Major League Baseball approved of a payment plan with its players union that will guarantee partial compensation for the 2020 season, which has been postponed due to the coronavirus, according to people familiar with the agreement.
The deal, which was ratified by MLB owners on Friday, includes a total of $170 million that will be distributed to players via a tiered system, options to reformat the postseason and modifications to the upcoming amateur draft. Only players on a big league or split contracts (veteran players on minor league deals) are eligible to receive compensation.
MLB had no immediate comment on the deal, though one official told CNBC the agreement is "a basic understanding of how [the league and players union] will work together to navigate uncharted territory."
Completing the agreement was essential both sides to avoid addressing economic disputes once play resumes, as the MLB doesn't operate under a salary cap like the National Football League or National Basketball Association.
The MLB started discussions on the agreement with the players union shortly after the league delayed the start of the 2020 regular-season due to the coronavirus pandemic. The season was originally scheduled to start Thursday. The league has not decided on a new start date yet.
As part of the deal, owners also agreed service time for players would count for 2020 whether or not a season is played. Players who are scheduled to become free agents following this year will still be eligible and not lose a year if this year's season is fully canceled.
The stipulations mean the Los Angeles Dodgers could suffer a big hit if the season never happens.
The Dodgers traded for star outfielder Mookie Betts in a transaction with the Boston Red Sox that included pitcher David Price. With service time secure, Betts can depart during next offseason without playing a game in a Dodgers uniform.
Before the coronavirus suspended play, Betts was scheduled to make $27 million for the 2020 season. He's scheduled to hit the market as an unrestricted free this coming offseason.
The deal also puts into question of players like New York Yankees slugger Giancarlo Stanton. Though unlikely, Stanton, 30, is eligible to exercise an opt-out clause in his contract, which could make him a free agent after this year. Stanton will make $29 million next season as part of a 13-year, $325 million deal he signed in 2014 as member of the Miami Marlins.
Should the MLB get through a regular season, the agreement also includes a "one-time" reformatting of the postseason, which gives league officials the right to expand the playoffs, and perhaps change venues to neutral locations.
In addition, USA Today reported June's amateur draft would be reduced to five rounds instead of 40.