How Does Free Agency Work in Baseball?

How Does Free Agency Work in Baseball?

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This offseason, some notable players became free agents and signed some lucrative contracts with Major League Baseball teams.

Outfielder George Springer signed a six year contract with the Houston Astros worth $150 million. Catcher JT Realmuto signed for five years and $115 million with the Philadelphia Phillies. And pitcher Trevor Bauer signed with the Los Angeles Dodgers for three years and a whopping $102 million ($34 million per year).

Springer and Realmuto both re-signed with the teams for which they already played, but Bauer showcased the true advantages of free agency by signing with the Dodgers after playing for the Cincinnati Reds the year before.

Free Agency in baseball is simple to understand, but there are a lot of moving parts to it.

After a player has served six years in the MLB for the same team under his original rookie contact, that player becomes a free agent. From that point, any team in the league, including the player’s current team, can offer him a contract, and he is free to sign with any team of his choosing.

Let’s dig a little deeper into the process of free agency.

How Did it Start?

In 1975, pitchers Andy Messersmith and Dave McNally pitched an entire season in the MLB without signed contracts. Peter Seitz, an independent arbitrator, ruled that the two players should become free agents and therefore be allowed to play for any team who may offer them a contract.

This put owners across the league in a panic. Free agency was a new concept to the league, and the owners had a gut feeling that the ruling on Messersmith and McNally would change the landscape of the game.

And they were right. The thought of every player on every team becoming a free agent every year was daunting. Then president of the Players’ Association, Marvin Miller, felt that yearly free agency would be a bad deal for players as well as it would oversaturate the market each year.

So the two sides agreed to a deal that allowed players to become free agents for one of two reasons: 1) their contract had expired or 2) they had given at least six years of service time to one team in the Major Leagues.

While these same principles still exist today, the process of obtaining a free agent player looked a lot different in the late 70s.

When a player entered free agency, teams had to draft bargaining rights to negotiate with that player. Only 12 teams were allowed to draft a player’s rights.

In today’s MLB free agency, players are able to take offers from all 30 teams.

(Most of this information came from ).

What is Salary Arbitration?

In most professional sports, there are restricted free agents and unrestricted free agents.

An unrestricted free agent is free to field offers and sign with any team of his choosing. A restricted free agent can field offers from other teams, but he is still under contract with his current team, so they have the right to match the offer and keep the player.

Major League Baseball does not have an unrestricted and restricted free agency system. Instead, they have what is called salary arbitration. Players who have more than three but less than six years of MLB service are eligible for salary arbitration.

Basically, after a player’s third year of service, he has the right to renegotiate his contract over the next three years, but there are significant limitations to this process.

If the player is ready to discuss a salary negotiation, he (usually his agent) brings forth a figure to the club, and they are able to negotiate the salary. If the player and team do not agree on the salary by the league’s deadline (typically in mid-January), then the negotiation enters arbitration.

When this happens, the case is sent to arbitrators, a group of labor attorneys. Both the player and the team present a salary to the arbitrators in a hearing, and the arbitrators side with either the team or the player, nothing in between.

Though many view it as a flawed system, salary arbitration is the league’s way of keeping both players and owners in check. It keeps owners from having complete control over their players for six years while also ensuring players are contractually obligated to a team for a certain amount of time.

One of the reasons it is considered to be flawed is that teams often manipulate the system as was the case with Cubs third baseman Kris Bryant.

In 2015, Bryant was considered to be one of the team’s best players, but they kept him in the minor leagues for eight games to push his arbitration date back to gain an extra year with him playing under his rookie contract.

While this is beneficial to the teams, many believe it is not fair to the players.

Also, many do not think it is up to a third party to decide a player’s contract. Leagues like the NFL, NBA, and NHL have implemented the restricted and unrestricted free agency system in order to avoid salary arbitration.

Frequently Asked Questions

Are there salary limitations for a player signing in free agency?

Unlike other professional leagues, the MLB does not have a salary cap meaning that teams can spend as much money as they wish on players’ salaries.

They do, however, have a luxury tax system that taxes teams who exceed the Competitive Balance threshold. For more information about salary cap and the luxury tax, take a look at one of our previous articles “Why Doesn’t the MLB Have a Salary Cap?”.

What is the richest free agent contract ever signed?

Bryce Harper signed with the Philadelphia Phillies in 2019 for $330 million over 13 years. It was the longest, richest contract ever when he signed it and still is.

Gerrit Cole’s 8 year $324 million deal with the New York Yankees is the richest free agent contract ever signed in terms of yearly salary. His deal is worth $36 million per year.


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