How to end the lockout in one easy step

In the midst of a lockout, many had hoped the coming of the New Year would thaw talks in the CBA negotiations. Apparently, cooperation was not among the sides’ New Years’ resolutions.

On January 13th, the owners and union talked core economics for the first time since the lockout began 43 days prior. Unfortunately, the owners’ proposal contained many non-starters for the players and failed to address their most pressing areas of concern. And so it’s back to the drawing board, with the union expected to make its first counterproposal Monday, January 24th.

Earlier this week, Lindsey Adler of The Athletic reviewed the key issues in the current CBA negotiations that could have the biggest effect on the Yankees. One passage in particular caught my eye:

MLB’s concern with regards to changing service time requirements for free agency is that it will lead to star players in smaller markets defecting for bigger market clubs if their original organization is unwilling to pay what it takes to retain them. This affects the Yankees very differently than it affects, say, the Oakland Athletics, who experience regular roster turnover.

This is not the first time that we’ve been told of the owners’ reluctance to address free agency eligibility. According to Evan Drellich of The Athletic, in their final set of talks prior to the lockout, the owners refused to address “reserve system and luxury-tax issues unless the MLBPA agreed in advance to drop a number of key demands, including the time it takes players to get to free agency.”

It seems to me that team control — and in particular the time it takes to reach arbitration and free agency — remains the biggest sticking point of negotiations. It’s what players want most and what the owners want most to avoid changing. That the owners are so loathe to even broach the topic suggests that changes in that area would result in the most significant monetary windfall for players, and that’s exactly why the players should continue to press for said changes. However, if this topic remains a non-negotiable impasse for players and owners, perhaps MLB could look to the NBA for a workaround.

At the beginning of last year, John proposed that MLB adopt their own version of the NBA’s Larry Bird Rights. He focused his argument around applying Bird Rights to players with 10/5 rights, allowing teams to retain their veteran — and often fan-favorite — players, and explored how implementation of the system would affect the Yankees, specifically with regard to Brett Gardner’s contract negotiations.

For those unaware, the Larry Bird Exception allows NBA teams to exceed the salary cap when re-signing their own free agents. Once a player has played for a team for three years, they may be retained up to the maximum salary even if doing so would put their team over the salary cap.

Today, I’d like to proffer and even bolder claim: in my view, the Larry Bird exception is the panacea to the current MLBPA-owner strife.

As we saw from the excerpted passage from Adler’s piece, the owners claim that the potential for increased roster turnover leaves any proposal to change service time requirements for free agency dead in the water. Owners point to star player movement and inability to retain homegrown players as unpalatable consequences of reducing time to reach arbitration and free agency. Adopting a Larry Bird exception system eliminates this ostensible fear. Or, if I may borrow John’s perfectly-phrased way of putting it, an MLB version of the Larry Bird exception “prevents the [luxury tax] from splitting up teams and incentivizes continuity in an organization.”

So what would this adapted version of the Larry Bird exception look like in MLB? First we have to define a “homegrown player” before devising methods allowing his team to retain him. In my mind a homegrown player would be someone drafted or signed as an international free agent that rises through the minor league system until eventual promotion to the big league squad. If that creates too narrow a list of players, it could be expanded to include players who play all six years of team control with one club, either is a reasonable criterion.

Now that we have the list of qualifying players, what form would the exception take? MLB does not have a true hard salary cap like the NBA, so modification is required. What if teams didn’t have to pay a tax on exception-qualifying players, even if the contract they signed brought the team’s payroll above the CBT threshold? That player would of course be free to test the free agent market, but now the team they came up with could offer a competitive contract without worrying about paying for luxury tax overages.

To review, my proposal for the Larry Bird exception would look something like this: a player qualifies for an exception if he is drafted/signed as an IFA and remains with that organization through big league promotion and/or plays all six years of major league team control with one club. Once that player reaches free agency, his parent club may offer a contract, and wouldn’t have to pay a tax on any overage above the CBT threshold.

So for example, say a team entered 2021 with a $230 million payroll, and extended a homegrown player for $30 million per year to bring payroll to $260 million. That team would only pay a tax on the $20 million overage above the $210 million CBT threshold instead of paying a tax on a $50 million figure.

In my mind, this system addresses almost every contentious facet of the current CBA talks. It allows teams to retain homegrown players while allowing said player to still earn a market-value contract with that team. It keeps the current CBT system in place — music to owners’ ears — while reducing penalties for specific luxury tax overages. It disincentivizes the movement of arbitration-eligible players and gives teams greater flexibility to increase payroll such that they would hopefully stop treating the threshold as a soft cap.

Obviously, the player that comes to mind when discussing this is Aaron Judge. He is the epitome of a homegrown player, drafted by the Yankees and worked his way through the minors to eventually become the face of the franchise. This system would allay the worry I shared on Thursday that the Yankees might treat a Judge extension versus external reinforcements as an either/or situation. If you remove the possibility of paying a tax on a mega-deal for Judge, maybe Hal Steinbrenner becomes a lot more receptive to the idea of adding a marquee free agent this winter.

The Larry Bird exception has worked wonders for the NBA. Perhaps it’s time MLB takes note. Who knows, it might just be the magic solution that ends the lockout with both sides happy.