An Explanation of MLB’s Qualifying Offer

Major League Baseball has had a qualifying offer since 2012. The qualifying offer can be offered by teams to eligible players that have reached free agency. It allows for a team to offer a 1 year contract at a designated amount. If the player rejects, he is a free agent. The team will be compensated in the draft by the team who signs him.

In 2012-13 it was set at $13.3 million. In 2014 it jumped to $14.1 million and in the 2015 season it increased again to $15.3 million. The 2016 the figure continued to rise to $15.8 million. The biggest jump was in 2017 when it landed at $17.2 million. Two more modest jumps in 2018 and 2019 to $17.4 and $17.9 million. This season it is going to do something it has never done before. The number is actually going to decrease by $100K according to Jayson Stark of the Athletic to $17.8 million.

Calculating the Number

The formula for the number is actually quite simplistic. MLB simply takes the top 125 salaries of that season and finds the average for those 125 salaries. These offers must be made by the club within the first five full days after the World Series ends. Players then have 10 days to accept or decline the offer. The team and player can negotiate with each other before he becomes a free agent if he declines the offer. To date, only 6 of the 80 players who have been extended qualifying offers have accepted the offers.

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Why the Decrease?

You can actually narrow this fact down to three of baseball’s best and highest paid players. Bryce Harper, Manny Machado, and Mike Trout. You may be saying how can Harper who signed a 13 year $330 million contract, or Machado who signed a 10 year $300 million contract or Trout who signed a 12 year $428 million contract make the qualifying offer go down? It is not about the overall contract, it is about the average number of the salaries of the current year. You may also be wondering that typically when a new contract is signed, especially a large contract, there is usually a signing bonus involved. In all three cases there was. The signing bonuses were prorated over the length of the contract rather than the year they were received so it had a negative impact on the qualifying offer.

Just as an example, if their 2020 salaries had been included instead, the qualifying offer figure would have risen to $18.3 million. As Harper’s salary increases from $10 million this year to $26 million in 2020. Machado’s moves from $10 million to $30 million and Trout’s from $16 million to $36 million.

The Gamble For the Teams and the Players

When an exact number is offered to all qualified players from all teams some of them are going to win, and some of them are going to lose. The teams have two reasons for offering their free agents the qualifying offer. The team can look at that player as a bargain for the money and hope they sign with that team. The bargain is only for a year. If the player accepts the offer he is then signed at that $17.8 million for the 2020 season. Reason two is, if the player rejects the offer he becomes a free agent and is able to sign with any team. There is a caveat for that team that chooses to sign him, draft compensation.

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If a team makes a player a qualifying offer and the player rejects it, there is now compensation for the team that made that offer. With the new collective bargaining agreement, those compensations are a little more complicated. Both revenue sharing and luxury tax spending are taken into consideration. Regardless, every team’s top overall first round pick is protected. If a team has multiple first round picks they can lose their late rounders.

If Your Team Extends An Offer And The Player Rejects It

A draft pick after Competitive Balance Round B (end of the second round) will be awarded if the team losing the free agent did not receive revenue sharing. If the free agent in question signs a contract worth less than $50 million in guaranteed money, this applies.

The team losing the player will be awarded a draft pick after Round 1 if the team received revenue sharing and the free agent in question signed for more than $50 million.

A draft pick after Round 4 will be awarded if the team losing the free agent paid luxury tax penalties in the preceding season.

If Your Team Signs A Player Who Rejects A Qualifying Offer

A team that received revenue sharing the previous season will forfeit its third-highest selection. Signing a second qualified player would result in the loss of that team’s fourth-highest selection. Signing a third would result in the loss of its fifth-highest selection. On the other hand, a team that did not receive revenue sharing and also did not pay any luxury tax penalties would lose its second-highest selection as well as $500K of the league’s allotted international bonus pool money. Signing additional qualified free agents would result in forfeiting the third-highest selection and another $500K of international allotments. A team that paid luxury tax penalties must forfeit both it’s second- and fifth-highest selections in the 2019 draft and forfeit $1 million in international funds. Signing a second would result in the loss of that team’s third- and sixth-highest picks, plus another $1MM in international funds.

Where Does My Team Fall In The Qualifying Offer Equation?

These 16 teams received revenue sharing and did not exceed the competitive balance tax; Diamondbacks, Braves, Orioles, Reds, Indians, Rockies, Astros, Royals, Marlins, Brewers, Twins, Athletics, Pirates, Padres, Mariners, and Rays.

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Which Players Are Eligible To Receive The Qualifying Offer?

Only players who spent the entire 2019 season with the same organization are eligible to receive a qualifying offer; midseason trade acquisitions and signings cannot receive one. Therefore, a couple of the more popular players who are examples of this rule would be Nicholas Castellanos who the Cubs received from the Tigers and Yasiel Puig, a trade that took place at the trade deadline between the Reds and the Indians. Additionally, the 2017-21 collective bargaining agreement added the stipulation that players can only receive one qualifying offer in their career. On account of this stipulation players such as Brewers catcher Yasmani Grandal and third baseman Mike Moustakas are among the players who cannot receive another qualifying offer this winter.

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Photo Credit: Mark J. Rebilas-USA TODAY Sports

Now that you understand the importance of the qualifying offer, and how this process starts the off-season full of moving parts we will take this two steps further in the coming days as we look at the players who will have the option of receiving the explained qualifying offer in each league as well as how those decisions will effect those teams, those players and baseball as a whole.

Author Twitter: @TheCleatGeek

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TheCleatGeek
I am an absolute sports fanatic. My top sport is baseball followed by wrestling and college football. I keep criminals from escaping. I love spirited logical debates. And am blessed with a great family. "Truth sounds like hate to those who hate truth."

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