Major League Baseball (MLB) and its players’ union have executed a new five year collective bargaining agreement (CBA) that will run through the 2016 season. The highlights of the new CBA include blood testing for Human Growth Hormone (HGH) and a rise in the minimum major league salary from $414,000 to $480,000 in 2012 and $500,000 by the end of the deal. In addition, the pact will expand the current playoff format to 10 teams by 2013 and introduce luxury taxes on both annual draft signings and international free agent signings.

The new labor pact, which replaces the current CBA that was set to expire on December 11th, guarantees labor peace in Major league Baseball for an unprecedented 21 consecutive years. This will represent the longest period of labor peace since the creation of the MLB Players Association in 1966.

“Nobody back in the ‘70’s, 80’s and early 90’s, would ever believe that we would have 21 years of labor peace,” MLB Commissioner Bud Selig said. 

Those players who test positive for HGH will face a 50-game suspension. This penalty mirrors the current first-time penalty for a positive steroid test.

“The players want to get out and be leaders on this issue, and they want there to be a level playing field,” MLB Players Association executive director Michael Weiner said.

The implementation of the HGH testing places MLB ahead of the National Football League (NFL) and makes it the first major North American professional sports league to require such testing. The NFL wanted to start HGH testing this season after a tentative testing protocol was agreed to in the league’s new labor agreement. To date, the NFL Players Association has failed to agree to the specific details of the NFL testing program and the program is currently being held in abeyance.

The new MLB agreement also contains restraints on the bonuses paid to amateur free agents, including players signing their first professional baseball contracts from high school and colleges, as well as those free agent players coming from abroad who are currently not subject to MLB’s annual amateur draft.  There will be five levels of tax, ranging from 75 percent for teams that exceed the specific team threshold by 0-5 percent to a maximum of 100 percent tax on the gross amount of the signing bonuses paid which exceed the bonus threshold as well as the loss of future first round draft picks. For players selected in the 11th round and beyond, teams may execute contracts with signing bonuses of up to $100,000 without the signing bonus amount counting against the team threshold. In addition, draft picks will no longer be able to sign major league contracts and avoid the impact of the bonus tax threshold.

For international free agents, such as players from the Dominican Republic and Venezuela, a separate threshold and tax with penalties will begin during the July 2012-June 2013 international signing period.

Free agent compensation will also be completely revised following the 2012 season. The current system, which awards the team losing the free agent draft picks from the team signing the free agent player, will be replaced. Teams will now have to offer its former players who became free agents the average of the top 125 contracts in MLB – currently about $12 million – to receive draft-pick compensation if a player signs with a new team.

The new agreement also modifies the current agreement’s salary arbitration eligibility provisions. After the 2012 season, 22% of the players with at least two years but less than three years of major league service will become eligible for salary arbitration. This increases the number from the current 17% and will result in approximately 5 additional players being eligible for salary arbitration each season.

The new agreement will also result in the shift of the Houston Astros franchise from the National League Central Division to the American League West Division in 2013. This realignment, the first in MLB since the Milwaukee Brewers joined the National League after the 1997 season, will result in each league containing 15 teams and create an expanded playoff system. The new playoff structure will increase the number of eligible playoff teams to 10, five each from the National League and American League. The two wild card teams in each league (the non-division winners with the best overall records) will meet each other in a one-game playoff.