into teams’ ability to generate surplus value (in short, the difference between the salary of a player generating a given quantity of on-field value and the cost of that value on the open market). It would do particular damage to teams operating on the model associated with the Rays and A’s of the last several decades, whereby teams generally either lock up players early in their careers for below-market rates (a la the deal Evan Longoria signed with the Rays in 2008, which gave the team nine years of control) or trade them for a maximal return before they reach free agency (as the A’s are likely to do with Matt Olson this offseason). In the 2021 season, for instance, Wander Franco would have been granted a full year of service time under the players’ proposal despite not making his debut until late June — keeping him under team control only through the 2026 season rather than through 2027 — while under the owners’ proposal the Rays would have only received a draft pick had they kept the twenty-year-old on their roster from Opening Day.

How much progress these apparent areas of agreement actually represent is a matter of some debate, and fans should bear in mind that even in these comparatively productive areas of discussion, significant and material gaps persist. Whether or not the 2022 season will begin on time remains an open question, but progress — or a lack thereof — on matters that affect the earning power of all players in the early years of their careers will go a long way toward providing an answer. In any event, the owners’ present proposals aren’t likely to cut the mustard with an MLBPA that feels it’s held the short end of the revenue stick for years.