Baseball’s free agency period begins when the World Series is completed. Teams will jockey for the opportunity to sign impact free agents, as well as veteran role players and functional depth pieces. Losing a quality player, such as a Jake Arrieta or a J.D. Martinez, can have a significant impact on the overall talent level of a team. In an effort to maintain some semblance of a competitive balance, Major League Baseball years ago instituted a system to compensate teams losing high-profile players to free agency. The system has been modified over the years, and since the 2012-2013 season, the process known as the Qualifying Offer system has been method by which teams losing free agents can receive compensation, in the form of supplemental draft picks.
What Is A Qualifying Offer?
In short, a Qualifying Offer is simply a one-year contract offer to a player who is due to leave his team for free agency. The amount of the offer varies from year to year, and is calculated by averaging the top 125 annual salaries from the previous season. For the 2017-2018 off-season, the Qualifying Offer is expected to be about $17.4 Million for the year.
MLB qualifying offer amount for 2018 has been set at $17,400,000.
— timdierkes (@timdierkes) October 12, 2017
Teams must offer potential free agents a Qualifying Offer within five days after the end of the World Series. Teams have exclusive negotiating rights with their free agents during this period. The player then has ten days to decide whether he will accept or reject the offer.
Who Can Receive A Qualifying Offer?
In theory, any player who played the entire season (or was on the DL) for the same team and who is due to leave for free agency can be tendered a Qualifying Offer. However, since the annual salary of the offer is roughly $17.4M, practicality dictates that offers are generally only made to star or impact players. For example, if Freddie Freeman was due to be a free agent after the World Series ended, the Braves would very likely tender a Qualifying Offer to him, but they likely would not make an offer to Kurt Suzuki, because no team would pay him $17.4M for a year.
Players who have come to a team mid-season and are due to be free agents can not receive a Qualifying Offer. As a result, some high-profile players – Jay Bruce, Jonathan Lucroy, Yu Darvish, Todd Frazier, J.D. Martinez – who were eligible to be free agents at the end of 2017 (either via their contracts ending or via a player opt-out clause) are not eligible to receive a qualifying offer. This likely affects the team they were traded from more than it does the players themselves (more on this later).
Also, new for the 2017-2018 offseason (based on new rules negotiated in the most recent CBA), players who have been given a Qualifying Offer in a previous season can not be given one again.
What Happens If A Player Declines The Qualifying Offer?
If a player has been tendered a Qualifying Offer and declines it, he becomes a free agent and is free to sign with any MLB team.
What Happens If A Player Accepts A Qualifying Offer?
If a player accepts a Qualifying Offer, he is effectively agreeing to a one-year contract at the QO rate (estimated $17.4M in 2017-2018).
What Happens If A Player Signs As A Free Agent?
Here’s where things have changed the most. Previously, if a player who declined a Qualifying Offer signed a major league contract with a team, then the signing team would forfeit their top, unprotected draft pick. The top 10 draft picks in the June amateur draft are considered protected, and can not be forfeited. In the event a team with a protected pick signs a player with compensation attached, then the team’s next highest pick would be forfeited. Teams can sign multiple free agents with compensation attached, if they wish. For example, if a team signed two QO free agents, that team would lose its two highest, unprotected draft picks.
The team losing the free agent would receive a supplemental draft pick that falls between the end of the first round and the start of the second round of the draft. The team losing the free agent did not receive the forfeited draft pick. Instead, the forfeited pick is simply removed from the draft, as if it never existed.
Now, as a result of the new collective bargaining agreement that took effect January 1, 2017, compensatory picks are dependent on the size of the contract the player signs and the financial situation of the team losing the free agent. Anthony Castrovince of MLB.com wrote a breakdown of the new system, with the following very brief synopsis:
*General rule: Compensation after Comp Round B
*Exception 1: Team paid luxury tax = compensation after fourth round
*Exception 2: Team received revenue sharing AND free agent signed for more than $50M = compensation after the first round.
In further detail, the changes to compensation are as follows:
- If the team issuing the Qualified Offer (the team losing the player) did not participate in the MLB Revenue Sharing Program OR if the player signed a free agent contract for less than $50M guaranteed, the team receives a draft pick after Competitive Balance Round B (between the end of the second round and the start of the third round).
- If the team issuing the Qualified Offer was a participant in the revenue sharing program AND the player signed a free agent contract for more than $50M guaranteed, the team receives a draft pick after the first round and before the second round.
- If the team issuing the Qualified Offer paid a Luxury Tax penalty, the team receives a draft pick after the fourth round.
In addition, the draft pick forfeited by the signing team depends on their status, as well:
- A team signing a QO free agent that received revenue sharing funds AND did not exceed the luxury tax threshold must forfeit its third-highest pick in the draft. If they sign multiple QO free agents, the team will forfeit successive draft picks (fourth-highest, fifth-highest, etc.).
- A team contributing to the revenue sharing program but not exceeding the luxury tax threshold must forfeit its second-highest draft pick AND lose $500K of international bonus pool money. Additional QO free agent signings would result in the the loss of successive draft picks (loss of the third-highest pick for a second signing, fourth-highest for a third free agent, etc.).
- A team paying the luxury tax must forfeit its second-highest and fifth-highest draft picks, AND lose $1M of international bonus pool money. A team in this situation signing multiple QO free agents would also lose successive picks (so, their third- and sixth- highest pick, in addition).
