The A-Rod Negotiations: Evaluating the Key Issues

Rather than just adding another thousand-or-so words to the million which have been written this week about Alex Rodriguez‘ negotiations with the Boston Red Sox, the Texas Rangers, the MLBPA, Scott Boras, Bud Selig, and a bunch of angry Red Sox fans, I’ll focus on a few specific issues which often seem to be misunderstood.

Why is the MLBPA involved?

To protect its rights under the CBA. Under the CBA, the union negotiates virtually all terms and conditions of employment on behalf of the players. Individual players may only negotiate (1) a salary above the minimum, and (2) special terms which actually or potentially provide additional benefits to the player. Any term inconsistent with these provisions is void even if the club and player agree to it, unless the MLBPA approves the term. Here are the key provisions of the CBA:

ARTICLE II – Recognition.

The Clubs recognize the Association as the sole and exclusive collective bargaining agent for all Major League Players, and individuals who may become Major League Players during the term of this Agreement, with regard to all terms and conditions of employment, provided that an individual Player shall be entitled to negotiate in accordance with the provisions set forth in this Agreement (1) an individual salary over and above the minimum requirements established by this Agreement and (2) Special Covenants to be included in an individual Uniform Player’s Contract, which actually or potentially provide additional benefits to the Player.

ARTICLE III – Uniform Player’s Contract.

The form of the Uniform Player’s Contract between a Club and a Player is attached hereto as Schedule A which is incorporated herein by reference and made a part hereof.

During the term of this Agreement, no other form of Uniform Player’s Contract will be utilized. Should the provisions of any Contract between any individual Player and any of the Clubs be inconsistent with the terms of this Agreement, the provisions of this Agreement shall govern. Subject to the limitations set forth in Article IV below, nothing herein contained shall limit the right of any Club and Player to enter into Special Covenants in the space provided in a manner not inconsistent with the provisions of this Agreement. The termination of this Agreement shall not impair, limit or terminate the rights and duties of any Club or Player under any Contract between any individual Player and any of the Clubs.

Since the CBA pre-empts all inconsistent contract terms, Rodriguez couldn’t unilaterally give back his guaranteed money any more than he could contractually agree to report two weeks early for spring training or stipulate that he wouldn’t be paid for time on the DL. He could only reduce the amount of his contract (a) if the MLBPA consented to the reduction, or (b) if the reductions were offset by nonmonetary concessions of roughly equivalent value.

Why didn’t the MLBPA consent to a reduction Rodriguez was willing to accept?

Because the MLBPA doesn’t represent Alex Rodriguez. Scott Boras represents Rodriguez. The MLBPA represents the collective interest of all the players, even if the interest of a specific player, in a specific situation, may be different. As Gene Orza of the MLBPA told the Boston Globe, the players who comprise the MLBPA’s executive council backed the union’s decision to block the proposed deal. Rodriguez himself told the Associated Press, “I advised the Red Sox I am willing to restructure my contract, but only within the guidelines prescribed by union officials. I recognize the principle involved, and fully support the need to protect the interests of my fellow players.”

What was the MLBPA worried about?

As sports law professor Stephen Ross of the University of Illinois told the Associated Press, “It’s not uncommon for owners to overpay players. The union and its members feel that it’s very important that the players not be pressured to give back what they’ve been promised.” The next time this situation arises, the player won’t be Alex Rodriguez. It’ll be some 30-year-old journeyman starting his first multiyear contract. He’ll lose his starting job to a rookie or fall out of favor with his manager, and his GM will tell him, “We can trade you to Detroit, but they only want you if you’ll take a $500,000 pay cut for next season.” Teams don’t have to offer multiyear guaranteed contracts, but when they do, the MLBPA is determined they be honored in full.

Then why was the MLBPA willing to let Rodriguez waive SOME of his salary?

Because the Red Sox offered concessions in other areas. These negotiations were further complicated by the fact that Rodriguez’ contract wasn’t just expensive, it was absurdly pro-player in other respects, too. Here are the key terms Scott Boras obtained from the Rangers for A-Rod:

• Signing Bonus: $10 million, payable between December 2000 and March 2005.

