Peter Wilt’s Proposed Solution to MLS Labor Strife

The MLS Collective Bargaining Agreement (CBA) negotiations are coming down to the wire and appear to be reaching an impasse.  Many of my New Year predictions will prove false, but I’m afraid the first one, which predicted a 3-4 week work stoppage,  is beginning to look accurate.  No one wants this and outsiders don’t have the specific information to fully understand how or why the situation has gotten to this point.

The differences seem to center around the less tangible issue of “player rights” rather than pure cash.  The owners have invested considerable sums into the league and they continue to do so.  Players see that the tide is beginning to turn with some teams generating positive cash flow and now want to be included in the reward.

While players and owners are beginning to provide general positioning statements, specifics are still hard to find.  The tight lips surrounding the CBA talks with the MLS Players Union has effectively limited public speculation and discussion to conjecture and generalities on the issues that are separating the players and management.

I don’t know first hand what MLS Commissioner Don Garber and MLS Players’ Union Executive Director Bob Foose are debating, but from the outside, there still seems to be quite a gap between the two sides despite the inclusion of a federal mediator.  Today’s column delves into some of the specific issues of the negotiations and, while somewhat speculative, is based on issues that are relevant to the current CBA.  To each issue I offer a proposed solution.

There are reportedly three main issues that the players are seeking concessions on:  free agency, guaranteed contracts and receiving 10% of international transfer fees.  These aren’t the only issues of course and the owners and players are discussing them individually and in context with them as a group.  Following are eleven issues that are likely among the most contentious.  The chart below lists the issues, how each one is addressed in the recently expired CBA and my proposal for how to handle each issue in a new CBA.

Issue Current My Proposed New
1. Unilateral options and semi-guaranteed vs. multi-year and guaranteed contracts Standard contracts are one year plus three one year League options.  No minimum # of guaranteed contracts. Same for length of contracts and options.  Create a minimum of four guaranteed contracts per team growing to six over the course eof the CBA.
2. International transfer fees.  Players want 10%. MLS receives 2/3 of transfer fees and teams receive 1/3. Same
3. Standard salary escalator 5% increase each year of contract (for most players) 7% increase for 2nd and 3rd years; 10% for fourth year
4. Standard length of contracts Four years Four years for 1st contract; 3 years for 2nd
5. Length of CBA Five years Five years
6. Free agency None Restricted – Allowed after 7 years in MLS. Draft pick compensation.
7. Team autonomy to negotiate contracts No Same
8. Roster spots 18-20 senior; 4 developmental 18-20 senior; 4 developmental in 2010 & add two per year up to 12
9. Minimum salary $34,000 for senior roster & $20,100 for developmental $37,400 in 2010, escalating to $40,000 for senior roster & $22,100 in 2010, escalating to $23,500 in final year of CBA for developmental players
10. Team salary cap $2,300,000 $2,530,000 in 2010, escalating to $2,700,000 in final year of CBA
11. Waived player rights Former team retains rights to match new offer for 48 hours Same

1. Unilateral options vs. multi-year contracts and semi-guaranteed vs. guaranteed contracts.

These are both very important issues to both parties.  The players obviously want more security and the owners want to maintain the flexibility that goes with semi-guaranteed contracts (contracts that allow teams to waive a player prior to July 1st without having to pay out any more money) and unilateral options (team options to extend contract on an annual basis for a minimal percentage increase in salary).  In-demand players (mainly national team players and high first round draft picks) have been able to leverage guaranteed contracts of one or more years.

I propose that MLS retains the unilateral options, but gives a little on guaranteed contracts by following the WPS model, which provides a minimum number of guaranteed contracts on all teams.  The exact minimum number of guaranteed contracts per team could grow over the life of the CBA.  Perhaps start at four and increase to six by the end.  MLS may be philosophically opposed, but the practical impact would be minimal as most teams have at least three to four already.  The risk is that a player underperforms and a team is stuck with a contract until the end of the term.  My proposal would not mandate any of the guaranteed contracts be multi-year, so “mistakes” could be released at the end of each season unless the team voluntarily chose to sign multi-year deals.

