Thursday, October 20, 2011

MLB Labor Armageddon – not in the cards in 2011

The National Basketball Association is in the midst of a labor dispute that has resulted in the cancellation of the first two weeks of the NBA’s 2011-12 regular season and in the next few days the NBA is expected to cancel most the league’s scheduled games through Christmas after talks broke down Thursday evening.

The National Hockey League lost the entire 2004-05 season to a labor lockout.

The National Football League didn’t miss any games on their 2011 schedule, but the ownership forced a lockout that ended shortly before the regularly scheduled start of the season.

Major League Baseball, whose strike shortened 1994 season resulted in the cancellation of the World Series, is set to extend its current collective bargaining agreement in the next few days.

"Both sides understand where we are in the contract. There is no lack of urgency," current MLBPA executive director Michael Weiner said.

The St. Louis Post Dispatch reported that both sides are meeting daily in hopes of announcing an extension to their current labor agreement. The announcement could happen during the World Series, as it did in 2006.

"Both sides have been working hard — and very professionally — and I'm sure both sides will continue to do so," Weiner said, adding that a lack of public comment benefits the process.

Speaking to the media during the National League Championship Series, MLB commissioner Bud Selig agreed with Weiner’s views without putting a timetable on when their new five-year agreement might be announced.

"Just keep working, make progress, continue to make progress, and I think things will work out well," the commissioner said.

"The sport, I've often said, was stuck in neutral for 25 years. And that's one of the reasons. It was brutal. It was really brutal. Every two or three years we went back to this," Selig said at the same time recognizing baseball’s troubled labor history. "The fans got tired of all that, got tired of hearing about it. And I don't blame them. So, 16 years of labor peace has really, really helped us."

"Both sides are very constructive and have work to do and understand that trying this in the media is not a good thing," the commissioner said. "That was the problem in the '90s. Every day you spent the first half of the day either mad at some reporter for something he wrote or who leaked it to who."

"We're past all that now," he added.

Baseball and labor have had a profound impact on the evolution of Major League Baseball.

Year Stoppage Days Games Key Issues
1972 Strike 14 86 player pensions, binding arbitration
Work stoppage lasted from April 1 - 12
Result: Players union and owners reach accord on a new collective bargaining agreement. Owners eventually agreed to add an additional $500,000 to the pension fund. Players forfeit payment for games missed during strike, but gain the right to salary arbitration.
1973 Lockout 12 0 salary arbitration
Work stoppage lasted from Feb. 8 - 25
Result: Camps open late but season starts on time with a new three-year collective bargaining agreement. Owners raise their contribution to the pension plan and increase minimum salaries from $13,500 to $15,000 in the first year and to $16,500 in the third year.
1976 Lockout 17 0 free agency, re-entry draft
Work stoppage lasted from March 1 - 17
Result: Federal judge John Oliver issued order making pitchers Andy Messersmith and Dave McNally free agents, upholding a ruling made the previous year by baseball arbitrator Peter Seitz. Commissioner Bowie Kuhn orders camps opened and a new Basic Agreement is negotiated.
1980 Strike 8 0 free agent compensation
Work stoppage lasted from April 1 - 8
Result: Final eight days of spring training lost, but season starts on time and a four-year agreement is reached, with a clause allowing the free agency issue to be re-opened in 1981.
1981 Strike 50 712 free agent compensation
Work stoppage lasted from June 12 - July 31
Result: Players' strike cancels 712 games. Owners lose right to have clubs directly compensated for the loss of free agents. Owners win right to retain players for six years and to be compensated with other players, as well as amateurs from the draft.
1985 Strike 2 0 salary arbitration
Work stoppage lasted from Aug. 6 - 7
Result: Owners agree to contribute $33 million for the next three years to the pension fund and $39 million in 1989. The players' minimum salary increases from $40,000 to $60,000.
1990 Lockout 32 0 salary arbitration, salary cap
Work stoppage lasted from Feb. 15 - March 18
Result: Camps open late. Owners raise their annual pension fund contribution to $55 million. Salary arbitration eligibility agreed to for 17 percent of the players with between two and three years of experience. The minimum salary increases to $100,000.
1994-95 Strike 232 938 salary cap, revenue sharing
Work stoppage lasted from Aug. 12 - March 31
Result: Postseason is cancelled. Judge's ruling ending labor dispute orders that 1995 and 1996 seasons must be played under previously existing labor conditions. New agreement is signed in March of '97 with implementation of a luxury tax on big-market owners for overspending.

