Oct 30, 2012, 12:34 PM EDT
It’s free agent season! Yay! What’s free agent season?
I know most of you know this stuff, but in an effort to be welcoming to all of the new fans baseball’s blockbuster World Series brought into the fold this year, let’s run down the basics of baseball free agency so that we are not adrift on a sea of ignorance this winter.
What’s a free agent?
Simple: a player with no contractual commitments who is free (get it?) to sign with any team he chooses.
Who is a free agent?
The short answer: Anyone not under contract or not otherwise under team control. Those are players who have at least six years of service time on a major league 25-man roster and who do not have an existing contract with a team. Here is an exhaustive list of the guys who are eligible for free agency. Easy, right?
Wait, there are guys who will be free agents without six years of service time, right?
Yep, a few! Players with between three and six years of service time — and some with a little less than three years called “super twos,” but let’s leave that for now — are not free to change teams, but they aren’t in a take-it-or-leave-it situation with respect to their salary for the next season either. Rather, they are eligible for salary arbitration. We’ll get to the details about that in a second. In the meantime, know that sometimes a team doesn’t want to even play the arbitration game and will simply refuse to tender them a contract offer of any kind (i.e. the team will be said to “non-tender” the player) in which case he is free to sign with anyone, just like a guy with six-years of service.
What are these “options” I keep hearing about?
Say a player has a five-year, $50 million deal, and five years have passed. At that point, the contract is usually over. But not always. Sometimes the contract calls for a “team option,” a “player option,” or a “mutual option” at the end of the term. All that means is that built into the contract was an additional year at a given price which either the team, the player (or sometimes both) have the right to simply exercise in order to keep the player out of the free agent pool. If it’s a team option and the price is a bargain for the team, they’ll exercise it. If it’s a player option and the salary is better than the player thinks he can get on the market, he’ll exercise it. If those conditions don’t exist, the option will be declined and the player will go out on the free agent market.
So, we have all of these free agents, however they got there. Everyone now just goes Galt and the free market decides where they end up, right?
Not so fast, Mr. Rand. We’re almost there. There is one last wrinkle before the greenback bacchanalia begins. We have to deal with Qualifying Offers.
What’s a Qualifying Offer?
In the past, teams who lose a player to free agency could, under certain circumstances, be compensated for their loss by being given a draft pick from the team who signs the player. Kinda took a bit of the “free” out of free agency, given that it costs the signing team and by extension lowers the value of the free agent a bit. That has been radically changed with the new Collective Bargaining Agreement, but there is still an element of compensation involved.
Now, if a team losing a player to free agency wants draft pick compensation, they have to first make a legitimate one-year contract offer to that player equal to or greater than the average salary of the top 125 free agents from the previous winter based on average annual value. That will change every year, but for 2013, that salary is $13.3 million. In other words, if you have a free agent on his way out the door, you have to make him a one-year contract offer of $13.3 million in order to get a draft pick back from the team that ends up signing him. The offer must come within five days of the end of the World Series. That’s by this Friday.
Now, the player could just accept the offer in which case his old team has him for that $13.3 million (he has until seven days after the World Series to accept or decline). If he declines, he can still negotiate with his old team at a different price. If he declines the offer and signs someplace else, the old team gets a draft pick at the end of the first round of next year’s draft and the team which signs him loses a first round draft pick in the next draft. Exception: if the signing team had a top-10 pick in the next draft, they lose a second round pick instead.
I think so!
So, players can now sign anywhere?
Not right now. They can sign new contracts with their old teams now. The open free agency period in which players can sign anywhere begins at 12:01 AM this Saturday.
At any price?
And no salary cap?
Nope. Baseball loves freedom. Ask yourself: why do those leagues with salary caps hate America?
Do the salaries get nutzoid?
It comes and goes. Baseball goes through cycles in which, in some years, teams hand out ridiculous contracts to players, often way more than they’re owed. Then in other years they come back to a more frugal footing and dollars are harder to come by, especially for the non-superstar free agents. The sense around baseball right now is that this winter is going to be a bit crazy, as new television deals for the league and many local TV deals for teams are giving team owners at least $30 million more a year in their pockets than they had last year. Sometimes much more. That, combined with (a) baseball’s overall financial health and; (b) the fact that not as many good young players are hitting the market as they used to due to teams signing younger players to longer contracts before they hit the market, means that the bidding may soon get fierce for the available talent.
So what was this arbitration you mentioned earlier?
Guys with zero to three years of service have to take whatever salary the team gives them. Sorry, dudes. Sucks to be you. However, arbitration-eligible players — guys with between three and six years of service — have some salary leverage. They can’t freely change teams, of course, but they can enter into a negotiation with their teams each winter over what next year’s salary will be. If they agree — and they can negotiate about it for months if they want — great. If not, they enter into an arbitration hearing in Februay in which the player argues that he should be paid X and the team argues that he should be paid Y. A panel of arbitrators decide who wins. They can’t split the baby here: they pick either the player’s or the team’s proposed salary.
OK, I think I got it all. Anything else?
Nothing I can think of. But if you think of any other questions, put ‘em in the comments, and we or our well-versed readers will tackle it.
And be careful out there. With free agent season come free agent rumors, which are a whole ‘nother topic. Just don’t believe anything you hear about a player’s potential destination. Unless, of course, you hear it from us …
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