In a rare show of complete unity, MLB and the MLB Player’s Union announced on Friday that all teams and player agents have been informed this month that clauses which include personal services of any kind in a contract will no longer be allowed.
The personal services ban does not include contracts already in place, such as the recent deals signed by Albert Pujols and Ryan Zimmerman with their respective teams.
In Pujols’ deal, a 10-year, $240 million contract that presumably takes him to the end of his playing days, the Los Angeles Angels also included an option for a 10-year, $10 million personal services contract after Pujols retires. In essence, Pujols would be paid $1 million per year to be an ambassador for the club.
So too for the recent contract of Zimmerman. In his deal with the Washington Nationals, a six-year, $100 million extension also included a personal-services option after his playing days are over.
The contract signed by Alex Rodriguez with the New York Yankees in 2007 also won’t be affected. That particular deal provides for a “marketing” package—$6 million bonuses for reaching Willie Mays, Babe Ruth, Hank Aaron and Barry Bonds on the all-time home run list, a package that could add $30 million to A-Rod’s bank account.
Pujols also receives marketing bonuses for several milestones, including $3 million for his 3,000th hit and an additional $7 million should he surpass the all-time home run record held by Bonds.
Specifically, it was Pujols’ deal with the Angels that precipitated the agreement between MLB and the union. Baseball has long had a ban on contracts that offer to pay out bonuses for any statistical achievement, and the fine print that referred to Pujols’ statistical achievements as “milestones” definitely blurred those lines.
In addition, MLB and the union stated that any contract including a personal services agreement after a player has retired is essentially unenforceable, since the player has retired and is no longer a part of the union or of MLB.
Angels’ owner Arte Moreno and Nationals’ owner Ted Lerner certainly did well to retain the services of players they deemed worthy of the money and the additional perks included in their contracts, and they did well to read between the lines in order to get the deals in place. However, it was clear that both circumvented the current rules in order to meet their objectives.
Now we know why the Angels were so secretive during last year’s winter meetings, huddled up in rooms away from the media. They had attorneys checking the fine print of MLB’s contract policies in order to make sure the Pujols deal passed muster.
It did pass muster, but now, MLB has to rewrite policy just to make sure deals like this don’t happen in the future.
While you will never find anyone connected to an MLB team that will agree, it’s clear that teams were using personal services agreements to attach more value to a contract. Rather than paying Pujols more money per year during his playing days, which would have raised the Angels’ luxury payroll tax liability, they attach money on the end that isn’t accounted for in terms of what’s counted for actual payroll.
Sneaky, but it worked. And now, the other 28 teams pay for the wheeling and dealing of both Moreno and Lerner.