Minor Leaguers Weigh Risks in Minimum-Wage Lawsuit

The minimum-wage lawsuit that a group of former and current minor leaguers is bringing against Major League Baseball could mark a paradigm shift in the industry. In a nutshell, a ruling in favor of the plaintiffs would fundamentally change the business model of the game, both at the minor league and major league levels.

As legal analyst Nathaniel Grow details as part of his running coverage of the suit, the plaintiffs contend that MLB violates federal and state minimum-wage and overtime laws by paying many minor leaguers as little as $3,300 a year. If plaintiffs were to obtain a favorable ruling, the cost of doing business for major league teams would increase dramatically. In all likelihood, major league clubs would try passing down that cost to minor league affiliates. In one extreme yet plausible scenario, we could see retraction in the minor leagues, which would have ripple effects on player development, the amateur draft and the international signing period. And that’s just the baseball side of it, saying nothing of the impact on regional economies that rely on their minor league franchises.

When a verdict is handed down, there will be plenty of time to assess its impact, the good and the bad. For now, I want to look at an issue that is getting less attention than the lawsuit’s hypothetical fallout: the risks that current minor leaguers must accept if they decide to join the lawsuit.

But first, there’s one important legal distinction to make about this case. In October, a San Francisco federal judge determined that the lawsuit should be certified as a collective-action lawsuit, which is commonly equated with a typical class-action lawsuit. The difference between the two is material. A typical class action requires that the plaintiff class members opt out of the lawsuit in order to remove themselves from the class; in other words, the class members don’t have to lift a finger in order to benefit from a decision in their favor.

Meanwhile, collective action (a designation reserved for cases brought under the Federal Labor Standards Act, as this one was) requires that the plaintiff class members opt in to the case in order to be part of the lawsuit, so the class members must first take an administrative action in order to benefit from a decision in their favor. Because this is a collective action, current minor leaguers wouldn’t automatically benefit from a decision in the plaintiffs’ favor; the onus is on the players to decide whether or not to join the lawsuit and thus make themselves eligible for that potential reward. But before they make that decision, they’ll have to weigh certain risks that are attached to their legal participation.

These risks came to light after I spoke with two agents who have current minor leaguers as clients. According to a legal notice sent to minor leaguers in November, the players have until February 11 to decide whether or not to join the lawsuit. If they consent, they will be represented in part by Garrett Broshuis, a former minor league pitcher for the Giants who’s now an attorney for the Korein Tillery law firm in St. Louis. (The notice also says that a player can retain his own counsel at his own expense.) The lawsuit is Senne vs. Office of the Commissioner, so named for Aaron Senne, a former Marlins farmhand whom Broshuis approached to join the suit before it was filed in 2014.

Baseball agent Bryan Symes, who’s also a labor-relations attorney at business law firm Ruder Ware in Wisconsin, is in the midst of advising his minor leaguer clients regarding the lawsuit. He tells me that in his discussions with his clients, the players mainly want to know the answer to one question: what are the advantages and disadvantages of joining the lawsuit?

He summed up their general concern like this:

What I’m hearing is that the players feel like, “Yes, I am getting paid peanuts, and I definitely think I should be making more money as a minor league player in terms of my salary. In the spirit of that sentiment, I want to be part of that lawsuit. But, as my agent, help me understand how I stand to benefit and what are the potential risks.”

The risk of not joining the lawsuit is not benefiting financially in the recovery of damages, should the plaintiffs prevail. But Symes says that by consenting to join the lawsuit, “the players who are unnamed class members cannot, through contributing to key strategic decisions, influence the possible outcome of the case. Players that opt in [to the lawsuit] forfeit the right to file suit individually – meaning these players relinquish decisional control.”

There’s also a career risk to consider. For players who join the lawsuit, it’s possible that players could diminish their standing within the organization if that organization views participation in the lawsuit unfavorably. Now granted, the legal notice that was sent to minor leaguers reminds that “federal law prohibits MLB or the MLB Club Defendants from retaliating” against the players, but let’s be honest – it would be pretty easy for an organization to mask its retaliation by citing a baseball-related justification. Forms of retaliation may include releasing a player, demoting him or refusing to promote him in spite of his talent and performance.

Any one of these actions may be detrimental to the organization from a player-development perspective, but the club may be willing to pay that price if they believe strongly enough in sending a certain message to the player. Regarding the likelihood of an organization getting caught for retaliating against a player, Symes says it “would be almost impossible to prove in the absence of smoking gun evidence like an email from the front office.”

