Baseball Draft Bonuses Down This Year Despite Skyrocketing Revenues

In the June 25 - July 1 issue of Sports Business Journal (subscription only), Liz Mullen reports that the MLBPA is investigating complaints from agents that major league clubs are being threatened by MLB to negotiate "league-recommended" signing bonuses for this year’s amateur draft picks that are about 10 percent lower than last year’s bonuses ("Baseball union reviews complaints"). However, MLB executive VP Rob Manfred denied that clubs were being told that recommended amounts were mandatory and that clubs were being threatened with penalties if they didn't sign the player for the recommended amount. But he did tell Mullen that the recommended amounts overall were "roughly 10 percent" below last year's recommendations due to the changes in the CBA negotiated late last year, which increased clubs' leverage in negotiating contracts with draft picks. According to Manfred, "Because of that increased leverage, we fully expect that (clubs) would pay less." Last October, I discussed these negotiated changes, which include: (1) clubs that fail to sign their first or second round draft pick will receive the same pick in the subsequent draft as compensation, and (2) pushing the signing deadline back to August 15. [However, I reviewed the 220 plus page document and did not find these provisions. These changes can most likely be found in the Major League Rules, which are adopted by the league.]

I've always thought that the baseball draft operates like the "wild west" because there are rules in place that are consistently violated and nobody cares. For example, scouts and agents frequently violate the rules by engaging in "pre-draft dealing," meaning that the scout and agent verbally agree on a signing bonus amount prior to the draft. But then, these verbal agreements are not legally enforceable anyways. Also, the baseball draft is unique from the other sports because agents working on behalf of players don't even have signed representation agreements (the draft takes place during the college baseball post-season and signing agreements with agents jeopardizes their NCAA eligibility). In baseball, agents also consistently violate the NCAA rules by communicating and negotiating directly with the clubs before and after the draft.

And getting to the subject of this post, my "lawyer brain" has also never understood this concept of "league recommended bonuses" in baseball. These recommended bonuses are sometimes referred to as "slot money," meaning that the player gets the league recommended bonus amount for the slot (or pick) in which the player was drafted. Each year the league has discretion to set the amounts of these recommended bonuses, yet the clubs are not required to adhere to the league recommended bonus amounts. And if a club suffers adverse consequences by the league for paying a player more than the recommended bonus amount, it would constitute a violation of the CBA. So then in that event, do the league recommended bonuses have any teeth? By the way, is anybody asking themselves at this point, if the clubs have greater leverage this year as a result of the new CBA revisions, then why would it be necessary for the league to even reduce the recommended amounts from last year, let alone threaten the clubs?

Well, amazingly (sarcasm), bonuses are in fact down exactly 10 percent this year across the board! Baseball America reported last week that "all 15 first-round picks who have come to terms have signed for slot money or less, and all of those slots have represented a 10 percent reduction from the 2006 slots." [I think they should just rename recommended bonuses as "restraints on trade."] Mullen noted that "compensation for rookies in other major American sports has been increasing, but agents say that signing bonuses for baseball players selected in the amateur draft have been down or flat in the last few years despite skyrocketing MLB revenue." Although approximately half of the players in the first round have yet to sign and there is still three weeks left until the signing deadline, I wouldn't expect the remaining bonuses to be much more than slot money when clubs will now get an additional draft pick in the same slot next year if they don't sign them this year.

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