Tossed: Court Dismisses Minor League Wage Increase

Over the last couple years, the battle for higher wages for minor league baseball players has been fought on several legal fronts. The highest profile challenge has come in the form of litigation claiming that the minor league pay scale — under which minor league players often earn as little as $3,000 to $7,500 per year — violates the nation’s minimum wage laws.

At the same time, however, a separate lawsuit filed last December attacked the problem from a different legal angle. In Miranda v. Office of the Commissioner of Baseball, four former minor league players asserted that Major League Baseball’s minor league pay practices violate the Sherman Antitrust Act. In particular, the players argued that MLB and its thirty teams have illegally conspired to fix minor league players’ salaries at below-market rates not only by agreeing to a uniform, league-wide salary scale for minor league players, but also by artificially reducing the size of the signing bonuses that entry-level players receive under MLB’s domestic and international signing bonus pool rules.

As I noted at the time the Miranda case was filed last year, the plaintiffs in the suit faced at least one major impediment in their attempt to challenge the minor league pay practices under the Sherman Act: baseball’s antitrust exemption. Indeed, soon after the case was filed, MLB filed a motion asking the court to dismiss the lawsuit in light of its antitrust immunity.

Given that precedent, it should come as little surprise that Judge Haywood Gilliam dismissed the Miranda suit on Monday, concluding that MLB was shielded from the plaintiffs’ claims by virtue of its antitrust exemption.

The plaintiffs’ attorneys in the Miranda suit had hoped to convince the court not to apply the antitrust exemption in the case by arguing that none of the U.S. Supreme Court’s prior decisions on the topic had ever considered the legality of the minor league pay scale. As one might expect, this argument failed to persuade Judge Gilliam.

Instead, the judge determined that he was bound to follow the decision issued earlier this year by the Ninth Circuit Court of Appeals in the city of San Jose’s lawsuit against MLB. In the San Jose case, the appellate court had ruled that baseball’s antitrust exemption broadly extends to the entire “business of baseball.” Judge Gilliam believed that MLB’s minor league pay practices — like the relocation restrictions at issue in the San Jose lawsuit — were thus clearly encompassed by the sport’s antitrust exemption.

Despite dismissing the plaintiffs’ case, Judge Gilliam was not entirely unsympathetic to the plight of minor league baseball players. In particular, he acknowledged that:

Plaintiffs have a persuasive policy argument that the Defendants should not be afforded carte blanche to restrict the pay and mobility of minor league players without answering to the federal antitrust laws that apply to the employment of major league baseball players and, for that matter, all other professional sports leagues. But that policy argument must be made to Congress or the Supreme Court.

While the Miranda plaintiffs thus struck out at the trial court level, they can still appeal Judge Gilliam’s decision to the appellate court. Unfortunately for the plaintiffs, they also face slim odds of prevailing on appeal, as their case will go to the same Ninth Circuit court that just rejected San Jose’s lawsuit against MLB earlier this year. So it appears unlikely that the former minor league players will fare any better at the court of appeals level than did San Jose.

As a result, the Miranda plaintiffs’ best — and in all likelihood only — hope is that the U.S. Supreme Court will be willing to overturn baseball’s antitrust exemption and subject MLB to the Sherman Act. Along those lines, the Supreme Court will soon decide whether to grant San Jose’s appeal in its lawsuit against MLB, with a decision expected in early October.

If the Supreme Court were to grant San Jose’s appeal and subsequently overturn baseball’s antitrust exemption, then the plaintiffs in the Miranda suit would be allowed to proceed with their claims against MLB under the Sherman Act. However, as I discussed back in June, the Court is unlikely to agree to hear San Jose’s case due to some problematic procedural issues in the suit.

Even if the Supreme Court declines to hear San Jose’s appeal, however, the Miranda plaintiffs could always elect to pursue a Supreme Court appeal of their own. And while any lawsuit faces long odds of successfully reaching the Supreme Court — with the Court only accepting around 1-2% of appeals in any given year — the Miranda case may very well prove to be more attractive to the Court than the San Jose suit since it does not present the same procedural issues that threaten to trip up San Jose’s appeal.

Assuming that the Miranda plaintiffs do appeal Monday’s decision, the Ninth Circuit would likely issue a ruling in the case sometime in late 2016 or early 2017. That would put the Miranda suit on track for a Supreme Court appeal sometime in 2017, with a decision — should the Court agree to hear the case — then likely coming in 2018.

On the other hand, even if the Supreme Court does not agree to overturn baseball’s exemption in the San Jose or Miranda suits, that does not mean that the battle for higher minor league wages is doomed. Indeed, Monday’s decision has no bearing on the two cases seeking to challenge MLB’s minor league pay practices under the nation’s minimum wage laws. And while the minimum wage cases face potential challenges of their own, they nevertheless have always had a much stronger chance of success than the Miranda suit in light of baseball’s antitrust immunity.

