Substantive Terms of the Collective Bargaining Agreement

Moore/Braves

• Why can individual clubs and players provide special covenants only that benefit the player?

• Why can’t Braves waive requirement for Moore to go into “re-entry draft”?

MLB Bonuses• Can the Phillies agree to give Ryan Howard a

$2m bonus if he hits 60 HRs next year?• If not, why not?• What bonuses are permitted in baseball?• Suppose the Phillies deliberately beneched

Howard so he would fail to earn bonus?

History of Salary Arbitration

• Adopted in NHL in ’70; MLB in ’76• Is the purpose to mirror the results of the

free market that would exist but for other restraints?

MLB Salary Arbitration Procedures

• Each side files “final offer”• Arbitrator must select one or the other• No advance briefs• No written opinion

Why do owners and players agree to such unusual procedures?

Scott Gomez arbitration: precedents

• Martin St. Louis• Brad Richards• Steve Sullivan• Milan Hejduk• Alex Tanguay• Marian Gaborik• Marian Hossa

Relevant Criteria

• Quality of player's contribution last yr, including special qualities

• Length & consistency of contribution• Record of past compensation• Comparative salaries• Physical or mental defects• Recent performance of club

Excluded Evidence

• Why is this relevant evidence excluded?– 1> finances of club or player; impt aspect of

the compromise– 2> press comments– 3> NHL: K of junior player or free agent– 4> prior offers

Salary Cap: Background

• Key concept: player gets guaranteed % of Designated Gross Revenues, and owners can cap salaries

• History– NBA– NFL– NHL

Problems with definition of Gross Revenue• Proper Accounting• International Revenue• Relationship between club revenue that is

“designated gross revenue” for purposes of salary cap and revenue that is designated for purposes of revenue sharing

• Good faith/best efforts to maximize DGR

Escrow Concept• where $ spent on exceptions > $ saved

by clubs spending less than cap (subject to floor), result is total player spending will exceed agreed upon cap %

• league recaptures by holding a % of each paycheck in escrow and eventually “taxing” each paycheck to pay owners back to get total spending down

• Further overspending in NBA lead to individual player caps

Individual Negotiations Under the Cap

• Generally left to free market• Rookie caps

– How can PA agree to a rookie cap that pays a junior player far less than fair market value?

• Process like tax law: complex rules that clubs and agents try to exploit with loopholes, that league must then try to close in next CBA

Salary Cap: Differences

• How they relate to other incentives for teams to become or remain competitive

• NFL: hard cap; wriggle-room• NBA: soft cap: Larry Bird exception

– Why would teams want this?• NHL: hard cap• MLB: No cap: luxury tax• Relevance of salary floor

Labor Law: Conclusions• Wagner Act gives workers choice to form unions and to

organize labor markets through collective bargaining• Recall purposes

– Prevent unfair exploitation by superior bargaining power of employers

– Minimize industrial disruption– Macroeconomic help to purchasing power of workers

• Do these concerns justify giving major league players the choice to form unions and to organize labor markets collectively?

• Are there other public-interest reasons why American professional sports should be organized around collective bargaining, rather than free markets?