The inside details from baseball's fascinating new CBA

Jeff PassanMLB columnist
Baseball will have labor peace for the next five years. (Getty)
Baseball will have labor peace for the next five years. (Getty)

There will be baseball. That was the first thing everyone said Thursday morning. Players, agents, officials at Major League Baseball and the MLB Players Association – all were appreciative of those who sequestered themselves inside a Dallas conference room for the marathon negotiating sessions that produced a collective-bargaining agreement Wednesday. Five years of baseball, guaranteed. Twenty-seven years of uninterrupted labor peace. Hooray. Huzzah. Bravo.

And then, when all the backslapping ceased, came the unvarnished truth.

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This was not a transformative labor deal, far from it, but a wide swath of people familiar with its inner details told Yahoo Sports some version of the same story Thursday: What it lacks in instantaneous impact it may make up for in historical resonance. Because baseball is barreling toward a potentially nuclear negotiation in 2021, when this current deal expires, that could see a confluence of factors – massive revenue increases, a growing chasm between big and small markets, continued international strife – lead to a far more tortuous and torturous path toward a deal.

“This is just the setup for war in 2021,” one high-ranking official told Yahoo Sports.

Another longtime power broker went a step further.

“If there’s not a strike,” he said, “I’ll be shocked.”

Trying to play Baseball Nostradamus is tricky, of course, because the ever-present potential for seismic change in the sport makes predictions a half-decade down the road murky. “The ink isn’t even dry on this agreement yet,” reminded one sage source. And yet this agreement is full of interesting levers that will maneuver the sport in a new direction – and many of them stem from a single decision in the last 48 hours of negotiations that divided the union and allowed MLB one of its more surprising victories in nearly five decades of MLB/MLBPA relations.

When a contingent of players from the Dominican Republic showed up in Dallas, it was a great sign for the union. Engaging Latin American players had proven difficult for a group whose membership had grown increasingly Latino in recent decades, and here they were, ready to fight for what infuriated them: the prospect of an international amateur draft proposed by MLB.

The fervor with which the players railed against the draft came from a place more emotional than logical. The rearing of young baseball players, particularly in the Dominican Republic, is part of an economy that supports thousands. It also can take boys as young as 12, rescue them from poverty, supply them with meals and training, and prepare them to sign with a major league team at 16 years old. Almost every Dominican player goes through this system. It becomes a part of him.

A subjective view, on the other hand, shows a system where trainers take usurious cuts of players’ bonuses, shoot them up with performance-enhancing drugs in their early teen years, don’t continue their education and teach them skills that suit them better for scouting showcases, not fundamental skills. The argument against the current system is strong enough that as much as cost containment drove MLB’s desire for an international draft, so did the prospect of bringing some semblance of order to the chaos.

In exchange for the international draft, MLB was prepared to offer the union something it long dreamt of: unfettered free agency. The qualifying offer – which attached draft-pick compensation to the best free agents and hindered their earning potential for the previous five seasons – would be gone. The market, and only the market, would determine their contract. As unwieldy as the international draft felt, the MLBPA had made a habit of prioritizing its membership – the 1,200 players on major league rosters – over the amateurs long from the big leagues.

This did not happen in Dallas. The desire of a vocal segment of players to avoid an international draft at all costs was abundantly clear, and ultimately – over the objection of a number of top players and officials – the union took that position: No deal until there’s no draft. MLB saw an opportunity and instead got the cost containment it desired without having to spend a penny on the infrastructure a draft would necessitate. The league asked for a hard cap on money spent internationally and couldn’t believe its fortune: The union acceded, a stunning reversal from past negotiations when a hard cap of any kind, be it on team salaries, draft spending or international money, was rejected outright.

Not only did the league introduce a hard cap, because it had moved off its desire for an international draft, it asked for constraints on free agents – ones less restrictive than the qualifying offer but certainly stronger than the get-back from agreeing to an international draft.

“We got hijacked,” one player told Yahoo Sports, echoing a word – “hijacked” – others frustrated with the international-draft fallout used as well.

Another player involved said “the draft was going to ruin baseball in Latin America,” a common talking point among the trainers and power brokers in the Dominican Republic and Venezuela whose politicking ended up winning the day. They were frightened, understandably so, not just at MLB’s desire to bump the age of Latin American players signing from 16 years old to 18 but because already they had targeted players in international classes all the way through 2020 – kids who, today, are 12 years old. The fear of a sea change in business fueled their desire to enlist those who could save a way of life many believe isn’t worth saving, or at least warrants an overhaul.

