Here we sit in the middle of January still waiting for the two biggest free agents in the marketplace, Bryce Harper and Manny Machado, to sign new contracts for the 2019 season and beyond. The past several years the Hot Stove league has become a waiting game as players and agents hold out until the last moment to squeeze the most possible dollars out of ownership. Having had so many large free agency deals blow up in their faces, owners are getting smarter about handing out such monstrous contracts. The result is a lot of boredom for baseball fans until spring training arrives.
Well I'm getting tired of waiting, I need to talk about some baseball. Let's go over the history of the dreaded reserve clause in baseball and how free agency eventually came to be in the major leagues.
The Reserve Clause
In 1887 the National League officially introduced the Reserve Clause to all player contracts. The American League, which was formed in 1901, later adopted the same rule for its player contracts as well. The Reserve Clause essentially stated that if a player and a ballclub fail to come to terms on a new contract, the ballclub can renew the previous year's contract for the same salary for one additional year.
Most professional baseball players were poorly educated at the time and led to believe by the club owners that the reserve clause option could be perpetuated ad infinitum. That wasn't true, the option was only valid for one additional season. However when a player caved in to the owners' demands and signed a new contract, the new deal was once again subject to the Reserve Clause. This clause tied ballplayers to one team and prevented them from being able to negotiate with other clubs for their services.
Eventually some ballplayers figured out they were being screwed by the Reserve Clause and tried to fight against it. They were hampered by the U.S. government. In 1910 Congress declared professional baseball was a sport, not a business, so it was exempt form the Sherman Anti-Trust Act. Judge Oliver Wendell Holmes re-affirmed this policy in a 1922 Supreme Court decision. For the next 50 plus years, baseball players were forced to negotiate to play with the clubs that originally signed them unless they were traded or released.
Curt Flood and the MLBPA
In the 1960's, major league baseball players finally decided to unionize in order to get more favorable working conditions. The players had informal unions in the past, but they were always led by someone handpicked by the owners. These sham unions did little to help the ballplayers. In 1966 the ballplayers hired Steelworkers Union leader Marvin Miller to be the boss of the newly formed Major League Baseball Players Association (MLBPA).
At the time Miller was mainly hired to protect the players pension benefits since the pension was administrated by the Commissioner's Office i.e. the club owners. However Miller had much greater plans in mind. After studying the Uniform Players Contract, he came to the realization that the Reserve Clause was only valid for one additional season unless the ballplayer signed a new contract. He encouraged ballplayers who were unhappy with their situations to play under the option contract for one season and then sue for free agency.
After being denied by no less then the Supreme Court on several occasions, ballplayers assumed free agency was a pipe dream and would never come to be granted. They would hold out, but eventually sign a new deal instead of testing the waters. What Miller needed was a ballplayer who was so angry about his contract that he would be incited to withhold his services and sue the club owners.
Enter Curt Flood.
Curt Flood was a solid hitter who by the late 1960's had transplanted Willie Mays as the best defensive center fielder in MLB. After being paid $90,000 for the 1969 season, Flood asked the St. Louis Cardinals for a raise to $100,000 for 1970. The ballclub refused and traded him along with some others to the Philadelphia Phillies for slugger Dick Allen and other players. The Cardinals didn't even have the decency to inform Flood of the deal, he found out when a newspaper reporter called him at home to ask his opinion of the trade. After 12 seasons in St. Louis, Flood was angry about the treatment he received.
He also wasn't happy about being sent to Philadelphia. While the Cardinals were one of the better organizations in the National League, the Phillies were the worst. Flood had no desire to sign with the Phillies no matter what they offered, so with the backing of the MLBPA he sued for his free agency rights in January 1970. The highly public case rocketed through the judicial system until June 1972 when Flood was denied by the Supreme Court.
It was a major loss for Curt Flood, but it cracked the door open for the MLBPA to continue to pursue the end of the Reserve Clause. The Supreme Court held up Judge Holmes original opinion, saying it was up to Congress, not the Supreme Court, to subject professional baseball to anti-trust laws. Congress responded by saying the issues should be worked out through collective bargaining instead of government interference.
Ballclub owners could feel public opinion was turning against them and the government was tired of bailing them out, so in 1972 they made some concessions to the MLBPA to keep the players happy. While they seemed fairly innocent at the time, they soon led to the end of the Reserve Clause.
The most important concession made was contract disputes would no longer be decided by the Commissioner, who was elected and paid by the owners. Disputes would be settled through binding impartial arbitration, with both the owners and the MLBPA agreeing on the arbitrator. The table was set for a new age of Free Agency.
Catfish Hunter, the first Free Agent
After three consecutive 20 win seasons, James "Catfish" Hunter signed a two year $100,000 per season contract with Oakland A's owner Charlie Finley in 1974. Under the advice of his attorney, Hunter asked that he be paid $50,000 during the season and have Finley defer the other $50,000 into payments for a life insurance annuity chosen by Hunter as earned during the year for tax purposes. Finley agreed and the contract was spelled out this way.
What Finley didn't realize at the time was he couldn't write off the deferred payments as a club expense on his taxes until Hunter received them in the future. Realizing his lost benefits, Finley failed to make the payments to the annuity designated by Hunter. So in 1974 Hunter was basically pitching for half the money agreed to in his contract.
