Sports Law Blog
All things legal relating
to the sports world...
Tuesday, April 28, 2015
 
MLBPA & Reducing Player Contracts

After a crippling loss to the New York Yankees in October 2003, several months later the Boston Red Sox reached an agreement to send Manny Ramirez to the Texas Rangers for Alex Rodriguez. [For more on the entire non-trade and an ESPN 30 for 30 short video go here.] The only caveat was that Alex Rodriguez had to agree to waive $28 million over 7 years off of his remaining $179 million contract, which he did. ARod reasoned he could recover this money from increased endorsement deals in a larger, more successful market.

Alas, MLBPA refused to sign off on his reduction in salary, blocking the trade in claiming that the Red Sox were not providing any "added benefits" to ARod to compensate for the loss in salary. The Red Sox offered to allow ARod to opt out of his contract two years early, but the union scoffed at that offer claiming he was the highest paid player in the league, unlikely to get the same money in free agency.

Ultimately, as we all know, the deal was blocked by the MLBPA leading Larry Lucchino, President & CEO of the Red Sox, to state "it's a sad day when the players' association thwarts the wills of its members...." Ultimately, as we all know, Alex Rodriguez found his way to the New York Yankees and the Boston Red Sox went on to win the 2004 World Series without him.

Fast forward to the present as the Los Angeles Angels of Anaheim agree to "trade" Josh Hamilton to the Texas Rangers after their owner's displeasure in his off-season drug relapse. As of now, the Rangers are offering the nebulous "player to be named later" as compensation to the Angels. With over $80 million remaining on his contract, Hamilton has reportedly agreed to forfeit $12 million to ensure his return to Texas. And, this time, the MLBPA has decided to allow this trade to go through. What's does the MLBPA see as differences between ARod's willingness to forgo salary and Hamilton's?
  1. Since there is no state income tax in Texas, the take home pay for Hamilton is close to negligible, thereby not actually "devaluing" Hamilton's compensation. In fact, Robert Raiola (@SportsTaxMan), told SI.com "By moving out of California sooner, Hamilton would escape the state's high income tax--the highest in the nation at 13.3%--and thereby recoup some of the money he'd lose if he takes less....";
  2. According to multiple reports, Hamilton will reportedly be given an opt-out clause in two years which qualifies as an "extra benefit" to the player; (not sure why this is valuable in 2015 but wasn't in 2003)
  3. And, finally, if one were to be optimistic, perhaps the union really is interested in what's best for a player, acknowledging Texas may be a better environment for Josh Hamilton off the field regardless of his salary.
Whatever the reasons, it's interesting to note how the MLBPA clearly treated Josh Hamilton differently than Alex Rodriguez. And, with luck, this change in location serves Hamilton well--both on and off the field.







1 Comments:

Something smells of hypocrisy what has changed so much since 2003. Has the fundamental rules on trading players changed so dramatically or have I been asleep for over a decade.

Anonymous Lloyd Barrett -- 4/30/2015 12:18 PM  


Post a Comment