MLB’s Sticky Service Time Situation

While the long-term financial implications of a pandemic for baseball players and owners might not be top of mind for many of us right now, discussions between players and owners on the myriad issues resulting from the season’s delay are taking place right now, and those discussions will have considerable effects on the sport’s future. Last week, among reports of the league potentially skipping June’s amateur draft, service time emerged as the most significant potential baseball issue resulting from COVID-19, particularly if the 2020 season is lost.

The problem is not a simple one, as players generally receive service time for being on a major league roster, with the resulting time accrued inching players closer to larger salaries in the form of arbitration and, eventually, free agency. If a partial season is played, some sort of service time pro-ration based on the actual number of days in a season seems likely. If the season goes 100 days instead of 186, starting every player who sees major league time with 86 days is another potential compromise. Likewise, salaries don’t seem to be a big issue, per Jon Heyman, with pro-ration also likely in that case. But what might happen should no season take place is more difficult to say.

Joel Sherman reported the MLBPA has proposed a full year of service time if players had a certain amount of service time accrued in 2019, with Ken Rosenthal reporting the time period was 60 days, essentially pushing forward service time for players who were on rosters for a significant portion of last season. MLB, for obvious reasons, does not want to provide such credit. Unfortunately, the framing of this issue has been somewhat problematic. In his tweets, Sherman said the following:

Pretty much certain MLB would not give full service without games played/revenue taken in. Remember service time is an MLB lifeblood impacting arbitration, free agency, pension.

While Rosenthal framed the issue in this manner:

The owners, after losing an entire year of revenue, would want relief in a variety of areas, including service time. They would not simply grant a year of service to every player who appeared in a single major-league game in 2019. The union, likewise, knows a certain threshold of service in ’19 would be required, and its proposals reflect that understanding.

Perhaps I’m missing some vital piece of information here, but are the players getting paid for 2020 in this scenario? Because if they are not, framing the issue as MLB losses that require relief without mentioning equivalent player losses misses a big part of the argument. Not providing service time for a lost 2020 season acts as a punishment for the players well beyond the losses they’re already set to suffer in losing this season.

As a practical matter, there’s around a billion dollars in 2020 salary scheduled to come off the books at the end of this season. In a normal year, raises in long-term contracts and arbitration, and new free agent contracts would make up for that difference. At the beginning of this past offseason, before free agency but including options and raises through contract extensions and arbitration, there was $440 million available to teams before they got back to 2019 spending levels. However, if we take away all the arbitration raises because players don’t accrue service time, that’s $250 million or so that doesn’t make it into the new payrolls. And free agent spending takes a massive hit as well. Of the last free agent class, roughly half the money went to players with under seven years of service time.

Back in February, Anthony Castrovince ranked next year’s free agent class. The top six free agents on his list were Mookie Betts, J.T. Realmuto, Marcus Semien, Trevor Bauer, George Springer, and Marcus Stroman. All six need the year of service time to become free agents. Without that group, the top player in the class would instead be Marcell Ozuna followed by DJ LeMahieu, Mike Minor, Jake Odorizzi, Andrelton Simmons, and Didi Gregorius. Free agent spending would nosedive and player salaries in 2021 would likely decrease by half a billion dollars or more from 2019 levels.

In addition to losing 2020 pay, players would need to take a huge pay cut in 2021 before the aftereffects of COVID-19 are even known. The collective losses pale in comparison to the individual losses, however. Among established big leaguers, you have players like Cole Hamels, Carlos Santana, Ryan Braun, Jordan Zimmermann, Ian Kennedy, Nelson Cruz, Shin-Soo Choo, Mike Leake, Mark Melancon, Jon Lester, Justin Turner, Yoenis Céspedes, and Jay Bruce, and Jeff Samardzija. Those players likely just saw the last big payday of their careers vanish, and with it 10% or more of their expected lifetime earnings.

And if free agency is delayed because of diminished service time, players in next years’ free agent class, like Betts, Realmuto, and Semien could lose tens of millions in future earnings. And it isn’t just those three — every free agent class down the line suffers a similar fate. Kris Bryant, Francisco Lindor, Javier Báez, and Noah Syndergaard are the top players of the next free agent class; they would face a delayed free agency and be under team control for another precious prime season. Tommy Pham has been outspoken about the matter, but losing this season’s pay amounts to more than half of what his earnings thus far have been, and hitting free agency after his age-34 season instead of after age-33 as he would if he received service time this season creates the potential for the loss of millions more. A three-year deal might turn into a two-year deal, or a two-year deal might turn into one. There are also players currently one year away from arbitration, like Jack Flaherty, Gleyber Torres, Shohei Ohtani, Lucas Giolito, Rafael Devers, Walker Buehler, and Juan Soto, as well as players like Pete Alonso, Fernando Tatis Jr., and Vladimir Guerrero Jr., who would all find themselves a year further away from their first seven-figure payday and, further down the line, the potential riches of free agency.

Unless there’s a drastically different CBA after the current agreement expires in 2021, agreeing to give away a year of service time in the event of a lost 2020 season will cost players billions of dollars over the next half-decade. This isn’t about MLB teams clawing back a little of the lost revenue for 2020, or seeking some relief from an uncertain economic environment a year from now. A year of service time would mean massive losses for an entire generation of players above and beyond what they could already potentially lose in 2021.

Hopefully, there is still baseball in 2020, and the issue becomes moot. But to pretend that the inclusion of one year of service time lost is a reasonable request in the negotiations between MLB and the MLBPA hugely understates the future losses that will be incurred by the players, as well as the potential gains for ownership.