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Baseball’s Collective Bargaining

by Cary Greene

October 20, 2021

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Before we start this conversation, be aware that MLB is currently in labor negotiations, the results of which are not yet known. Two months ago, MLB (the owners) proposed to dramatically lower the luxury tax threshold to $180 million. MLB doesn’t have a level playing field, due to payroll disparity and we all get that. I wonder if this is the true reason baseball is in such bad shape?

Revenue sharing, funded by luxury tax and compensatory draft picks, attempts to make the game more competitive and for a few teams who defy the norm, they do a brilliant job of competing with the bigger market teams, but, by and large, if a team doesn’t spend, they don’t win consistently and they have difficulty stacking up against the teams that do spend. (More on that in a second.)

MLB is proposing that, in addition to dropping the threshold down to $180 million, that the penalty for exceeding this threshold be raised to 25%. This proposal includes four other thresholds that increase taxation on any team that chooses to spend more than $180 million and also includes a $100 million payroll minimum “floor,” which would affect a number of penny-pinching teams. Please think that over for a moment. (I’ll happily wait while we all jump to thousands of conversational tangents!)

Would this proposal make the game more competitive? I personally think it’s a solid proposal, though I’d like to see a $150 million floor personally, with a $250 million first threshold. Not sure the owners would ever go for that though.

Interestingly, there were 14 teams that operated under $100 million this past season. We know that the Yankees spent $203,319,863 in total payroll for the 2021 season. The lowest spending team in the division was the Orioles, who spent $53,766,204, ranking as the the team with the second lowest payroll in all of baseball. Yankee fans watched 18 Yankees-Orioles games this season, with the Bombers going 11-8 by the way.

The Cleveland Indians took the honor for the lowest payroll, spending only $50,220,534 and the Yankees went 4-3 against them this year. The Pirates had the third lowest payroll, spending only $54,356,609 and they didn’t play the Yankees this past season. The fourth lowest payroll honor went to the Marlins, who spent only $58,958,100 and the Yankees went 3-0 against them. The Rays were fifth lowest, spending $79,836,327 and the Yankees went 8-11 against them.

For the sake of posterity I had to understand how the Yankees faired collectively, against the 14 teams who spent under $100 million in payroll and I was relieved to find that the Yankees went a combined 48-33 / .688

Presently, the Collective Bargaining Agreement (CBA) between Owners and Players threshold sits at $210 million and any team that exceeds this mark, up to $230 million is subject to a 20% tax. Any team between $230 million and $250 million faces a 32% tax and if a team is over $250 million, the penalty is 62.5%, not to mention there are additional compensatory draft pick penalties.

Certainly Hal Steinbrenner has proven to be the type of owner to not throw money to the wind so most would agree he would operate below any imposed luxury tax thresholds. With as many needs as the Yankees have, there could be far reaching ramifications based on how MLB’s labor negotiations pan out.

Recently, according to Joel Sherman of the NY Post, MLB has proposed a revised service time arrangement in which arbitration-eligible players split a $1 billion pool and all players become free agents at 29 1/2 years. The Player’s Union has long fought a hard salary cap and as doing this would represent just that. The two sides do appear to be quite far apart presently, so unless they can make significant progress towards an agreement that would be palatable for both owners and players, we could even be looking at a possible strike, which is a topic for another day and something that obviously would be very bad for MLB.

If the Player’s Union accepted this most recent $1 billion pool of money proposal, it would mean Aaron Judge would become a free agent this offseason, instead of next. It would also mean that younger stars would continue to not experience free agency when they are in their primes. A player like Vlad Guerrero Jr would have to wait seven more years to benefit,

The first question we need answered is will the owners lock out the players in 2022? Or, will the players strike? I think a lot remains to be seen but it does feel to me that we may see a strike of unprecedented proportions. However, if the owners are able to keep much of the existing framework in place and get the small tweaks above passed, they are probably going to have to make big concessions on how they currently underpay younger players.

Unions rarely lobby for younger employees and instead tend to favor established veterans and the MLB Players Union has proven to be no different.

Also, a huge sticking point is going to be related to the arbitration case between the Union and Owners revolving around Owners shortening the length of the 2020 season and thereby saving a fortune in payroll.

Let’s be positive and say that by some miracle, we don’t have a strike. What would the proposed changes to the CBA relating to the luxury tax mean for whomever the Yankees GM is this offseason? We know that GM probably can no longer spend $210 million like Cashman did this past season.

For 2022, the Yankees may possibly need to come in no higher than $180 million. Folks, we’re looking at what amounts to large market teams either sharing huge sums of money through taxation or we’re looking at large market teams just saying, “thanks anyway, we’ll field a competitive team, if we win, great! We win. But if not, no worries, we’ll catch you next year.”

