View From The Bleachers

Talking Cubs Baseball Since 2003

Tuesday

26

July 2016

39

COMMENTS

Free Agency

Written by , Posted in General

Picking up where we left off last week, today’s Quickie will discuss the rules for free agency in the major leagues.

Readers of this space will recall that the reserve clause era ended at the conclusion of the 1975 baseball season. But that did not result in unrestricted free agency where a player could immediately go seek the highest pay he could find at the end of his contract year. Instead, the owners negotiated with the player’s union for new rules that would strike a balance between the owner’s desire for control versus a player’s right to sell his services at the highest price the market will bear.

The owner’s control begins with the amateur draft. When a player is drafted in the amateur draft, his team gains control for 3 years. He can be sent anywhere in the organization without restriction for three years.

If, at the end of three years, he is not on the 40 man major league roster, then he can be drafted by another team in the Rule 5 draft.  There is a cost to the team that drafts him. Namely, the player must remain on the drafting team’s 25 man roster for the entire season following the draft or he must be returned to the team from whence he was drafted.

If, on the other hand, he is on the 40 man major league roster, then he will begin to earn major league service time toward free agency. (Note that it is possible to earn free agency through minor league service time too, but I will not address minor league service time rules here.)  Once a player is placed on the 40 man major league roster, he may not be removed from that roster without his consent. Still, for the next three seasons, he continues to be controlled by his team. For the next three seasons, he can be optioned to the minors without restriction and his contract will be renewed automatically each year with his existing team.

After 3 years on the 40 man major league roster, a player qualifies for salary arbitration.  After six years of major league service time, a player qualifies for free agency. (Fans of Kris Bryant know that he was held back in the minors for a short period at the beginning of the 2015 season for the apparent purpose of forestalling Kris’ eligibility for arbitration and, ultimately, free agency. That could pay off big for the Cubs, though it is more likely that Bryant’s grievance over this will be settled and rolled into a negotiated multi-year contract before Kris qualifies for free agency.) There usually is a catch for the team signing a free agent. That is that the former team will qualify for a draft pick in the next Rule 5 draft, assuming it had offered salary arbitration to the player before he signed with his new team. That Rule 5 draft pick comes from the team that signs the  free agent. For example, the Cubs gave up a draft pick as compensation to the Cardinals for signing Jason Heyward last winter.

There are other perks that ball players earn through service time. The most important is the so-called 10/5 benefit. When a player has ten years of major league service and five years with his current team, then he earns the right to reject any trade involving him. Cubs fans saw an example of that with Ryan Dempster a few years ago when he would not approve a trade that would have sent him to the Braves. He had earned that right through accumulating the required service time under the deal the owners had negotiated with the players.

  • Loved both parts Brad. It’s good for all of us to have a refresher on this every now and then.

    • Brad Lyerla

      Thanks Lizzie. Good for me too.

  • Loved both parts Brad. It’s good for all of us to have a refresher on this every now and then.

    • Brad Lyerla

      Thanks Lizzie. Good for me too.

  • Ben

    Question why do we have to give up a first round draft pick for heyward? we just got him for money?

    • Seymour Butts

      We “stole” him from the Cardinals and they get compensated. Chapman will not cost a draft pick (assuming we pick him up) as he was traded for.

      • Ben

        How did we steal him he was a free agent and we just offered him more money. I dont get why we have to give up draft picks for signing a free agent. Im trying to compare this to football where if a team signs a free agent they just have to fork out money and they still gets thier draft picks. But in baseball we give the free agent money and give up draft pick for it. That makes no sense to me. I feel like that kinda ruins the power the team has and its farm system. I dont get these wierd quirks that the mlb has in terms of front office stuff.

      • CBPtOSU

        It’s always been this way in MLB in one way or another. If you sign a FA and their old team offered them arbitration (or under the new system a qualifying offer), you lose a draft pick. Back in 2009, Rich Harden was claimed off waivers in August, Hendry pulled him back because he felt he would get better with the draft picks, which required giving arbitration and then declined to give him arbitration over the winter because he felt Harden would accept it.

        We lost picks for signing Lackey and Heyward because the Cardinals made them the qualifying offer. If they hadn’t we wouldn’t have given up anything.

