MLB Offseason 2012: Breaking Down the New Collective Bargaining Agreement

Major League Baseball and the Player's Association reached a new five-year agreement on Monday. It covers everything from new wild-card spots, drug testing and the way clubs sign international free agents to a competitive balance lottery, overhauling free agency and the introduction of new batting helmets.

This slideshow breaks down the main elements of the new collective bargaining agreement (CBA) and examines the impact it may have.

The Things We Knew Already

We have known for a week or so now that the Houston Astros will switch from the NL Central to the AL West in 2013, but for the sake of completeness, let's begin there.

The move will create two 15-team divisions, with interleague games played throughout the year.

For the playoffs, we'll see an expansion for the first time since 1995. There will be two wild-card teams now, with these two clubs playing a one-game playoff for the right to join the three division winners.

This rewards the teams winning their divisions, keeps more teams in the hunt for a playoff berth and creates an exciting winner-take-all showdown.

The critics say that it may eliminate the drama of the final days of the regular season. I think it would have been less of an issue—but an issue nonetheless—if we didn't have the Red Sox-Braves meltdowns fresh in our minds.

The playoffs could be expanded next year, but in all likelihood it will be 2013.

Changes to Free Agency

Starting next season, MLB will no longer use Elias' "Type A" and "Type B" free agent rankings. Here's how it will work, in the words of the CBA:

"

1. Only players who have been with their clubs for the entire season will be subject to compensation.
2. A free agent will be subject to compensation if his former Club offers him a guaranteed one-year contract with a salary equal to the average salary of the 125 highest-paid players from the prior season.
3. A club that signs a player subject to compensation will forfeit its first-round selection, unless it selects in the top 10, in which case it will forfeit its second-highest selection in the draft.
4. The player’s former club will receive a selection at the end of the first round beginning after the last regularly scheduled selection in the round. The former clubs will select based on reverse order of winning percentage from the prior championship season.

"

The average salary of the highest-paid players last year was around $12 million, so it will only affect the elite free agents. But the important thing to note here is that it only includes players who are on the team for a whole year. If a team trades for a person at the deadline, they will not be compensated at all if he leaves at the end of the year, no matter how big he is.

For example, if the Miami Marlins sign Jose Reyes this year, they would give their second overall pick to the Mets and the Mets would also receive a sandwich pick at the end of the first round.

In the new system, the Marlins would still lose their 40th overall pick because their first-round pick is No. 9. The Mets would have a sandwich pick at the end of the first round after the Phillies make the 31st overall selection. Depending how many other teams have lost free agents, the Mets would pick again between 32 and 50 on account of having the 11th-worst regular season round in 2011.

If a team signed Carlos Beltran, ranked in the top 20 percent of players in his position, the new team would give up its top draft pick to the new team, who would also get a sandwich pick.

But in the new system, however, the Giants would get nothing at all, and the team who signed him would just forfeit their their first-round pick or highest non-top-10 pick.

First-Year Player Draft Changes

Each team will be assigned an allotment to spend on signing players in the draft. This will be based on where they pick in the first 10 rounds, with each position having a corresponding monetary value.

If a team goes over its imposed allotment, it will face penalties. They range from clubs being taxed 75 percent of however much they go over, to losing their first-round pick in each of the next two drafts.

This will severely impact teams that know they can't afford to go toe-to-toe with big payroll teams in acquiring free agents and teams that have instead chosen to spend their dollars in signing draftees. Teams like Texas and Kansas City, who rely on the draft to acquire talent to compete, could suffer under this rule, because they aren't in a position to pay taxes and can't afford to lose the chance of a high pick the following year.

The range of the pool will be between $4.5 million and $11.5 million, Fox's Ken Rosenthal reported. Considering the Pirates, Nats, Royals and D-backs all spent more on this on the draft this year—and five others spent $11 million—that's one-third of the league, and most of the small market teams facing penalties.

If the Royals have an allowance of $11.5 million and go over by $115,000 (just 1 percent) they will face a fine of $575,000.

The rule, as MLB.com's Jonathan Mayo tried to explain it, is intended to make sure teams choose the best player available at the time they pick, rather than the best available player they can afford.

Proceeds generated by the tax will be distributed to clubs under the revenue sharing plan that do not exceed their limits. Draft picks that are forfeited by clubs will be awarded to other clubs through a lottery in which a team’s odds of winning will be based on its prior season’s winning percentage and its prior season’s revenue. More on that in the next slide.

Only clubs that do not exceed their signing bonus pools are eligible for the lottery. This is another reason why teams like Kansas City cannot afford going over their signing bonus allowance.

