A Looming Lockout: The Salary Cap and MLB CBA Negotiations
Throughout its long history, Major League Baseball has often been at the center of labor relations issues. Since the creation of the Major League Baseball Players Association (MLBPA) in its current form, there have been nine work stoppages, both in the form of strikes from the players and lockouts from the owners. While each stoppage had an individual catalyst, they all focused primarily on how money is distributed between the players and the owners. The worst stoppage in MLB history came on August 21st, 1994, and lasted until March 31st, 1995—a time period that included the World Series. At its core, the 1994 stoppage centered around one concrete issue: the salary cap. MLB owners wanted to adopt a similar salary cap structure to the NBA and NFL, a proposal that the MLBPA saw as a threat to players’ earnings across the league. The strike lasted 232 days, finally ending when the National Labor Relations Board issued an injunction, an effort led by future supreme court justice Sonya Sotomayor. Now, 32 years later, the MLB stands on the precipice of yet another stoppage, with the salary cap again at the forefront of negotiations.
Salary Caps
Salary caps are a relatively recent development in the North American professional sports world. Historically, in the United States, the salaries of professional athletes were governed solely by the principles of free market economics. However, in the 1980s the main revenue source for many teams began to shift from ticketing to TV deals and merchandising. This shift provided a massive advantage to big market teams, who were now able to pay players more than their small market counterparts, attracting the best free agents and leading to a competitive imbalance. To combat the imbalance, leagues across North America began to adopt salary caps, beginning with the NBA in 1984, the NFL in 1994, and the NHL in 2005. Among these leagues, there are small differences in how the salary cap was implemented, but the central concept remains the same: cap player salaries in order to maximize competitive balance between big-market and small-market teams. Of the major North American professional sports leagues, only the MLB has refrained from implementing a true salary cap.
Instead, the MLB uses a luxury tax system. This system taxes teams that carry payrolls above a certain threshold, with that tax rate increasing with every consecutive year the team is above the threshold. According to the current MLB Collective Bargaining Agreement (CBA), the luxury tax threshold for the 2025 season was $241 million. At the end of the 2025 season, nine teams exceeded this threshold, with the highest payroll belonging to the Los Angeles Dodgers, who paid $169,375,768 in luxury tax. Critics of this system argue that the luxury tax provides an advantage to bigger market teams, who can sign big free agents to massive contracts, choosing simply to pay the tax in exchange for getting the best players. The tax dollars collected from the luxury tax are partially distributed down to small-market teams. However, those teams enjoy complete discretion to spend the money how they see fit, which doesn't necessarily include on-field performance.
The Two Sides
The MLB and its owners insist that the league has the worst competitive balance in sports. They believe that it is time for the MLB to join their peers and fully implement a salary cap system, and the fans largely agree. In a survey done by The Athletic, 60% of fans said that they want to see a salary cap and floor implemented in the upcoming CBA. Fan frustration is primarily directed at billionaire owners who choose to limit payroll expenditures rather than at those who spend heavily to acquire top free agents. The league recognizes the growing fan concern, and MLB Commissioner Rob Manfred seems to be dead-set on addressing them in these upcoming CBA negotiations.
The current proposal on the table from the owners and the league includes a $171.2 million salary floor and a $245.3 million salary cap, with players receiving 50% of league revenues. Under this proposal, eight teams would have to reduce their payrolls: the Los Angeles Dodgers, New York Mets, New York Yankees, Toronto Blue Jays, Philadelphia Phillies, Boston Red Sox, San Diego Padres and Atlanta Braves. Twelve teams would need to increase their payrolls in order to meet the floor: the Miami Marlins, Cleveland Guardians, Tampa Bay Rays, Chicago White Sox, St. Louis Cardinals, Washington Nationals, Pittsburgh Pirates, Minnesota Twins, Milwaukee Brewers, Oakland Athletics, Colorado Rockies and Cincinnati Reds. This deal, the owners argue, would lead to more money spent on players as a whole, with lower-payroll teams increasing their spending by $621 million, and higher-payroll teams decreasing their spending by $577 million. The League agrees with the owners that implementing this system would improve the competitive balance of the league overall. They argue that while some stars would have to take pay cuts to ensure the team could flesh out their rosters, it would lead to an increase in mid-level players’ salaries and would force small-market owners to spend more on the field.
