How to settle the MLB lockout and write a new Basic Agreement

Free agency and service time

Owners implemented the lockout in part because they basically want to keep the existing system, which gives free agency after six seasons of Major League service. They have also offered to add a proviso allowing players to become free agents at age 29.5, whichever point occurs first.

The Players Association has proposed a system that would tighten free agent eligibility over time. Its proposal would reduce eligibility to five years of service — or age 30.5 — following the 2022 season, then reduce it again to five years or age 29.5 following the 2025 season.

This is obviously a major point of conflict in the lockout. Here’s the compromise solution.

The Players Association should counter the owners’ proposal. Taking a page from a suggestion made Wednesday by Ryan Spilborghs on the MLB radio show, “Loud Outs,”  they should propose that the terms of qualifying for free agency be based on the time a player spends on a team’s 40-man roster rather than on Major League service.

From the Association’s standpoint, this would have the salubrious byproduct of eliminating the question of service time manipulation, at least for purposes of free agent eligibility. The same principle could be applied to the Association’s demand that something be done to address the existing inequities in the salary system, which substantially under-compensates younger players relative to their contributions to team success.

The one exception would be eligibility for MLB’s pension system, which sets full vesture at 10 years. Unless the two sides agree otherwise, that could continue to be based on actual Major League service.

Free agency compensation

Teams have received compensation, first in the form of players but for many years in the form of draft picks, basically since the mid-1970s when free agency came into effect. The Players Association has always objected, but reluctantly gone along in an effort to achieve a broader deal.

In recent agreements, that compensation has, however, been weakened. There was a time when teams signing an eligible free agent surrendered a first-round pick as part of the process. Under the just-expired agreement, the penalty for signing an eligible free agent was tied to several factors, some of which watered down the compensation to basically a third-round pick.

If one accepts the widely accepted principle that a player who has fulfilled all his contractual terms with a team under rules outlined in the existing Basic Agreement is a free agent, then there really is no logical basis for any sort of draft pick compensation. As the Players Association has consistently pointed out, such conditions make free agency less free.

Beyond that, the argument is essentially pointless. Since 2018, 36 persons have been taken by MLB teams in the Competitive Balance/Compensations portions of the draft. Of those 36, only five — Shane McClanahan by Tampa Bay, Jake McCarthy by Arizona, and Jackson Kowar, Daniel Lynch and Kris Bubic by Kansas City — have even played in a Major League game.

McClanahan and Bubic are the only ones who have seen significant playing time. Do the owners truly propose to threaten the start of the season by a fight over Shane McClanahan and Kris Bubic?

The solution: Abandon free agent compensation.

Arbitration

The Players Association wants to replace the existing arbitration system with one that makes players eligible after two seasons, saying such a change would improve the financial status of younger players. That’s one of the Association’s core goals. The just-expired Basic Agreement basically set arbitration eligibility at three years with a small window of opportunity at two seasons for exceptional cases.

The owners locked players out because they basically want to maintain the existing arbitration structure, although they are willing to talk about status enhancements for players winning significant individual awards.

The arbitration system has always been one that tended to favor the players since arbitration was pegged to peer group performance. The peer group tended to include younger players already locked in to long-term contracts by their teams, and who were thus very well compensated.

In essence, this has created a situation where, even when players lost, they still won fairly big-time.

Last arbitration season, for example, nine arbitration cases went to a decision, four in favor of the player and five in favor of the team. Yet despite that superficially break-even record, the salaries of the nine impacted players increased nearly five-fold as a result of the decisions, from an average of $677,000 to an average of $3.22 million.

The pressure is always especially acute at the Arb 3 and Arb 4 levels. In January of 2020, the Cubs re-signed third baseman Kris Bryant, a potential Arb 3, for one season at $18.6 million, a raise of nearly $6 million. They did so out of a legitimate concern that an arbitrator might gauge Bryant’s value even higher.

The existing arbitration system, then, is generally working well. It should be left as is. The Association’s concerns for the financial health of younger players can be addressed in innovative ways already stated, such as extending minimums and service time to 40-man roster players.

Other financial issues

The existing $210 million Luxury Tax threshold will be raised; the only question is by how much. The Association has proposed a $240 million ceiling, the owners want $214 million with a $100 million salary floor.

Compromise is clearly in order and also simple: Just split the difference. Set the new cap at $225 million. And forget the salary floor.

Minimum salary always increases, and will again in this new agreement. Even if one extends it to all players on the 40-man, we’re not talking about that much money.

The present minimum is about $570,000. Raise it to $650,000, apply it to an additional 14 players not on the active 26, and we’re talking about $10 million to $15 million per team.

What’s 10 million to $15 million? Last season, the Twins paid Andrelton Simmons $10.5 million to play shortstop for their sorry, last-place team. It’s what the Cubs and Mets jointly played Javier Baez, what the Reds paid Eugenio Suarez to hit .198, and about what the Brewers paid Jackie Bradley Jr. to play half-time in center field.

Statistically, it was about 10 percent of the average MLB team payroll. Owners need to own up, extend the minimum to the entire 40-man, and take the good feeling that goes along with doing so. Especially if it provides a key to ending the lockout and the impasse.

Non-financial issues

Since instituting the lockout, the owners have proposed a three-team draft lottery in response to the Association’s competitive balance concerns. Those Association concerns, by the way, are only superficially valid. More than half of “tanking” teams play at least one postseason game within three seasons of “tanking.”

The Association is apparently willing to accept a five-team lottery. Owners should take them up on that amendment.

The owners, seeking more postseason revenue, want to extend the postseason from 10 to 14 teams. The Players have offered to extend to 12, although why they have a problem with adding two more teams is not clear.

The true cost of this idea is esoteric; every team added to the postseason increases the lottery aspect of the postseason and decreases the likelihood of the best team winning. Still, this idea is obviously going through, and whether at 10 or 14 doesn’t make much difference.

The DH: It’s obviously coming to the National League, whose owners aren’t even fighting the idea despite the fact that DH is easily the most costly position in baseball.

Ads on uniforms: Another means of increasing revenue that will happen notwithstanding its artistic demerits. At this point, the only debate is how to cut the players in for a share of becoming billboards. MLB’s existing agreement with a crypto service over advertising on umps provides an obvious framework.

Rules changes: Some variant of the extra inning rule, probably starting at 12 innings, will be adopted non-controversially. A committee consisting of players and owners will be appointed to look at other potential changes, including how to deal with increasing game lengths without reducing commercial TV ad time. That ought to happen, but it would reduce revenues so it’s a non-starter.

Summary

The key to ending the lockout and implementing an agreement is a “third way” breakthrough negotiating strategy that finds a path somewhere between the existing players’ and owners’ positions.

The extension of minimum salaries and service time to players on the 40-man provides such a ‘third way’ breakthrough. At a reasonable cost, probably $10 to $15 million per team, it goes a long way to ameliorating the Association’s concerns about salaries for younger players.

It also has the byproduct of raising low-end tea payrolls significantly, thus alleviating any discussion of the need for a silly and superficial salary floor.

That plus the elimination of draft compensation would be important concessions by the owners. It would also make it easier for the Association to yield on retention — perhaps with minor modifications — of the current free agency and arbitration structures.

In combination with implementation of the anti-taking lottery and an increased minimum salary, the core issue of pay for young players ought to be resolved.

Most of the other issues — the DH, other rules changes, ads on uniforms — can be easily worked out. Then all we’re really talking about is the length of the new agreement.

It ought to be in force for a minimum of five seasons. Nobody looks forward to going through this process again any time soon.