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Baseball Keeps on Swinging – Impact of COVID-19

Jun 23, 2020

From the dugout – and Jim Jacaruso, as he takes a look at the business side of baseball

This is part three of a multi-part series on Major League Baseball and some of the issues it’s facing in the time of COVID-19, especially in light of its relationship with its fans. You can read part one here; part two is here.

Notwithstanding the 2020 work quarantine is a result of this global COVID-19 pandemic, the legal and monetary issues faced by MLB and MLBPA are just as prevalent, if not more, in 2020. Since the current CBA expires at the end of December, the issues being discussed are a precursor to the negotiation of the next CBA.

MLB and MLBPA, working together to limit the pain, earlier this year agreed to drastic and innovative steps:

  • MLB agreed to advance players on the 40-man roster and the injured list $170 million dollars over the first 60 days of the original schedule, which covers through May 31. (Standard contract language allows salary suspension during a national emergency. The players agreed to this as a hedge against a season’s worth of wages, expected to be about $4 billion dollars.)
    • Veteran players will receive $4,775 per day for a total of $286,500.
    • Less veteran players will receive smaller amounts: $16,500, $30,000 or $60,000.
    • Minor leaguers with some MLB experience will receive $500 per day ($30,000).
    • Minor leaguers that have exhausted rookie status will receive $1,000 per day ($60,000).
    • The criteria for $275 per day $16,500) is not clear, but it may be minor leaguers at certain levels with no major league experience.
  • A joint (MLB and MLBPA) $1 million donation will be split evenly between Feeding America and Meals on Wheels.
  • Players will receive pro-rated service time for games played. There are approximately 187 days in the season and a player receives a full year of service time if he is on the active roster or injured list for 172 days. Service time is essential in determining arbitration and free agency eligibility.
    • If there is no baseball in 2020, players will receive the same service time in 2020 that they earned in 2019.
    • If there is a short season, as expected, players will receive a pro-rata number of service days.
  • A transaction freeze is in place, limiting player movements through options to the minor leagues or trades.
  • Players who do not complete suspensions in 2020 will not have their suspension carry over to 2021.
  • The June MLB draft was postponed until July, and the rounds will be limited to five or ten rounds rather than the usual 40, deferring bonuses to drafted players and capping bonuses to undrafted players.
  • Minor league players will receive their meal allowance in a lump sum, and weekly payments of $400 through May 31.

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James A. Jacaruso, Jr.

James A. Jacaruso Jr. is a Private Client Services Group Director with more than 25 years of tax compliance and planning experience focusing on personal and fiduciary income taxation, gift taxation and wealth transfer planning.

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