2.  International transfer fee split.

MLS and the MLS team retain 100% of the international transfer fee with the League keeping 2/3 and the teams keeping 1/3.  In the rest of the world the player or his representative receives 10%.  MLS suggests to the agents that they work out the 10% directly with the new team while they’re working out the player’s new salary.  The player does receive a huge bump in salary and has the opportunity to negotiate the 10% from the new team, so it’s not as if the player is worse off.  As Buzz Carrick notes in this fine piece for the Dallas based blog 3rd Degree, players from Latin America often have the money go directly to their agents and never see the transfer money, so this won’t be an important issue for them.  It also won’t be an important issue for the 90% of the players who have little realistic chance of an international transfer.  While this is an important issue to the agents and a few of the high end players, my proposal would have the players acquiescing on this issue in exchange for cracking the door on free agency.

3.  Standard salary escalator.

Most MLS contracts in the League’s first ten years had unilateral options that increased salary 3% if exercised by MLS.  The last CBA increased the escalator to 5% in recent years.  My proposal is to increase the escalator to 7% for the contract’s second and third year and 10% for the fourth year. In practice, a rookie making $38,000 would make $40,660 in his second year, $43,506 in his third year and $47,858 in his fourth year.

4. Standard length of contracts.

Most MLS contracts are four years with a League option after each of the first three seasons.  Players would prefer shorter contracts that would allow them freedom sooner.  My proposal calls for second contracts to be a year shorter to reward veterans with a little more flexibility and give them an opportunity for a better contract a year earlier. This change shouldn’t result in an increased European flight as most players would be 28 to 30 when the second contract expires.

5. Length of CBA.

The last MLS CBA was for five years. MLS would certainly like this one to be as long or longer to maintain stability and allow long term planning which is important to securing further expansion.  MLS is hardly rolling in money now, but there are finally several teams that are proving profitable.  If the next rounds of expansion in Philadelphia, Vancouver and Portland prove equally successful and Red Bull Arena turns New York around, the players may soon have some real leverage as a critical mass of teams will be financially incentivized to avoid a strike.  As it currently stands, most teams would be better off economically in the short term if the players went on strike – kind of like NHL owners in 2004-05.  A shorter CBA would allow players a chance to revisit all of the issues they compromise on this time when they have a little more leverage in a few years.

While the owners may be looking for seven years, the players would be wise to cut a deal for five or even four years.

6. Free agency. On the surface, as long as the League has a salary cap, it doesn’t seem like free agency can have a negative economic impact  on the owners.  Sure, teams would lose players within the League, but there’s a finite amount of money in a cap system, so those teams would then get other players to replace their losses.  So what’s the risk to owners if free agency is installed?  There are several:

  • Free agency would lead to increased compensation for current “middle to upper class” MLS players who really don’t have good European options (i.e., American veterans).  So instead of spending money on retaining or attracting the best talent, the League would be spending money retaining players who really don’t have better options.
  • There is also the potential of a competitive imbalance caused by players willing to sacrifice money for location.  Potentially, Los Angeles for example, could have an unfair advantage, because so many players are from southern California and many others desire to live there.
  • Free agency also has the potential to squeeze out the League’s middle class players.  Bidding would result in higher salaries for the best players leaving less money for the rest.  The result would be a preponderance of salaries on the high and low extremes without as many players in the middle.  Many “middle class” players would be forced into retirement leaving the League with a bit of a talent – or at least experience - drain.
  • Opening the door to even limited free agency may be anathema to the owners who have a legal ruling in federal court upholding the current system to back them up.  After all, the players sued MLS over free agency in the Fraser case and lost.  The ruling provided MLS with cost certainty, which has proven very helpful in attracting new investors.

The flip side is that limited free agency could potentially resolve the impasse without having much significant impact to the League’s economics or competitive platform.  A compromise found in other sports is to provide a form of restricted free agency that allows player movement, but limits it to players of a certain experience level and compensates teams that lose a player.