When Hunter found out Finley reneged on the deal, he had his lawyer start sending letters. Finley ignored them. Finally in August Finley offered to simply give Hunter $50,000. Hunter refused the money since it would screw up his tax planning and asked that it be used to purchase the annuity as designated in the contract. Finley refused.
According to the Uniform Players Contract, if a ballclub defaulted on payment a player should notify the club in writing and if the default is not corrected in 10 days the contract is terminated. After the World Series, which was won by Hunter and the A's, the MLBPA informed Finley the contract was terminated due to his default payments and petitioned Commissioner Bowie Kuhn to declare Hunter a free agent.
Kuhn, who was the owners' puppet, refused so the case was sent to binding impartial arbitration. Finley argued he tried to pay Hunter the $50,000 and Hunter refused to take the money, while the MLBPA countered Finley was supposed to use the money to buy an annuity, which he never did. After deliberating for 20 days, arbitrator Peter Seitz ruled Finley defaulted on the contract and therefore it was terminated.
"Catfish" Hunter was declared baseball's first free agent and Finley still had to purchase the $50,00 annuity, plus make interest payments. In 1975 Hunter signed a 5 year $3.75 million dollar deal with the New York Yankees.
Andy Messersmith and Dave McNally
Although Catfish Hunter was the first player granted free agency, the Reserve Clause was still in place. His situation was a one time deal since Finley violated the terms of his contract. Yet the Hunter case opened up the players' eyes as to what would be available to them if they were free to negotiate with all teams. Catfish became the highest paid player in MLB at a time when starting pitchers generally earned less than everyday players.
Coming off of a 20 win season in 1974, pitcher Andy Messersmith could not come to terms with the Dodgers for a new deal in 1975. He not only wanted more money than the Dodgers were offering, he also wanted a no-trade clause. Using the Reserve Clause, the Dodgers renewed Messersmith's 1974 contract and Messersmith pitched during the 1975 season without a new contract.
When August rolled around, Messersmith still hadn't come to terms with the Dodgers for a new deal. He contacted MLBPA leader Marvin Miller about his dispute and the two agreed he would sue for free agency after the 1975 season if he didn't sign a new contract to test the validity of the Reserve Clause.
Word filtered back to Dodgers owner Walter O'Malley, who offered Messersmith the money he asked for but held firm on not agreeing to the no-trade clause. Messersmith told Miller he would sign a new deal if O'Malley gave him the no-trade clause, meaning once again the Reserve Clause would not be tested.
Sensing that change was in the air since O'Malley was starting to cave, Miller searched the player records to find out if anybody else was playing on a renewed contract for the 1975 season in case Messersmith decided to sign. Veteran pitcher Dave McNally was traded from the Orioles to the Expos before the 1975 season and did not sign a new contract. The Expos renewed his 1974 contract and McNally started the season in their rotation before retiring after a wrist injury.
Miller contacted McNally to see if he would sue for free agency after the season was over. Since McNally retired and had no thoughts of making a comeback, he agreed. In the past players were afraid of being blackballed if they sued and lost. McNally had no such fears since he didn't intend on coming back. Now Miller had a backup plan if Messersmith signed a new deal. O'Malley, who was easily the most savvy club owner at the time, had no reason to offer Messersmith a no-trade clause since Miller found another test case.
The 1975 season concluded without Messersmith nor McNally signing new contracts. Each player said they had played out their option year and declared themselves free agents. Bowie Kuhn refused the notion, saying both players were bound to their respective clubs by the Reserve Clause. The players sued and the case was sent to arbitration.
The owners filed a suit in Federal court claiming the case was not subject to arbitration. The courts denied the motion. The arbitration hearing began on November 21, 1975 and lasted for three days. After testimony was over, arbitrator Peter Seitz told both sides he thought the issue would be best resolved through collective bargaining and gave each side several weeks to solve the problem in that matter. The owners refused to negotiate. On December 23, 1975 Seitz issued his ruling. The Reserve Clause only allowed ballclubs to renew a contract for one additional season. Both Messersmith and McNally were granted free agency.
The owners tried to have the verdict overturned in Federal courts, but were denied. Ballplayers around the Major Leagues were refusing to sign new contracts in order to gain free agent designation. The owners locked the players out of spring training in 1976, but that only pushed back the inevitable. The mythical status of the Reserve Clause was dead.
McNally stayed retired, he didn't seek out a new contract. Messersmith waited patiently as the owners tried to get the ruling overturned. Shortly after the beginning of the 1976 season, he signed a 3 year $1 million dollar deal with the Atlanta Braves.
Having been thoroughly defeated, the owners finally agreed to begin collective bargaining with the MLBPA. Understanding the fact that chaos would reign if every player suddenly became a free agent, the two sides agreed that a player would be tied to his original club for six seasons. After that the player would become a free agent. It is essentially the same system that is in place today.
This post is a very basic discussion on the history of the Reserve Clause and how Free Agency came to be in professional baseball. If you have more interest in the topic I recommend reading Marvin Miller's book "A Whole Different Ball Game" and Bowie Kuhn's book "Hardball" to gain perspective from both sides of the situation. Those two guys hated each other and take plenty of potshots at one other in their respective narratives.
Thanks for reading. Feel free to make any comments below.