MLB's Lockout Is Over — What Changed?

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Hey Friends,

Major League Baseball and its players’ union officially agreed to a new Collective Bargaining Agreement yesterday, ending the second-longest work stoppage in MLB history and committing to play the entire 162-game schedule — baseball is back!

So today, I’ve asked my friends at Conduct Detrimental to break down the new CBA, including what changed, what is still to come, and who “won” the deal.

I highly suggest following Dan Lust & Tarun Sharma to stay up to date on the intersection of sports & law. Enjoy!

Thank you to Joe for giving us another opportunity to contribute to his newsletter. The Conduct Detrimental team has hit the MLB Lockout hard, and we recently produced a mega episode on the subject, which you can check out here.

Today, we’ll talk about the critical points of the new Collective Bargaining Agreement (“CBA”) between the owners and players, what’s left to settle, and leave it to you to judge who made out better.

KEY POINTS

• Full Season — Through nearly 100 days of being locked out and a few arbitrary deadlines instituted by MLB Commissioner Rob Manfred, the MLBPA did not cave on their major asks. Manfred announced last week that he was canceling the first two series of the year and proceeded to announce just this week that he was canceling another rash of games.Ultimately, the two sides reached a deal in the nick of time, and the full 162 game schedule will be played, albeit with some doubleheaders and rescheduled games to make up for the delayed start. A compressed Spring Training will start today. Opening Day will take place on April 7th.

• Expanded Playoffs — It wasn’t the 14 team bracket that the owners’ pockets were hoping for, but we will have an expanded playoff beginning this season.The top two division winners in each league will earn a bye, while the 3 seed hosts the 6 seed and the 4 seed hosts the 5 seed in best-of-three series’. The 1 seed would then play the winner of the 4/5 matchup, and the 2 seed plays the winner of the 3/6 series. Here’s how it would have looked last year.

• New Competitive Balance Tax Thresholds — In recent years, the Competitive Balance Tax (known as “CBT” or the “luxury” tax, where payroll dollars spent above a certain threshold are taxed) has begun to look more and more like a salary cap, which teams concentrated around the threshold.However, unlike a salary cap, the thresholds have not been tied to increases in revenue (average team revenue has increased 78%, while the CBT thresholds have increased 27%), and there has been no salary floor to require teams to spend (NBA teams are required to spend 90% of the cap on player salaries), so teams like the Pirates have payrolls near $50M with no consequence, while teams like the Dodgers, who are spending to win, are taxed for doing so.The new CBT threshold will be $230M beginning in 2023 (it was $210M in 2021) and will increase to $244M by the end of the five-year agreement.

• Younger Players Get Paid — One key goal for the players was to increase the amount of money going to younger players. The increased emphasis on data in decision-making for MLB front offices led to a move away from higher-priced free agents and towards younger “controllable” talent.This shift led to a decrease in player salaries when revenues and franchise values were soaring ever higher. The new CBA includes a pre-arbitration bonus pool for the first time. Top players who are not yet eligible for arbitration will participate in the $50M pool based on their Wins Above Replacement (WAR).Additionally, the minimum salary will increase to $700K in 2022 and rise to $780K by the final year of the new CBA in 2026. This means that all players will make more, and the best young players have the potential to increase their take-home pay with bonuses exceeding $1M.

• Cracking Down On Tanking — In recent years, teams in big and small markets alike have attempted to tank in an effort to secure high draft picks and the larger signing bonus pools that accompany them.The two sides began to address this issue with the institution of a draft lottery for the bottom six spots, a first in MLB history. Whether this truly makes an impact remains to be seen, but this is a good first step.

• Addressing Service Time Manipulation — Players must accrue six years of Major League service time in order to be eligible for Free Agency. During the most recent CBA period, teams have gamed the service time system by keeping players down in the minor leagues for long enough to ensure that they would not reach six years of service time until their seventh year with the club.The new CBA takes a first stab at addressing these issues by awarding a full year of service time to the top two finishers in each league’s Rookie of the Year voting. Additionally, clubs that promote players on Opening Day who later finish amongst the top vote-getters for major awards at the end of the year will be awarded draft picks.

