Transaction Primer v1.0
Yes, the title of the site does mean something.
A few years ago, Rob Neyer wrote up a Transactions Primer for ESPN to cover
some of the major rules governing baseball transactions, which is still housed
Rob hasn’t had a chance to update it, so I figured I’d try my hand at filling
in some of the holes.
This is where most American and Canadian athletes start his path to the Major
Leagues. The draft is held every year in June with clubs selecting players based
on reverse order of their win-loss records from the previous season and the
leagues alternating selections. The American League gets the first pick in odd-numbered
years with the National League obviously getting it in the even-numbered.
The number of rounds has varied historically, but a team has the option to
drop out of the draft at any point and if all the teams drop out, the draft
simply ends. If you are a resident of the United States, Canada, Puerto Rico
or any other U.S. territory, you’re eligible for the draft. Once you sign either
a major or minor league contract, you’re ineligible for all future drafts. Foreign-born
players are currently not subject to the draft.
A club keeps the rights to a player until a week before the next draft or enrollment
in a four-year college. Also, a club cannot draft a player in two consecutive
drafts without the player’s written consent.
Once a player drafted has signed with the club, he cannot be traded until the
following year’s amateur draft (the Pete Incaviglia Rule).
In the minor leagues, the rosters are managed in quite a different manner than
the standard 25-man rosters in the majors. Minor league teams keep two separate
lists of players. The first is the Active List which, like in the NFL, denotes
which players are eligible for the current game while the second list, the Reserve
List, is the entire roster of the team.
AAA and AA clubs are allowed to put 24 players on the Active List for the first
30 days of the season, 23 players on the Active List from the 31st day until
August 10th and then 24 players again for the rest of the season, including
the playoffs. The Reserve List limit, however, is always 38 players for AAA
and 37 players for AA teams.
For A teams, the Active List limit is 25 players, for Short-Season A teams,
30 and for Rookie Teams, 35. All levels below AA allow clubs a Reserve Limit
of 35 players. Below A-ball, only 25 players may actually get into a single
Players may be loaned to other minor league organizations, but must be returned
by September 30.
As in the majors, there are two disabled lists. The normal disabled list only
has a 7-day minimum as opposed to the 15 days used as the limit for the majors.
The 60-day DL, or Emergency Disabled List, works the same as in the majors;
the player doesn’t count against any roster limits but cannot be reinstated
until either 60 days have passed or the season ends.
Rule V Draft
Once a player is signed by an organization either through the draft or as a
free agent, the clock immediately starts ticking on the club’s exclusive rights
to the player.
After 3 complete minor league seasons (or 4 if the player was younger than
19 on the preceding June 5), a player comes to one of the major crossroads of
his career. At this point, a team has to decide if they want to sign the player
to a major-league contract (adding him to the 40-man roster which consists of
25 active players and 15 on optional assignment) or if they want to let the
other teams have a shot at him.
Players that have the minor league seasons required and are not added to the
40-man roster are eligible for baseball’s Rule V draft. A player can be drafted
by another organization for a sum of $50,000. The catch, however, is that if
the player is ever removed from his new team’s 25-man roster during the next
season, he has to be offered back to the original club for half the price, or
A player not on the 40-man roster and not taken in the Rule V draft remains
under contract with his current organization. If the player has less than 6
years of minor league service, he can elect to be a minor league free agent,
thus getting out of Rule V consideration for all intents and purposes.
The 40-Man Roster and Options
Now that the player is on the 40-man roster, another clock starts ticking.
He’s signed to what amounts to a major-league contract, but the organization
has a limited number of seasons in which to keep the player on the team for
good. A player can be removed from the 40-man roster at any time, but removing
a player from the 40-man roster results in the player having to pass through
Once a player is added to the 40-man roster, the parent club can send him down
to the minors on "optional assignment" in 3 separate seasons. You
don’t need to actually be on the 25-man roster for an option year to be used;
being on the 40-man roster in spring training and optioned to the minors before
the season is enough to make the season count as an option year. If a player
is never sent down, however, he doesn’t use an option year.
Also, despite it being a major league contract, the minimum for players on
the 40-man roster and not the 25-man roster is $37,000 plus collective cost
of living increases since 1999.
After the three option years are up, a player must pass through waivers to
be placed on optional assignment.
When a player is designated for assignment, the player is essentially in limbo.
He doesn’t count against any of the roster sizes and this is used while you
either try to trade the player or get him to accept a minor league assignment.
