Among the myriad challenges faced by sports leagues and their stakeholders in connection with the coronavirus (COVID-19) pandemic, questions concerning the payment of player salaries during suspended, and perhaps lost, seasons have garnered much media attention. This issue continues to be addressed in professional sports leagues around the world, and is dependent upon a number of factors including the legal system in which the league operates and the league’s economic system, which may involve regulatory oversight by national and/or governing bodies (e.g., FIFA, UEFA) and/or a collective bargaining agreement (CBA) between management and players (e.g., MLB, NBA, NFL).
Here, we review the negotiations between Major League Baseball (MLB) and the Major League Baseball Players Association (MLBPA), which culminated on March 26, 2020 with a comprehensive agreement on payment of player salaries for the 2020 MLB season. In a period of great uncertainty surrounding live sports, MLB and MLBPA came together to broker a deal that covers virtually every aspect of what a 2020 season could look like, including how and when players are to be paid.
For a number of the major sports leagues in the United States, a standard player contract (a form agreement signed by each player in the league) and the CBA that governs it, together contain the contractual terms that address (directly or indirectly) the payment of player salaries both generally and in connection with potential game cancellations or suspensions due to acts beyond the control of the parties—typically in the form of “force majeure” language. However, even among these U.S. leagues, specific force majeure and cancellation provisions vary considerably across CBAs and their respective standard player contracts, and, even then, these provisions may not paint the entire picture of rights and obligations relating to player salaries.
In the case of the MLB, the CBA (which is set to expire in 2021) is silent with respect to the parties’ rights in the event games are postponed, suspended or cancelled outright due to a pandemic. In fact, words and phrases like “force majeure”, “act of god”, “pandemic”, “epidemic”, or “virus” are not included in the MLB CBA. However, paragraph 11 of the MLB’s Uniform Player’s Contract (UPC) provides:
“11. This contract is subject to federal or state legislation, regulations, executive or other official orders or other governmental action, now or hereafter in effect respecting military, naval, air or other governmental service, which may directly or indirectly affect the Player, Club or League and subject also to the right of the Commissioner to suspend the operation of this contract during any national emergency during which Major League Baseball is not played.” (emphasis added)
Thus, when President Trump declared a state of emergency on March 13, 2020 in connection with the COVID-19 pandemic, Commissioner Manfred effectively had the right to suspend immediately all player contracts, including any payment obligations of the clubs thereunder, indefinitely for the period of time during which the state of emergency was in effect and games were not being played.
Another particularly thorny issue regarding player salaries concerns the accumulation of “Major League service” (often referred to as “service time”). Under Articles XX and XXI of the CBA, a player is not eligible for free agency until that player has accumulated six “full years” of Major League service. A player is credited one day of Major League service for each day on which the player is on an MLB club’s “Active List” (which includes periods of time during which the player is on the club’s roster but is placed on the injured list or otherwise suspended for disciplinary reasons), with 172 days of Major League service constituting one “full year”. For reference, the total number of days originally scheduled for the 2020 Major League season was 186. Thus, in any season conducted but shortened due to COVID-19, a player could theoretically play in all of his club’s scheduled games but not be on a Major League roster for the minimum number of days required to accrue a full year of Major League service. In other words, a shortened season due to COVID-19 could technically delay a player’s eligibility for free agency for another year.
When MLB and MLBPA representatives sat down to discuss what baseball might look like in 2020, such discussions presumably were framed by these provisions and the following related questions: (1) Would the players be paid while play is suspended in light of paragraph 11 of the UPC, and if so, how much? (2) How would Major League service be attributed to players for an abbreviated season?
With respect to player salaries, the MLB and MLBPA opted for a pro-rated approach based on the number of games actually played during the 2020 season. Under the agreement, each player is to receive a portion of his scheduled full-season salary based on the number of games actually played against a traditional season of 162 games. For example, if a player was slated to earn $10 million in base salary over a 162 game season and only 81 games are played, the player would be paid $5 million pursuant to the terms of the agreement. The same metric would be applied proportionately to reduce bonuses, escalators, and other vesting options under a given player’s contract. Additionally, clubs agreed to advance an aggregate of $170 million (payable at a rate of $94,444.44 per day for 60 days) for salary payments that would ordinarily be due to players for the period beginning March 26 and ending on the earlier of May 24 or the beginning of the 2020 MLB season. The $170 million advance will be paid out to players on a sliding scale based upon a given player’s level of Major League service and his contract particulars. If games are played, the $170 million would be credited against the pro-rated salaries due to players as described above. In the event the season should be cancelled and no games are played, the players would retain the entire amount of the funds advanced with no obligation of repayment.
With respect to Major League service, the parties agreed to a formula which would provide an opportunity for players to accrue a full year of Major League service in the event that the 2020 MLB Season is played on an abbreviated schedule. In other words, if there is a 2020 season of any length, players who are on a Major League roster for the duration of such season will receive a “full year” of Major League service, regardless of how many days the 2020 season spans. In the event that the 2020 season is cancelled outright and no games are played, players would be attributed the same amount of Major League service that they accrued during the 2019 season. Thus, for players such as Mookie Betts, recently traded from the Boston Red Sox to the Los Angeles Dodgers, the specter of an abbreviated season would no longer prevent the accrual of the Major League service time necessary to test the waters of free agency in the offseason.
More negotiations may ensue if live games resume without fans in attendance, given the impact such a change would have on the league’s economic system. In the meantime, the comprehensive agreement reached by the MLB and MLBPA in late March included a number of terms and provisions, including conditions relating to safety and COVID-19 exposure risk that must be satisfied in order for MLB and its players to return to the field in 2020. While baseball fans everywhere watch and wait for such conditions to be met, the deal cut by the MLB and MLBA provides a level of certainty regarding player compensation that allows both sides to focus on what is most important—the seamless resumption of “America’s Pastime” when it is once again safe to play ball.