Collective bargaining agreements in the major sports league in the United States of America are basically the list of agreements that are reached between the particular league’s owners and the league’s professional players. There are various provisions that fall under the CBA, like: Rookie Salary Cap, Franchise Tag, Salary cap, Guaranteed Contracts, restrictions on player mobility, disciplinary rules and many other rules and regulations. For this paper, we will look into the Salary Cap provision of the CBA between the three major leagues, NBA, NFL and MLB. As we all know in today’s world, players are allowed to sell their services to the highest bidder after a certain period of time. Salary Caps’ main function is to restrict the owners to a limited amount of budget to be spent on the whole team. This allows the league to keep a check on how much the teams are spending on their players. The first league to incorporate this was the NBA in the year 1984-1985 season. NFL had the similar restriction be put on its teams in 1994. MLB however, does not follow the salary cap provision. It follows what is called a luxury tax system, meaning it pays a tax penalty for every penny spent over a certain amount. This provision was contested during the 1994-1995 baseball strike. It allows for healthy competition and prevent one team from getting a fair advantage over another because they can afford more stars, allows the smaller franchises to remain in the game and also allow the league to do better so that fan following are spread across all the teams and not favouring only certain teams in the league. However, we will also see how the CBAs of various leagues have loopholes that the teams do exploit.
The NBA introduced the salary caps in the year 1984. It was the first major league to introduce this provision in their CBA. This provision was mainly accepted in NBA, because of the new system of open market bidding that was created, which created a huge stress on the teams with lower budget. This system was put in place so that all the teams have an equal chance of recruiting players that would ensure no team gets all the top talents in the recruitment process. The salary cap started out at $3.6 million, rose well over $99 million during the year 2017-2018, and today it stands at $119 million. However, NBA follows a Soft Salary Cap, which means that in some exceptional scenarios, the teams can spend well over the salary cap in order to retain the players that have been with them to ensure the fan base that is following that particular player. ?
As I have mentioned above, a similar salary cap structure was introduced in the NFL as well, in the year 1994. The salary cap then was $34.6 million, rising to a whopping $177.2 million by last year. However this number also means that it needs to be shared among the huge roster of 63 athletes (53 playing and 10 bench). The salary cap of $119 million in NBA on the other hand needs to be shared by 15 athletes. The salary cap in NFL is called the Hard Caps, i.e. the teams can;in no scenario spend over the stated budget for the team.
MLB is the only league in United States that does not follow a salary cap provision. Instead it follows its own system of paying a luxury tax. They pay this tax to every penny they spend over a certain amount. This difference in the salary cap, also can be seen in the results. MLB has seen, consistently, the similar teams in the playoffs and winning championship that are on a higher payroll as compared to other teams. This does create an uneven balance, however this provision is supported by the players who are provided with bigger and bigger pay checks every year.
NBA and NFL have certain salary caps and MLB budget is controlled by a certain luxury tax system. These provisions are very good and beneficial for the owners and teams as this allows them to have a well-rounded roster which can ensure them a better chance of making playoffs consistently. For the players, it might undermine their true potential price as they cannot be paid a certain amount even when they are worth it, allowing the owners to be able to press down the actual amount that the players might deserve in a free market. This article was able to find out the differences in how the provision of salary cap works within these major leagues. Salary Cap is a crucial element to keep a check on the spending limit of certain teams especially when they can are backed up by crazy billionaires and franchises who does not have an expenditure limit, and prevent the teams with smaller budget to fall out of competition.