• Salary: $21 million/year in 2001-04, $25 million/year in 2005-06, $27 million/year in 2007-10, with between $3 and $5 million/year deferred at 3% interest.

• Award Bonuses: $50,000 for finishing 6th through 10th in the MVP voting. $100,000 each for making the All-Star team, receiving the most All-Star votes, winning the Gold Glove, winning the Silver Slugger, making the postseason AP/Baseball America/Sporting News All-star team; being named Player of the Year by any of these. $150,000 for being named Divisional Series MVP (an award which doesn’t even exist) or LCS MVP; $200,000 for being named World Series MVP or for finishing 2nd through 5th in the MVP voting. $500,000 for winning the MVP, rising to $1 million for a second MVP award and $1.5 million for any subsequent MVP.

• Voidable Years: Rodriguez can void the last three years of his contract after the 2007 season. After the 2008 or 2009 season, he can void the remainder unless his salary is increased to the higher of $32 million or $1 million more than any other position player.

Of course the contract was fully guaranteed and contained a no-trade provision. For good measure, the Rangers agreed not to offer Rodriguez salary arbitration after the 2010 season, increasing the value of his next contract by ensuring that the signing club would not lose a draft pick. The one protection for the Rangers? If Rodriguez was permanently disabled during the first three years of the deal, seven years later his remaining salary would be deferred without interest. But now that three seasons have elapsed, if Rodriguez is disabled tomorrow whoever owns his contract would still owe him the full $159,000,000 remaining on his deal.

If Rodriguez’ contract weren’t already back-loaded, it could have been restructured by pushing more money to the later years. If his contract were shorter, it could have been restructured by adding more seasons and swapping lower salaries in the early years for more money in 2011 and beyond. If some of the seasons had been club options, the options could have been converted to guarantees at a lower salary. Instead the parties had to get creative.

USA Today reports that Rodriguez’ final offer, approved by the MLBPA, would have reduced his salary by $12 million in return for (1) allowing him to opt out of the deal after 2005 rather than 2007, and (2) granting him “increased marketing and logo use rights.” Such rights could enhance his commercial marketability by, for example, allowing him to appear in advertisements while wearing a Red Sox uniform, instead of the generic uniforms advertisers favor so they don’t have to license the logo from the team. The value of these concessions may be difficult to quantify, but they’re very real.

What happens now?

Bud Selig has ruled out further direct pre-trade negotiations between the Red Sox and Rodriguez. The real question is why those negotiations were allowed in the first place. As Hal Bodley wrote last week:

It’s hard to believe the Boston Red Sox have been given permission to speak directly with Alex Rodriguez before a tentative trade has been agreed upon with the Texas Rangers… As a matter of fact, it’s a wonder some team owners aren’t knocking down Bud Selig’s door, accusing the commissioner of preferential treatment.

The Red Sox weren’t allowed to negotiate with Curt Schilling before reaching agreement with Arizona on the terms of a proposed trade. As per common practice, they were then given a 72-hour window in which to persuade Schilling to waive his no-trade clause, a window which the Commissioner subsequently extended by another 24 hours. There’s no reason the A-Rod deal couldn’t have been handled the same way. Even Selig eventually said “Enough” and cut off pre-trade talks.

Tom Hicks bears ultimate responsibility for the mess. He proved that even the most valuable player in baseball can still be overpaid–and that even adding the best player in the American League won’t keep you out of last place if you make enough other bad deals. The Rangers spent $80 million in 2003 on players not named Alex Rodriguez; that’s $30 million more than the Opening Day payroll of the world champion Marlins.

Larry Lucchino’s tantrum notwithstanding, there’s no reason the trade can’t still go through. Rodriguez clearly wants to play in Boston. John Henry clearly wants him. The $12 million reduction is still on the table. The only issue is how much of the contract Tom Hicks is forced to eat…or what the Red Sox can send Texas, along with Manny Ramirez, to make the swallowing palatable. I think they’ll find a way to get this done.