The MLBPA, time and again, has beaten management. Consider what happened after the owners lost to the players after 1985’s brief player strike, and what took place after the two sides agreed to a new collective bargaining agreement.

Despite industry growth, owners repeatedly tried to find ways to thwart free agency rights won by the players. None of those efforts were more cynical than when owners collectively decided not to pursue free agents in the player markets following the 1985, ’86 and ’87 seasons.

Only four of 35 free agents signed with new teams following the 1985 season. Great players like Kirk Gibson, Tommy John and Phil Neikro were not offered contracts.

The following season owners acted in concert again to restrain the free agent market. Players like Tim Raines, Bob Boone and Jack Morris were unable to get offers from other clubs.

The MLBPA filed grievances alleging ownership collusion in early 1986 and again in February 1987. In September 1987, arbitrator Tom Roberts ruled the owners had violated the Basic Agreement in the first collusion case and later, in January 1988, determined damages of $10.5 million.

In October 1989, arbitrator George Nicolau ruled that owners had again violated the Basic Agreement in the second collusion case, awarding damages of $38 million.

In January 1988, the MLBPA filed a third collusion grievance after an off-season players market for which the owners created an “information bank’ to share information and restrain salaries.

The players prevailed in that grievance as well and in November of 1990 they reached a final settlement to all three collusion cases in which $280 million in damages was awarded to players.

Baseball, the only major sport without a salary cap, finally has a revenue sharing plan that appears to be working. The success of small and middle market teams like the Tampa Bay Rays, Texas Rangers and the 2010 World Series Champion San Francisco Giants shows that having the right people in your front office is just as important as how much money a team has to spend on their payroll.

"The MLBPA's position is that revenue sharing should not be used to pay down club debt," union executive director Michael Weiner told Baseball America. "We have consistently expressed to the commissioner's office that using revenue-sharing proceeds to pay down debt does not improve a team's performance on the field."

Baseball had grown concerned franchises that benefited from revenue sharing were taking the money and using that to help cover their financial losses. There are no safeguards in place to prevent that from happening.

"Overall, the Commissioner's view is that revenue-sharing recipients have made appropriate use of revenue-sharing proceeds over a very long period," Rob Manfred, MLB's executive vice president of labor relations said in a Baseball America report.

"Clubs at low-revenue spectrum have always gone through cycles when they develop with less expensive young talent, in a way like Tampa Bay did, that moves them along to field a very competitive team. When you're at that low-revenue period, you're still going to be getting your revenue-sharing. Clubs can then position themselves for a much higher player payroll when that roster matures, and one of the ways you may decide to position yourself is reduce your debt load so that you don't have to pay debt when your roster then matures."

At the same time, revenue sharing remains a thorn in the side of those who are forced to pay those who need.

“Over a billion dollars has been paid to seven chronically uncompetitive teams,” Red Sox Owner John Henry said. “Five of whom have had baseball's highest operating profits.”

So How did revenue-sharing work during the current CBA?

All 30 teams pay 31 percent of their local revenues into a pot each season. This pot is then evenly distributed among the 30 teams. A team in New York or Chicago will pay more into this pot than a team in Tampa Bay or Kansas City.

Major League Baseball distributes a portion of their Central Fund, comprised from sources like the television contract with the various networks, among the 30 teams with those with the lowest revenues getting the bulk.

There is also a 'luxury tax' where a team must pay a percentage on the portion of their payroll that exceeds a pre-set limit. The Yankees usually have the highest luxury tax bill.
The system isn’t perfect but it seems to be working.

Why hasn’t baseball had a major dispute since 1994? In part because MLB owners realized they weren’t going to beat the players. The resolve of the MLBPA is as strong today as it was when Marvin Miller took over the MLB Players Association in 1966.

Miller instilled in the players a number of principles, namely to never give back anything you bargained for in good faith.

Nine years ago in August 2002 the MLBPA nearly went on strike. Then union head Donald Fehr and Commissioner Bud Selig reached an understanding that was partially based on what they believed what was in the best interests of the two groups they represented.

More importantly they knew after the 1994 World Series had been cancelled the two sides couldn’t risk damaging the game again. A lesson learned in 1994 paid off in 2002, 2006 and is about to pay dividends again in 2011.

For Sports Business News this is Howard Bloom

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