What they’ve got, some fear, is worse for the players than a draft. Every team will start with $4.75 million to spend from July 2 to June 15 the next year on amateurs under 25 years old. Teams in the bottom 10 of local revenues or market size will receive extra money depending on the year. One year, they’ll get a Competitive-Balance Round A pick in the U.S. amateur draft, after the first round, plus an additional $500,000 in international bonus money, and the next year, they’ll get a Competitive-Balance Round B pick, following the second round, with a million-dollar international bonus allotment. In addition, teams can trade all of their international-spending space, and teams can trade for up to 75 percent of theirs, meaning the teams with $5.75 million can acquire an additional $4.3 million to spend internationally.

Still, a cap of just over $10 million pales compared to the current agreement. The San Diego Padres, in the midst of a rebuild, have spent upward of $40 million on Latin American amateurs since July 2 – and they’re happy to pay the dollar-for-dollar tax that accompanies nearly all of it. In the new agreement, teams cannot shatter their ceiling. It is a hard cap, counting every dollar spent except those on players who cost $10,000 and under, which tend to be the longer-shot prospects.

With the same severe penalties in place for exceeding the bonus pool in the amateur draft and now the hard cap internationally, executives spent Thursday asking: Where do I spend my money? This is a fairly common refrain after every new basic agreement, and yet this time it resonated, not just because of the international rules but ones intended to rein in major league payrolls at the highest level.

This is where the fear of a strike comes into play, and much of it concerns the rate of revenue growth. One person anticipated revenues will grow by more than a billion dollars annually over the next five years and end up at $16 billion when the current deal expires. While others weren’t quite as optimistic, it’s impossible to see owners not growing far richer, especially with the proceeds of Major League Baseball Advanced Media, the beyond-successful digital media arm of the league, shielded from the players.

Just how much of the wealth is distributed to the players will guide their tack come 2021. Some of the spending restrictions put in place with Wednesday’s deal could prevent teams from exceeding certain payroll levels, though that same refrain was uttered after the last agreement, and the 2015 Dodgers spent well over $300 million.

The competitive-balance tax – also known as the luxury tax – will increase from $189 million in 2016 to $195 million this year and $197 million, $206 million, $208 million and $210 million in the coming years. Any team that exceeds the threshold for the first time must pay a 20 percent tax on every dollar over. Two-time offenders pay 30 percent. Those over for the third time and beyond are taxed at 50 percent.

On top of those base tax rates are new surtaxes. The first kicks in at $20 million over the luxury-tax threshold, which calls for an additional 12 percent penalty. For example, if a team this season has a $220 million payroll, it will pay 50 percent on the $25 million over the threshold and another 12 percent on the $5 million above the $215 million threshold. At $40 million over comes another surtax: 42.5 percent, which jumps to 45 percent for third-time offenders.

Which is to say luxury-tax recidivists with enormous payrolls could stand to pay nearly a dollar-for-dollar tax on money spent, a level never seen before and one a club president said “might as well be like a cap.” That might be an exaggeration, but other rules do strongly disincentivize spending for teams over the luxury tax.

Take, for example, the qualifying-offer rules. For both those losing and signing players with qualifying offers, the rules separate them into three categories: teams receiving revenue-sharing money (there are 16), teams over the luxury-tax threshold and teams that don’t fall into either category.

If a revenue-sharing payee loses a player it gave a qualifying offer to a contract for $50 million-plus, that team receives a pick right after the first round and for under $50 million after the second. Teams over the luxury tax don’t get a pick until after the fourth round. The rest of the teams are given picks after the second or third rounds. If a team receiving revenue sharing signs a qualifying-offer player, it forfeits a third-round pick. The in-between team gives up a second-round pick and $500,000 in international bonus money. And the team over the luxury tax? Well, it has every reason to be frightened: It surrenders second- and fifth-round picks, plus $1 million in international money. And if it happens to be a team more than $40 million over the threshold, its first-round draft pick automatically falls 10 spots from its original location, too.

For teams like the Los Angeles Dodgers and New York Yankees and Boston Red Sox, this makes for a paralyzing decision, one that has the ability to stifle their spending. Whether it will, of course, depends on market dynamics that are near impossible to forecast, but the penalties on teams exceeding the luxury tax may put a governor on those on the cusp of it, which would only exacerbate the potential lack of spending.

Complicating matters more is the evergreen issue of how high- and low-revenue teams coexist. Cleveland was the only team with a sub-$100 million payroll last season to make the playoffs. The other nine had payrolls among the league’s top 14 and spent at least $135 million. A nightmare scenario for baseball is an oligarchy, where the rich benefit the most from the rules. Indeed, with the elimination in this agreement of the so-called “Performance Factor” – a multiplier on local revenue that cost the highest-earning teams the most in shared money – the Yankees stand to benefit more from the new deal than perhaps any team. The Cardinals, a big-revenue team that gets extra international dollars and draft picks because of their small market, are a close second.

