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And now, a free agency primer

Oct 30, 2012, 12:34 PM EDT

Money Bag

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.

The basics:

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.

Got that?

I think so!

Good!

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?

Yep.

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 …

  1. dawgpoundmember - Oct 30, 2012 at 12:46 PM

    I know it has nothing to do with free agency, but the rule 5 draft is another way a player can change clubs in the off season. Any player not on a teams 40 man roster can be selected during the rule 5 draft but must remain on that teams 25 man roster the entire next season. When are the dates for those?

    • sknut - Oct 30, 2012 at 12:53 PM

      Usually the Rule 5 draft is at the Winter meetings, sometime in early December if memory serves. Its a good chance to take a flier on a guy.

      • D.J. Short - Oct 30, 2012 at 12:59 PM

        It’s on December 6 this year, the last day of the winter meetings.

    • mirmz - Oct 30, 2012 at 1:32 PM

      Is it really ANY player not on the 40-man roster, or does the player in question have to have a certain amount of minor league experience without being placed on the 40-man roster? I always thought there was a year threshold a player had to meet before he was eligible for Rule-5.

      • hk62 - Oct 30, 2012 at 2:42 PM

        After 5 seasons (years) in the minors if originally signed after their 18th birthday or after 6 seasons (years) if originally signed before their 18th birthday. “To prevent teams from stock piling major league talent in their minor league system” – reason we even have the Rule 5 Draft. And there are AAA and AA levels of the Rule 5 as well.

      • scottp9 - Oct 30, 2012 at 3:38 PM

        Actually it’s after 5 seasons for players who were 18 and under on June 5 of their signing year or 4 seasons for players who were older than 18 on June 5 of their signing year. So, for players drafted in 2012 and signed by the July signing deadline applicable to most players, they’d first be eligible for the Rule 5 Draft in 2015 for those over 18 on 6/5/12 and in 2016 for those 18 or younger on 6/5/12.

    • Joe - Oct 30, 2012 at 1:35 PM

      Kudos for properly referencing “Rule 5″ and not using the incorrect, overly complicated “Rule V.”

  2. Jason @ IIATMS - Oct 30, 2012 at 12:50 PM

    Is it in fact a codicil of the CBA that the Yankees maintain first right of refusal of any and all free agents, and that any player offered up in any trade rumor not only must be offered to the Yankees, but the team again owns first right of refusal.

    Or something like that, amirite?

    • marinersnate - Oct 30, 2012 at 11:59 PM

      You are partially right. This rule applies only to players over the age of 40.

  3. Stiller43 - Oct 30, 2012 at 12:51 PM

    Who will the pirates sign?!

  4. indaburg - Oct 30, 2012 at 1:08 PM

    Thanks for the link to the free agents this year.

    Rays should keep Keppinger, Peralta, and Howell. Upton too, but they can’t afford him. (Please, B.J., don’t sign with the Yankees.)

    • cur68 - Oct 30, 2012 at 1:23 PM

      You know he likely will. Not only will Upton be a Citizen of the Empire but he’ll be 10-20 ticks better on the BA, too. In that tiny hatbox of a park, he can’t miss.

      • indaburg - Oct 30, 2012 at 2:17 PM

        I hate you.

      • cur68 - Oct 30, 2012 at 3:07 PM

        8)

    • APBA Guy - Oct 30, 2012 at 1:34 PM

      Now that they’ve picked up Shields’ option, what do you think they’ll do with him. Why do I think Cashman’s already been on the phone?

      • indaburg - Oct 30, 2012 at 2:16 PM

        I think Friedman will definitely entertain offers for Shields. Some team is going to give up some major talent for him. Friedman’s a dexterous negotiator. So far, it’s been Friedman’s MO to not trade within the division so I doubt he would pick up if Cashman called. I hope.

  5. girardisbraces - Oct 30, 2012 at 1:11 PM

    I’d actually like to know a bit more about salary arbitration. Is there some metric by which teams devise their figure to propose as a salary? What are the statistics of arbitration cases won by players vs. teams?

    I assume there must be some sort of formula involved, lest they risk seriously low-balling the player and having the case ruled against them out of hand.

    • Joe - Oct 30, 2012 at 1:37 PM

      Teams can not offer a contract that cuts a player’s pay by more than 20%. (Last I knew, anyway.) If a player deserves a greater pay cut, the team won’t offer him arb.