      • Ben

        How did we steal him he was a free agent and we just offered him more money. I dont get why we have to give up draft picks for signing a free agent. Im trying to compare this to football where if a team signs a free agent they just have to fork out money and they still gets thier draft picks. But in baseball we give the free agent money and give up draft pick for it. That makes no sense to me. I feel like that kinda ruins the power the team has and its farm system. I dont get these wierd quirks that the mlb has in terms of front office stuff.

      • AC0000000

        It’s always been this way in MLB in one way or another. If you sign a FA and their old team offered them arbitration (or under the new system a qualifying offer), you lose a draft pick. Back in 2009, Rich Harden was claimed off waivers in August, Hendry pulled him back because he felt he would get better with the draft picks, which required giving arbitration and then declined to give him arbitration over the winter because he felt Harden would accept it.

        We lost picks for signing Lackey and Heyward because the Cardinals made them the qualifying offer. If they hadn’t we wouldn’t have given up anything.

  • Ben

    Question why do we have to give up a first round draft pick for heyward? we just got him for money?

  • CBPtOSU

    You used to get draft pick compensation even if you acquired an impending free agent mid season. The pick the Angels used for Trout was a compensation pick for losing Tiexiera who was only there half the season. In the book Moneyball, there is a scene where Bily Beane says he traded for a player simply because he goes I’ll get better with the draft picks than with what I gave up to get him.

  • AC0000000

    You used to get draft pick compensation even if you acquired an impending free agent mid season. The pick the Angels used for Trout was a compensation pick for losing Tiexiera who was only there half the season. In the book Moneyball, there is a scene where Bily Beane says he traded for a player simply because he goes I’ll get better with the draft picks than with what I gave up to get him.

  • Brad Lyerla

    Compensating draft choices are something negotiated by the owners and the players. The basic concept is that although the players have the right to free agency, as negotiated in the Basic Agreement, there have to be offsets to maintain competitive balance. Competitive balance, it is argued, is in the best interest of the game and benefits owners and players alike.
    The worry is that the small market teams will develop talent and then lose it all to the big market clubs when players qualify for free agency. The compensating draft pick is to staunch that flow of talent and maintain competitive balance.
    It also makes free agency somewhat more expensive and might hold down salaries somewhat. It certainly plays a role in how teams behave around free agency, as cited by others in this series of postings.

    • CBPtOSU

      It’s also hurt the players who get the qualifying offers as teams don’t want to give up the draft picks. We saw that with Fowler this past winter, and in years past, Nelson Cruz and Stephen Drew.

      • Brad Lyerla

        Exactly.

      • CBPtOSU

        Drew was unsigned into May the year after he rejected the qualifying offer, because no one wanted to give up a draft pick for him. So what the Red Sox ended up doing is bringing him back for a pro-rated share of the qualifying offer. There is risk on both sides with offering the qualifying offer/arbitration. Maddux’s last year in Atlanta was 2003, but the Braves were expecting him to depart after 2002, and gave him arbitration to get the picks. He ended up accepting the arbitration.

      • Brad Lyerla

        CB, you should write a post. Call it ‘anatomy of a deal’ and walk the reader through the permutations of a hypothetical deal. See if Joe would post it as a guest posting.

      • CBPtOSU

        What do you suggest for the frame of such an article? It’s pretty straight forward. Give the QO, player accepts or rejects. If he rejects, if he signs with a new team, they lose a draft pick. If he signs with his old team, he’s back with them.

      • CBPtOSU

        Speaking of Maddux, here’s a stumper for you. Don’t look it up. From 1990-2008, Greg Maddux won the NL pitcher gold glove every year except 1. What year did he not win it, and who was the winner that year.
        2 hints:
        1. He was a teammate of Maddux at the time
        2. It was not Glavine or Smoltz

      • Brad Lyerla

        No clue.

  • Brad Lyerla

    Compensating draft choices are something negotiated by the owners and the players. The basic concept is that although the players have the right to free agency, as negotiated in the Basic Agreement, there have to be offsets to maintain competitive balance. Competitive balance, it is argued, is in the best interest of the game and benefits owners and players alike.
    The worry is that the small market teams will develop talent and then lose it all to the big market clubs when players qualify for free agency. The compensating draft pick is to staunch that flow of talent and maintain competitive balance.
    It also makes free agency somewhat more expensive and might hold down salaries somewhat. It certainly plays a role in how teams behave around free agency, as cited by others in this series of postings.