A team that signs two QO free agents would lose next highest pick(s). Over luxury-tax threshold: 3rd and 6th rd in addition to 2nd and 5th.
— Ken Rosenthal (@Ken_Rosenthal) December 1, 2016
According to Jon Morosi at MLB.com, there are 16 teams currently thought to be collecting MLB Revenue Sharing funds:
According to industry sources, 16 of Major League Baseball’s 30 clubs currently meet the first of those qualifications: alphabetically, the Arizona Diamondbacks, Atlanta Braves, Baltimore Orioles, Cincinnati Reds, Cleveland Indians, Colorado Rockies, Houston Astros, Kansas City Royals, Miami Marlins, Milwaukee Brewers, Minnesota Twins, Oakland Athletics, Pittsburgh Pirates, San Diego Padres, Seattle Mariners and Tampa Bay Rays.
Four teams are expected to pay the luxury tax this season: the Dodgers, Yankees, Red Sox, and Tigers.
If a player declines a Qualifying Offer and then later signs with that same team as a free agent, there is no compensation or penalty.
If a player declines a Qualifying Offer and for some reason signs a minor league deal as a free agent, there is no compensation or forfeited draft pick.
What Is The Benefit Of A Qualifying Offer To A Team Or Player?
For a team, the benefit of offering a Qualifying Offer is the potential payoff of receiving either a high or additional draft pick (if the player declines the QO and signs elsewhere), or receiving the services of a quality player on a short-term contract (if the player accepts the QO).
For a player, the benefit of a QO is knowing that there is at least one guaranteed contract offer, typically at a higher annual salary than what could be negotiated in a multi-year deal. It also allows an injured player, or a player who had a poor season, the opportunity to play on a short-term deal to rebuild their value before hitting the free-agent market.
What Are The Drawbacks Of Qualifying Offers To Teams/Players?
Teams must walk a fine line when determining to whom they will make a Qualifying Offer. While any eligible player can be tendered a QO, teams usually only offer them to star players for fear that a marginal player offered a QO may actually accept it. This puts the team in a position of having to pay a player who they didn’t expect to be on the team. In 2015, the Astros’ off-season plans were put in a bind when Colby Rasmus accepted the Qualifying Offer he was tendered. Houston ended up paying about $15M more for a position than they had anticipated.
For players, some research has shown that teams offer slightly smaller contracts to players if draft pick compensation is attached. As a result, players may not be receiving their true values on the open free agent market, whch is what ld to some of the changes seen in the most recent CBA. In addition to the actual pick, there is draft slot money associated with the pick. Some teams, like the Atlanta Braves in 2016, manage that pool money very efficiently to maximize their draft picks. Also, some teams who use the draft, rather than free agency, to keep a steady supply of talent coming through their system are less likely to become involved in the bidding for a player’s services if there is draft pick compensation attached. As a result, a player who declined a QO may be offered less money and be courted by fewer teams than if there was no compensation attached to his signing.
Since Qualifying Offers are only one-year contracts, there is no long-term security for players. While the average annual salary on a QO may be higher than what they could get in free agency, most players choose to settle for the safety of more years for a larger total guarantee. Eighteen million dollars a year for one year sounds good, but if you can get $15M a year for four years guaranteed? Take the extra $42M.
Due to these drawbacks, only three players had accepted their Qualifying Offer since the system began through the 2015-2016 off-season: Matt Wieters, Brett Anderson, and Colby Rasmus. In the 2016-2017 offseason, Neil Walker and Jeremy Hellickson accepted Qualifying Offers.
How Does This Affect The Atlanta Braves in 2017-2018?
The Braves have no departing free agents who would be offered a Qualifying Offer.
However, some rumored potential off-season free agent targets that Atlanta may pursue could receive Qualifying Offers. Jake Arrieta has been on the wish list of many fans due to the Braves’ need for a top of the rotation starter, though it seems the Braves have more interest in acquiring a pitcher via trade. Mike Moustakas is another free agent likely to receive a QO who seems like he could be a short-term fit for Atlanta.
While it’s uncertain if any of those players will be offered a Qualifying Offer, they are the types of players that a team would consider for a QO. If they were offered, and declined, and later signed with the Braves, the Braves would lose their #3 draft pick that fell outside of the Top 10 picks, which is their 4th round pick in 2018. The 3rd round pick in 2018 was forfeited as part of MLB’s sanctions against the Braves for inappropriate actions involving the signing of Drew Waters.
Have The Braves Ever Tendered A Qualifying Offer To A Player?
The Braves have made Qualifying Offers to three players since the implementation of the Qualifying Offer system:
2013 – Michael Bourn was tendered a 1-yr/$13.3M QO and rejected it. He later signed a 4-year/$48M (with a possible 5th year vesting option for $12M more) deal with the Cleveland Indians. The Braves used the supplemental pick they received to select pitcher Jason Hursh.
2014 – Brian McCann rejected a 1-yr/$14.1M QO from Atlanta. He later signed a 5-yrs/$85M (with a possible 6th year vesting option for $15M more) contract with the New York Yankees. The Braves used their compensatory pick to select OF Braxton Davidson.
2015 – Ervin Santana was offered a 1-yr/$15.3M QO and rejected it. He later signed a 4-year/$55M (with a possible 5th year team option for $14M more) with the Minnesota Twins. With the pick received for losing Santana, the Braves selected pitcher Mike Soroka.
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Sources:
MLBTradeRumors.com
FanGraphs
MLB Collective Bargaining Agreement