There’s New Rules, So What Does that Mean for the Davis and Arrieta Offers
I have seen some questions on the Qualifying Offers the Chicago Cubs presented to Jake Arrieta and Wade Davis, so I thought I would try and explain what it all means. Also, there are new rules under the collective bargaining agreement that was signed almost a year ago, so even some that are in the know might learn something as well.
The Cubs submitted a Qualifying Offer, or QO, to both Arrieta and Davis. These are one-year contracts worth $17.4 million each. That figure is based on the mean salary of the top 125 contracts in baseball. Each player has 10-days to either accept the offer or deny it, once the 10-days are up or the offer is denied the player will become a free agent. Almost every player that has been offered a QO has rejected it and entered free agency. Here is the MLB definition of the QO, for your reference.
Because the Cubs offered the players a QO, they will get an exclusive window to negotiate a long-term deal with the players, if they choose to.
What’s in it for the team?
Well, this protects the team from losing players to free agency for virtually nothing. There was a long-standing issue in baseball where small-market teams would either be forced to trade their star players or lose them because they could not afford the player once he earned free agent rights.
To combat that, baseball and the Major League Baseball Players Association (MLBPA) negotiated the QO rights into the collective bargaining agreement. In the original agreement, which began in 2012, teams would have designated Type A and Type B free agents. Each “type” would carry a sort of penalty in the event that a player signed elsewhere. The penalty being, if a team signed a Type A free agent, the team that signed the player would lose their top draft pick in the next year’s draft, and if you signed a Type B free agent, that team would lose their next best pick in that upcoming draft.
On the flip-side, if a team lost a Type A player, they would assume a sandwich pick between the first and second round, and if they lost a Type B player they would assume a sandwich pick between the second and third round. MLB Trade Rumors has a nice explanation of that first year, and how the rule was intended to work.
The thought was, teams might be a little more reluctant to sign free agents and small-market teams could potentially keep some of their players. But, if a team did want to spend a ton of money AND lose a draft pick in the process, it would help those small-market teams remain competitive over the course of multiple years through smart drafting.
Thing is, teams were becoming smart and began to take advantage of this rule. The Cubs own Theo Epstein was one of the biggest benders of the rule, which lead him to build a powerhouse system in Boston while he was the GM of the Red Sox. Seeing this, baseball once again went back to the drawing board and decided to eliminate the Type A and Type B picks and only allow for one designation. This, of course, was backward-engineered and the smart guys in baseball figured a way to take advantage of the rules again.
So baseball changed the rules again, throwing another wrench into the mix.
Things are somewhat similar, as soon as a player rejects a QO, any team that signs that player in free agency would then lose a draft pick. But, and this is where the rule changed…
If a team signs a player that was offered a QO, they could lose one or more picks in the upcoming draft. A team’s highest first-round pick is protected, however, so if a team has one pick per round they would lose their second-round pick. Now, if the team that signs Jake Arrieta or Wade Davis was above the luxury tax in the previous season, they would lose their second and fifth highest rated pick in the upcoming draft. That team would also lose $1 million in their international bonus pool. If they signed another player that rejected a QO, they would then lose their third and sixth highest picks, so on and so forth.
Additionally, if a team that received revenue sharing were to sign a QO player, that team would lose their third highest rated draft pick. Or if a team that was neither above the luxury tax nor accepted revenue sharing, they would lose their second highest pick and $500,000 from the international pool.
Was that confusing? Well, it’s about to get a little crazier…
If a QO player signs a contract with a guaranteed total value above $50 million and the old team receives revenue sharing, the former team would immediately receive a pick after the first round. If that player receives a deal worth less than $50 million, the old team would receive a compensation pick after the Competitive Balance Round B (after the second round).
Now, in either of these two cases, the value of the contract does not matter…
If the old team was over the luxury tax in the previous season, that team’s compensation pick would come after the fourth round. Finally, if the old team neither received revenue sharing nor was over the luxury tax, that team would receive a pick after the Competitive Balance Round B.
And exhale…
So what in the hell does all of that mean???
Well, since I assume 95% of the readers are only concerned about how the Cubs are affected by this rule… the Cubs were not over the luxury tax, nor did they receive revenue sharing. Since both of those were true, if Jake Arrieta or Wade Davis were to sign elsewhere, they would receive a compensatory pick after the Competitive Balance Round B for either player.
This new rule should help those teams with smaller revenues compete long-term against teams with unlimited amounts of money. But another side-effect of this rule is, you won’t have the Dexter Fowler effect any longer. What I mean by this is, after the 2015 season, the Cubs offered Dexter a QO, and since a first-round pick was tied to him if he signed elsewhere, he went into Spring Training of 2016 without having a team. He played well enough to earn a deal somewhere, but with that pick, it became hard for a team to justify his signing over the promise of what a first-round draft pick would bring.
Since a team wouldn’t lose their top pick in the upcoming draft, they will be more open to signing free agents that have been offered a Qualifying Offer.
Here are the nine players that received a QO from their teams (from MLB Trade Rumors).
- Jake Arrieta, SP, Cubs (source)
- Lorenzo Cain, OF, Royals (post)
- Alex Cobb, SP, Rays (post)
- Wade Davis, RP, Cubs (source)
- Greg Holland, RP, Rockies (source)
- Eric Hosmer, 1B, Royals (post)
- Lance Lynn, SP, Cardinals (post)
- Mike Moustakas, 3B, Royals (post)
- Carlos Santana, 1B, Indians (post)
Of those players, the Cubs have had some connection to Cobb, Holland, and Lynn. So in either case, the Cubs would actually benefit from the new rule over last season, since if they signed any of the above they would only stand to lose their second highest ranked pick (and then third, etc). They would of course only receive a pick after the second round (Competitive Balance Round B), if any of their QO players sign elsewhere.
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