Though these risks are real and worthy of consideration as players decide whether or not to opt in, Symes says that there is still “very little downside for players entering this suit.” Regarding the surrender of decisional control, he calls it a double-edged sword, noting that most minor leaguers do not have the financial means to retain their own counsel and pursue a separate suit. And concerning the potential for retaliation by major league clubs, it seems unlikely that an organization would view participation in the lawsuit so unfavorably that it would be compelled to punish the player, especially so for players of a greater prospect ilk who are viewed by their organizations as valuable long-term assets.

Aside from the risks, sheer apathy is another factor that will depress the number of plaintiffs. Because of the opt-in requirement, some current players inevitably will open the envelope and throw away the contents to avoid the hassle.

Naturally, Symes recommends that the players seek legal counsel if they haven’t already. He encourages players to call the information-hotline number provided in the legal notice, collect as much info as possible, and bring it to their agents. Additionally, they might consider calling the Korein Tillery plaintiffs’ firm, who may be able to provide further information that could help the players make an informed decision.

“I can’t speak for the plaintiffs’ attorneys, but my sense is, based on this type of lawsuit, that the players are probably motivated to obtain a decision from the court as opposed to trying to settle it. And I would imagine the league is equally motivated to defeat the lawsuit, because the ripple effects are obvious,” Symes says. “It has the potential to be a very important case, so I think it’s imperative that these players get with someone who’s equipped to sufficiently advise them about the pros and cons, and sooner rather than later.”



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szielinski
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szielinski
4 months 6 days ago

The minimum wage creates income that fails to put the wage earner far over the poverty line. The poverty line in most of the United States: $11,770 per year for one person household. The poverty line is stingy. Hence, the relevance of the living wage movement to the working poor in the United States.

So, can one find any reason to support a sub minimum wage economy? And, can one even provide a moral defend a sub-minimum wage economy in an industry that generates monopoly rents from its product?

Fans look closely at ML teams, top prospects, etc. What we do not often see are the many people working in the industry who endure an impoverished life just because “baseball.”

They are not slaves, of course. The are, however, highly exploited wage slaves.

walt526
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walt526
4 months 6 days ago

“can one find any reason to support a sub minimum wage economy?”

The main argument against a minimum wage is that it lowers the quantity of jobs, which is possible if MLB’s response is to contract their minor league systems.

jfree
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jfree
4 months 6 days ago

That is only partially true in this case. The only reason a retaliatory action by MLB to reduce their MiLB system would affect total employment is because MLB is legally able to kill new competition via anti-trust exemption. IOW – they have monopoly power and they have a long ugly history of using it in ways that no other entity in the US legally can (eg not paying employees minimum wage).

I generally agree that minimum wage laws are worse than useless. But this situation (and one-employer towns – the whole ‘company store/housing/scrip/etc’ – which still exist in places) is exactly the sort of structural power disparity (if unfixable via competition and free markets – like MLB with its exemption from the law) that were the reason for min wage laws in the first place.

Dave from DC
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Dave from DC
4 months 6 days ago

Exactly what jfree said. Though the question of whether or not minimum wage laws help the economy is an open one, the argument against them is (as best I know) always predicated on the fact that such laws constitute a damaging restriction on the free-market. MLB, with its preposterous anti-trust exemption, is nothing like a free market.

Paul22
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Paul22
4 months 6 days ago

Minimum wage (Fed minimum wage 7.25) by my calculation based on a 40 hr work week gets you about 15K per year (52 weeks). Its about 30% less than it was in 1968 if adjusted for CPI inflation. There is no way that’s a living wage unless you live in a tent or your moms basement.

3300 wont feed my dog

johnsilver
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johnsilver
4 months 6 days ago

There is always McDonalds, or some other minimum wage job if they don’t particularly like PLAYING a sport and getting some cash out of it.

szielinski
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Member
szielinski
4 months 6 days ago

Playing a sport from which others handsomely profit. The rent takers can easily share a fraction of their income to pay everybody a living wage.

HomerAtTheBat
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HomerAtTheBat
4 months 6 days ago

People don’t handsomely profit from minor league games, they profit from the major league games which players are paid well for. And just like they can pay the minor leaguers more, they can also release a ton of them also. I could see financially strapped teams getting rid of an A-ball team after this suit so that they have less players to pay and then the minor leaguers are just screwed in a different way.

walt526
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walt526
4 months 6 days ago

If there wasn’t money to be paid from owning a minor league baseball team, then people wouldn’t be paying several hundred thousand to over a million for them.

