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Sport Economics – Collective Bargaining
Prologue: Collective bargaining is a very essential tool in any Trade Union’s arsenal. They bargain for the collective good of their members. It deals with wage rise, working conditions, promotions, annual increments, holidays etc. They fight for the right of their members.
Important points in the new collective bargaining agreement – a concise summary:
Duration: 5 years – 2002 to 2006 (Starting 2002 season and ending on 19th December 2006
Local Revenue Sharing: 1996-2001 = 20%, 2002-2006 = 34%. This is net of ballpark expenses. Revenue sharing money divided equally among all teams.
Central Fund Revenue Sharing: Based on 2001 figures, $ 722 million collected from clubs, which happen to be net payers in the base revenue sharing plan, and given to those who happen to be net receivers. This figure for future will be: 2003 – 60%, 2004 – 80%, 2005 & 2006 – 100%.
Discretionary Fund: $10 million from central fund will be placed under the control of the Commissioner and allocated at his discretion.
Luxury Tax Rates: For luxury tax calculations, incomes are defined to include salaries + earned bonuses for all players + a fixed sum per team relating to benefits and incidental expenses.
2002: No tax
2003: 17.5%
2004: First time violators = 22.5%
Second time violators = 30%
2005: First time violators = 22.5%
Second time violators = 30%
Third time violators = 40%
2006: First time violators = no tax
Second time violators = 30%
Third time violators = 40%
To be used for player related benefits.
Minimum Salary: 2003 & 2004 = $300,000 (2 year cost of living adjustment in 2005 and 1 year cost of living adjustment in 2006).
Minor League Players: Minimum of $50,000 per year.
Discipline: Same as the previous one. However, suspended players to receive full salary during suspension.
Other clauses on salary arbitration, club debt, interleague play, drug testing, benefits, expense allowances, injury rehabilitation, second opinions, contract tenders, and waivers are all there with minor variations.