Summary of New 2002-06 CBA

Issue Terms Explanation
Duration 2002-06 Agreement retroactive to start of 2002 season; expires December 19, 2006
Local Revenue Sharing Rises from 20% under former CBA to 34%, net of ballpark expenses. Revenue sharing money divided equally among all teams. Each club receiving revenue sharing is required to "use its revenue-sharing payments in an effort to improve its performance on the field," subject to unspecified penalties from the Commissioner if it doesn't.
Central Fund Revenue Sharing $72.2 million (based on 2001 revenue figures) taken from clubs which are net payers in the base revenue sharing plan and given to those who are net receivers. This amount will fluctuate in conjunction with the base plan, and is phased in: 60% in 2003, 80% in 2004, 100% in 2005-06. Money is paid and disbursed in proportion to a club's distance from the average. This replaces most of the Commissioner's discretionary fund with a formula along the lines proposed by the players. Fluctuations intended to assure that the projected amount of revenue is transferred each season from the combination of local and central fund revenue sharing.
Discretionary Fund $10 million from central fund to be placed within the Commissioner's control, to be allocated at his discretion
Luxury Tax Threshold No luxury tax in 2002; $117 million in 2003, $120.5 million in 2004, $128 million in 2005, $136.5 million in 2006. Luxury tax expires on the final day of the 2006 season, so if the parties play under the terms of the expired agreement in 2007, there will be no luxury tax. For luxury tax purposes, payrolls are defined to include salaries plus earned bonuses for all players on the 40-man roster, plus a fixed amount per team in benefits and related expenses. All multiyear contracts are valued at their average annual value regardless of the actual payout in a specific year.
Luxury Tax Rates 2002: No tax
2003: 17.5%
2004: 22.5% for first-time violators, 30% for second-time violators
2005: 22.5% for first-timers, 30% for second-timers, 40% for third-timers
2006: No tax for first-timers; 30% for second-timers; 40% for third- and fourth-timers
Luxury tax money to be used for player benefits (50%), the industry growth fund (25%), or developing players in countries lacking organized high school baseball (25%).
Minimum Salary $300,000 in 2003 and 2004, with two-year cost of living adjustment in 2005 and one-year COLA in 2006. As of 2003, minor leaguers on split contracts must receive at least $50,000/year while in the minors, up from $40,500 under previous CBA
Amateur Draft Rules for a proposed worldwide draft to be established by a jointly appointed committee. Committee will decide whether clubs will be allowed to trade draft picks and will determine the number of rounds: the players want 20, the owners want 38. A club which fails to sign its first-round draft pick will receive a corresponding compensation pick in the next year's draft; one which fails to sign its second-round pick will receive a "sandwich" pick between the second and third rounds. Draft pick compensation for losing Types A, B or C free agents retained, though earlier reports said compensation would be eliminated.
Contraction Clubs agree to maintain 30 teams through 2006. They may elect to eliminate two teams for the 2007 season; if they do, they cannot take a contraction vote before April 1, 2006 and must notify the players of their intent to contract by July 1, 2006. Players agree that if they do, they will not argue before the NLRB that contraction is a mandatory subject of collective bargaining. Current contraction grievance will be withdrawn. If owners elect to contract in 2007, their July 1, 2006 notice does not have to tell the players which teams will be contracted.
Discipline Maximum fine the Commissioner may impose rises from $500 to $5,000. As under current system, suspended players receive full salary. Owners drop proposals to authorize suspensions without pay and to establish a system of automatic fines and suspensions for certain offenses
Salary arbitration Same as under prior CBA Owners drop proposal to eliminate arbitration for "Super Twos" and to allow clubs to release players after exchanging arbitration figures
Club Debt Club debt cannot exceed 10 times EBIDTA (earnings before interest, depreciation, taxes and amortization), except that clubs which have moved into new parks within the past 10 years can have debt equal to 15 times EBIDTA. Three-year grace period, at the end of which the Commissioner must choose between this debt limitation and the old 60/40 rule. "Debt" defined to exclude money owed to players on long-term contracts.
Interleague Play Expressly reauthorized for the duration of the CBA.
Drug testing Two announced tests for steroids during spring training 2003. If more than 5% of players test positive, mandatory random testing starts in 2004 and continues until 2.5% or fewer test positive over two consecutive years. The first time a player tests positive, he is placed in a treatment program; subsequent positive tests bring suspensions of 30 days to two years.

Players in inpatient treatment programs receive full pay for first 30 days, half pay for days 31-60.
No testing for other illegal drugs except for just cause. Over the counter supplements such as androstenedione aren't banned, but if more than 10% of players test positive for them in any year, a joint union-management committee may ban them. Vote of such a committee must be unanimous.
Penalties for drug violations For players convicted of drug possession offenses (other than marijuana and steroids): 15-30 day suspensions for first offenses, 30-90 day suspensions for second, one-year suspension for third, two-year suspension for fourth, suspension at the Commissioner's discretion for fifth and succeeding offenses. Commissioner can substitute fines for the suspensions.

For players convicted of drug distribution offenses: 60-90 day suspension and $100,000 fine for first offense, two-year suspension for second.

No penalty for players who voluntarily come forward and seek treatment.

Marijuana use: Fines of up to $15,000; no suspensions.

Steroid use: drug treatment after first positive test; 15-day suspension or up to $10,000 fine for second; 25-day suspension without pay for third, 50 days for fourth, one year for fifth.
Benefits Clubs' contribution increased from $74 million in 2002 to $113 million in 2003-04, $114 million in 2005 and $115 million in 2006.
Expense allowances Annual cost of living increases for spring training and meal/other expense allowances
Injury rehabilitation Players with less than five years of major league service can be sent to a club's spring training facility for rehabilitation; however, each day starting with the 11th counts toward the maximum length for rehabilitation assignments (30 days for pitchers, 20 days for others)
Second opinions Clubs will pay for players' transportation expenses if they seek a second medical opinion anywhere in the country. Formerly the country was divided into three regions; players paid for their own transportation if they went outside their region to seek the second opinion
Contract tenders All contract tenders to unsigned players on 40-man rosters will be made by the Commissioner's office instead of individual teams.
Waivers Additional round of waivers added: current waiver period of Nov. 11-30th day of season is split in two, with the first period ending February 15 and the second beginning February 16.
Options Seasons in which a player is optioned to the minors for fewer than 20 days won't count against the maximum number of seasons in which a player may be optioned; in return, players receive major league service time for the period of such assignments.
10-and-5 rights A player with more than 10 years in the majors, including at least five with his current club will be allowed, as part of a multiyear contract, waive his "10 and 5" right to block trades, so long as the waiver applies to no more than 13 teams.
Anti-tampering rule Modified to afford clubs a 72-hour window to talk to a player under contract to another club, even if no tentative trade for the player has yet been arranged.

Compiled from news reports and other public sources.
If I've missed anything, please let me know.

Back to Labor and Contraction Coverage

Back to Doug's Business of Baseball menu