My proposal calls for free agency after seven years in MLS and compensation from the signing team to the team losing the player in the form of a SuperDraft pick.  For example, if a player finished his second MLS contract (a four year and a three year contract), he could sign with any team in the League.  The higher his new salary, the better the compensation pick the new team would provide the former team.  Perhaps compensation of a first round pick for a player who signs for more than $200,000, a 2nd round pick  if the contract is for more than $100,000 and a 3rd round pick for a player who signs for less than $100,000.

This compromise would permit a certain amount of player freedom and would open the door to increased free agency the next time the CBA is negotiated.  Both sides would feel they sacrificed, but hopefully both sides will see the benefits as well.

7. Team autonomy to negotiate contracts. The players feel this would improve their ability to negotiate better contracts and ease transfers to foreign clubs.  They are right, but it would also undermine the League’s single entity justification, which has allowed MLS to sustain itself and attract new investors.  This issue is a non-starter for owners, who would rather close down shop than give on this point.  I am probably biased, but i adamantly agree with the owners on this point.

8. Roster spots. More jobs!  There are two ways to create more jobs for the players:  expand the number of teams and expand the team rosters.  Developmental rosters constricted two years ago when the MLS reserve league disbanded.  The reserve league rarely served its intended purpose of developing players as their games lacked quality and often included tired players who had played in first team games the day prior.  The overall roster never grew beyond 28 and injuries, suspensions and national team call ups meant reserve teams were often short of players.  Current rosters are 22-24 players.  I propose that two developmental slots be added each year until there are a total of 32 players per team.

A 32 player roster would allow enough players for quality reserve team games, which could be brought back in a couple years.  The additional developmental roster spots could be filled by MLS team academy players who would be promoted based on merit.  This would provide a strong connection between the team’s academy program and the first team.  It would generate enough success stories to attract more youth talent to the MLS team academies and would fuel the quality and quantity of these MLS controlled youth programs.

9. Minimum salary and 10. Team salary cap. The impasse in these negotiations does not seem to be caused by money.  The major differences involve player rights.  Given that, I don’t believe MLS will stand in the way of reasonable increases to the minimum salary levels for senior and developmental players or to the team salary caps if the players acquiesce on many of the player rights issues.  I propose a 10% increase in each the first year, increasing to 17% by the end of the CBA.  This would lead to a $40,000 minimum senior roster salary, a $23,500 developmental roster salary and a $2.7 million team salary cap.  I would also propose that any developmental roster player who sees first team action gets paid at the rate of a minimum salaried senior roster player.

11. Waived player rights. The union and players, including Freddie Ljungberg, have mischaracterized this policy in an attempt to show that MLS unfairly restrains players from actively seeking employment.  But the truth is, this policy does NOT prevent players from being resigned in MLS.  As the recent waiver deals of Kevin Hartman and Adrian Serioux showed, the current MLS policy of teams retaining the rights to waived players does not prevent waived players from finding new teams.  It merely gives their former teams a chance for 48 hours to match the new salary offer.  If the former team doesn’t match in 48 hours, the player is free to join another team at that salary WITHOUT any compensation going to the former team.  I propose that this policy be maintained, but if MLS chooses to trade this for a union give elsewhere, it wouldn’t be a huge give on the League’s behalf.

So there you have it.  Proposed solutions to eleven issues.  Taken individually, I imagine folks on the two sides can find fault with many of my proposals, but I’d like to think that taken collectively, these eleven points represent a fair compromise that would allow the union to show its membership that they have made some real gains both financially and on player rights.  At the same time, I believe MLS would come away retaining the foundation of its business model, while allowing the players to share in some of the revenue growth the League has enjoyed via improved broadcast rights fees, sponsorship, team expansion and stadium development since the last CBA went into effect.  And if both sides are a little upset with the compromises, that probably means it’s a good deal.

Whaddya think?  Too generous to the owners?  To the players?  Too impractical?  Too simplistic?  Am I missing any key issues?  The devil’s in the details of course, but could this serve as the framework for a solution?

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