The qualifying offer was first introduced in the 2012 Collective Bargaining Agreement and updated in the most recent CBA in 2017. It is a measure that allows clubs to receive draft pick compensation in the scenario that one of their players signs with another club during free agency.
Qualifying Offer Details
The qualifying offer is a one-year contract for the following season at a pay rate equal to the average salary of the league’s 125 highest-paid players for the current MLB season. The qualifying offer amount for the 2020 season was $17.8 million.
Clubs can submit a qualifying offer to pending free agents as long as they meet the following two stipulations:
1) The player has never received a qualifying offer previously
2) The player was on the roster of the current club for the entire season (players acquired mid-season are not eligible)
Once the qualifying offer is submitted to the player, he has 10 days to accept or reject it. Should he reject, enter free agency, and sign with another club, his former club will receive draft pick compensation. Players can only receive a qualifying offer once during their careers, regardless of how many clubs they play for.
MLB Draft Compensation
An MLB club that has a player reject their qualifying offer and sign with a different MLB club will receive draft pick compensation in the following year’s amateur draft. Similarly, an MLB club that signs a player who rejects a qualifying offer will lose a pick in the following year’s draft.
Under the current CBA, there are three tiers for draft pick forfeiture. They are dependent on the signing team’s financial status and the value of the player’s new contract. Here are the tiers:
1) A club that exceeded the luxury tax will lose its 2nd and 5th highest draft picks, as well as $1 million from its international signing bonus pool.
2) A club that receives revenue sharing will forfeit its 3rd highest draft pick in the following year’s draft. If such a club signs two players that rejected qualifying offers, the club will lose its 3rd and 4th highest draft picks.
3) A club that did not exceed the luxury tax and did not receive revenue sharing will forfeit its 2nd highest draft pick and $500,000 from its international signing bonus pool. If such a club signs two players who rejected qualifying offers it will forfeit its 2nd and 3rd highest draft picks.
Qualifying offer draft pick compensation is also dependent on the financial status of the rejecting player’s former club. When a free agent rejects the qualifying offer, signs a subsequent new contract worth more than $50 million, and previously played for a club that received revenue sharing, the player’s old club will receive a compensatory draft pick following the first round of the following year’s MLB draft.
If the player receives a contract for less than $50 million, such a club would receive a compensatory pick after Competitive Balance Round B, which follows the second round in the MLB Draft.
Furthermore, if a player rejects a qualifying offer from a club that is over the luxury tax, that club will receive a compensatory pick following the fourth round of the following year’s MLB Draft.
If a club neither receives revenue sharing nor is over the luxury tax and loses a player who rejects a qualifying offer, that club will receive a compensatory pick after Competitive Balance Round B.
When a player rejects a qualifying offer, draft pick compensation only applies up until the MLB Draft the following season. If a player remains unsigned through the completion of the MLB Draft no draft pick compensation will be required to sign them.
For example, Dallas Keuchel rejected a qualifying offer from the Houston Astros following the 2018 season. He remained unsigned until June 7, 2019, when the Atlanta Braves agreed to a 1 year/$13 million contract two days after the conclusion of the 2019 MLB Draft.
Summary
The qualifying offer has benefits for both players and clubs alike. For players, it gives them a high-value one-year contract to cash in on before ideally signing a longer-term contract the following offseason.
On the flip side, clubs can receive draft pick compensation for players they simply cannot afford to pay or do not wish to sign a long-term contract. It gives clubs security to either bring back players on one-year contracts without the risk of losing them to another club without compensation.
Related Links: http://m.mlb.com/glossary/transactions/qualifying-offer
Comments