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The case for the reserve clause


Forty years ago this Saturday, Curt Flood set in motion events which would alter the landscape of professional sports forever, filing a lawsuit against commissioner Bowie Kuhn and Major League Baseball over violations of anti-trust law. At the crux of the lawsuit was MLB's long-standing reserve clause, which allowed teams to perpetually keep players under contract.

While Flood didn't win the case (the Supreme Court upheld the clause, citing past precedent), his suit set in motion the downfall of the reserve clause system and the rise of free agency. After arbitrator Peter Seitz struck down the reserve clause in 1975, Players Association head Marvin Miller hammered out an agreement with the major league owners, and developed a blueprint for the modern free-agency system.

Miller set up a tiered system under which players were allowed to become free agents after six years in the major leagues. Those who had played for more than three years were allowed to have their contract disputes settled by an independent arbitrator, while players in their first three years would remain completely under team control. It wasn't long before other sports followed baseball's lead and service-based free agency became the norm.

Miller's service-based system was a landmark in sports history, but was it a good one? If we redesigned the system from scratch, would it make sense to replicate it? While Miller's system of compensation is so familiar and intuitive to us today, the rationale behind it is a bit puzzling. In a factory or a plant, a worker's wage that increases with years of service may be appropriate. But does this system make sense in baseball? After all, baseball, unlike a factory, is a workplace in which the value of workers' productivity varies tremendously. Some workers are immensely productive for their employers, while many others are not. Shouldn't this productivity be rewarded, regardless of how long a player has been in the league?

In 2008 the AL MVP was Dustin Pedroia. Stunningly, the most valuable player in the league made just $457,000. Meanwhile, his teammate Manny Ramirez, a player of comparable value, hauled in $20 million. The difference of course, was that Ramirez was in his 15th year in the majors, while Pedroia was in his second. Still, you would be hard-pressed to find a workplace in which one laborer was paid 40 times more than another for doing similar work. Miller's job was to compensate players fairly for their performance, but does his system really do the job?

Certainly Miller righted a major wrong, in that the players were not getting a fair share of the revenues from major league owners. Winning games is extraordinarily important to a team's bottom line, and it's only fair that the players who provide those wins should benefit. But while the Players Association may earn its fair share as a whole, the individual market is still highly unbalanced.

Of course, Miller would argue that players "pay their dues" when they are young, and reap the rewards later in their careers when they become free agents. Still, in a sport fraught with injury and unpredictable performance, this can easily lead to serious inequities. Take, for example, former Cubs phenom Mark Prior, who, not including his draft bonus, made just $13 million for 657 innings of outstanding pitching (3.51 ERA). Thirteen million bucks is nothing to sneeze at, but, given the game's economic markers, it's hardly proportional to his value. Meanwhile, Carlos Silva, who has had a much less valuable career than Prior's (five career Wins Above Replacement for Silva vs. 13 for Prior) made nearly that amount just last year! The difference? Silva had the good fortune to have a great year just before he hit free agency, and hit the jackpot with a four-year, $48 million contract, while Prior broke down before he could cash in.

This problem of inequitable salaries could have been avoided had Miller negotiated to make all players free agents, instead of just those with six years of service. (A's owner Charlie O. Finley actually advocated this position, but the other owners refused to listen to him.) While making all players free agents might distribute salaries more evenly, having all players become free agents each year would have a detrimental effect on the game. Fans' attachment to their favorite players and teams is the life blood of baseball, and when players are constantly changing squads, that bond becomes weakened. As one might expect, turnover among veteran players has spiked dramatically during the age of free agency. Opening up all players to free agency would only exacerbate the problem. It would also allow big-market teams such as the Yankees to snatch up small-market stars even sooner, likely having a detrimental effect on the competitive balance of the game.

No, having all players become free agents isn't the answer at all. Still, the current system doesn't seem like an ideal setup either. So what would be better? Ironically, a return to the reserve clause system could be the best for all parties.

Of course, that will never happen. But there was a lot to like about the old system. For one, big-market clubs were prevented from simply buying all the best players -- without free agency, teams were forced to grow their own players and could keep their core talent together. Two, there was more team continuity from year to year, and star players were far more likely to stay with their clubs for the entirety of the careers -- a big plus for the fans, the owners, and the players (who I suspect would much rather become a local hero for the team they came up with than go from team to team as a hired gun). The big problem with the original reserve clause, of course, was that the players were vastly underpaid. However, baseball could easily solve this problem by agreeing to collectively pay the Players Association a certain percentage of MLB revenues. The NFL and NBA already essentially do this, so there is no reason that it couldn't be done in baseball as well.

