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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 Adam Heitner, Esq., is a preeminent sports attorney and the founder of Heitner Legal, P.L.L.C., a Fort Lauderdale-based law firm specializing in sports law, contract negotiations, intellectual property, and arbitration. He earned his Juris Doctor from the University of Florida Levin College of Law in 2010 and a Bachelor of Arts in Political Science, magna cum laude, from the University of Florida in 2007, where he was named Valedictorian of the College of Liberal Arts and Sciences. Admitted to practice in the state bars of Florida, New York, and the District of Columbia, as well as multiple federal courts, Darren also serves as a certified arbitrator with the American Arbitration Association.

As an adjunct professor, Darren imparts his expertise through teaching Sports Law at the University of Florida Levin College of Law and Name, Image, and Likeness (NIL) at the University of Miami School of Law in the Entertainment, Arts, and Sports Law LL.M. program. His scholarly contributions include authoring several books published by the American Bar Association, such as How to Play the Game: What Every Sports Attorney Needs to Know, and numerous articles in prominent publications like Forbes, Inc. Magazine, and Above the Law. His thought leadership in NIL has earned him recognition as one of the foremost experts by The Wall Street Journal, USA TODAY, and On3, and he has been lauded as a “power player in NIL deals” by Action Network and a “top sports trademark attorney” by Sportico.

Darren’s passion for sports law led him to establish Sports Agent Blog on December 31, 2005, initially titled “I Want To Be A Sports Agent.” The platform, created as a New Year’s resolution, has grown into a cornerstone of the sports agency community, offering in-depth analysis of industry trends, legal disputes, and agent-player dynamics. His commitment to the field is further evidenced by his representation of numerous athletes and sports agents, as well as his prior role as an Adjunct Professor at Indiana University Bloomington, where he developed and taught a course on Sport Agency Management from 2011 to 2014.

Darren’s contributions have been recognized with prestigious honors, including the University of Florida’s 40 Under 40 Award, the University of Florida Levin College of Law’s Outstanding Young Alumnus Award, and designation as the best lawyer in Fort Lauderdale by Fort Lauderdale Magazine. He remains an active voice in the sports law community, sharing insights through his weekly NIL newsletter and his X posts, engaging a broad audience on legal developments in sports.

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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