August 23, 2010

Contractual Matters

An Airing of Grievances

by Jeff Euston

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Two weeks ago, Francisco Rodriguez threw a perfect ninth inning against the heart of the Rockies’ lineup, closing out the Mets’ second 1-0 victory in four days. The appearance marked K-Rod’s 45^th game finished this season, putting him on pace to reach 100 games finished for 2010 and 2011 combined, an achievement that would guarantee the $17.5 million option for 2012 in his contract.

But in a span of 13 days, everything has changed. Rodriguez suffered a season-ending injury to the thumb on his pitching hand during a post-game altercation with his girlfriend’s father at Citi Field. In the resulting fallout, the Mets have converted his $37 million contract to a non-guaranteed deal, prompting the Major League Baseball Players Association to file a grievance challenging the club’s decision on K-Rod’s behalf. Though the Mets have not moved to void the contract altogether, any changes to a guaranteed contract are all but certain to be met with an argument from the players’ union. And if the recent history of similar high-dollar contractual disputes is a guide, the likelihood is slim that any unilateral decision by the Mets will stand.

An unpaid, two-day stint on the restricted list before the injury was discovered has already cost Rodriguez $125,683 in salary. He now finds himself on the disqualified list, earning no salary, with about $18 million remaining on his contract. He stands to lose $3,016,393 of his $11.5 million salary for 2010. But by converting the contract to a non-guaranteed deal, the Mets could conceivably release their closer before Opening Day next season and pay him a far lesser amount—30 or 45 days’ salary—in termination pay. So not only is Rodriguez’s remaining 2010 salary in dispute, his $11.5 million guarantee for 2011 is now in jeopardy, to say nothing of the chances that the 2012 option becomes vested.

What’s more, Rodriguez is not earning major-league service time, which is an issue for any player short of the 10 seasons necessary to earn full pension benefits after he retires. At 28 years old, he had accumulated seven-plus years of service as the 2010 season began. Although the dispute will prevent Rodriguez from reaching the eight-year mark this season, he shouldn’t have a problem getting his 10 years in, assuming his thumb returns to normal for 2011. Then again, no assumption is really safe at this point.

The dispute is the latest in a line of recent controversies for the Mets. In July 2009, the club fired vice president of player personnel Tony Bernazard after reports he had a series of angry confrontations with several people in the organization, including Rodriguez. In January, Carlos Beltran sparred with the club about his decision to have knee surgery, delaying his 2010 debut until July 15. The Mets reportedly explored the options of voiding his contract or converting it to a non-guaranteed deal before deciding to simply hope Beltran could recover and return to the lineup. More recently, left-hander Oliver Perez refused a demotion to the minor leagues, as was his right as a veteran player. Perez soon landed on the disabled list with tendinitis in his knee and was dispatched to the minors on a rehab assignment. Though he has returned to the Mets’ bullpen, he has thrown only 4 1/3 innings in four appearances since July 21.

Like the Beltran case, the K-Rod dispute involves an action by the player rendering him unable to perform. In paragraph three of the Uniform Player Contract (enshrined as Schedule A in the Collective Bargaining Agreement - .pdf warning), a player promises to “keep himself in first-class physical condition and to obey the Club’s training rules, and pledges himself to the American public and to the Club to conform to high standards of personal conduct, fair play and good sportsmanship.”

Two other provisions spell out scenarios allowing a club to void a player’s contract. Under paragraph 7(b)(1), a club may terminate a contract if a player fails, refuses, or neglects, “to conform his personal conduct to the standards of good citizenship and good sportsmanship or to keep himself in first-class physical condition or to obey the Club’s training rules.” And paragraph 7(b)(3) allows a team to terminate a contract if a player fails, refuses or neglects “to render his services hereunder or in any other manner materially breach this contract.”

But the dry language of a player’s contract is only a starting point. Any salary reduction or change in contract terms is a virtual invitation to the players association to contest the issue with a grievance, the procedure allowing a player or the union to challenge the action of a club at a hearing in front of an impartial arbitrator. Predictably, many cases are settled before the hearing—often on terms favorable to the players and the MLBPA.

The Padres attempted to void the deal of LaMarr Hoyt after he was arrested with illegal drugs while returning to the United States from Mexico in 1987. But arbitrator George Nicolau ruled that Hoyt’s deal was guaranteed under the CBA, prompting clubs to broaden the contract language spelling out scenarios when a contract could be terminated to include infractions such as violating the law, failing to be in playing condition, or refusing to play. Still, clubs hoping to void a contract have not met with much success. 

When Colorado’s Denny Neagle was charged with solicitation in 2004, the Rockies announced they were voiding his contract, which guaranteed the left-hander $19.5 million. The Players Association responded by filing a grievance, and the two sides agreed to a settlement which paid the pitcher $16 million.

Similarly, Baltimore tried to void the deal of starter Sidney Ponson in 2005 after a string of alcohol-related incidents, including driving while intoxicated. With one year and $10 million left on his contract, Ponson and the MLBPA challenged the Orioles’ action with a grievance. That case was eventually settled for an undisclosed amount a year later when Major League Baseball and the MLBPA agreed to settle nearly all outstanding grievances as part of the new collective bargaining agreement reached in October 2006.

However, one more recent example does provide the Mets a precedent for voiding K-Rod’s deal, should it come to that.

Just a week ago, a three-person arbitration panel denied the grievance of reliever Shawn Chacon, who contested the Astros’ 2009 termination of his contract after he had a physical altercation with Houston general manager Ed Wade and was released with $983,607 left on his one-year, $2 million contract.

 The Rodriguez case involves a multi-year contract with much more cash at stake, which should encourage both sides to find a compromise and settle their differences before a hearing. And obviously Chacon is more easily replaced than the Mets’ closer. But if K-Rod’s thumb does not allow him to return to form, the Mets now have an arbitration ruling they can point to as precedent to terminate his deal, if they choose to press the issue.  

Jeff Euston is an author of Baseball Prospectus. Follow @JeffEuston
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