Meltdown, Part II

On October 25, baseball fans rejoiced as MLBPA head Donald Fehr and owners' negotiator Randy Levine shook hands on a deal which would assure labor peace into the next century. Two weeks later the owners repudiated their own negotiator, forcing a third off-season under terms less favorable to the owners than than the players' proposal had been.

Key terms of the rejected agreement included:

• Duration: 1996 through 2000; player option to extend the deal through 2001. If the players exercise this option, they lose $24 million in postseason revenues and the minimum salary won't be adjusted for inflation in 2000 or 2001.
• Luxury tax: 1997: 35% on amounts over $51 million. 1998: 35% tax on amounts over $55 million. 1998: 34% tax on amounts over $58.9 million. No tax in 2000, nor in 2001 if the deal's extended. No more than five teams liable for the tax, even if more are over the tax threshold.
• Special player tax: Players pay a tax equal to 2.5% of their salaries in 1996 and 1997, with most of the money to come from licensing income.
• Minimum salary: $150,000 in 1997, $170,000 in 1998, $200,000 in 1999, with COLA in 2000 if the players don't exercise their option to extend the deal to 2001.
• Free agency: Eliminates restriction against players filing for free agency twice within five years.
• Service time: Players credited with service time for the 75 days of the strike. If any of the 11 players who become free agents as a result of this credit changes teams, his former club gets an extra pick between the first and second rounds of the draft.
• Revenue sharing: Owners' plan phased in: 60% in 1997, 80% in 1998, 85% in 1999, 100% in 2000. According to a September 21 AP analysis, in 1996 11 teams would receive more than $2 million each: Pittsburgh ($4.7 million), Kansas City ($4.5 million), Montreal ($4.5 million), Detroit ($4.4 million), Minnesota ($4 million), Milwaukee ($3.7 million), Oakland ($3.2 million), Cincinnati ($3 million), California ($2.7 million), San Diego ($2.7 million) and Houston ($2.5 million). Nine would pay more than $1 million: Yankees ($5.5 million), Cleveland ($5 million), Baltimore ($5 million), Atlanta ($4 million), Los Angeles ($3.4 million), Texas ($2.8 million), Boston ($2.7 million), White Sox ($2.4 million) and Toronto ($1.2 million).
• Postseason player pool: Players' shacre from first three games of Division Series cut from 80% to 60%.
• Expansion: Owners may add two more teams, to be chosen by 1999 to begin play by 2002.
• Travel: All players receive single rooms on road trips.
• Legal: Union drops all strike-related grievances and litigation, and releases owners from any damage claims. Owners join players in asking Congress to repeal baseball's antitrust exemption for labor matters -- would allow players to file antitrust suits if the union decertified.
• Arbitration: No change in eligibility. Three-man arbitration panels in half the 1997 hearings, 3/4 of the 1998 hearings, all hearings in 1999-2000.
• Computation of team payrolls: New formula:

(1) Includes everyone on the 40-man roster, not just the 25-man major league roster plus the DL.

(2) For multiyear contracts, uses the average annual value of the contract rather than the current system's yearly salary plus pro-rated share of a signing bonus -- designed to prevent teams from back-loading salaries into the untaxed year(s).

(3) Salary of players traded in midyear will be apportioned between the teams, not, as under the current system, assigned entirely to the team holding rights on August 31.

(4) Cost of player benefits (about $5 million/team) will be added to payroll figures.

The Players Association had previously authorized Donald Fehr to close the deal on their behalf -- but. ominously, Acting Commissioner for Life Selig refused to schedule an immediate vote on the deal. Hard-line owners wasted no time blasting the tentative agreement. Some went further, lambasting their own negotiator in anonymous comments to friendly reporters. One NL owner told Jerome Holtzman of the anti-deal Chicago Tribune, "What we should do is put Randy against the wall, blindfold him and shoot him for treason." Another unnamed member of the executive committee told Holtzman that Levine owed his job to family connections: "What Randy has done is horrendous. Bud is bleeding and very hurt, but there isn't much he can do" because his wife was best friends with Levine's mother-in-law. Showing an optimism which revealed him as a newcomer to the baseball wars, Arizona Diamondbacks owner Jerry Colangelo said in support of the deal, "If you look at chaos today and chaos five years from now, I would vote for chaos five years from now because you've got four years to develop a relationship to avoid it."

The owners rejected the tentative agreement on November 6. Although the official vote was 18-12 against the deal, the New York Times reported that in addition to the recorded Yes votes (Colorado, Los Angeles, New York Mets, New York Yankees, Philadelphia, Pittsburgh, San Diego, San Francisco, Texas, Toronto and expansion teams Arizona and Tampa Bay), Baltimore, Cincinnati, Oakland and St. Louis actually backed the deal but voted No in response to Selig's plea to present a more unified front for future negotiations. Most press coverage blamed White Sox owner Jerry Reinsdorf for the deal's demise. Reinsdorf claimed with a straight face, "I hope the fans understand that what we are doing is meant to be to their benefit. We're attempting to control the spiraling of salaries," and said "I have never campaigned against this deal. I have never called a single person." Jerome Holtzman's Chicago Tribune coverage was the major exception, though he turned Orwellian in describing the deal struck by the owners' negotiator as a "player proposal."

The owners voted to let their Executive Committee conduct further talks with the MLBPA. The Committee is evenly divided between staunch opponents of the current deal (Selig, Jerry Reinsdorf of the White Sox, Montreal's Claude Brochu, and John Harrington of the Red Sox), supporters of the pact (Jerry McMorris of Colorado, Fred Wilpon of the Mets, George Steinbrenner of the Yankees and Bill Giles of Philadelphia), and moderates or enigmas (AL president Gene Budig, NL president Leonard Coleman, Atlanta's Bill Bartholomay and Minnesota's Carl Pohlad). The owners demanded that the tentative agreement be rewritten to eliminate the option year and the five-team limit on the luxury tax. The MLBPA summarily rejected any attempt to reopen the deal, claiming that Selig had repeatedly assured them he stood behind Levine.

The owners also rejected sponsorship contracts negotiated by their new marketing chief with Nike and Reebok. These deals would have given Nike and Reebok the rights to outfit all major league teams, but would have netted each team only $250,000 cash/year plus the uniforms. The companies would also have spent $20 million/year on national advertising, but MLB wants more cash and less advertising.

Copyright © 1996 Doug Pappas. All rights reserved.
Originally published in the Fall 1996 issue of Outside the Lines, the SABR Business of Baseball Committee newsletter.