So despite Monday’s decision, the fight over MLB’s minor league pay scale is likely to continue on well into the foreseeable future.

Nathaniel Grow is an Associate Professor of Business Law and Ethics and the Yormark Family Director of the Sports Industry Workshop at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.

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8 years ago

Is there any good additional reading on this subject? On the surface it just seems very unfair to the players, but I don’t want to just make an assumption and say raise the wage. There may be better alternatives.

I’m wondering also things such as how much more in wages do the players want on average? And how much would that cost the league?

8 years ago
Reply to  Frank

I like how you couch your comment in not wanting to outright pay guys more who make as little as $7,500 a year. Pay them more. See, that was easy.

I never get the hating on people who want to make more money. Don’t we all want to make more money?

8 years ago
Reply to  pbmax

I agree to pay them more, but is there a better way to pay them? For instance I don’t know if they receive any type of workers comp for injuries, but that would be a plus if they don’t already. That may improve the quality of play since players would player harder. Also, incentives added to minor league contracts should improve the quality of play as well. Maybe also a one time bonus when a player moves up a league.

But of course maybe the best option is to just pay’em more.

8 years ago
Reply to  pbmax

I’m not a fan of the MLB anti-trust exemption or how they use it to control draft bonuses, but it’s a bit disingenuous to simply say pay them more.

First, the MLB doesn’t have to. The talent they want are perfectly willing to play minor league games for minor league salaries. It’s clearly a fair free market salary. Why are players so willing to play for so little?

Reasons include:

a) is it’s not ” as little as $7,500 a year”, it’s $7,500 for 6 months. They can and do work other jobs the rest of the year.

b) Almost every player gets a draft signing bonus, which is usually at least $10k or $20K, and often far more. My guess is the median bonus is $30k or $40K, that’s a lot of money to help them through their minor league years.

c) If they play one day in the majors they get lifetime medical care. Every day they stay on a MLB roster they make a minimum of $3K+.

d) If they stay in the majors for 43 days they get a pension that pays them a minimum of $34K a year for life.

e) If they last in the majors for more than 3 years, they make millions.

These aren’t janitors or waitresses with limited skills and a shaky future. These are men who are making a calculated gamble to work for a few years at a low pay scale to see if they can get promoted to a job that will quickly ensure they can be wealthy for the rest of their life.

Al Dimond
8 years ago
Reply to  valuearb

It’s not “clearly a free-market salary” when organizations that compete over how much they can pay MLB free agents collude to set MiLB salaries and bonuses.

It’s a salary that many minor-leaguers agree to (freely enough, I guess), for all the reasons you mention, and the collusion is sanctioned under the antitrust exemption, but that doesn’t make it a free market. As is often said of freedom, free markets aren’t free. All the econ 101 stuff about the positive outcomes that result from free markets depends on the agents not only acting rationally, but on their having information and agency. Maintaining these conditions requires effective infrastructure and regulation, which is why free markets are not part of the natural human condition, they had to be invented. Here the players’ agency is limited within the market, to where it can hardly be described as a free market.

Stank Asten
8 years ago
Reply to  valuearb

They are willing to play for so little because MLB is a recognized monopoly that would be outright illegal without an anti-trust exemption.

Famous Mortimer
8 years ago
Reply to  valuearb

What Al said, really. Paying guys a decent wage might encourage more fringe guys to stick around and try to develop, too.

Brad Johnsonmember
8 years ago
Reply to  valuearb

You’re confusing the concept of a “free market.” Baseball is a very distorted labor market.

I personally know/have met at least a dozen American born prospects who opted to pass or quit on their baseball dreams because of the low wage involved. If you’re drafted as a college senior, you often have better financial options. Teams don’t offer money to college seniors because of perceived leverage.

While the guys I know probably weren’t future major leaguers, they still had a small chance to turn into something. Think about where David Peralta came from…It’s in baseball’s best interest to encourage as many prospects as possible to play professionally.

Peter R
8 years ago
Reply to  valuearb

Even if we accept your claim that the average bonus is 30-40K (which I don’t, maybe for the top rounds yes) and then they make another 8k a year, that is not a lot of money to survive on for perhaps 5+ years.

Also, your assertion that they can work in the off-season is false as most of the off-season is filled up with rigorous physical training programs thus many players cannot hold a part or full time job as well. They are also expected to attend at an average of three months of spring training and instructional leagues that they are not paid for.

Lastly, using Major League benefits as part of your assessment of minor league pay is silly as only 35% of the top 10 rounds of draft picks even make the MLB, let alone all the rest of the rounds and the org guys. A small, small minority of minor league guys will ever sniff the bigs so you cant use those numbers in your argument.