Preview of Upcoming Labor Talks
With the collective bargaining agreement between the owners and
players expiring after the World Series, columnists like me are
supposed to start speculating about the fate of the 2002
I'm not going to do that. I haven't the foggiest idea if
there's going to be a lockout, a strike, a settlement, or an
agreement to play out the season while the parties continue to
talk. And despite the thousands of words that will be devoted to
this subject, neither does anyone else.
But here's what to look for.
First, unlike almost every other labor negotiation, the players
have no major new demands. They'd gladly renew the current
CBA, with a modest increase in the minimum salary. The real issue
is how hard the owners will press for givebacks.
Whether presented as a "salary cap," luxury tax,"
"industry-wide revenue sharing," or something else, the
owners' proposal will be intended to reduce the percentage of
MLB's revenues spent on player salaries. The players will be
trying to preserve the status quo.
As a result, the players start the negotiations with a big
advantage. They don't need a new CBA -- the owners do. Since
the terms of the expired agreement will remain in effect pending
new developments, the owners can only obtain the changes they
want by getting the players to accept them, or by bargaining to
an impasse and imposing the terms of their latest offer. Either
way, the owners must make the first move.
But before the owners can open serious negotiations with the
players, they have to agree on a proposal -- and before they can
agree on a proposal, they have to resolve their internal dispute
over revenue sharing. While large-market owners have come to
accept the principle of revenue sharing, they’re determined
to hold recipients more accountable for how the money is used.
Whatever you might think of George Steinbrenner, he’s
absolutely right to demand that the billionaire owners of the
Reds and Twins reinvest the revenue-sharing money in their teams
rather than pocketing it.
At press time, neither I nor anyone else outside ownership
circles knows what the owners will ultimately decide. For that we
can thank Commissioner Selig’s gag order: any owner who
leaks details of their internal deliberations can be fined up to
$1 million. (Earlier this year Selig fined John Harrington of the
Red Sox $500,000 for telling the Globe, "you're
not going to see a lockout happen again.") Without knowing
what the owners will demand, it’s impossible to predict how
negotiations will go – but the owners’ first offer
will send a strong signal.
Red light: A proposal for industry-wide “revenue
sharing.” In 1994, the owners’ first offer was a
50-50 split of all “industry revenues” with the
players. However, (a) the players were already receiving 58% of
revenues, so the proposal amounted to a collective 15% salary
cut; (b) the owners’ definition of “industry
revenues” included the players’ licensing money,
reducing the true value to the players even further; and (c) the
owners offered no way for the players to verify their calculation
of “industry revenues.” A total non-starter -- if
this turkey returns, there will be a strike or lockout,
and probably not a short one.
Flashing red light: A hard salary cap. The players will
never go for it, and the owners’ argument for a salary cap
was weakened considerably when their own “Blue Ribbon
Economic Panel” failed to recommend one. A salary cap may
be part of the owners’ first offer, but the serious
bargaining won’t begin until it’s off the table. It
might take a labor stoppage to reach this point.
Yellow light: A luxury tax. Some form of luxury tax -- a
surcharge to be paid by the clubs with the highest payrolls --
will eventually be part of the owners’ proposal. The
players could live with the luxury tax in place from 1997-99: a
34-35% tax on the five highest-payroll clubs, paid only on the
increment by which their payrolls exceeded the midpoint between
the fifth and sixth highest-salaried teams. Of course, the reason
the players can accept that formula is the same reason the owners
won’t: it was totally ineffectual.
Negotiating the details of a luxury tax could take months. Key
issues include the tax rate, the number of teams liable, the base
on which it is computed, and whether that base will rise from
year to year. If the owners’ Blue Ribbon Panel
recommendation – a 50% tax on all payrolls in excess of $84
million/year – had been in place on Opening Day 2001, seven
teams would have paid close to $60 million in luxury tax, with
the Red Sox liable for almost $13 million If the parties agree on
the concept of a luxury tax, the risk of a labor stoppage will be
proportional to the distance between their numbers.
Green light: Revenue sharing, worldwide amateur draft, cap
on draftee signing bonuses, almost anything else. If the owners
want to redistribute their money, the players won’t stop
them. If they want to reduce player-related costs, the MLBPA will
protect its members and let non-members suffer the
So what’s going to happen? Ask me again after the
owners’ first offer.
Copyright © 2001 Doug Pappas. All rights
Originally published in the September 2001 issue of Boston
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