On August 12, 1994 professional baseball players went on strike for the eighth time in the sports history. Since 1972, negotiations between the union and owners over contract terms has led to major economic problems and the absence of a World Series in 1994. All issues were open for debate due to the expiration of the last contract. Until 1968, no collective bargaining agreement had ever been reached between the owners and the players (Dolan 11). Collective bargaining is the process by which union representatives for employees in a bargaining unit negotiate employment conditions for the entire bargaining unit (Atlantic Unbound).
Instead, the players were at the mercy of each owner who possessed the exclusive right, at the close of each season, to resign each player on his roster. If the owner chose to renew a players contract, that player had the option of agreeing to those terms or not playing baseball. As a result of the obvious imbalance in the labor situation, the players attempted, on several occasions, to organize a union. Although this process may seem like a simple one, baseball has proven that it can be very difficult.
The players have been represented by various unions in the twentieth century, all of which have failed until the current union, the Major League Baseball Players Association. After fourteen years of negotiations between the current union and the owners representative, the first basic labor agreement between the two parties was reached. Led by Marvin Miller in 1968, the players received higher minimum salaries, better health insurance plans, and increases in retirement benefits. These, so called, Basic Agreements in major industries usually turn out to be more complex. As a result, strikes and lockouts have occurred ever since (Koppett 23).
The baseball strike, which occurred in 1994, was really about one thing; money. Two major issues led directly to the interruption and eventually the cancellation of the entire season. After a 28-0 vote among the owners, they agreed to share revenue on the condition they could get the players to accept a salary cap. The issue of revenue sharing was directly linked to the salary cap. By taking this action, the owners signaled they had come to realize the problem of disparity between big market teams (New York, Los Angeles, Chicago) and small market teams (Seattle, Pittsburgh, Milwaukee).
The problem, however, was that because the owners linked their revenue sharing with a salary cap, the players felt they were being asked to solve the owners financial disparity problem. There is a noticeable difference in team payrolls, as displayed in 1993, when the the payroll of the Toronto Blue Jays was $48. 4 million, compared with San Diego Padres payroll of only $10. 6 million (Layden 17). Therefore, the idea of revenue sharing, wherein big market teams would transfer monies to the small market teams, was a good one, but it caused disputes among the owners as to how the formula would be worked out.
Not all of the small market teams were in bad shape financially. In fact, some that had built or were building new stadiums such as Baltimore, Cleveland, and Texas were doing quite well. It was not until June 14, 1994, that the owners finally presented their collective bargaining proposal, 18 months after they voted to reopen the contract. The owners proposed a 7-year contract that would split their total revenue with the players, 50-50, while introducing a salary cap over the next four years (Dolan 26).
The players had been making tremendous gains in wages through free agency, and they did not want to see that trend come to an end. Provided that revenues did not fall, the players would be guaranteed no less than $1 billion in pay and benefits scheduled for 1994. The proposal also eliminated salary arbitration, but allowed players with 4 to 6 years of major league service to become free agents (compared with the 6 years previously required for free agency), with a right of first refusal by the players current club.
For players with fewer than 4 years of service, a rising scale of minimum salaries was proposed, with the actual minimum amounts to be negotiated later on. Players licensing revenue (about $80,000 per player) would have to be split with the owners. Depending on the average obligation to the players under the 50-50 split of total revenues, no team could have a payroll of more than 110 percent of that average or less than 84 percent (Dolan 33). To the players, the owners proposal had several shortcomings.
The players share of 50 percent of revenues would be a cut from the existing share of 56 percent. In addition, the players did not want to share their licensing revenue, and the loss of salary arbitration would remove a major impetus to higher player salaries. Although free agency would be liberalized, it came with the catch that the current club could retain a player by matching the offer of a club seeking a free agent. Another drawback was that the players pensions, health overage, and other benefits would be funded out of their own 50-percent share of revenues (Atlantic Unbound).
The unions executive director, Donald Fehr, estimated that the owners proposal would cost the players over $1. 5 billion in salary over the 7-year life of the contract. On June 18, the union predictably rejected the salary cap and other major aspects of the proposal. The union then proposed lowering the standard for qualifying for salary arbitration to 2 years, raising minimum salaries to $175,000 and, even eventually $200,000 (Monthly Labor Review). With the union dismissing the owners proposals, it was not surprising a few days later when the owners rejected the unions offer.
