Major League Baseball submitted its latest proposal Thursday in the ongoing labor negotiations, introducing significant changes that appear to target contract structures frequently utilized by the Los Angeles Dodgers. The proposal includes de facto maximum contracts for players and seeks to eliminate deferred money from all future deals, alongside a push for a hard salary cap.
Under the proposed system, free agents changing teams could receive contracts limited to five years and $202 million, while those re-signing with their current team could be eligible for six years and $265 million. This structure resembles the system currently in place in the NBA.
MLB also proposed outlawing deferred payments in future contracts. In return, the league offered to increase minimum player salaries, grant players earlier access to free agency, and abolish the qualifying offer system, which has historically impacted the market for top free agents.
The players' union rebuked the proposal later Thursday afternoon, marking another point of contention in the increasingly contentious collective bargaining agreement (CBA) negotiations.
These proposed limitations are seen as an attempt by the league to curb tactics the Dodgers have employed to build their recent success, including long-term and heavily deferred contracts that have allowed the team to manage record-setting payrolls.
Currently, the Dodgers have several players with contracts exceeding the league's proposed maximums. Shohei Ohtani leads this group with a 10-year, $700 million deal that heavily features deferred money. Other notable contracts that would surpass the proposed limits include those of Mookie Betts (12 years, $365 million), Yoshinobu Yamamoto (12 years, $325 million), Will Smith (10 years, $140 million), Kyle Tucker (four years, $240 million), and Freddie Freeman (six years, $162 million).
Furthermore, nine Dodgers players have contracts that include some level of deferred compensation. Ohtani's deal is the most extreme example, with $680 million of his salary scheduled to be paid out after the initial 10-year term concludes. Other players with deferred money include Betts, Smith, Freeman, Blake Snell, Teoscar Hernández, Tanner Scott, Tommy Edman, and Edwin Díaz.
For the Dodgers, the strategy of stretching out contract lengths and deferring payments has provided crucial short-term financial flexibility, enabling them to assemble star-studded rosters annually. Players, in turn, benefit from long-term financial security, potential tax advantages, and enhanced negotiation leverage.
Andrew Friedman, president of baseball operations for the Dodgers, has previously defended the use of deferrals as a "lever to find that overlap" when negotiating deals. However, critics argue that the absence of regulations on contract structures allows teams like the Dodgers to exploit economic advantages.
Ohtani's contract, in particular, has become a focal point. While his presence has significantly boosted club revenues, his annual salary for the initial 10 years is only $2 million, with the bulk of his compensation deferred. Even so, Ohtani's deal accounts for over $46 million annually in luxury tax calculations, which are based on the present-day value of his contract.
This approach has fueled calls from some fans for MLB to adopt a salary cap to address financial disparities across the league. The league's latest proposal appears to directly address these concerns by advocating for contract limits and a ban on deferred money.