The date is March 24th. It is almost my turn to pick in the 21st round of a highly competitive, yearly keeper league between 12 of my closest friends from college. I take a look at my cheat sheet and one name jumps out. "Whoa," I think to myself, "Kyle Lohse is still available? That guy was a stud last year!" Of course, I knew why Lohse is still available in the 21st round: as of March 24th, Lohse was still without an employer for the 2013 season. At that point in the draft, I had already made a couple of late round selections on players who would be sitting on my bench/occupying my DL spots for part of the year in Brandon Beachy, Mark Teixiera, and Will Myers, as is often necessary in a keeper league. I needed players who were ready to roll come opening day. Still, I ran a quick search to see, just maybe, if there was a rumor that Lohse was on the verge of a deal with a club. Nothing. So, I gritted my teeth and grabbed the next guy way down on my list, Mike Fiers. Lohse would end up going undrafted. On March 25th, Lohse surprised the baseball world by signing a three-year deal with the Milwaukee Brewers. Naturally, he was scooped off waivers in our league by the defending champs. Fiers, meanwhile, struggled in his lone start for Milwaukee before being optioned to Triple-A.
It's not unusual for some big name free agents to remain unsigned after the New Year begins, but mid-February is another matter, and late-March was simply unheard of up until this year. How in the world was a healthy pitcher who went 16-3 with a 2.86 ERA and miniscule WHIP of 1.09 over 211 innings in 2012 still unemployed on the brink of the 2013 season?
It all starts with the new Collective Bargaining Agreement (CBA) agreed to by the players and MLB owners in November 2011. While baseball fans can be thankful that Major League Baseball's future will remain secure through the 2016 season, some players, like Lohse, have fallen victim to more restrictive policies, adopted for the first time in 2012, governing MLB's free agent compensation system and the First-Year Player Draft. As a result of the new rules, clubs have had to make difficult decisions when it comes to signing players.
In past years, free agents were designated as Type A, Type B, or no-compensation (prior to the 2006-07 season, there was also a Type C). For Type A and Type B free agents, the club had the option of offering salary arbitration. If the player accepted arbitration, it was tantamount to agreeing to a one-year contract, with the salary to be determined. If the player declined arbitration, he could test the free agent market, and if he signed elsewhere, the team losing the player would receive compensation. Generally, a team losing a Type A free agent received two draft picks, one from the signing team and one in a compensatory "sandwich" round. For Type B free agents, the team losing the player would only receive the sandwich pick, with the signing team not losing a selection.
Starting with this offseason, the new CBA did away with the Type A and Type B designations. Now, when a player reaches free agency, his former team makes him what is known as a qualifying offer. A team is not required to make a qualifying offer, but it is necessary if the team wishes to receive draft pick compensation if the player departs. The value of the qualifying offer is determined annually by averaging of the top 125 player salaries from the previous year ($13.3 million for free agents this offseason). All qualifying offers are for the same duration (one year) and same amount ($13.3 million). Teams have until five days after the World Series to make qualifying offers, and at that point, players have seven days to accept.
This is where things begin to get hairy. Given the substantial heft of the qualifying offer, teams are careful to only issue them to players that were worthy of such a lucrative deal, lest a team end up on the hook for a lesser player. Under the old system, players who might make much less than the current $13.3 million qualifying offer were commonly offered arbitration. Last winter, 37 players (13 Type A and 24 Type B) were offered arbitration, thereby preserving the team's ability to receive compensation should that player decline arbitration. This winter, under the new compensation system, that number dwindled to a mere nine players who received compensation-preserving qualifying offers: Lohse, Michael Bourn, John Hamilton, Hiroki Kuroda, Adam LaRoche, David Ortiz, Rafael Soriano, Nick Swisher, and B.J. Upton.
So what happens if a player rejects a club's qualifying offer? That player is free to re-sign with his old team without consequences. This was the case for Kuroda, Ortiz, and LaRoche, though the latter did not reach an agreement until January. The new system, however, is more punitive in the situation where a player signs a deal with a new team. Teams that sign free agents who turned down qualifying offers with another club are now forced to surrender their first round pick. The only exception to this rule is where a team picks in the first 10 slots in the draft; those picks are protected, and teams with a top-10 selection will surrender their second-highest selection.
