MLB, Commissioner, Teams Hit with Antitrust Class Action Over Minor League Salaries

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A proposed class action alleges Major League Baseball and all 30 teams have routinely and openly colluded to restrict and depress the wages and compensation paid to minor league players. 

The 57-page antitrust lawsuit filed in Puerto Rico says that in order to “monopolize” minor leaguers and keep their salaries below market rates, the “MLB cartel” has utilized a reserve clause provision in players’ contracts. The reserve clause allows a team to retain the contractual rights to a player and restrict their movement and ability to negotiate with other teams for baseball services and compensation, the suit states.

More broadly, the reserve clause at issue preserves MLB’s status as the lone decision-maker in its minor league system, as it illegally keeps artificially low the compensation paid to players and restricts their contractual mobility, the lawsuit alleges. 

“Defendants’ conspiracy and agreement to restrain trade in the market for the employment of minor league baseball players has had an adverse effect on interstate commerce in Puerto Rico and nationwide by lowering the compensation minor leaguers receive and spend throughout the United States,” the plaintiff, a former minor leaguer in the Kansas City Royals’ system, argues.

According to the lawsuit, the fact that minor leaguers, who are acquired by teams through either an amateur draft or free agency, do not belong to a union has allowed the MLB and its teams to keep players’ wages artificially low. The case alleges that since MLB controls entry into the highest levels of baseball, and given young players’ strong desire to enter the industry, the defendants have “exploited” minor leaguers by paying anti-competitive, fixed salaries below the minimum wage and without overtime pay, and sometimes by paying no wages at all. 

Per the suit, the amateur draft implemented by MLB in 1965, now called the Rule 4 draft, has limited players 18 to 22 years old from the U.S. and abroad looking to enter the league’s developmental system to negotiating only with the team that drafted them. MLB rules dictate that each team use the same uniform player contract (UPC) when signing previously unsigned amateur players, and these contracts grant an MLB team the exclusive rights to a player for roughly seven years, the case says. 

As the lawsuit tells it, MLB has intentionally set the rules so as to allow minor league teams to sign Latin American players from the Dominican Republic and Venezuela as early as the age of 16. Over 40 percent of all minor league baseball player signees are Latin American, the case says. 

Although the team who holds the rights to a player can in turn assign those rights to any other team, and MLB may terminate a player’s UPC at any time for almost any reason, a minor leaguer is afforded no such mobility, the complaint stresses. 

“The UPC traps a player in the minor leagues of a single organization,” the lawsuit says. “A minor leaguer selected in the amateur draft can only sign with the MLB team that drafted him. For the next seven years, the MLB team controls the minor leaguer’s rights.” 

By the time a player’s UPC expires, much of the minor leaguer’s value as a young prospect has diminished because the player has aged, the complaint relays. 

According to the lawsuit, salaries beyond a minor leaguer’s first year are fixed and similar across all franchises. The suit states that MLB currently imposes a salary of less than $12,000 per year for Rookie- and Short Season Class A-level baseball; $14,400 per year for Class AA; and $16,800 per year for AAA ball. Salaries are paid to minor leaguers only while the season is occurring, or typically five months out of the year, according to the case. 

Despite being compensated for only a portion of the calendar year, minor leaguers are required by MLB’s UPC to perform professional services on a yearly basis, the filing states. 

The proposed class action marks the latest attempt by players to chip away at MLB’s long-held exemption from federal antitrust laws. In 2020, MLB cut ties amid the pandemic with 43 minor league franchises nationwide, about a quarter of the teams in the minor league system, in a move seen by many, including members of Congress, as a greed-based blow to talent development, fan loyalty and communities far from a major league team or where tickets to major league games are cost-prohibitive. 

More recently, MLB locked out its own players at 12:01 a.m. on December 2, 2021 as the 2016 collective bargaining agreement between the two sides expired. Issues at the center of baseball’s latest labor trouble concern compensation for young players and placing limitations on teams “tanking” during the season so as to gain higher slots in the MLB draft. 

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