Major League Baseball Transactions - Free Agency and Salary Arbitration

Free Agency and Salary Arbitration

A free agent is a player whose contract with a team has expired and who is thus eligible to sign with another team.

If a player is drafted and is offered a contract by his drafting team (or any team to which he is traded) each year, he may not become a free agent until:

1. His contract has expired with at least six years of service time on a major league 25-man roster or disabled list, OR
2. His contract has expired with less than six years of service time, but the player was signed as a 10-year free agent from the Japanese major leagues (NPB).
3. His contract has expired with less than six years of service time, but is not tendered a contract or salary arbitration offer (if eligible) by the tender deadline (usually in the second week of December). Such players become non-tender free agents.

Examples of players of (2) above include Hideki Okajima and Hiroki Kuroda.

A player with less than six years of service time is eligible for salary arbitration if he:

1. is without a contract for the next season, AND
2. has been tendered a contract offer by his current team by the tender deadline, AND
3. cannot agree with his current team on a new contract, AND
4. meets one of the conditions below:
   1. has been on a major league roster or disabled list for at least three years, OR
   2. has at least two years of major league service but less than three, AND is among the top 22 percent for cumulative playing time in the majors in this class of players (and ties), AND was on an active major-league roster for at least 86 days in the previous season.

Players with more than six years of service time and who are eligible for free agency can also be offered arbitration when their contracts are up, if they have been tendered a contract offer by his current team by the tender deadline, and have not agreed on a contract.

The 4.2 example of arbitration eligibility above is called the "Super Two" exception, in which a player will have an extra year of arbitration eligibility. Notable recent "Super Two" players include Russell Martin, Ryan Braun, Ryan Howard, and Tim Lincecum.

Following the salary arbitration process, the player and the team both submit a salary offer for a new contract. The arbitrator chooses one number or the other, based on which offer is closest to the salaries of players with similar ability and service time.

For purposes of salary arbitration and free agency, a player acquires a year of service time if the player remains on the major league roster for at least 172 days of the 182-day season.

Players eligible for neither free agency nor salary arbitration are very seldom offered contracts for much more than the league minimum salary, as the player has no recourse to try to obtain a better salary elsewhere. For this reason, in the first three major league years of their careers (except for the "Super Two" exception above), it is standard practice for players to accept comparatively low salaries even when their performance is stellar. Occasionally, a team may wish to sign a player in his second or third year to a long-term contract, and the resulting negotiations can involve salaries significantly higher than minimum. A recent example is the contract Ryan Braun signed barely a year into his major league career, which would have taken him through 2015. However, in April 2011, he and the Milwaukee Brewers extended that contract through 2020.

A team does not have to offer a contract to a player not eligible for free agency if his contract has expired, regardless of service time. If the player is not tendered a contract offer by the tender deadline (usually in the second week of December), the player becomes a non-tender free agent.