No bargaining had even really taken place. The real purpose of the negotiators (Richard Ravitch and Donald Fehr) was to get their positions before the print and the broadcast media. This was very consistent with contract negotiations over the past quarter-century in baseball and suggested a strong likelihood of a work stoppage (Layden 26). Baseball negotiations in the modern era have been plagued by strong-willed personalities. Marvin Miller set the tone when he refused to accept the paternalism between owners and players that had existed for so long in the game.
Instead, he was determined to establish an adversarial relationship that continues to the present. The players felt they had little alternative to striking. Had they continued playing through the season without coming to an agreement, the owners could have declared an impasse and most likely implemented their proposals. Also, the timing of the strike, which began on August 12, 1994, was favorable for the union because it inflicted maximum damage on the owners.
That late in the season, the players had received most of their pay, but the owners were vulnerable to big losses because they receive three-fourths of their television revenues from postseason play. In anticipation of a strike for the previous 4 years the Players Association had retained a portion of each players licensing revenues from the sale of products such as baseball cards. As a result, a strike fund of about $175 million was accumulated so that each player with 4 years experience would have about $150,000 to hold them over until the strike came to an end (Monthly Labor Review).
At the beginning of the strike, the parties had agreed to accept mediation efforts by the Federal Mediation and Conciliation Service. Mediators try to persuade the parties to make concessions and come to an agreement, but unlike arbitrators have no power to impose a settlement. Therefore, mediation would not necessarily bring an end to the dispute. Several Federal mediators, including the Conciliation Services director, John Calhoun Wells, were unable to make progress toward settlement in 1994. This was because the parties were already committed to disagreeing.
Under such circumstances, no mediator can be successful. One change that did result from the suggestions of mediators was that several owners became involved in negotiations, and bargaining influence began to slip away from Ravitch and toward owners Jerry McMorris of Colorado and John Harrington of Boston (Monthly Labor Review). Under the owners rules, a three-fourths vote was required to approve a settlement. This created a sever obstacle because the owners were split generally into three groups.
The groups were largely based on market size, the small market teams, which include teams like Kansas City, Milwaukee, Minnesota, Montreal, Pittsburgh, San Diego, and Seattle. On the other end were owners with teams in large markets and some owners from smaller market teams that had recently built new stadiums and were doing well financially. These clubs, who had more to lose from a prolonged strike, included Atlanta, Boston, Colorado, Los Angeles, both New York teams, Texas, and Toronto.
The remaining teams were somewhere in between, looking for only moderate changes, but were susceptible to arm-twisting from either side (Layden 42). In late August, McMorris and the owners legal counsel, Charles O’Connor, suggested the idea of a graduated luxury tax to the union. If a clubs payroll significantly exceeded the major league average, that club would have to pay a luxury tax based on its total payroll. The tax rate would be graduated the more the clubs payroll exceeded the major league average.
Money from the tax would go into a pool that would be distributed to financially needy teams (Monthly Labor Review). The union viewed this proposal as a salary cap in disguise, because clubs would resist signing high-salaried free agents if the addition to payroll would have the side of effect of more taxes being paid. Still, the union tried to work with the luxury tax concept, proposing a 1. 5 percent tax on revenues and payrolls of the 16 largest clubs in terms of revenue and payroll, with the money distributed to the bottom 12 clubs (Dolan 111).
The union also suggested that home teams share 25 percent of their gate receipts with visiting teams. Shortly after rejecting the unions counteroffer, on September 14, 1994, the owners declared the cancellation of the World Series for the first time since 1904 (Atlantic Unbound). In mid-October, President Bill Clinton announced the appointment of William J. Usery, Jr. , to mediate the dispute. The President could not have chosen a more able representative. Usery was Secretary of Labor in the Ford administration and before that was director of the Federal Mediation and Conciliation Service.
Although 70 years old, Usery had remained active after his Government service by privately mediating some of the Nations biggest industrial disputes in recent years. He had the experience to identify common ground and the tenacity to move the parties in that direction, but he lacked knowledge of the complications of baseball labor relations (Layden 55). Unfortunately, Usery suffered the same fate as the earlier mediators. The parties modified their proposals somewhat, but remained far apart. The owners wanted to contain the salary rise, which had grown to an average of nearly $1. illion per player, while the union was unwilling to do so.
At this time, the only understanding between the parties was that some kind of revenue distribution should occur from richer to poorer teams. By the end of 1994, negotiations were slowing down, and the owners declared an impasse, putting the salary cap into effect. The declaration of an impasse was a dreaded scenario for the union because it meant that management could implement its own proposals. To show its distaste for the owners actions, the union filed unfair labor practice charges with the National Labor Relations Board (NLRB) (Atlantic Unbound).