MLB, union announce five-year labor agreement

The basics of a soon-to-be-ratified Basic Agreement between the owners and the Player’s Association were announced today, but the actual ratification and publication of the new CBA is likely a few weeks, if not months, away. The new CBA will include several provisions that could alter the landscape of the business side of baseball for the next five years. Changes at the major league level will include the implementation of HGH testing, a new tobacco policy, changes to the competitive balance tax (also known as the luxury tax), new social media rules, changes to replay, the movement of the Houston Astros to the American League to even number of teams in each league, year-round interleague play, and additional playoff teams.

But our readers tend to be more interested in how the new CBA will affect the draft, international free agency, minor league prospects, rookies, and recently graduated prospects. Here’s what we’re hearing about those changes from the Twitterverse.  Hat tip to Jeff Passan of Yahoo! Sports, who leaked many of the details early on.

Amateur Draft: The new agreement may have been completed months ago had the owners not been insistent in implementing some sort of slotting system to reel in bonus spending on the draft. The new CBA will contain an overall luxury tax that will be calculated by the number of draft picks multiplied the recommended “slot” bonus for each pick that a team possesses. If a team exceeds that figure by less than 5%, the extra spending will be taxed at 75%. If a team exceeds that figure by 5-10%, it will be taxed 75% and required to forfeit a first round pick. If a team exceeds that figure by 10-15%, it will be taxed 100% and required to forfeit a first round and a second round pick. If a team exceeds that figure by over 15%, it will be taxed 100% and required to forfeit two first round picks. If a player signs after the tenth round for more than $100,000, the excess money will go against the team's draft tax. Drafted players will no longer be allowed to sign major league deals.

Draft Compensation: In the new CBA, Type A and Type B free agent draft compensation will be eliminated beginning in the 2012-2013 off-season. Starting next off-season, clubs that offer a free agent a qualifying offer of at least $12.4 million per season will receive first-round compensation if the player rejects the qualifying offer and signs with another club, who would forfeit the draft pick as compensation. The $12.4 million figure may rise each year depending on a yet-to-be-disclosed formula. Teams in the bottom 10 of overall standings will be protected from forfeiting first-round picks. Only Players who have been with their Clubs for the entire season will be subject to compensation.

Supplemental Small Market Rounds: There will be six draft picks immediately after the first round given out via lottery to teams with the 10 lowest revenues. The teams that do not get one of those six picks will be entered in another lottery for picks after the second round.

Draft Signing Deadline: The draft signing deadline will move from August 15 to a date between July 12 and 18.

International Amateur Free Agency: Similar to the draft, a separate luxury tax will be implemented for the signing of international free agents. Every team will have $2.9 million to spend in international “amateur” bonus money this season. Those funds will not be tradable this off-season, but will be tradable in the future. Most professional international players looking to sign in the United States will not be subject to this tax.  In future years, the luxury tax threshold for international free agents will vary per team based on winning percentage (the best teams' threshold will reportedly be set at around $1.8 million, while worst team's threshold will be set at around $5 million). Overspending will make teams subject to luxury taxes and the loss of the right to give out high bonuses to international players in subsequent years.

Minimum Salary: The minimum salary will increase from $414,000 per year in 2011 to $480,000 in 2012, and ultimately to $500,000 by 2014.

“Super Two” Eligibility: Under the old CBA, all players with at least three and less than six years of service time were eligible for pre-free agency salary arbitration. Additionally, the top 17% of players with more than two and less than three years of service time were also eligible for arbitration. These players became what are known as “Super Twos.” In the new CBA, the 17% will increase to 22%, meaning an additional five to six players will be eligible for pre-free agency salary arbitration each off-season.

Options: There will be unspecified changes to the fourth option year and outrightability rules.

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