    • AC0000000

      It’s also hurt the players who get the qualifying offers as teams don’t want to give up the draft picks. We saw that with Fowler this past winter, and in years past, Nelson Cruz and Stephen Drew.

      • Brad Lyerla

        Exactly.

      • AC0000000

        Drew was unsigned into May the year after he rejected the qualifying offer, because no one wanted to give up a draft pick for him. So what the Red Sox ended up doing is bringing him back for a pro-rated share of the qualifying offer. There is risk on both sides with offering the qualifying offer/arbitration. Maddux’s last year in Atlanta was 2003, but the Braves were expecting him to depart after 2002, and gave him arbitration to get the picks. He ended up accepting the arbitration.

      • Brad Lyerla

        CB, you should write a post. Call it ‘anatomy of a deal’ and walk the reader through the permutations of a hypothetical deal. See if Joe would post it as a guest posting.

      • AC0000000

        What do you suggest for the frame of such an article? It’s pretty straight forward. Give the QO, player accepts or rejects. If he rejects, if he signs with a new team, they lose a draft pick. If he signs with his old team, he’s back with them.

      • AC0000000

        Speaking of Maddux, here’s a stumper for you. Don’t look it up. From 1990-2008, Greg Maddux won the NL pitcher gold glove every year except 1. What year did he not win it, and who was the winner that year.
        2 hints:
        1. He was a teammate of Maddux at the time
        2. It was not Glavine or Smoltz

      • Brad Lyerla

        No clue.

  • James

    Brad – What you’re describing is not the Rule 5 draft, but the first-year player draft (technically, the Rule 4 draft). Also, a compensatory pick is tied to a free agent *only* when their respective team makes a Qualifying Offer (not salary arbitration) and the player rejects it. In addition to losing draft picks for Jason Heyward and John Lackey, the Cubs would have received a compensation pick for Dexter Fowler (since they made him a QO and he rejected it) if he hadn’t re-signed with the Cubs.

    • Brad Lyerla

      Thanks for catching these errors. I am an amateur and, generally, have to research these things in order to write them up.

    • CBPtOSU

      Arbitration was the old system before the qualifying offer. There were 2 types of arbitration in those days. The team control arbitration (which we still have), and the FA arbitration (which has been replaced by the qualifying offer.) Under the old rules, FA had until December 7 to sign with their old team, or they wouldn’t be allowed to sign with them until May 1. Now, if they were offered arbitration, and they accepted, they would be bound to their team, and the arbitration process was exactly the same as the team control arbitration. If they rejected arbitration, they would have until January 8 to negotiate with their old team, before going into the May 1 pile.

      • Brad Lyerla

        My favorite thing about this is how much I learn from you guys. This is very enlightening.

  • James

    Brad – What you’re describing is not the Rule 5 draft, but the first-year player draft (technically, the Rule 4 draft). Also, a compensatory pick is tied to a free agent *only* when their respective team makes a Qualifying Offer (not salary arbitration) and the player rejects it. In addition to losing draft picks for Jason Heyward and John Lackey, the Cubs would have received a compensation pick for Dexter Fowler (since they made him a QO and he rejected it) if he hadn’t re-signed with the Cubs.

    • Brad Lyerla

      Thanks for catching these errors. I am an amateur and, generally, have to research these things in order to write them up.

    • AC0000000

      Arbitration was the old system before the qualifying offer. There were 2 types of arbitration in those days. The team control arbitration (which we still have), and the FA arbitration (which has been replaced by the qualifying offer.) Under the old rules, FA had until December 7 to sign with their old team, or they wouldn’t be allowed to sign with them until May 1. Now, if they were offered arbitration, and they accepted, they would be bound to their team, and the arbitration process was exactly the same as the team control arbitration, player and team exchange figures, and then either settle or argue why they should be paid what they want.

      If they rejected arbitration, they would have until January 8 to negotiate with their old team, before going into the May 1 pile. Under the old system, the Elias Sports Bureau would determine if you were a type A, type B, or type C free agent. Type A free agents would get you the signing team’s first round pick, and a “sandwich” pick, extra picks in between rounds 1 and 2. Type B FAs would net you a sandwich pick. Type C, nothing. The salary under the qualifying offer system is based on the average of the top 125 contracts I believe, and there is no ABC designation. Under the new system, the team losing the free agent does not get the signing team’s pick. The pick just goes away.

      • Brad Lyerla

        My favorite thing about this is how much I learn from you guys. This is very enlightening.