The problem with this, though, is that if teams are unable or unwilling to pay the draft picks the big bucks, will those same players walk away?

Will baseball lose top two-sport athletes to the NFL and dilute the talent level in the league? Will high school players opt for college instead of the pros?

Oh, and just to make this a little worse, teams can only sign players to Minor League contracts. Horrible.

A Change to International Signings, Too

Like with the main draft, there will be a pool for teams to sign international players. But this pool is initially only $2.9 million, ESPN is reporting.

That is tiny in today's market, especially when you look at the money paid to the likes of Aroldis Chapman.

There are penalties there, too, for going over the limit.

Go up to five percent over your limit and you pay a 75 percent tax; go up to 10 percent over and not only do you get taxed, but you lose the right to give more than one international player a bonus over $500,000.

Between 10 and 15 percent and you get taxed 100 percent and lose the right to give any player more than half a mil, while if you go 15 percent over your allotted budget you get taxed 100 percent and you're ineligible to give any international signee more than $250,000.

Competitive Balance Lotto

For the first time, clubs with the lowest revenues and in the smallest markets will have an opportunity to obtain additional draft picks through a lottery.

There will be six spots at the end of the first round and six more at the end of the second round.

Here's how it works: The 10 clubs with the lowest revenues and the 10 clubs in the smallest markets will be entered into a lottery. A club’s odds of winning the lottery will be based on its prior season’s winning percentage.

Teams like the Mets that are not even a .500 team will not have the chance for these picks because they still have a large payroll and still play in the largest market in the sport.

The eligible clubs that did not receive one of the six selections after the first round will be entered into a second lottery. As before, a club’s odds of winning the lottery will be based on its prior season’s winning percentage.

Can the Houston Astros spend more than they are assigned to ensure they get the top players they want? Absolutely. But they also lose out of the chance to sign another top-50 draft prospect in the lottery (where their chances at higher than any other team in the league) as well as being taxed or forced to lose their top draft pick the following year.

Speaking of the Mets, ESPN's Jayson Stark also reported the Mets are one of 15 teams unlikely to qualify for revenue sharing by 2016.

The others? The Yankees, Dodgers, Angels, Cubs, White Sox, Phillies, Red Sox, Rangers, Braves, Nationals, Blue Jays, Astros, Giants and A's.

Competitive Balance Tax

The threshold level of $178 million in 2011 will remain unchanged in 2012 and 2013. The threshold will increase to $189 million for 2014, 2015 and 2016.

The tax rate will decrease to 17.5 percent for clubs that exceed the threshold for the first time, and the rate will increase to 50 percent for clubs that exceed the threshold for the fourth time or more.

This impacts the biggest spenders out there, but we'll just have to see what effect it has. If teams can afford to pay the tax—at whatever level—there's no reason they won't keep spending. Unless you have the hard ceiling of a salary cap, this type of competitive tax isn't going to stop those teams.

I also read that teams who receive money from this tax will have to use it to improve their roster instead of paying off loans and debt. That is a great, sensible idea that I'm all for.

Drug Testing, Salary Increases, Mandatory All-Star Game Attendance and Others

• As of Spring Training, all players will be subject to HGH blood testing. Starting with the 2012-13 offseason, players will be subject to random unannounced testing for HGH. The top 200 draft prospects will also be tested prior to the draft.

• Participation in the All-Star Game will be required unless the player is unable to play due to injury or is otherwise excused by the Office of the Commissioner.

• Instant replay will be expanded to include fair/foul and “trapped” ball plays.

• The percentage of players with two years of service who will be arbitration-eligible will be increased from the top 17 percent to the top 22 percent in terms of service.

• The minimum Major League salary will increase from $414,000 in 2011 to: $480,000 in 2012; $490,000 in 2013; and $500,000 in 2014. Minimum Minor League salaries will increase from $67,300 in 2011 to: $78,250 in 2012; $79,900 in 2013; and $81,500 in 2014.

• The MLB draft will still be conducted in June, but the signing deadline will be moved forward a month. This will hopefully help first-year players get some games at a short season team or low-level affiliate under their belt before the year is over. The new deadline will not interfere with the collegiate season or College World Series.

• By 2013, all Major League players will wear a new batting helmet developed by Rawlings that protects against pitches thrown at 100 miles per hour.

• All players will be subject to a policy governing the use of social media.

• Non-discrimination protections based on sexual orientation were added to the agreement.

• Teams may have the option to arrange a doubleheader in order to create a better schedule for logistics purposes. With this in mind active roster limits will be expanded to 26 for certain regular or split doubleheaders.