While this compensation system is similar to the one of years past, particularly for players designated as Type A free agents, the more significant change was to the First-Year Player Draft. As of the last Draft, teams were permitted a "bonus pool" of money for signing players, which was based on, among other factors, the number of picks that team owned. In past years, a team that forfeited its first-round pick under the previous compensation system for free agents had an avenue by which to make up for that lost talent. Teams could draft a player in a later round who fell due to bonus demands, and pay him the money that would have otherwise been spent on the forfeited first-round pick. Now, however, when a team loses a draft pick as free agent compensation, it loses the ability to spend that bonus pool money. Additionally, MLB has suggested bonus values (known as slotting) for each pick through the first 10 rounds in an attempt to stop agents such as Scott Boras from holding teams hostage by holding out top players seeking huge bonuses. Teams that now go over their "recommended" budget on their bonus pools will face significant sanctions, including being subject to a luxury tax and the loss of future draft picks.
All in all, while the new changes were well-intentioned, they have significantly affected the weight that teams put on draft pick compensation for signing free agents, and have led to some unintended consequences that have already and will continue to seriously affect fantasy teams. As we have already seen with Lohse, and to a lesser extent Bourn (who, despite scoring 96 runs and stealing 42 bases, didn't sign with Cleveland until mid-February), players who are deemed too expensive, too old, too risky, or simply not worth losing a draft pick over are finding themselves unemployed late into the offseason. With fantasy drafts starting earlier and earlier every year, the ADPs of these players plummeted due to uncertainty, resulting in fantastic value for owners willing to gamble that the players would fall in good landing spot.* Astute owners can and should take advantage of these bargains in future years. While it is always a risk that a player may sign with a team that may not be a great fit (i.e. Lohse's value would have certainly been lower if he had signed in the American League), the reward generally outweighs the risk as good players will eventually find a home before the season begins.
*Bourn, for example, finished 2012 as the 9th ranked player according to ESPN. Based on a 2013 ADP near 80, Bourn could be had in the 7th or 8th round in standard leagues. Lohse, similarly, sports a 2013 ADP north of 200(!) despite ranking as the 11th best player in 2012 according to ESPN.
Still, a similar fate could befall a number of free agents-to-be this offseason. Jacoby Ellsbury, Matt Garza, Tim Lincecum, Josh Johnson, Shin-Soo Choo, Hunter Pence, Brian McCann, and Corey Hart are all eligible for free agency and all are likely worthy of a qualifying offer form their current clubs. However, each comes with significant questions that could suppress their market value, resulting in an extended unemployment. For someone like Lincecum, free agency could be like going through the draft all over again. Concerns about his body type, potential injury based on his mechanics, and his propensity for prolonged slumps could scare away many teams.
Yet, as the narrative goes, players in their "walk year" are going to turn in special performances. In pursuit of their next contract, free agents-to-be will either turn that extra motivation into big numbers or allow it to completely overwhelm them. Though it is extremely early in the season, we have already seen both sides of the coin on this issue. Through April 25, Choo is batting a robust .378 with three home runs and 18 runs in his first, and possibly last, full season in Cincinnati. While some regression can be expected, particularly in his batting average, it is not unreasonable to expect Choo to continue to perform at a high level in a potent Reds' lineup, particularly as he will need to convince potential offseason suitors that his offensive capabilities far outshine his defensive shortcomings. Meanwhile, Johnson, who is only 29 years old and holds a career ERA of 3.23, has been slapped around in his first four April starts, allowing opponents to bat .329 against him and sporting an ugly 6.86 ERA . With a somewhat checkered injury history, Johnson knows that he will need to get things sorted out quickly if he hopes to avoid a potentially similar fate as to the one suffered by Lohse this offseason, but it seems as though that pressure, coupled with Toronto's lofty aspirations, has gotten to him early in the season.
In addition to the super-sizing of walk year stressors for those players that are actually playing, there remain further complications for potential free agents who are dealing with injuries. Matt Garza, for example, certainly falls into this category. Having missed significant time with injury last season and again appearing on the disabled list with a lat strain to start 2013, Garza has slowly earned the dreaded "injury-prone" label that could scare off a number of teams in free agency this offseason. With the need to prove that he is worthy of a big contract and the hefty draft pick compensation any team will need to give up to acquire him, Garza may be liable to rush back before he is fully healthy or even hide an injury during the year in order to make up for lost time. Either of these potential scenarios could hurt both Garza and fantasy owners relying on him to be a key contributor to their pitching staffs.
COMING SOON: Part 2 of this column will take a look at the new rules' impact on the trade market and subsequent effect on the fantasy value of MLB-ready prospects.
Justin Fielkow is an attorney at the Franklin Law Group in Northfield, Illinois, a Chicago suburb. Justin attended Tulane University Law School and obtained a Certificate in Sports Law. He has been writing for Rotowire since 2008, first while at the University of Wisconsin, then and still as the beat writer for the New Orleans Saints, and now as a featured columnist providing insight twice a month into the legal side of sport with a fantasy spin.