Bonuses are an important element in any professional players’ contract and a means of increasing a player’s compensation. There are a number of different bonuses utilized in professional sports including:
(1) Signing Bonus – An amount paid by a team to a player for simply executing a contract;
(2) Volume of Play Bonus – Most popular in Major League Baseball and not based on skill, but on volume of play such as games started, games appeared, minutes played, plate appearances, etc.
(3) Performance Bonus – Based on skill and attaining a specified performance level, such as 3-point percentage, assists, rebounds, steals, points per game, interceptions, sacks, etc.
(4) Awards or Honor Bonus – To recognize a player’s achievements either individually or on behalf of a team standing, such as conference titles, NBA league champion, Most Valuable Player, All-Star Team, Rookie of the Year, All League Defense Team, Six Man Award, Defensive Player of the Year, Most Improved Player, All Rookie Team, etc.
However, Major League Baseball (“MLB”) has a rule that restricts certain bonuses. Major League Rule 3(b)(5) indicates:
“No Major League Uniform Player’s Contract or Minor League Uniform Player Contract shall be approved if it contains a bonus for playing, pitching or batting skill or if it provides for the payment of a bonus contingent on the standing of the signing Club at the end of the championship season.”
Therefore, in MLB, a bonus cannot be based on batting or pitching skill or where the club finishes in the standings. A bonus, however, can be tied to days spent on an MLB active roster during an MLB regular season and games played, games started, games finished, and/or inning pitched for pitchers and games played, games started, and/or plate appearances for position players. Awards such as MVP, Cy Young, Slugger, Gold Glove, and/or being named to an All-Star team can also be tied to an incentive bonus.[1]
There are three unusual MLB contracts in effect today that have bonus provisions that were approved by the Commissioner’s office and the players’ union, Major League Baseball Players Association (“MLBPA”). In November of 2007, an agreement was reached between Alex Rodriguez (“Rodriguez”) and the New York Yankees (“Yankees”) that gave Rodriguez a $30 million marketing package based on home run achievements. Under the agreement, Rodriguez could receive $6 million each for tying the home run levels of Willie Mays (660), Babe Ruth (714), Hank Aaron (755), and Barry Bonds (762), and an additional $6 million for breaking Bonds’ MLB record. Under the agreement, the Yankees have the right to designate each level as a historic event, enabling Rodriguez to receive the additional money in exchange for additional personal appearances and signed memorabilia for the Yankees. The marketing agreement indicates that it is “in the sole discretion of the New York Yankees to determine whether each of these milestones is commercially marketable as the home run chase . . . The Yankees have the right, but not the obligation, to determine whether it is a commercially marketable milestone.”[2] Each of the Rodriguez milestones were designated, if achieved, as “an historic event in order to receive special approval.” [3]
Albert Pujols (“Pujols”) joined the Los Angeles Angels (“Angels”) as a free agent for the 2012 baseball season after a historic eleven-year career with the St. Louis Cardinals. Pujols also has a unique contract, which includes a ten million dollar, ten year personal service contract with the Angels after his retirement. In addition, Pujols has a marketing provision patterned after Rodriguez’s contract that would pay him up to $10 million dollars for the marketing rights related to milestone accomplishments, including $3 million dollars for his 3,000th hit, and $7 million dollars if he breaks Barry Bonds’ all-time home run record, i.e. – 763 home runs.[4]
Finally, Ryan Zimmerman (“Zimmerman”) of the Washington Nationals agreed in February of 2012 on a deal adding $90 million dollars in guaranteed money over six seasons through 2019. There was a separate personal-service contract for $2 million dollars annually over five years starting with his retirement or the end of his contract. MLB and the MLBPA approved all these deals, deciding there was no strict prohibition against them at the time.[5]
In April of 2012, however, MLB and the MLBPA came to an agreement that MLB teams will no longer be able to offer personal service contracts or special milestone bonuses in future player contract. “Both milestones agreements and post-contract personal-services agreements raise issues under the terms of the Basic Agreement,” said union special adviser Rick Shapiro. “After discussions with the commissioner’s office, we agreed that they should no longer be permitted as a subject of individual negotiations between players and clubs.”[6] So, therefore, the Pujols, Zimmerman, and Rodriguez contracts were grandfathered in and are not affected by the change in the rules.[7]
So the question remains: why didn’t these particular contractual provisions raise eyebrows for MLB and the MLBPA? “The “milestones” payouts, for instance, appear to violate baseball’s longtime ban on bonuses for virtually all statistical achievements.”[8] In essence then, because the milestone payouts are not regarded as guaranteed money, a team could potentially use this device to avoid luxury tax bills through milestone bonuses and personal services contracts.
