MLB Rules

MLB Free Agent Compensation

I have mentioned it briefly in the past, so I will bring it up again.  Paul DePodesta (of fame from the book, Moneyball: The Art of Winning an Unfair Game), has his own blog.  It’s called, It Might Be Dangerous… You Go First.  DePodesta is definitely a blog maverick (sorry to steal the phrase from Mark Cuban).  But other than Cuban and DePodesta, I do not know of any high-level executive at a sports franchise actively blogging.  DePodesta is the Special Assistant, Baseball Operations for the San Diego Padres and often has very insightful posts.  For all you baseball fans that never understood why compensation picks are given to certain teams in each draft, Paul wants to lend his knowledge.

When teams talk about trading players at the deadline, potential free agents dominate the discussion. After all, teams want to get something for these players before losing them to free agency, which is the primary incentive to trade them.

At the conclusion of the season every free agent will be ranked, and only the Type A and Type B free agents carry any kind of compensation with them. This is roughly the top 30% of players (overall, not just free agents) in terms of performance both on a one-year and multi-year look. For the Club to receive any compensation a few things have to happen:

1) The Club must offer the player arbitration (sometimes a risky proposition)
2) The Player must reject the offer of arbitration
3) The Player must sign a Major League contract with another organization

Furthermore, when a Type A free agent signs with another Club, the signing Club loses their first round pick (or second round pick if their first round pick is within the first 15 picks). So, if you have a Type A free agent, you had better be awfully sure that he’s not going to accept arbitration and that some other team is going to be willing to sacrifice a top pick in order to sign him. Type B free agents do not “cost” the signing club anything in terms of a pick.

These rules are why there were just 16 compensation picks in between the first and second rounds of the 2008 draft despite the fact that there were over 100 free agents last winter. In short, it’s not a foregone conclusion that you’ll receive draft picks as compensation. There is no doubt, however, that the potential for draft picks (or lack thereof) weighs into the calculus at the deadline.

The more you know..

By Darren Heitner

Darren Heitner created Sports Agent Blog as a New Year's Resolution on December 31, 2005. Originally titled, "I Want To Be A Sports Agent," the website was founded with the intention of causing Heitner to learn more about the profession that he wanted to join, meet reputable individuals in the space and force himself to stay on top of the latest news and trends.

Heitner now runs Heitner Legal, P.L.L.C., which is a law firm with many practice areas, including sports law and contract law. Heitner has represented numerous athletes and sports agents as legal counsel. He has also served as an Adjunct Professor at Indiana University Bloomington from 2011-2014, where he created and taught a course titled, Sport Agency Management, which included subjects ranging from NCAA regulations to athlete agent certification and the rules governing the profession. Heitner serves as an Adjunct Professor at the University of Florida Levin College of Law, where he teaches a Sports Law class that includes case law surrounding athlete agents and the NCAA rules.

One reply on “MLB Free Agent Compensation”

too much is weighed in on top picks anyways…Sure some TOP PICKS become stars but the whole league is full of so many players drafted in the 10th million draft and non-draft picks it ridiculous. Remember Mike Piazza? The last thing I would be worried about when trading at the deadline for a sure player that will help me immediately would be draft pick, way to overrated if you want to WIN NOW.

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