An Early Preview of MLB’s 2016 CBA Negotiations: Part I

With Major League Baseball’s 2015 season in the books, focus has shifted to 2016. And one of the story lines that you’ll be hearing a lot about in the next year is the upcoming negotiation of a new collective bargaining agreement between MLB and the Major League Baseball Players Association. Indeed, rather than wait for the current agreement to officially expire on December 1, 2016, the league and the players union will likely begin discussing a new agreement sometime in the next few months.

For the uninitiated, the CBA is the contract that governs the relationship between MLB (and its 30 teams) and the players. It dictates the rules governing free agency, players’ salaries, revenue sharing, and the length of the playing season, among a host of other issues.

As in any collective bargaining process, the league and union will discuss a variety of topics during the 2016 negotiations. And while new issues will inevitably emerge between now and next December, based on statements made over the last couple years by MLB and MLBPA officials, we can generate a pretty reliable list of what are likely to be among the most pressing issues the parties will face during the upcoming negotiations.

I’ll be examining these bargaining issues in a two-part preview of the 2016 CBA negotiations. In this initial post, we’ll take a look at: (i) the new leadership dynamic at MLB and the MLBPA, (ii) various economic-related issues that are likely to be discussed during the negotiations (including the players’ declining share of league revenues, the qualifying offer, and service time manipulation), and (iii) possible changes to the league’s Joint Drug Agreement.

Part II will then consider bargaining issues related to the draft (both domestic and, potentially, international) as well as various pace-of-play and scheduling-related issues, before offering a preliminary assessment of the likelihood that a work stoppage will impact the 2017 season.

New Leadership

While not a bargaining issue per se, one story line that is likely to emerge during the 2016 collective bargaining process is the fact that both MLB and the MLBPA will be represented by new leadership during the upcoming negotiations. On MLB’s side, the talks will be the first of Rob Manfred’s commissionership. Manfred is well acquainted with the collective bargaining process himself, having negotiated the 2002, 2006, and 2011 CBAs on behalf of MLB as its Executive Vice President for Labor Relations & Human Resources. However, with Manfred now in the commissioner’s chair, MLB’s chief legal officer, Dan Halem, will likely serve as the league’s lead negotiator.

Meanwhile, the 2016 negotiations will feature new leadership on the players’ side as well. Following the untimely death of former MLBPA executive director Michael Weiner in 2013, this year’s negotiations will be the first with Tony Clark at the helm of the players union.

Whenever you have new leadership on one side of a process like this it raises the possibility that the new negotiators will attempt to establish their authority by taking hard-line bargaining positions, increasing the possibility of a work stoppage. That fear is obviously compounded here by the fact that both sides will be represented by new leaders.

Moreover, on MLB’s side, Commissioner Manfred will undoubtedly feel some pressure to drive a hard bargain on behalf of the league. The primary source of opposition that Manfred faced during his election to the commissionership came from a group of owners – led by the White Sox’ Jerry Reinsdorf – who wanted to hire someone for the position who was perceived to be a tougher negotiator. While Manfred won’t be leading the negotiations on MLB’s behalf himself this time around, he will of course be heavily involved in the process, and as a result the criticism he faced during the commissionership election could influence the positions that the league adopts during the negotiations.

All that having been said, the fact that Manfred, Halem, and Clark were each heavily involved in prior collective bargaining negotiations suggests that the leadership changes at MLB and the MLBPA are less likely to hinder the parties from reaching a new agreement in 2016 than might normally be the case. Still, it would probably be unrealistic to expect the league and union to negotiate a new agreement quite as seamlessly as they did during the last few rounds of bargaining, when Manfred and Weiner were able to draw upon their lengthy history and strong working relationship to reach new agreements in a remarkably amicable fashion.

The Players’ Declining Share of League Revenues

Turning to more substantive matters, the most important – and contentious – issues in any collective bargaining process inevitably revolve around money. Things are likely to be no different during MLB’s 2016 negotiations.

As I discussed earlier this year, MLB players have seen their share of league-wide revenues decline precipitously over the last 10-15 years. Depending on how you calculate it – for instance, whether you factor in stadium debt, pension payments, etc. – the players have gone from receiving around 56% of league revenues in 2002 to less than 40% today (by other estimates, the numbers went from 63% in 2003 to 50% in 2014).

Dave Cameron has a great piece coming out in the soon-to-be-published Hardball Times Annual 2016 that takes an in-depth look at MLB’s economics and the related implications for the players union. I don’t want to steal Dave’s thunder, so I’d encourage everyone to buy the book and read Dave’s piece.

That having been said, the players have a difficult task ahead of them should they wish to try to increase their share of overall MLB league revenues during the 2016 negotiations. In other leagues like the NFL and NBA, players receive a minimum share of league revenues in exchange for agreeing to a salary cap. So players in these leagues can attempt to directly negotiate a higher guaranteed percentage of their league’s profits as part of their CBA.

Because the MLBPA has never agreed to a salary cap, however, baseball players are not guaranteed any particular share of league revenues. This means that unless the union is willing to reevaluate its position on a salary cap – which would appear to be highly unlikely to say the least – then it could prove difficult for the MLBPA to guarantee a larger share of MLB’s revenues for its membership in the 2016 CBA.