Rodriguez passed Willie Mays for 4th place on the all-time career home run list, connecting for home run number 661 on May 7, 2015. Rodriguez hit a liner off Baltimore’s pitcher, Chris Tillman, into a secure area just to the left of Monument Park Center Field in the third inning. Rodriguez sent a soaring shot in the first inning that Delmon Young caught by reaching over the top of the wall in right field.
However, the historic homer may now be shrouded in controversy. The Yankees, who were supposed to pay pursuant to the marketing provision of Rodriguez’s contract – a $6 million milestone bonus to Rodriguez once he tied or surpassed Mays, came out publicly for the first time on May 9, 2015 indicating they would refuse to pay the milestone bonus.
Presumably, the Yankees’ position is that since Rodriguez was suspended for all of last season (2014) for performance enhancing drug use, and all the hysterics surrounding those issues, the Yankees could not market his feats, which in essence would void their obligation to pay any bonuses. Once again, the Yankees have the right to designate the home runs as historical milestones bonuses according to the wording in the contract as reported. “It’s the sole discretion of the New York Yankees to determine whether each of these milestones is commercially marketable as the home-run chase,” according to the contract. “The Yankees have the right, but not the obligation, to determine whether it’s a commercially marketable milestone.” Brian Cashman, General Manager and Senior Vice President of the Yankees, indicated that “[w]e have the right, ‘not the obligation to do something. And that’s it. It’s not you do this, you get that. It’s completely different.’”[9]
Rodriguez will also point to the wording in the contract that requires the Yankees to act in good faith. But, of course, the Yankees could argue likewise that it is Rodriguez, in violating the MLB drug policy, who did not act in good faith. The Yankees have shown no effort to market the home run. There are no T-shirts, no memorabilia, and no public appearances with respect to homerun number 660.[10]
Without analyzing the actual marketing provision in Rodriguez’s contract it is difficult to assess with certainty as to whether the Yankees are obligated to pay Rodriguez. Given what has been released, the Yankees will base their position on “it is within their sole discretion to determine whether each of these milestones is commercially marketable.” It would appear that the Yankees have the right to determine whether Rodriguez reaching 660 homeruns was “commercially marketable” as a qualifying condition in order for the Yankees to pay him the bonus money. The use of the words “sole discretion” and “commercially marketable” have legal implications and will impact the case. The definition of “commercial marketability” ultimately will weigh on whether Rodriguez’s milestone homerun had the opportunity to increase sales such as tickets and merchandise, improved television ratings, or some other measurable.[11]
The Yankees probably have a totally different perspective on what “commercially marketable” means as it relates to Rodriguez. Rodriguez has become one of the most infamous athletes of all time and many baseball fans associate his name with lying, cheating, cover-ups, and feats not worthy of celebration. In a 2014 Sports Illustrated article entitled “The Most Disliked People in Sports,” Rodriguez was ranked second only to Donald Sterling of the Los Angeles Clippers. So the Yankees will probably take the position that the milestone feats are most difficult, if not nearly impossible, to market in the marketplace because of Rodriguez.[12]
Rodriguez will assert that payment has nothing to do with commercially marketable, but is a breach of contract in not paying a specifically stated bonus. Rodriguez will further assert that he was already punished for his steroid use under the terms of the Joint Drug Treatment and Prevention Program, and that non-payment of the bonus constitutes a second unauthorized punishment.[13]
Rodriguez was suspended for not only violating the Joint Drug Treatment and Prevention Program, but also for violating the Basic Agreement, which resulted in a 162 game suspension, i.e. an entire season suspension.[14]
Rodriguez attempted to cover-up his involvement with the Biogenesis Clinic and his conduct was deemed under the Basic Agreement to be “conduct detrimental to the best interest of the game.”[15]
Nonpayment by the Yankees will result in a grievance being filed by Rodriguez and ultimately a hearing before an independent arbitrator.[16] Rodriguez had thirty days from the date of the Yankees’ failure to pay the milestone bonus to file a grievance with the league.[17] Both sides have pushed back the deadlines in order to work out a resolution of the issue. On July 3, 2015, MLB and the MLBPA released a joint statement announcing a resolution of the dispute between the Yankees and Rodriguez for the $6 million milestone bonus in his contract. It reads in part:
As part of this resolution, Mr. Rodriguez and the Yankees have agreed that a total of $3.5 million in charitable contributions will be made by the Club, with $1 million going to the following charities that have long enjoyed the support of one or both: the Special Operations Warrior Foundation, the Boys & Girls Club of Tampa, and Pitch In For Baseball; and $2.5 million going to the MLB Urban Youth Foundation, which will use the money to further programs and initiatives aimed at increasing youth participation in baseball, particularly in urban areas. Commissioner Robert D. Manfred, Jr. will determine the initiatives to be supported by the $2.5 million contribution after consulting with Mr. Rodriguez, and taking into consideration the focus of Mr. Rodriguez’s past charitable contributions.
