A Roadmap for a Potential MLB Work Stoppage

This post is being republished after appearing at FanGraphs earlier this month — as it seems particularly relevant given the lack of a new CBA ahead of the December 1 expiration of the current one.

In two weeks time, on December 1st, the existing collective bargaining agreement (CBA) between Major League Baseball and the Major League Baseball Players Association is set to expire. While the two sides have been working for the better part of a year on negotiating a new agreement, to date they have not yet been able to come to terms on a new CBA.

Based on existing media reports, it appears that the hold-up over the new agreement centers around two primary issues: raising the luxury-tax threshold and creating an international draft. Both topics were expected to be among the most important — and thus potentially contentious — issues discussed during the CBA negotiations. So the fact that the parties have not yet reached an agreement on either point is not particularly surprising.

Still, with only two weeks left until the old CBA expires, some are beginning to speculate about whether a potential work stoppage could be looming on the horizon. That, in turn, raises questions regarding the potential legal ramifications of the two sides failing to agree to a new CBA before December 1st.

As an initial matter, it is important to note that the December 1st expiration date of the existing CBA is not a hard-and-fast deadline by which the owners and union must reach a new agreement. Even if the two sides fail to agree to a new CBA by the beginning of the month, that will not immediately trigger a work stoppage in the sport. Instead, both sides can agree to continue to amicably work towards a new agreement, with the existing CBA continuing to govern the sport in the interim.

Realistically, this is the most likely scenario should it turn out that the players and owners aren’t able to reach a new agreement over the next two weeks. Throughout the 2016 CBA negotiations, both sides have repeatedly stressed their belief that they would ultimately be able to agree to terms on a new CBA without a work stoppage. So as long as the two parties continue to believe talks are progressing in a reasonable manner, then there is no reason for fans to assume that a work stoppage is imminent, even if we still do not have a new agreement in place by the first of December.

That having been said, the longer that the talks drag out, the more likely a potential work stoppage becomes. Even if the players and owners are both content to continue to negotiate past December 1st, at some point in the future — whether it be January, February, or March — one side is likely to become frustrated enough with the pace of the talks that they eventually decide to initiate a work stoppage in order to shake up the negotiations.

Such a work stoppage could take one of two forms: a lockout by the owners or a strike by the players. In a lockout, the owners would collectively announce that they are refusing to allow the players to work until the labor talks are resolved. Conversely, in a strike, the players would declare their refusal to work until the owners agree to terms on a new CBA. In either case, the end result would be the same from the fans’ perspective: there would be no free-agent signings, trades, or games played until the parties agreed to terms on a new CBA.

Of these two possible avenues towards a work stoppage, a lockout by the owners is by far the more likely scenario. While MLB’s previous labor disputes have most frequently involved the players going out on strike, that would be unlikely in this case, since a strike by the players in the middle of the offseason would give the union little leverage over the owners. Instead, player strikes are most effective when they come in the midst of the playing season, depriving the owners of valuable television and ticket revenue.

This is the reason why MLB players went out on strike in August during the 1994 labor dispute, for instance. By sitting out games during the pennant chase and playoffs, the players imposed the maximum financial pain on ownership. A strike in December or January would not have nearly the same effect.

While baseball has enjoyed unprecedented labor peace for over 22 years, this helps explain why all recent work stoppages in the other professional sports leagues — including the 2011 labor disputes in both the National Football League and National Basketball Association — have come in the form of a lockout, rather than a strike. Rather than allow the players to dictate the timing of the work stoppage, owners in the other leagues have learned in recent years that they are better off initiating a lockout themselves during the offseason in order to gain leverage over the players union, thereby increasing the likelihood that the labor dispute is resolved before it consumes too much of the playing season.

A lockout would potentially benefit the owners in several respects. For starters, by locking the players out during the offseason, ownership would deprive free agents of the ability to sign lucrative new contracts, while also preventing any arbitration-eligible players from negotiating new agreements with their teams. This, in turn, could eventually lead a portion of the union membership to begin to pressure the union leadership to relent to the owners’ demands.

Meanwhile, if the lockout were to extend into February, then ownership could also theoretically gain some leverage over the players by preventing them from reporting to spring training, throwing off their normal training routines. And if the lockout were to drag on all the way into April, then the players would begin to miss actual paychecks, giving the owners perhaps the greatest leverage of all.

The MLBPA could respond to a lockout in several possible ways. First, the players could simply continue to negotiate with the owners in the hopes of reaching an agreement on a new CBA. Indeed, while a lockout could impose some hardship on any current free agents or arbitration-eligible players, it would have relatively little impact on the overwhelming majority of the union’s membership during the months of December and January.

Alternatively, the MLBPA could — either immediately, or at some point down the road — elect to pursue a legal challenge against the owners’ lockout. If the players believed that the owners were bargaining in bad faith, for instance, then they could file an unfair labor practice charge with the National Labor Relations Board (NLRB). If the NLRB agreed, then the government could go to court to seek to have the lockout dissolved. (The NLRB’s decision to challenge the owners’ bargaining practices eventually resulted in the end of the 1994-95 players strike, for instance, when then-Judge Sonia Sotomayor ruled that the owners had violated federal labor law during the labor negotiations.)

More realistically, however, if the players decided to challenge the lockout legally, they would instead likely follow the lead of the NFL and NBA players from back in 2011 by directly filing their own lawsuit in court contesting the owners’ lockout. As in the case of both the NFL and NBA, MLB players would presumably allege that the owners have violated the Sherman Antitrust Act by collectively refusing to employ their players, thus creating what is, in effect, an illicit group boycott.

