Let's See The Owners Pitch Their Way Out Of ThisAaron Bernstein
In baseball, it's called a pickle. A runner, fooled by a good pick-off move, gets trapped between bases. He can't go to second or he'll be thrown out. And he can't return to first, where the ball is waiting. Either way, he's stuck.
Baseball's owners look to be caught in a pickle of their own design. Any day now, the National Labor Relations Board is expected to seek a federal court injunction in New York against the owners, based on an NLRB finding that the owners used unfair bargaining practices. If granted, the court order would restore the salary structure in place under baseball's last ratified contract, prompting Major League players to end their seven-month-old walkout. It also would set up a potentially costly confrontation.
JUST ONE OUT. If the owners let the players back into the stadiums on opening day, Apr. 2, they'll lose much of the leverage they've built up in bargaining. But if they lock out the players' union, as Boston Red Sox CEO John Harrington has threatened, the owners eventually could have to fork out $5.5 million a day in players' salaries--and, possibly, triple damages on top of that. The reason: Labor law typically forbids lockouts if employers have bargained unfairly. "A lockout runs the risk of back pay, and the clubs will be apprised of that," says Charles P. O'Connor, the league's chief labor lawyer.
The owners have one viable out: compromise before the NLRB crunch. Having wrung major concessions from the union since last August, the club owners still would come out ahead even if they agreed to a deal that doesn't give them everything they want. Ballplayers, anxious about losing a full season in pay, are eager to avoid an opening day showdown. As a result, the two sides finally have negotiated their way into the same ballpark. In the past month, the players have given in to the owners' demand for a mechanism to restrain salary growth. And the owners have ditched the salary-cap approach in favor of the union's idea of a luxury tax on teams with high payrolls.
But the owners still are haunted by past overaggressiveness. In December, they declared talks to be at an impasse and ended the existing salary arbitration and free-agency bidding systems. In their place, the clubs imposed the salary cap they wanted. Two months later, the NLRB warned owners that they probably had illegally jumped the gun because the two sides didn't seem to be at an impasse as federal law requires.
The owners have been dancing at the edge of the law ever since. They dumped the salary cap after the NLRB warning but refused to reinstate the old system. Finally, on Mar. 14, the NLRB's general counsel recommended that the agency seek a court injunction to restore the old system while talks continue. League lawyer O'Connor says the NLRB is misguided. The players say that the NLRB has sided with the right team. "This is not a good situation for the clubs," says Gene Orza, an in-house lawyer for the union.
ON THE HOOK. Although the owners continue to talk tough, locking out players after an NLRB injunction would heighten their risk dramatically. If the NLRB finds the lockout illegal, the league could be on the hook for players' salaries totaling some $1 billion for the season. That amount could be tripled if the lockout also was found to have violated the old contract's anticollusion clause. "If they got stuck with back pay and still had to reinstate the old rules, it would be a colossal failure," says Gerald W. Scully, a University of Texas management professor and the author of a book on the economics of baseball.
The irony is that the two sides aren't that far apart anymore. The union's latest proposal calls for a league tax of 25% on any club whose payroll exceeds the average for the league by more than 33%. The owners have countered with a 50% tax on clubs that exceed last year's average of $40.7 million per club. That sounds pretty close, but "everything is relative," says O'Connor. "And these aren't average people--on either side." True, this is baseball. But even in this strange business, logic eventually should triumph over emotion.