Neither party will have any further comment on the specific terms of the agreement and both look forward to focusing their energies on winning another championship for Yankees fans.[18]
This settlement only covers the first milestone bonus in Rodriguez’s contract, i.e. – homerun number 660. Rodriguez’s contract still contains another $24 million in milestone bonuses should he continue to climb the homerun list.
2015 has been a banner season for Rodriguez. Prior to the 2015 All-Star game, he was leading the Yankees with the following statistics: 82 games played with a batting average of .278 along with 18 homeruns and 45 runs batted in.[19] Rodriguez has also come back into grace with the Yankee fans. Maybe the milestones in the future will be given contractual credence.
Lori Shaw is currently a 3L at Marquette University Law School where she is focusing on Intellectual Property and Sports Law. Shaw is also the Managing Editor for the Marquette Intellectual Property Law Review and is a member of the Alternative Dispute Resolution Society and Labor and Employment Law Society at Marquette. Prior to coming to Marquette Law, Shaw double-majored in History and Political Science, with a Psychology minor, at Indiana University in Bloomington, Indiana.
[1] http://www.thecubreporter.com/book/export/html/3506
[2] http://riveraveblues.com/2015/05/cashman-confirms-yankees-arent-planning-pay-rods-home-run-milestone-bonus-118693/
[3] http://sports.espn.go.com/mlb/news/story?id=3126616
[4] http://www.forbes.com/sites/kurtbadenhausen/2014/04/23/albert-pujols-by-the-numbers/
[5] http://onlineathens.com/sports/2012-04-20/mlb-outlaws-pujols-perks
[6] http://onlineathens.com/sports/2012-04-20/mlb-outlaws-pujols-perks
[7] http://espn.go.com/mlb/story/_/id/7836171/mlb-union-deny-albert-pujols-type-deals-future
[8] http://espn.go.com/mlb/story/_/page/rumblings120420/baseball-banning-personal-service-deals-all-milestone-bonuses
[9] http://www.usatoday.com/story/sports/mlb/yankees/2015/05/02/alex-rodriguez-bonus-brian-cashman-660th-home-run-willie-mays/26774077/
[10] Id.
[11] http://www.si.com/mlb/2015/05/05/alex-rodriguez-yankees-660th-home-run-bonus-legal-analysis
[12] http://www.si.com/mlb/2015/05/05/alex-rodriguez-yankees-660th-home-run-bonus-legal-analysis
[13] http://www.si.com/mlb/2015/05/05/alex-rodriguez-yankees-660th-home-run-bonus-legal-analysis
[14] http://www.si.com/mlb/2015/05/05/alex-rodriguez-yankees-660th-home-run-bonus-legal-analysis
[15] http://www.si.com/mlb/2015/05/05/alex-rodriguez-yankees-660th-home-run-bonus-legal-analysis
[16] http://www.usatoday.com/story/sports/mlb/yankees/2015/05/02/alex-rodriguez-bonus-brian-cashman-660th-home-run-willie-mays/26774077/
[17] http://www.si.com/mlb/2015/04/23/new-york-yankees-alex-rodriguez-milestone-bonus
[18] http://ftw.usatoday.com/2015/07/new-york-yankees-alex-rodriguez-settlement-contract-milestone-mlb