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The Path to Free Agency in Major League Baseball

Updated on December 13, 2016
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Major league baseball has become a very lucrative profession for many of the men who play the game. Almost every year, a new contract is signed that surpasses the value of all previous contracts. Fans struggle to understand the immense amount of money that is being earned by the players that they see in ballparks and on television.

The salaries are the result of rule changes and market dynamics that took shape in the 1960s and 1970s. The strength of the players' union greatly increased, and players looked for more leverage in the negotiations for their contracts. More money was coming into the game, through television and new stadiums, and players wanted to get as much as possible from these revenue streams.

Start of Baseball Draft

The launching of the first baseball draft in 1965 contributed indirectly to the establishment of free agency.

Although the draft seems like a step back for the freedom of players to decide where they played and how much they earned, it did establish a new foundation for player compensation. A player's draft position helped establish their market value. The draft also eliminated the open market for amateur players in the United States and helped the later drive towards an open market for free agent players.

Over the next 11 years, a system was created where a player's contract negotiation rights increased as their major league service time increased, culminating in free agency. The draft helped establish the beginning of that service time by pulling even low drafted players into a team's development system.

Also in 1965, a new two-year television contract with ABC started, bringing more revenue into the game. Baseball authorities had watched professional football prosper from a new television contract, and baseball wanted a similar deal.

The baseball contract with ABC lasted only one year, but it was followed by a long contract with NBC that helped establish baseball as profitable programming for national television. From there, the contracts increased in value, leading to the wide variety of video options that are enjoyed today by baseball fans.

Holdout by Koufax and Drysdale

In the middle 1960s, baseball players were becoming increasingly aware of their values as entertainers. This status made them look for the same kind of contract negotiation rights as movie and television stars.

This led to the salary holdouts by Los Angeles Dodger pitchers Sandy Koufax and Don Drysdale before the 1966 season. The Dodgers were defending world champions, with Koufax and Drysdale each winning more than 20 games in 1965. They played in the entertainment capitol of the world, and often rubbed shoulders with celebrities from movie and television.

The holdout strategy worked, with both players increasing their annual salary to more than $100,000, an amount that few other players in baseball earned in 1966. Their holdout helped all players better understand their value as both entertainers and independent contractors.

Rise of Players' Union

Many of the significant steps towards free agency were taken by the Major League Baseball Players Association in its negotiations with Major League Baseball for basic agreements that governed the working relationship between management and players.

In 1966, the MLBPA elected Marvin Miller as its first executive director. Miller would be in the center of many news-making events during his 16-year tenure, as both a spokesman for the players and as an adviser to them. When he started, his power was helped by the presence of a relatively weak baseball commissioner, William Eckert, who would be succeeded in 1969 by Bowie Kuhn, who fought many battles with Miller.

One of Miller's first accomplishments was the first Basic Agreement in 1968, which increased the minimum salary by $3,000. Later Basic Agreements in 1970, 1973, and 1976 established the following rights for players:

  • An arbitrator for labor disputes (1970)
  • Trade veto rights for 10-year major league veterans with five years of service with their current team (1973)
  • Salary arbitration after three years of major league service (1973)
  • Free agency after six years of major league service (1976)

Before the 1969 season, Miller guided the players in an attempt to increase their compensation in another area besides their salary. A dispute over pension benefits almost led to a strike before the dispute was resolved.

Curt Flood Challenges Baseball

What was arguably the most significant step towards free agency was an action that eventually failed in the court of law. It had no legal effect on the future of player/management relations, but its psychological and inspirational effect was tremendous.

After the 1969 season, Curt Flood of the St. Louis Cardinals was traded to the Philadelphia Phillies but refused to report to his new team. Flood cited his business interests in St. Louis as the main reason for wanting to stay with the Cardinals. With the support of the players' union, Flood challenged baseball rules all the way to the U.S. Supreme Court, where he contested baseball's exemption from antitrust laws. The Supreme Court ruled against him on June 19, 1972.

Meanwhile, Flood sat out the 1970 season and played a partial season with the Washington Senators in 1971 before retiring. Although he lost his personal battle with baseball and legal authorities, he did inspire the imaginations and ambitions of other players. His efforts contributed to the 10-and-5 rule in the 1973 Basic Agreement. They also inspired challenges in 1975 to the reserve clause in players' contracts which restricted their employment opportunities.

1972 Strike

The 1972 season saw the players exercise more leverage over their relationship with owners, when past threats of a strike became a reality. Another pension dispute knocked 86 games off the beginning of the season before the sides came to an agreement.

The pension disputes in 1969 and 1972 both occurred in the last year of the current Basic Agreement, so that relatively new document had become a powerful leveraging tool for players in contract negotiations.

Catfish Hunter Becomes Free Agent

After the 1973 Basic Agreement was signed, the final and deciding steps towards free agency occurred. An unexpected boost to free agency occurred in 1974 when the owner of the Oakland A's, Charles O. Finley, did not honor part of the contract of his star pitcher, Catfish Hunter.

Hunter was made a free agent by the independent arbitrator that was created by the 1970 Basic Agreement. Fans soon saw the now familiar sight of a prominent ballplayer marketing his services to the highest bidder.

The winning bid was placed by the team that would be the biggest player in the early years of the free agency that was created by the Basic Agreement of 1976—the New York Yankees. The bidding for Hunter had no legal impact on the creation of free agency, but it did open the eyes of players to the market possibilities of free agency..

Tests of Reserve Clause

Meanwhile, players were testing the limits of their contracts, which included a reserve clause that prevented them from offering their services to another team. The contracts had an automatic renewal clause that kicked in if a player did not sign a contract before the beginning of a season.

In 1974, New York Yankee reliever Sparky Lyle did not sign a contract until the last day of the season. San Diego Padre outfielder Bobby Tolan took it even further by going through the whole season unsigned before getting a new contract on December 9.

Legal Decision for Free Agency

In 1975, even more players went into the season unsigned. Pitchers Andy Messersmith and Dave McNally pushed for the most leverage by not signing during the season and then submitting their contracts to arbitration.

In the decision that established free agency, arbitrator Peter Seitz essentially stated that owners had the right to renew an unsigned player after March 1 for only one year, and then that player was free to negotiate with other teams. Messersmith took advantage of his new freedom to sign a big contract with the Atlanta Braves. McNally had retired during the 1975 season and had been lending his name to this test case.

The players' challenge of the reserve clause was motivated in part by the expiration of the current Basic Agreement on December 31, 1975. The arbitrator's ruling for Messersmith and McNally made the negotiations for the new Basic Agreement particularly challenging, and they stretched way into 1976.

Free Agency Added to Baseball Rules

Free agency became an official part of baseball rules on July 12, 1976, about a week after the big celebration of the 200th anniversary of the signing of the Declaration of the Independence in the United States. The new four-year Basic Agreement granted free agency to players after six years of major league service, and also restricted the number of teams with which they could negotiate.

The bidding began a few months later, after the second consecutive World Series championship by the Cincinnati Reds. The Reds had resourcefully used the player acquisition tools of the pre-free agent era to create one of the greatest teams of all time. Now they, along with the rest of baseball, would have to build their teams in a different way.

The Reds would be succeeded by the New York Yankees, who would snag the biggest prize of the first free agent offseason. Reggie Jackson had helped the Oakland A's win three World Series titles, and in very dramatic fashion would help the Yankees win two more. Jackson's postseason heroics in 1977 and 1978 helped to motivate many owners to explore free agency as a way to improve their teams.

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