Thursday, December 18, 2003

Sports: Union 1, A-Rod $25 million

For weeks, the Boston Red Sox have pursued a trade with the Texas Rangers whereby Boston outfielder Manny Ramirez would be swapped for Texas’s Alex Rodriguez. The sticking point is money, though not in the usual sense. Rodriguez holds baseball’s richest contract, earning between $25 million and $32 million per year through 2009. The Red Sox want some relief from this high price. According to an unnamed baseball official, some of Rodriguez’s salary would be reduced and some would be deferred, and Rodriguez would be eligible for free agency earlier than the original contract provided. Both parties apparently agreed to this arrangement.

Unfortunately, the MLBPA, the union representing Rodriguez, effectively vetoes the deal. Union lawyer Gene Orza claims the current collective bargaining agreement (CBA) prevents any contract renegotiation that results in the player receiving less money. Rob Manfred, baseball’s chief labor lawyer, disputes Orza, arguing the CBA only requires a restructuring provide “an actual or potential benefit to the player”. The actual rule, as reported by Baseball Musings, seems to support Orza’s interpretation. It says, “The amount stated in paragraph 2 [i.e., Payment] and in special covenants hereof which is payable to the Player for the period stated in paragraph 1 hereof shall not be diminished by any such assignment, except for failure to report as provided in the next subparagraph (d).” This pretty clearly forbids any reduction or deferment in actual salary.

But the real issue here is whether it’s proper for the union to interfere with the contractual relationship between Rodriguez, his current team, and a team he has agreed to be traded to. No doubt Rodriguez is glad to give back some money in order to go from Texas, a perennial last-place team, to Boston, a World Series contender. Traditionally, the union cares first and last about increasing salaries. There are numerous tales of players pressured by the union to accept the highest bid, even when a lower offer from another club proved appealing to the player for other reasons. (For example, Andy Pettite recently signed with the Houston Astros, which play in his hometown, rather then resign for an allegedly higher salary with the New York Yankees.)

The MLBPA is certainly better than most unions. Unlike, say, the National Education Association, MLBPA supports a competitive salary structure that permits individual players to negotiate contracts within general boundaries set by the CBA. The NEA insists on the same contract for all workers, regardless of merit, tied only to seniority. But the MLBPA ultimately suffers from the same flaw as all unions: They’re power derives not from economic production, but from the CBA. The union must strictly enforce the CBA’s terms, even to the detriment of Rodriguez and two teams, because without the CBA, the union is meaningless.

Under U.S. law, a union enjoys monopoly bargaining power. Whenever a simple majority of workers vote to form a union, all workers immediately come under whatever CBA is negotiated. If not for this legal privilege, it’s doubtful the most recent labor disputes in baseball would have reached crisis points. If players were free to negotiate on their own without any CBA constraints, a large enough percentage would have broken union ranks to make a strike unprofitable for the holdouts. This outcome is impossible under labor law, however, and thus the union is able to veto Rodriguez’s trade despite the benefit to all parties in interest. The union’s interests are political, not economic.

This is not to suggest CBAs are inherently wrong. Many, if not most, private sector employers benefit from well-structured CBAs. If nothing else, they can make labor negotiations more efficient and productive. As the NEA example demonstrates, the worst abuse of CBAs and unionism come in public-sector unions, where both sides of the negotiation are subject to political control.

It’s regrettable that Rodriguez, the Rangers, and the Red Sox can’t work a deal that satisfies the union’s factually correct interpretation of the CBA. But it should also be noted that Texas originally offered Rodriguez the large contract that they are now unable to trade. As with most things in business, poor decision making will come back to haunt you, irrespective of outside legal and political pressures.

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