The Seitz decision was a ruling by arbitrator Peter Seitz on December 23, 1975 which declared that Major League Baseball players became free agents upon playing one year for their team without a contract, effectively nullifying baseball's reserve clause. The ruling was issued in regard to pitchers Andy Messersmith and Dave McNally.
Since the 1880s, baseball owners had included what was referred to as the reserve clause in every player contract. The agreement allowed teams to renew a contract for a period of one year following the end of a signed contract. Since owners rarely allowed players to play without signing a new contract the process had the effect of holding the player to the team with which he first signed indefinitely. This eliminated all market competition and kept salaries relatively low.
In 1975, Messersmith of the Los Angeles Dodgers and McNally of the Montreal Expos were the only two players playing on the basis of this reserve clause. Since neither signed a contract during that option year, both insisted that they were free to sign with other teams the following season. The owners disagreed, arguing that under the reserve clause the one-year contracts were perpetually renewed.
The two players submitted the grievance to arbitration, and Seitz later issued his ruling that Messersmith and McNally were free to bargain with other teams because organized baseball could not maintain a player's services indefinitely.
MLB appealed the decision to the United States district court for Western Missouri, but Seitz' ruling was upheld on February 3, 1976 by Judge John Watkins Oliver, and later by the 8th Circuit Court of Appeals.Kansas City Royals Baseball Corp. v. Major League Baseball Players Ass'n, 409 F. Supp. 233, 261 (W.D. Mo. 1976) aff'd, 532 F.2d 615 (8th Cir. 1976) After all appeals were exhausted, Major League Baseball and the Major League Baseball Players Association signed a new agreement in 1976 allowing players with six years experience to become free agents.