Realistically, the union will likely push for increases in the league minimum salary and luxury tax threshold to try to steer a larger percentage of league revenues to the players. The union may try to convince MLB to tweak its revenue sharing formula in some way that could benefit the players as well. The MLBPA will also likely take a fresh look at the league’s debt service rules, which potentially restrain teams from spending on player salaries, and may try to tap into the growing profits the league receives from MLB Advanced Media (the subsidiary that runs MLB.tv, along with a host of other non-baseball-related streaming services).

Whether any of these measures will be enough to significantly reverse the recent trend and secure an increasing share of league revenues for the players, however, remains uncertain.

The Qualifying Offer

Along with the players’ declining share of league revenues, possible modifications to the current qualifying offer system for free agents will also likely to be on the table during the upcoming negotiations. From the MLBPA’s perspective, the existing system is problematic in several respects, concerns that are only likely to be exacerbated by the fact that a record 20 free agents received qualifying offers from teams last week.

First, as recent experience has shown, the potential loss of a draft pick can substantially reduce the marketability of free agents who receive qualifying offers from their prior clubs. While draft pick compensation may not impact the market for elite players, it can certainly affect the value of the contract offers that lower-tier free agents receive. In this sense, then, the current system has likely helped contribute to the players’ dwindling share of league revenues.

Moreover, as we saw back in 2014, receiving a qualifying offer can, in extreme cases, effectively destroy a player’s market. Rather than give up a draft pick to sign a free agent during the off-season, teams have in some cases instead opted to wait until the following June to sign a player, at which point his new franchise will no longer lose a draft pick.

The MLBPA may try to address these issues in a variety of ways. First, the union could seek to dispense with free agent compensation entirely – a proposal that MLB is probably unlikely to accept. Alternatively, the players could propose replacing the qualifying offer system with some new form of compensation for teams that lose a free agent.

Assuming that the parties stick with the qualifying offer system, however, the union may seek to change the existing process in any one of several ways. First, the players could look to increase the dollar value of a qualifying offer, making the decision to extend such an offer more cost-prohibitive for a player’s former team. For instance, rather than set the value of the qualifying offer at the average of the 125 highest-paid players’ salaries – as specified in the current CBA – the union could instead try to base the qualifying offer on an average of a smaller range of players (such as the salaries of the top 50 or 75 players).

Similarly, the MLBPA could look to make the qualifying offer a multi-year, rather than a single-year, contract. This would also serve to increase the potential cost of a team extending a qualifying offer to a free agent, and would more closely approximate the length of the offers that players are likely to receive on the open market.

Alternatively, the union could push to extend the time period for free agents to accept a team’s qualifying offer. As Dave Cameron has previously proposed, eliminating the current seven-day deadline for acceptance of a qualifying offer could cause teams to hesitate before extending an offer to non-elite free agents, for fear that the player would agree to return to his prior club after the franchise has already allocated his salary to other off-season acquisitions.

Even if the union can’t get the league to agree to eliminate the deadline in its entirety, at a minimum it would seem to be reasonable to give players a longer window to decide whether to accept a qualifying offer. Such a change could help free agents avoid remaining unsigned well into spring training – as we have seen on more than a few occasions in recent years – by reducing the odds that they misgauge the strength of their market during the short window that they currently have to consider whether to accept a qualifying offer.

Admittedly, it’s hard to know which, if any, of these proposals MLB would be willing to go along with. Still, it’s probably reasonable to assume that some changes to the current qualifying offer system will be coming in the new CBA.

Service Time Manipulation

Another issue that the MLBPA is likely to take up during the upcoming negotiations is service time manipulation. While it is nothing new for teams to strategically send top prospects to the minor leagues for a short period of time in order to delay their free agency clock, the issue came to a head this past season when the Cubs announced that Kris Bryant would not be on the team’s opening day roster despite having destroyed the Cactus League. In fact, the Cubs’ decision to send Bryant to Triple-A resulted in the players union taking the unprecedented step of publicly denouncing the demotion.

As with the qualifying offer system, there are any number of potential ways to reduce service time manipulation. While some of these proposals are likely to be more acceptable to MLB than others, the league does generally have an interest in seeing its top prospects play in the major leagues as soon as they are ready, rather than waiting until it becomes most financially prudent for their teams to promote them. Therefore, MLB should be amenable to at least discussing potential changes to the existing system.

That having been said, finding a mutually agreeable solution to the service time issue is easier said than done, and as a result, the two sides may very well be unable to resolve this issue during their 2016 negotiations. On the other hand, if the MLBPA is willing to budge on some other issues of importance to the league – such as an international draft, for instance, as discussed in Part II of this series – then MLB may be willing to take some significant steps to curb service time manipulation.

Modifications to the Joint Drug Agreement

Finally, after Josh Hamilton successfully avoided punishment for his reported drug relapse earlier this year, MLB vowed to pursue changes to the league’s Joint Drug Agreement (JDA) during the 2016 collective bargaining negotiations. Because we do not know precisely why the arbitrator ruled that Hamilton had not violated his drug treatment program, it is difficult to predict which aspects of the current JDA the league will seek to modify.

For instance, as I noted at the time, it is possible that because Hamilton allegedly self-reported his violation, rather than failing a drug test, his relapse did not trigger any penalties under his personalized treatment program. If this were the case, then MLB would presumably look to change the rules to ensure that self-reported violations will trigger potential punishment under the JDA in the future.

Since we don’t know exactly what MLB is likely to push for in this regard, it is also difficult to predict whether the MLPBA will be willing to agree to any of the league’s proposed changes. Nevertheless, this will inevitably be an issue that the parties discuss in the coming year.