  6. lessthanittakes - Oct 30, 2012 at 1:19 PM

    It’s MS. Rand.
    Oh shit. Did I just get wing-nut trolled?

    • dowhatifeellike - Oct 30, 2012 at 1:30 PM

      I think you get a pass for having read that far.

      He may also have meant Mr. Ryan or Mr. Rand Paul? Hard to say.

  7. buffalomafia - Oct 30, 2012 at 1:30 PM

    A Yankee wish list! Trade for joe mauer, & king felix. Also trade a-rod to get david wright! Or pick up kevin youlillis?

    Then pick up bj upton & dump swisher?

    Just wishing?!

    • dowhatifeellike - Oct 30, 2012 at 1:32 PM

      A Yankee wish list! All Yankees break their penises and retire.

      • Jeremy T - Oct 30, 2012 at 2:26 PM

        A few specific Yankees retiring would provide some significant salary relief for the Yankees. Also, buffalomafia, I can only hope that you’re not serious…

      • mrwillie - Oct 30, 2012 at 4:11 PM

        If they keep putting them in Madonna you may get your wish.

    • IdahoMariner - Oct 30, 2012 at 2:09 PM

      King Felix. He’s ours and you can’t have him.

      • Old Gator - Oct 30, 2012 at 2:56 PM

        I think I remember your saying the same thing about Boeing.

    • husky2score - Oct 30, 2012 at 4:00 PM

      SMH

  8. BigBeachBall - Oct 30, 2012 at 1:38 PM

    You lost me at, “the basics”….

  9. kopy - Oct 30, 2012 at 1:45 PM

    Can players sign with other teams at 12:00 AM this Saturday, since Midnight is always the beginning of a new day, or do they have to wait until 12:01 AM?

    • deep64blue - Oct 30, 2012 at 1:58 PM

      There is 12 Noon and 12 Midnight and there is 12:00 but there is no such thing as 12:00 AM

      • kopy - Oct 30, 2012 at 2:03 PM

        There is in the practical sense. Either way, you can replace “12:00 AM” with “12 Midnight” and the question still stands.

      • kopy - Oct 30, 2012 at 2:05 PM

        Although, it is a rhetorical composed entirely of snark.

      • scottp9 - Oct 30, 2012 at 3:40 PM

        That’s not true. The transition to the new day (and from PM to AM) occurs when we leave 11:59.9999 (add as many 9’s as you like to the string) and hit 12:00.

      • manchestermiracle - Oct 31, 2012 at 11:19 AM

        Just go with the 24-hour clock: Midnight is 2400, the new day is 0001.

  10. 12strikes - Oct 30, 2012 at 1:47 PM

    Whats a Contract?

  11. Jeremy T - Oct 30, 2012 at 2:01 PM

    There’s no salary cap, but there is the luxury tax, which in theory at least makes for a soft cap at the extreme upper end.

  12. lew24 - Oct 30, 2012 at 2:27 PM

    Thanks…great info!

  13. scottp9 - Oct 30, 2012 at 3:42 PM

    One error in the primer – players who receive Qualifying Offers have seven days to consider the offers. Thus the deadline is not seven days after the World Series, but seven days after the five-day “quiet period” that follows the World Series, or 12 days after the World Series.

  14. dawglb - Oct 30, 2012 at 3:52 PM

    Craig, great piece!

  15. natslady - Oct 30, 2012 at 3:53 PM

    What about the following scenario. Player has a “mutual” option with the team. Player has had a very good year, and declines the mutual option. Player is now a free agent, right. Team makes a qualifying offer. Player has had a very good year and declines the qualifying offer. Does the team get the compensation pick?

    This is, BTW, not hypothetical. This is Adam LaRoche and inquiring Nats fans want to know.

    • scottp9 - Oct 30, 2012 at 9:29 PM

      Yes

  16. davearnone - Oct 30, 2012 at 4:00 PM

    Baseball “loves freedom” just as long as they get to play in tax payer provided revenue generation stadiums.

    Cruelest type of redistribution of wealth. $$ to owners and players.

  17. Jason @ IIATMS - Oct 30, 2012 at 4:04 PM

    Also, there no such thing as a Mystery Team, unless there really is, as put forth by the Disciples of Boras.

  18. hornbuckle - Oct 30, 2012 at 8:43 PM

    Duh

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