Ian R.
Member
4 months 6 days ago

Even if it’s true that the minor leagues don’t make any money themselves (which is debatable), the minor leagues as a group provide tremendous value to the MLB clubs by developing those players who will play in those highly profitable major league games. Without the minor leagues as a development tool, there are no major leagues. Without minor league players to fill out the rosters, the minor leagues don’t exist.

It’s worth noting, also, that minor league players aren’t fungible in the same way that people who work at, say, McDonald’s are. There is a basically unlimited pool of people who could do most minimum-wage jobs. There isn’t an unlimited pool of people who can play affiliated ball at any level. Even guys in rookie league have a very high degree of talent relative to the general population.

Famous Mortimer
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Member
4 months 6 days ago

So you’d rather decent players left the minors because they literally couldn’t afford to live on the wages that the billionaire owners provide for them?

aaronsteindler
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aaronsteindler
4 months 6 days ago

Most prospects make decent money even as minor leaguers.

That said, I do believe that it’s just plain immoral to not pay living wages to players who give up significant time to produce for an entity that nets more than enough money to afford it.

szielinski
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Member
szielinski
4 months 5 days ago

Hmmm, if most prospects make decent money as minor leagers, then this lawsuit has no merit at all because decent money > income generated by a sub-minimum wage.

Arjon
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Arjon
4 months 6 days ago

Are any estimates available as to how much it would cost per year for an MLB team to pay all its minor leaguers minimum wage?

LHPSU
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LHPSU
4 months 6 days ago

Probably in the region of 3 million/year? Frankly I don’t see it as an excessive burden for the team.

rlwhite
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rlwhite
4 months 6 days ago

A typical MLB team has 6 or 7 domestic minor league affiliates. A typical minor league roster is about 21 or 22 spots. To pay 7 teams of 22 players each $30,000 a year (not minimum wage, rather close to an average domestic annual salary), would be $4.6M a year.

That MLB players are paid so much and milb players so little is morally outrageous.

Tak
Member
Tak
4 months 6 days ago

In other words, teams could pay all their minor leaguers a fair and livable wage for a cost less than 1 WAR per season on the open market at the MLB level.

LHPSU
Member
LHPSU
4 months 6 days ago

While I can understand the fear of retaliation, I doubt teams would actually screw with its own assets for such reason, as long as they are actual assets (prospects). It makes no economic sense, nor do I see the benefit of “sending a message”.

walt526
Member
walt526
4 months 6 days ago

Where it will hurt players is the AAAA players (aka, organizational depth players) who become minor league free agents in their mid or late 20s. Those players are pretty fungible and it’s possible that teams will discriminate against those who participated in the lawsuit.

But a top prospect has less to lose, but also less to gain from joining the lawsuit.

LHPSU
Member
LHPSU
4 months 6 days ago

Those who do make it to or near minor league free agency as AAAA players do make above minimum wage. Organizational depth is another thing, but then minor league attrition is of such a nature that it probably doesn’t really matter (which, of course, is kind of the point of the paragraph).

walt526
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walt526
4 months 6 days ago

My point was that AAAA-type players are most vulnerable to retaliation (i.e., not getting MiLC, NRI, etc), not that they wouldn’t be paid above minimum wage if they were able to secure a contract.

jfree
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jfree
4 months 6 days ago

MLB has a long history of successfully blacklisting players. The main reason why relations between Mexican League and MLB is so bad is because MLB blacklisted players who went there to play in the 40’s. Biggest names were prob Sal Maglie and Danny Gardella. MLB had earlier blacklisted players from Cuban League too because that was an interracial league.

Mex League later responded in kind – blacklisting any Mexican player who signs with MLB before they sign with a MexLeague team – and that blacklist still exists today.

MLB is quite unusual in that a cartel can work and be sustained (unlike say OPEC). Because 100% of the value of an MLB team derives from what the cartel itself does – schedule games, negotiate exclusive national media contracts, etc. So even if one team decided to do its own thing, the cartel can easily force them into compliance if they choose.

TKDC
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Member
TKDC
4 months 6 days ago

If I were a farmhand for 29 teams, I wouldn’t be too worried. If I were in the Marlins organization…

Famous Mortimer
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Member
4 months 6 days ago

Wouldn’t this benefit everyone? There might be players who’d develop later, who left the game because they couldn’t afford to live on MiLB wages. It just makes no sense in 2016 to have the game organised this way.

ogZayYsj3r7CGsz
Member
ogZayYsj3r7CGsz
4 months 6 days ago

Minor league players that don’t make enough money can qualify for government assistance. Somebody is going to end up paying for these people to live and it might as well be baseball instead of everyone else.

bjsguess
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Member
bjsguess
4 months 6 days ago

Baseball is so incredibly unique that it doesn’t strike me as odd that the compensation is low. How many jobs routinely offer a nice signing bonus before paying less than minimum wage? How many jobs are there that a person can make peanuts and then get a pay increase north of $500k all in the same year? How many jobs hold the allure of earning $50M over the next 10 years.

