Major League Baseball on Tuesday proposed postponing the implementation of a salary cap until the 2028 season while still putting into place the other elements of its labor offer for 2027 as the current collective bargaining agreement approaches its Dec. 1 expiration.
With the MLB Players Association consistently voicing its objection to any cap, the league has pressed forward with its pursuit of a cap and floor. But the opening of free agency Monday, and the significant likelihood of MLB locking out the players when the current labor deal expires, complicated the ability of teams to plan amid the uncertain labor landscape and prompted the proposed delay, sources told ESPN.
The $258.2 million cap and $180.2 million floor that the league projected for 2028 in a meeting with the union Tuesday was higher than the $245.3 million and $171.2 million numbers proposed by MLB as its original cap-and-floor offer for 2027. The new numbers reflect a 50-50 split on projected 2028 revenue, with the calculation of player share including hundreds of millions of dollars in amateur signing bonuses as well as deductions by teams that other major men's leagues use in their cap-and-floor systems.
MLB also proposed giving $282 million in competitive balance tax proceeds to players in cash payments, sources said. Players are entitled to 50% of proceeds, according to the current collective bargaining agreement, that are used to fully fund players' 401(k) accounts. IRS limits cap the present-day distribution at around $72 million, according to sources. Because of increased spending beyond the $244 million competitive balance tax threshold, hundreds of millions of dollars in excess owed to players sit in reserve.
Union officials have said players would lose more than $1 billion over the life of the league's proposal if they agreed to a cap, reflecting the chasm between the parties that could lead to a prolonged work stoppage.
MLB locked out players in December 2021, leading to a 99-day stoppage that ended in mid-March 2022. In late May of this year, the league formally proposed a cap-and-floor system for the first time since 1994, when players went on strike for 232 days, the World Series was canceled and baseball returned to the field after players avoided an overhaul to the game's economic system through legal challenges.
Under the league's proposal Tuesday, competitive balance tax thresholds -- a luxury tax mechanism used to penalize teams with higher payrolls -- would remain the same for the 2027 season. While the 2028 cap-and-floor numbers are projections, 12 teams -- including the World Series champion Milwaukee Brewers -- would need to increase their payrolls to reach the floor. Eight teams carried payrolls that would have been in excess of the ceiling.
Teams would not be forced to reach the floor in any given year under the league's proposal. They would be permitted to spend as little as 90% of the floor number, as long as over multiple years their spending reflects a minimum agreed-upon number.
The MLBPA has proposed maintaining the current framework of the league's financial system while significantly increasing spending, reflected by a base competitive balance tax threshold of $300 million, a $56 million rise from the current number. Additionally, the union has asked for a surge in the minimum salary from $780,000 to $1.5 million, a $180 million pre-arbitration bonus pool -- it's currently at $50 million -- and free agency for players 30 and older after five years of major league service, not six.
The league, contingent on the acceptance of a cap-and-floor system, has said it would agree to earlier free agency for those 30 and older, while proposing a $900,000 minimum (with some players receiving $1 million) and a $65 million pre-arbitration bonus pool. MLB also has proposed significant changes to amateur entry, implementing an international draft, removing high school players from the domestic draft and slashing domestic draft bonuses, all of which the union opposes.
"Coming off another incredible season of baseball, MLB owners continue to propose blowing up the current system and replacing it with one designed to line their pockets and increase their franchise values," the MLBPA said in a statement. "... Players stand ready to negotiate in good faith toward a new CBA that will capitalize on our sport's unprecedented momentum and benefit players, clubs, and fans alike."
MLB, in a statement explaining its proposal to delay a cap by a year, said it recognized that teams need a full offseason to prepare to operate within the cap-and-floor system.
"This proposal would allow a smoother transition into the cap and floor system without delaying key player benefits, including earlier free agency, a $1 million minimum salary, a 30% increase to the pre-arbitration bonus pool, and transactional reform that will reduce roster churn," the statement said. "The projected salary cap and floor for 2028 continues to provide more money for major league players while leveling the playing field and giving more teams the ability to participate in the free agent market and retain their homegrown stars so that every fan believes their team has a fair chance to win it all."
