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
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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
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Martin St. Louis
Brad Richards
Steve Sullivan
Milan Hejduk
Alex Tanguay
Marian Gaborik
Marian Hossa
Relevant Criteria
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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?