Shooting for being a professional baseball player is the ultimate gamble. If you make it you are set for life. If you fail you’ll probably leave the game with not much in the bank. For some the gamble is worth it. For others it isn’t. If you don’t like your odds do something else – something that offers more stability but less upside.

jfree
Member
jfree
4 months 6 days ago

Even better – choose the high stability, high pay, taxpayer-subsidized, high upside of being – an MLB team owner.

JDX
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JDX
4 months 5 days ago

If only I knew I could choose to be a billionaire! Man! Certainly I wouldn’t have gone to college to become an engineer! Drat!

Dominikk85
Member
Dominikk85
4 months 6 days ago

So a billion dollar economy can’t pay its employees the minimum wage? Fangraphs wrote an article that the owners revenues increased a ton and salaries increase much slower. 15 years ago it was over 50 percent of total revenue and now it is under 40. So those owners that are saving on players salaries can’t support their minor league players? Consider especially that part of the reason why (relative) salaries go down is that teams are putting increased value on player development and thus have more productive players for the minimum instead of paying free agents.

So teams want to develope cheap homegrown players but not pay for it. Teams are getting more and more production out of homegrown players who are peaking earlier ( partly because they paid 1000s of dollars in their teens to play in high level “travel teams” and on hitting instruction, pitching coaches etc…) but both minor league salaries and minimum MLB wages have risen much slower than both free agent salaries and especially MLB revenue ( the union is certainly to blame for that too because the veterans had a lot more power in it than young players and only now that teams try to save money by going young starts to care about it).

In short: MLB saves tons of money by underpaying ( Not meant judgemental, just pure dollar per WAR) young minor league graduates and should pay for this in some way.

Certainly teams could contract the minor leagues but it would be much more costly to buy those players on the open market. MLB teams don’t pay minor league players out of generosity, they do it to get young talent for a discount price. Of course only 1 in 100 or so becomes a star and most minor league players players are paid without ever contributing but rookies are so much cheaper that it still pays off.

Paul22
Member
Paul22
4 months 6 days ago

I have heard MLB owners state that each players development costs is about 20 million so as to justify underpaying players for 6 years. I would love to see the breakdown for those numbers since assuming each MLB team generates 6 MLB players from its system per year, that would seem to indicate they are paying 120 million a year in development costs, or maybe thats the total they spend on the entire farm system?

Paul22
Member
Paul22
4 months 6 days ago

So the average team has what, about 200 minor leaguers who are not part of the 40 man? The average pay is 3300 per year, so that’s 6.6 million. If they have to pay minimum wage, lets call that 13,000 per year or about 26 million. That increases MLB costs about 20 million a year. These are all ball park figures of course, back of the envelope calculations one must resort to in the absence of exact figures. This is not insignificant, but then again, the percentage of revenue MLB pays to MLB players has dropped from 50% to 40% over the years, which is about 30 million a year for each club, so they are still better off than they were at the turn of the century.

In fact, one can say the minor league players are subsidizing what the owners pay MLB players, since MLB salaries have went up 2000 percent since 1976 while minor leaguers have only increased 75% which is 4 times less than CPI inflation). If minor league salaries had kept up with inflation, they would be getting paid about 13,000 per year. What a coincidence.

I think the courts would want MLB to explain the reduction in minor league pay over the last 40 years in real dollars. Perhaps bonuses are higher, but then MLB has already capped bonuses for American born players so they are substantially less than what is being paid to imported amateurs.

wee162
Member
wee162
4 months 6 days ago

This bit;
“So the average team has what, about 200 minor leaguers who are not part of the 40 man? The average pay is 3300 per year, so that’s 6.6 million. If they have to pay minimum wage, lets call that 13,000 per year or about 26 million.”
If your figures are right, you’ve just described players being paid one quarter of the minimum wage. And that’s an average. Which would suggest there are players getting under that.

But I don’t think your figures are right. Baseball players don’t work 40 hours a week for a year, they probably work way longer than that each week (meetings, practice, travelling, working out, as well as games are all part of their job) but they play for around 8 months of the year.

Minor leaguers should unionise.