MLB commissioner Rob Manfred has greater room to punish teams that cheat internationally. (Getty)
MLB commissioner Rob Manfred has greater room to punish teams that cheat internationally. (Getty)

At one point in the negotiations, with competitive balance in mind, the union suggested the amateur-draft order be determined by market size and revenue instead of win-loss record. The proposal never got off the table, and even with the potential spending restrictions on high-revenue teams, they’re still at enough of an advantage that a have/have-not world in baseball isn’t entirely far-fetched.

Nobody wants that, not with peace still on the mind, not with all of the other parts of the agreement. Some of the more interesting are as follows:

• No longer will the All-Star Game serve as the determinant of home-field advantage in the World Series. Hallelujah. The stupidest rule in sports is dead. Instead, the pennant winner with the best regular-season record hosts Game 1. Should the teams have identical records, the first tiebreaker is head-to-head matchups during the regular season, then record within division.

• Foreign players under 25 years old are subject to international bonus limits, which … ugh. That means Shohei Otani, the 102-mph-throwing, 30-homer hitting Japanese version of Babe Ruth, cannot come to MLB for another three years, unless he wants to sign for a maximum of a sliver over $10 million. Which he doesn’t because Otani isn’t dumb. Thankfully, sources told Yahoo Sports, there could be ways to tinker with the rules so a player like Otani, who on the open market could command a $200 million-plus outlay, doesn’t need to bide his time to reach the major leagues.

• Good-bye, sweet prince. The 15-day disabled list, a staple for 50 years, is no longer. It is now two-thirds the inanimate object it used to be. The 10-day disabled list, a relic of the past, banished to the glue factory in 1984, is back and will be the main spot for the ailing and aggrieved. The 15-day DL has been placed on the 60-day DL.

• Not only did the rumored 26th roster spot never materialize, the rules of September are the same, which is to say the next five Septembers are bound to be unwatchable.

• While this isn’t exactly a death penalty, a new rule allowing commissioner Rob Manfred to hammer teams that cheat internationally has serious teeth. Manfred can take away up to 50 percent of a team’s international bonus allotment for the remainder of the contract, meaning if a team is caught cheating this season – like the Red Sox were this year – he can rescind money for 2018-21 as well. Just because it got a hard cap doesn’t mean the league is done with Latin America. The league may push for an international draft again with the next negotiations.

• There will be no amnesty for teams with existing international-spending penalties. Following their spree this year, the Padres will not be allowed to spend more than $300,000 on an individual international player for the next two seasons. They can, however, still trade as much of their international money as they’d like to potentially recoup value there.

• The top slot value in the amateur draft will be $7.4 million, lower than it has been since 2012. By bringing the slots for the first four picks closer to one another and changing international funding, the incentive to tank isn’t nearly as strong as it might have been. That said, the idea that rebuilding teams aren’t going to use every possibility to rebuild through amateur players is foolhardy. Allowing teams to trade draft picks only would have helped this situation, but that did not happen. Only competitive-balance picks can be dealt.

• With international play a priority written into the CBA, it wouldn’t surprise anyone to see a regular-season Yankees-Red Sox matchup in London at some point in the near future.

• The season will start four days earlier, which will give players four extra off-days. That doesn’t sound like much. Over the course of the now-187-day season, though, every off-day is like a gleaming pond in the desert for a parched soul, and not one of those mirages, either.

• Every clubhouse will have a chef. Players are guaranteed to have two seats on every spring training bus ride. Teams are now allowed to pay players’ meal money in check cards. These are real rules.

• Players who haven’t appeared on a major league roster yet cannot chew tobacco on the field. Current players are grandfathered in and are allowed to dip in stadiums where it is legal. True story: The league employs people who, as part of their job, look at which players are chewing tobacco. They could conceivably be fined.

• The minimum salary this season is $535,000.

• High-school players can formally opt out of the amateur draft instead of just telling teams not to draft them.

• Like the 15-day DL, optional waivers are no more. What are optional waivers? Exactly. They will not be missed by anyone.

There are hundreds more rules to be revealed in the coming days, when the lawyers from both sides finish drafting the document and owners and players ratify it. At this point, that is a formality, and that’s a good thing, because no matter how idle the owners’ threats may have been, the fact that in his first negotiation Tony Clark, the new head of the union, avoided any sort of labor stoppage was promising.

It was a good lesson, too, in the preparedness of MLB, how in the event of something like the international draft falling through, not only did the league have a backup plan but somehow managed to leverage itself into an even stronger position. It’s a lesson Clark and the union won’t forget, not now, not going into 2021, when they’ll try to do the toughest thing in bargaining: get back what once was lost.

Perhaps the next five years do turn out to be a mutually beneficial deal, enough to prevent any of the doomsday scenarios from playing out and reminding the world what baseball looked like amid a labor mess. It was ugly and protracted, but it put baseball in its current position. Corrections can be necessary and beneficial. In the meantime, just enjoy the next half-decade, knowing there will be baseball, and that is never a bad thing.

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