The MLBPA disagrees entirely with the League’s assertion that competitive imbalance is the biggest issue facing the game today. The players argue that since 2000, the MLB has had 18 different World Series winners, as opposed to 14 different Super Bowl winners, 12 Stanley Cup champions, and 11 NBA Champions during that same amount of time. Most recently, the Tampa Bay Rays and the Milwaukee Brewers became the first two teams to clinch a spot in the 2026 playoffs, two teams who sit at 27th and 19th in the MLB payroll rankings for 2026. Only three days after the Rays and Brewers clinched a playoff berth, the N.Y. Mets, who have the second-highest payroll in all of baseball, were mathematically eliminated from contention.
The interim director of the MLBPA, Bruce Meyer, argues that owners should not be allowed to spend less on players in order to reduce a non-existent competitive imbalance. The association argues that regardless of the existence of a cap or a floor, the Los Angeles Dodgers will remain at the top of spending, and the Miami Marlins will remain at the bottom. According to the players, this evidence does not signify an imbalance between small and big markets, but rather a lack of willingness to spend money on the field. Under the current system, Meyer argues, all teams have the financial ability to invest freely in player payroll. Instead, certain teams choose to limit spending and then point to payroll disparities as evidence of competitive imbalance, when it is clear that all teams have the ability to spend at comparable levels. The MLBPA’s position is clearly illustrated in the contrast between a lower-spending team like the Miami Marlins and aggressive spending teams like the San Diego Padres. The Marlins currently maintain the lowest payroll in all of baseball, coming in at $83 million in 2026. The Padres have the 7th-highest payroll, $236 million in 2026. Under the league's reasoning, one would assume that the Padres play in a much bigger market than the Marlins, therefore accounting for the disparity. However, the data proves otherwise. San Diego County has 3.4 million people, while the Miami metropolitan area is home to 6.4 million. So why the disparity? The players place the blame directly at the feet of the ownership. The Seidler family, who owned the San Diego Padres in 2025-2026, made an effort to sign big-time free agents like Xander Bogaerts and Manny Machado. Meanwhile, Miami Marlins owner Bruce Sherman seems more interested in the new mall outside the Marlins stadium than going after big free agents.
Potential Implications
When staring down the barrel of another lockout, it is easy to forget just how wide-ranging the consequences could be. In 1994, the owners lost around $1 billion over the course of the lockout, with the players losing millions in salaries. Arguably more devastating, however, was the effect the lockout had on all the other businesses and individuals who rely heavily on Major League Baseball. These are the restaurants and hotels surrounding the stadiums, the vendors who supply concessions for the stadiums, the taxis and Uber drivers who shuttle people to and from games, and thousands more people who rely on the game of baseball to earn their livelihood. Considering the astronomical growth of the game in the 32 years since the 1994 strike, the magnitude of a modern lockout is difficult to comprehend.
Sitting at the core of the disagreement between players and owners is a fundamental disagreement about the state of baseball. The owners argue that big market teams have an unfair advantage over their small market peers. The players argue that low-spending owners simply need to invest more in the product on the field. This fundamental disagreement between players and owners makes a swift resolution unlikely. With a lockout looming, it is difficult not to draw parallels between the current negotiations and the negotiations in 1994, which led to the largest strike in MLB history. That strike ultimately ended with an injunction from the National Labor Relations Board, and had drastic implications on the game of baseball for years to come. It remains to be seen what kind of impact another strike of the same magnitude would have on baseball today.
*The views expressed in this article do not represent the views of Santa Clara University.
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