While MLB generally enjoys protection from federal antitrust law under its infamous antitrust exemption, this doctrine would not apply to a suit brought against the league by the players. Back in 1998, Congress enacted what is known as the Curt Flood Act, a statute that partially repealed baseball’s antitrust exemption in order to allow MLB players to file suit against the league during future labor disputes.

That having been said, in order to successfully challenge a lockout under federal antitrust law, a court would require the players to disband their union. Under a somewhat arcane legal doctrine known as the “non-statutory labor exemption,” courts refuse to allow unionized employees to sue management under antitrust law during the midst of the collective bargaining process. Instead, the players would have to dissolve their union — thereby ending the collective bargaining relationship — and proceed against the owners on a non-unionized basis in order to challenge a lockout under the Sherman Act.

Dissolving the MLBPA would have several negative consequences for the players, requiring them to forgo any benefits provided by the union (such as the regulation of player agents and the management of the players’ health-care and pension systems). Nevertheless, because the duration of any such litigation is likely to be relatively short — and because they could quickly reform the union once the labor dispute was resolved — the players could very easily determine that the benefits of disbanding the union and pursuing antitrust claims against the league would outweigh the negatives.

Indeed, by suing the owners under antitrust law, the players could potentially gain considerable leverage over ownership. Most significantly, such a suit could possibly result in the players securing a court order enjoining the owners from continuing their lockout. (The NFL players successfully received such a ruling from the trial court during their 2011 lockout, before having that decision overturned on appeal.)

But even if the court were unwilling to enjoin the lockout, the players would begin accruing potential triple damages from the owners by filing suit, meaning that they could ultimately be entitled to three times the wages that they lost during the duration of the work stoppage. Such a possibility could substantially alter the owners’ financial calculus in any continued CBA negotiations.

Realistically, any such litigation by the players would likely be short-lived. As in the case of the NFL and NBA lockouts in 2011, MLB owners and players would presumably be able to resolve their differences before the work stoppage consumed too much of the 2017 season, at which point the players would agree to drop their lawsuit and reform their union. But if talks were somehow to break down completely — as they did during the depths of the 1994-95 players strike — then it isn’t totally inconceivable that we could spend the better part of next year debating the owners’ and players’ respective legal strategies and discussing the intricacies of federal antitrust and labor law.

All that having been said, though, it’s worth repeating that the odds of the 2016 CBA negotiations resulting in any work stoppage — let alone one of significant duration — appear to be quite slim. By all accounts, the players and owners both seem intent on reaching a new agreement peacefully, rather than risk disrupting their 22 years of uninterrupted labor harmony. So even if we don’t have a new agreement in place by December 1st, the two sides will likely continue to work together amicably until a new agreement is reached.

We hoped you liked reading A Roadmap for a Potential MLB Work Stoppage by Nathaniel Grow!

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Nathaniel Grow is an Associate Professor of Business Law and Ethics at Indiana University's Kelley School of Business. He is the author of Baseball on Trial: The Origin of Baseball's Antitrust Exemption, as well as a number of sports-related law review articles. You can follow him on Twitter @NathanielGrow. The views expressed are solely those of the author and do not express the views or opinions of Indiana University.

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Mike NMN
Member
Mike NMN

The issues that separate them this time don’t seem to be unbridgeable. There hasn’t been much breast-beating from management about how the entire business is about to be wiped out unless the players accept substantial cutbacks. I think the QO is low-lying fruit to be given as a concession because few people really care about it. The draft is bigger–but we are talking about international players, and I would imagine domestic players who went through the basic amateur draft (with it’s unfriendly-to-labor rules) may not have all that much willingness to fight. Expect some tradeoffs, with the owners scoring some small wins that will enhance profitability.

v2micca
Member
Member
v2micca

Agreed. I’ll admit I haven’t been following the negotiations closely, but the disagreements over the Salary tax threshold don’t appear to be very far apart on both sides. If the MLBPA really wanted to grind things to a halt they would be going after service time rules. And, honestly, if the MLBPA was concerned about their declining percentages of overall revenue (they don’t seem to be), this would be the place to start. Teams have become increasingly intelligent regarding salary allocation, and the fact that teams can suppress a player’s Salary for their first 6, and often 7 seasons in the league (largely covering their most productive years) is predominantly contributing to this continued declining percentage. When Bryce Harper files for free agency he will be an outlier, a superstar going into his age 26 season who will be allowed to name his price. The cost controlled period is currently so long that most players will opt to sell out several of their free agency years in order to get money sooner. If the MLBPA could find a way to shave off two years of the cost control, we would see a different league.

Dave T
Member
Member
Dave T

I think that the luxury tax – increasing it, and decreasing the penalties for going over it repeatedly – is more fertile ground for the union than service time rules. A less punitive luxury tax should increase spending at the top end of teams with a likely cascading effect that also causes other teams to push up payroll.

The problematic point with service time rules is that the members of the union have different economic interests there. Players who are already qualified for free agency almost certainly would take at least some hit economically, because the reason that a win costs about $8 million on the free agent market is the limited supply. So it’s positive for any young player who would get to free agency sooner, but negative (or, at best, neutral) for players who are already eligible to be free agents. Then top that off with the fact that I’m pretty sure the latter group of players are more likely to be active in the union as team reps, and it’s an issue that logically splits the interests of the players’ union, or is at least a lot less important to many of them than other issues. And the teams are all going to be united in viewing service time requirements as a very big issue for them.

The luxury tax should also be a better negotiating target for the players because it’s an issue that divides the economic interests of high-spending vs. low-spending teams, just as free agency splits players’ economic interests.

I therefore also think that a more realistic target to benefit younger players is enhanced arbitration eligibility. Making it two years of service time rather than three seems like something that should push up players’ percent of revenue at least a little bit and that I’d think the owners would find to be a reasonable deal. TBD if the concept of Super Two eligibility goes away or becomes Super One eligibility.