• A Different Looking Game — The game itself could look very different during this next CBA period, as well, both aesthetically and in terms of gameplay.Most notably, the union agreed to allow the owners to place advertisements on uniforms and helmets. I think that’s a terrible move that ruins the simple beauty of baseball uniforms, but I’m also not making tens of millions of dollars by Gillette or Rogaine.On the field, fans of National League clubs will notice that pitchers are no longer required to hit. For the first time, NL pitchers will experience a full 162 game slate with a Designated Hitter. That may not be the last change to the on-field product, though.The union and owners agreed to create a new joint committee beginning in 2023 that can impose rule changes with 45 days’ notice. Tweaks like pitch clocks, larger bases, banning the shift, and robot umpires may be on the table.

WHAT’S LEFT

• International Draft/Qualifying Offer — Still left to be decided is whether MLB will institute a draft for amateur players outside the U.S., Canada, and Puerto Rico in 2024. In many of these countries, particularly in Latin America, baseball is a way of life. There is a very delicate ecosystem upon which the game runs. MLB sees this space as rife with corruption, yes (the Braves and Red Sox have been penalized for bonus pool tampering in recent years), but also as a free market with very little supervision by MLB.The owners are interested in creating a draft as soon as possible to create a regulated system and to address long-festering issues of reneged bonus agreements and PED use amongst adolescent prospects. Latin American players, notably HOFer David Ortiz and Union Executive Committee member Francisco Lindor, have spoken out against the rapid nature with which MLB hopes to implement such a system and urged all interested parties to get educated on the matter before taking a stand for or against the draft.The owners and the union decided to delay a final decision and negotiate on the issue until July 25th of this year. Tied to the approval of the international draft is the removal of the Qualifying Offer, which permits teams to recoup draft compensation when their players are signed as high-priced free agents elsewhere. Experts estimate that the value of the Qualifying Offer is between $50M and $100M, as its elimination could encourage more free-spending by teams on top free agents.

• MLB’s Antitrust Exemption — Shortly after MLB and the Union announced that they had reached an agreement, Vermont Senator Bernie Sanders announced that he would be introducing a bill to eliminate MLB’s longstanding antitrust exemption.MLB has enjoyed unique treatment in the eyes of the courts since the days of the Federal Baseball case, and Sanders’ move seems to be the first legitimate shot at bringing MLB back to a level playing field. It remains to be seen whether such a move would have political support once games are being played and we collectively get sucked back into the rhythm of a season.

WHO WON?

So, who won in your opinion? The players managed to get more of their younger players paid sooner, addressed the noncompetitive tanking teams, and loosened restraints on the big-spending teams at the top through increases to the CBT.

Players weren’t able to touch revenue sharing and had to agree to drop a grievance they filed over Manfred’s unilateral implementation of a 60 game covid season in 2020.

The owners maintained the core functions of a system that has led to exploding franchise values, unlocked new revenue streams with advertising and expanded playoffs, and gained greater control over rule changes with the 45-day committee.

The owners were not able to “break” the union’s spirit and avoid raising the CBT. Both sides avoided irreparably harming the game by allowing the work stoppage to seep into the season. But most importantly, it feels that the fans won because we will get a flurry of offseason activity with the optimism of spring training and a full 162 games.

Have a great weekend, and let’s play ball!

Dan Lust (@SportsLawLust) is a Sports Law attorney at Geragos & Geragos and Co-Host of the Conduct Detrimental Podcast. Tarun Sharma (@TKSharmaLaw) is a Third-Year Law Student at Minnesota Law, and he is a frequent guest on the podcast in addition to publishing Conduct Detrimental’s weekly “Sports Law Review” Newsletter, which you can subscribe to through our website.

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