When a player is placed on waivers, other teams have a shot at claiming him,
in order of worst record in the same league to best record in same league to
worst record in opposing league to best team in opposing league. For the first
month of the season, the W-L record of the previous season is used. When a team
places a waiver claim on a player, the new team is subject to the same option
rules. For example, if the Red Sox claim Joe Schmoe off waivers because he was
out of options when the Devil Rays sent him down, the Red Sox would then have
still to pass Schmo through waivers to send him down to their own minor league
There are two disabled lists in the majors. The 15-day disabled list forces
teams to keep players out for a minimum of 15 days and does not count against
the 25-man roster. The 60-day or Emergency disabled list requires a minimum
of 60 days on the shelf and doesn’t count against either the 25-man or 40-man
Service time is accrued for every day spent in the majors. If a player spends
20 days or less of the season on optional assignment, the player is given service
time for the entire season. This is to prevent various shenanigans if calling
up a player at the end of April to buy an extra year of rights.
Service time allows the player more authority over how his contract can be
A player with 10 years or more Major League service, the last 5 being with
the team he’s currently on may not be assigned to another team without his consent.
A player with 5 years or more Major League service cannot be optioned to the
minors without his permission. He must be offered his release. In the case of
a player signed to a Major League contract as a free agent, and thus almost
certainly signed to a guarantee contract, still has to be paid according to
the provisions of his contract.
A player with 3 years or more Major League service may not be removed from
the 40-man roster without his permission. The player can opt to be released
immediately or at the end of the season.
A player may elect to become a free agent whenever he is removed from the 40-man
roster starting with the second removal of his career. The player may opt to
not become a free agent but to become a free agent after the season.
A player with 5 years or more Major League service that is traded in the middle
of a multi-year contract may, during the offseason, require his new team to
either trade him or let him become a free agent. If the player is eventually
traded, he’s not eligible to demand a trade again under the current contract
and loses free agency rights for 3 years.
Salaries and Arbitration
A player may not make less than the league minimum of $200,000.
Players with one or two years of service time and players between two and three
years of service time (except for the 17% with the most service time) can have
their contracts renewed automatically by the team if they cannot come to an
agreement. When renewing a contract, a team cannot reduce a player’s pay by
more than 20% from the prior year or 30% from the year before that.
Players with 3, 4, or 5 years of service time and the top 17% of the 2 year
players may opt for arbitration in order to come to a contract.
The club’ proposal may not be less than 80% of the player’s salary the previous
year. The exception here is that if a player won an arbitration award the prior
year that resulted in a 50% or greater salary increase, there is no maximum
paycut allowed in the proposal.
Arguments that are not allowed in an arbitration hearing include the state
of the team’s finances, previous offers made during salary negotiations between
the player and the team, any press comments or testimonials with the exception
of media-supported awards like the MVP Award or salaries in other sports or
A player with a non-guaranteed contract or an arbitration award may be released
up until the 15th day of spring training with 30 days’ pay or from the 16th
day of spring training until the opening of the season with 45 days’ pay.
When a player is claimed on waivers, the new team takes on the contract. When
a player is released in the middle of a guaranteed contract, the new team only
has to pay league minimum with the old team footing the rest of the bill.
Free Agency and Compensation
A player that has accrued 6 complete years or more of service time at the end
of a season and does not have a contract is eligible for filing for free agency,
after which the player can sign with any team he wants.
To receive compensation for a player that signs with another team, the team
must offer the player salary arbitration.
The team must offer salary arbitration to the player by December 7 or will
not be allowed to negotiate with or sign the player until the following May
1. After arbitration is offered, the player has until December 19 to either
accept or refuse salary arbitration. If it is refused, the player can only negotiate
with the club until January 7th, after which no more negotiation can take place
until May 1.
The compensation formula is based off a negotiated formula, heavy on triple
crown stats, for the previous 2 seasons. Type A players are those that rank
in the top 30% of his position. Type B players are those that rank below top
30% but still in the top 50%. Type C players are those that rank in the top
60% but not the top 50%.
A type players fetch the 1st-round draft pick of teams in the top half of W-L
record or a 2nd-round draft pick of teams in the bottom half of W-L record and
an additional pick between the 1st and 2nd rounds. B types don’t get the sandwich
pick and C type players fetch a sandwich between the 2nd and 3rd rounds. The
higher the player’s ranking in the compensation formula, the higher priority
the old team gets in acquiring draft picks.
Something that’s never mentioned is that there are still limits to the type
of free agents that teams may sign.
If there are 14 or less type A and B players available, no team may sign more
than 1 type A or B player. If there are 15-38 available A and B players, no
team may sign more than 2. From 39-62 this becomes 3. The club quota increases
accordingly for higher totals of available free agents. There is no maximum
allowed for type C free agents. Lastly, a team can sign up to as many type A
and B free agents as they’ve lost, regardless of the above quota.
Major League free agents come with an automatic no-trade clause until after
the next June 15.
Posted: July 04, 2002 at 06:00 AM | 11 comment(s)
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