We may be in for more of the same here in the Bronx, only worse. Back in April, I was becoming convinced that during the 2022 offseason, the Yankees might spend big. I didn’t like the construction of the roster at all and I thought big spending would become necessary at the end of the season. I expected the Yankees to be around .525 to .550 and it was clear that the balance of power had shifted to Tampa, when you factor in their farm system, there is no debating they represent the top of the heap in the AL.

Now, the chances of the Yankees spending big are looking extremely slim. In fact, can we just agree? The Yankees aren’t going to be spending much at all. Can we honestly picture Hal Steinbrenner authorizing the 2022 Yankees GM to spend big when the team could be facing a luxury tax threshold that is $30 million less than it was this year and carries stiffer penalties?

The Yankees do have some payroll coming off the books. Presently, the Yankees sit at $153,319,049 for 2022. This means that if this MLB plan is ratified by the CBA, the Yankees and Hal Steinbrenner, wishing to stay under the $180 million threshold, will spend about $26,680,951 and not a dang penny more!

Ladies and Gents, it sure does feel like its high time to start promoting from within and letting expiring contracts come off the books and this may be a theme for many teams this offseason. If this new agreement, or some iteration of it goes through, there will be a very high number of free agents playing for smaller market teams, who will be forced to spend significantly more than they’re presently spending. Meanwhile, many larger market teams may need to be very thrifty to avoid exceeding the threshold.

Not to worry, the Yankees have a number of highly desirable, highly paid players they can easily trade right? Um – not so fast! We had better take a look at this situation because the highest paid Yankees, Gerrit Cole aside, are virtually untradeable.

The Yankees have elected to spend 23.48% of their payroll on Gerrit Cole, yet despite the annual $36 million hit that having him under contract requires, Cole actually has positive trade value, meaning, the Yankees could at least get a little something for him in return, if they managed to trade him. In fact, this offseason, the Yankees could acquire a player similar to Joey Gallo, with one year of team control, for Cole straight up, without having to eat a dime of Cole’s contract – just to illustrate what Cole is presently worth in a trade. Suffice it to say, players with large contracts are very hard to trade, even when they are performing at a high level.

It’s also time to just give up on the notion that Giancarlo Stanton can be traded. It’s not worth it to the Yankees because they’d have to give up almost six prospects equivalent to Jasson Dominguez to get another team to take Giancarlo Stanton and pay the remainder of his contract. Nor is it worth it to eat most of his contract and only have to include Dominguez. Forget it! He’s not tradeable.

In fact, while we’re at it, we also need to accept that DJ LeMahieu has also become untradeable and we can add Aaron Hicks, Aroldis Chapman, Zack Britton to that list. The Yankees would have to give up assets or eat contracts to get any team in baseball to take any one of these players. NY is absolutely stuck with each one of them for next season and it’s not even worth discussing how they could be traded because not a team in baseball would take any one of them without the Yankees either eating the contract or kicking in highly valuable prospects like Dominguez, Volpe, Peraza or Gil.

Many Yankee fans seem to feel that free agency will be the primary way in which Brian Cashman, if he still has a job by then, will have to address the flawed roster and attempt to pry the Yankees playoff window back open.

It does feel like the Yankee window is closing fast. The Yankee system hasn’t produced much recently. Luis Gil is a big bright spot and players like Stephen Ridings, Andrew Velazquez, Estevan Florial, Clarke Schmidt and Greg Allen all had cups of coffee this year, it’s not like the Yankee system produced a Wander Franco to build around. Yankee fans are in for lean times if the Yankee GM is going to have to bargain shop to try to fix this team, with as many issues as it has. I keep going back to the thought that promoting from within may need to be the main way for the Yankees to put a better team on the field for next season and would that really move the needle enough to compete with Toronto, Tampa, and Boston?

I personally don’t see the Yankees doing much of anything this offseason with free agents. I think it’s fairly obvious that the Yankees will be shopping mostly in bargain bins. There is no way Hal Steinbrenner is going to smash through the $180 million barrier and eat significantly higher tax penalties. I wish this wasn’t the case and I hate to rain on a postseason free agent spree party before it begins, but the writing is on the wall, isn’t it?

Still, the offseason is approaching and there is much to be strategized about in the Yankee camp. Many fans will clamor for the Yankees to trade for this ace starter or that all-star centerfielder, but we should look at the reality that is staring the Bronx Bombers in the face. They can’t spend much money and they really don’t have a lot of trade chips either, at least, not chips they’d actually want to trade away. Sure, they do have a few lesser prospects they might be okay parting with in small deals, but the Yankee system has grown much less valuable in the last year, under the direction of Brian Cashman’s leadership.

With this much uncertainty, heading into the offseason, I’m highly concerned. The Yankees can’t afford to squander premium talent in the Rule 5 Draft. I hope we see better results here this offseason. What happened last season can not happen again. Brian Cashman’s nonsense is not only killing the team here, but he’s handing trips to the World Series to the Red Sox. We need an intervention!

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