Fillmore
Member
Fillmore
4 months 5 days ago

Your figures are off by a factor of 10. $13,000 times 200 = $2.6 million, not $26 million. Owners could easily, easily afford that. There’s no excuse.

waldthm
Member
waldthm
4 months 6 days ago

Most clubs are beginning to realize that improving life quality for MILB players have tangible benefits on development. Look at the Dodgers and the programs Gabe Kapler has implemented.

That being said, I don’t think that pay should be an issue for most draftees when you account for signing bonuses. They will have enough over a typical 7-year minor league contract for $30K per year in expenses (e.g. living wage), and still have some remaining savings after year 7 assuming they never make it up to the big leagues.

For example, a player drafted in the 10th round generally gets around a $150,000 signing bonus. If he invest it into a low-cost investment vehicle (e.g., broad-based ETF, assume 6% return per annum); only taking out $2,500 per month for expenses; and get 3-months pay (plus per diem for road games) in years 1 and 2 in a rookie league, 6-months pay in year 3 in a low A league, 6-months pay in year 4 in a high A league, 6-months pay in year 5 in a AA league, 6-month pay in years 6 through 7 in AAA league; he would have more than $50,000 still left in his investment account. This isn’t even taking into account bonuses for making AA/AAA/40-man roster, moonlighting in the off-season, etc.

If he starts with a $500,000 signing bonus (4th round), following the strategy above, he would have almost $600,000 in savings by the end of year 7 (due to the miracle of compounded interest).

How many minor leaguers are financially educated enough to do this very basic strategy? Probably not many, and likely includes the plaintiffs of this suit.

Better investment: financial education for minor leaguers after they sign. Tell them how to plan financially for their minor league career, and it could also have positive effects on development.

sunshine_and_rainbows
Member
sunshine_and_rainbows
4 months 6 days ago

I think you’re being pretty misleading here. A 10th rounder almost never gets $150,000; they’re always signed way under slot so the teams can pay over slot for the earlier pics. See the cubs this year (http://www.bleachernation.com/2014/07/04/chicago-cubs-reportedly-agree-with-sixth-rounder-dylan-cease-at-1-5-million-plus-bonus-pool-update/) and last year (http://www.bleachernation.com/2015/06/17/chicago-cubs-reportedly-sign-5th-7th-and-10th-round-draft-picks-kellogg-brooks-machin/), or the dodgers this year (http://www.truebluela.com/2015/6/9/8750441/mlb-draft-2015-tracker-dodgers-picks).

It’s the superstars and the high schoolers who are being lured away from college that get the big bonuses. College seniors have no leverage whatsoever and get pittances (see the links above) unless they’re stars (someone like Kyle Schwarber). It would be cool to get the mean and median signing bonuses per active player in the MiLB, but I don’t have that information. As is, I get the feeling that it’s lower than you’re assuming.

waldthm
Member
waldthm
4 months 6 days ago

Fair enough — I was going by slot. Just use the median bonus for an 8th rounders and should take you to a little more than $150,000:

http://m.mlb.com/news/article/130246508/2015-draft-signing-and-bonus-tracker

That’s 200-250 minor leaguers per year, or 1,400-1,750 for 7 years, which is a significant fraction of players in the MILB system.

They’re back-of-the-envelope calculations, but should be close to the actual answer.

rosen380
Member
rosen380
4 months 5 days ago

… and what percentage of them get there with no or minimal college expense [either drafted out of HS/JuCo or got significant sports scholarships].

An engineer going into the marketplace with an MS will almost certainly start out with a much higher salary, but no or minimal signing bonus and probably a couple hundred thousand in debt.

I’m not suggesting that they shouldn’t get more, but I suspect outside of the sorts of players drafted in like the 10th+ round who ultimately never even sniff the Majors, I am not entirely sure MiLB is too bad a gig.

Deelron
Member
Deelron
4 months 6 days ago

The minimum MLB salary is ~500,000.

500,000 divided by 25 is 20,000 for a years worth of work.

It’s frightful for both moral and development purposes that MLB teams could field an entire, affliliated minor league team for what they pay a single rookie at the minimum rate.

JDX
Member
JDX
4 months 5 days ago

I don’t know the answer to this question, so I’m hoping someone else does.

Does the $3300 per year “average” take into account other benefits received? I’m sure some amount of players are fed after games, or receive some sort of subsidized housing. Those are taxable benefits, so they should be included in the discussion. Saying a player makes $3300/yr is pretty disingenuous because any reasonable person knows that isn’t true. They are not homeless, as far as I know, so they are living under a roof. They aren’t paying for that roof because $3300/yr isn’t enough to pay for a roof. So… either their being subsidized heavily, or the numbers are faulty. One has to be true.

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