However, instead of the complicated system of hard caps, soft caps, salary floors, Larry Bird exceptions, restricted free agents, sign-and-trades, etc., that are used to control player movement and competitive balance in the other leagues, baseball could do better by returning to the old-fashioned reserve clause, with MLB owners simply giving a lump sum to the Players Association. The players would then be free to divide up their considerable compensation any way they see fit. One option would be to have the players themselves rank each other's contributions from the previous season. They could then give the highest-rated player the most cash (say, $30 million), and use a sliding salary scale down to the league minimum (which could be whatever they wanted). The best players in a given season would make the most money and the worst players would make the least. Simple. Meanwhile, individual teams and players wouldn't have to worry about complex contract negotiations and free agency.

The new system of compensation would mean that fans would never have to hear a player whining about his contract. If a player didn't like his salary he would have only his own poor performance to blame. It would also solve the problem of highly inequitable salaries. Players would make a salary in proportion to their production, and no one would ever be vastly underpaid or overpaid. Not only would such a simple system make sense from a public relations standpoint, but it would also give players peace of mind to know that they would be paid fairly. As it stands now, an outstanding young player such as Tim Lincecum (total MLB earnings: $1.1 million) is one injury away from being out of baseball and never cashing in on his great performances that include two Cy Young awards in his first three years with a lucrative long-term deal. (Lincecum is up for arbitration for the first time this offseason.) However, in the alternate scenario, he would already have been paid handsomely for his stellar season.

It also means that a player would never feel the crushing burden of being massively overpaid. Take Lincecum's rotation-mate in San Francisco, Barry Zito: He was vastly underpaid for being one of the best pitchers in baseball early in his career. He then signed a huge contract with the Giants and has disappointed, drawing the wrath of fans. Under this alternate system, Zito would still be happily toiling in Oakland, having made a mint of money during his outstanding first several seasons in the majors, and currently drawing a modest salary that reflects his drop in performance. The total amount of money he earned would probably be the same, but everyone involved would have a much greater sense of fairness -- Zito, the fans, the Giants and the A's would probably all be a lot happier.

The beauty of the reserve clause system is that it would almost completely take money out of the game. While stat wonks like me may enjoy things like calculating salary-per-win ratios, most fans (and players) would rather focus on the game itself. Any trades that would be made would be made from a baseball standpoint -- no more salary dumps and fire sales. Additionally, there would be no more drama surrounding 11th-hour contract negotiations and signing demands. All players would have to do is show up and play. No more big contract expectations to deal with or money-related distractions -- the focus would return to the field, where it belongs.

Of course, the players would never go for it (and the owners, who would be required to share their revenues by paying into a central salary fund, might not, either). Why? Players lose some choice. They would no longer have the freedom to sign wherever they want. Never mind that all but the elite players have little choice anyway. There are usually only a handful of teams that compete for a given free agent, and often only one best offer presents itself, meaning that even in free agency, the owners, not the players, are really the ones who determine where players end up. Additionally, there are plenty of free agents who might like to stay with their former club but find that their free-agent status actually forces them out. There's little doubt that Kerry Wood would have loved to remain a Cub following the 2008 season, but his free-agent status forced him to go elsewhere to get a fair payday. Under the reserve clause, Wood would still be in Chicago, earning a fair salary in proportion to his production.

To give players some protections and autonomy I would argue for giving veterans a no-trade clause and perhaps a once-in-a-career "mandatory trade" clause, which would allow a player to force a trade to escape an environment that he truly disliked. Given those caveats, I would imagine that many players might actually welcome the return to the reserve clause, as it would simplify the monetary aspect of the game and give them the peace of mind that they would be paid fairly for their performance no matter what stage of their career it comes. Additionally, players would change teams less often, enjoy improved rapport from the fans and never have to worry about a contract again. Not to mention, they could save a bundle on the considerable fees that they currently pay to their agents. With no more contract negotiations, they wouldn't need them!

Still, I don't see the Players Association going for it. Convincing the Yankees to pay into a central salary fund and give up the opportunity to steal away a CC Sabathia or A.J. Burnett from a small-market club wouldn't be easy, either. So it may be a pipe dream, but one thing is clear: The return to the reserve clause would be a victory for the fans. Clubs of all sizes would be able to compete on an equal playing field and no more would fans have to worry that their precious John Lackeys and Jason Giambis would be snatched away after just six glorious years, threatening to send their teams back to mediocrity. Fans prefer homegrown talent to hired guns, and the return to the reserve clause would mean a return to the days when a club's core could be kept together for years. Trades would still be prevalent, and in fact would likely occur more often, but by and large fans and players would be able to forge a lasting bond that would only increase the enjoyment of the game for all involved. All except for Scott Boras, that is.