When I started the day yesterday, I had no idea that I would be writing about the reserve clause for today’s Afternoon Quickie. But Sherm brought it up yesterday morning. We were commenting on the behavior of ball player’s and it was his theory that players today are more motivated by money than by a love of the game or loyalty to a team. He argued that it used to be better. I countered that it probably isn’t much different today than it was before because there have always been bad teammates, greedy owners and other jerks in the game.
But Sherm started me wondering about how much has changed in baseball since players’ salaries ballooned after the advent of free agency. This is the first installment of what will probably be a two-parter. In this first installment, I want to sketch out how free agency came about in the first place. Next time, I will write about the changes it has wrought.
We begin at the end of the National League baseball season of 1879. That year some owners introduced what became known as “the reserve clause”. This was a clause in a baseball player’s contract with his team that required that at the conclusion of the one-year contract, the player could not negotiate with any other team. Rather, the player agreed that he would negotiate for the next year only with the team with whom his contract had just expired.
Soon, all the owners were requiring ‘reserve clauses’ in their contracts with individual players. This had the effect of making a player the exclusive property of his ball club once he signed his first contract. Because there was no amateur draft until 1965, a player before then was a free agent until that first contract. But thereafter, the reserve clause prevented him from negotiating with anyone other than his current owner. This, of course, had the effect of preventing competition among owners for the services of baseball players from contract to contract. That, in turn, suppressed the price of those services.
In 1892, congress passed the Sherman Antitrust Act. It prohibited concerted action in restraint of trade. Lawyers saw a problem for baseball. The conduct of the owners in concertedly requiring the reserve clause in player contracts looked like a violation of the Sherman Act. The issue did not come to a head until 1922.
At that time, the Supreme Court decided a case called Federal Baseball Club v. National League. The Court ruled for the owners, but on grounds having to do with the limits of congress’s power, not on the merits of whether the owners had acted anti-competitively. Oliver Wendell Holmes, Jr. wrote for the Court. He reasoned that baseball is not in interstate commerce. According to his opinion, major league baseball is just a collection of private teams that arrange for baseball exhibitions that each occur within a particular state. Because that activity does not occur in interstate commerce, the Sherman Act does not apply to Major League Baseball. Major league baseball not in interstate commerce!?! That, of course, was pure nonsense then and is more so today. But the decision has never been over-ruled. It lives on and is sometimes cited as the worst piece of legal reasoning ever to have been penned by Justice Holmes, one of our greatest jurists. (Baseball gets the best of even the very smartest of us eventually. He was a Boston fan, so . . . you know.)
Despite its obvious anti-competitive effect, it was not the courts that ended the reserve clause. That happened in a series of arbitrations conducted in the ‘70s under the player’s Basic Agreement. In 1965, the players formed a union and the union negotiated the first Basic Agreement with the owners. The BA incorporated the reserve clause – that is, the union agreed that the clause was retained as a part of every player’s contract with his team. But the BA also set up a grievance process that included arbitration. Eventually, that process would be the undoing of the reserve clause.
It seemed to some that the reserve clause had always had a loophole. What would happen if a player negotiated in good faith for a year, but did not agree to a new contract? Would he in the following year be a free agent?
In the 1974 season, Catfish Hunter had a grievance with Charlie Finley, owner of the A’s. Hunter was the reigning Cy Young award winner, but Finley had not funded certain deferred benefits in violation of Hunter’s contract. Hunter had the contract voided for the year, meaning that he had played for a year with no contract. The arbitrator ruled that Hunter was, therefore, a free agent for the 1975 season. He signed an enormous new multi-year contract with the Yankees.
The next year, Andy Messersmith of the Dodgers and Dave McNally of the Expos, did not sign a contract and played for the season unsigned. (McNally had actually retired half way through the season, but did not complete the documentation to make his retirement official.) At the end of the season, the union, on the players’ behalf, initiated arbitration and Messersmith and McNally were declared free agents for the 1976 season. Effectively, this was the end of the reserve clause. Every player could achieve free agency by playing with no new contract for a year (during that year, their compensation would be determined under the BA).
In the next Basic Agreement, the reserve clause was removed and free agency became available to all players subject to a set of restrictions, which were negotiated into the BA. I will describe those restrictions the next time.