New Agreement Includes Draft, Rule 5 Changes

By Alan Schwarz
October 25, 2006

ST. LOUIS --Overshadowed by more wide-ranging issues and the sheer euphoria of an agreement between Major League Baseball and the Players Association being reached with no rancor or threats of a work stoppage, the structure of the new five-year Collective Bargaining Agreement announced yesterday between labor and management did carry some significant changes to baseball’s amateur draft and player-development pipeline.

Several draft alterations, ranging from a uniform Aug. 15 signing deadline to compensation for unsigned picks, will change how both teams and players experience the process, as well as how much and when money changes hands.

The most notable changes are those that deal with draft-pick compensation--both for teams that fail to sign a high pick as well as those who lose major league free agents in the offseason.

Teams that fail to sign a first-round pick no longer receive an extra pick after the first round as compensation, but instead a virtually identical pick the following year; for example, a team that fails to sign the No. 5 pick one year will receive the No. 6 pick the next, rather than one in the 30s or 40s. The same compensation also now exists for unsigned second-round picks, while a team that fails to sign a third-round pick will receive a sandwich pick between the third and fourth rounds.

The new system should decrease the growth of bonus payments to amateurs, as teams can walk away from negotiations with the reassurance of having a similar pick the next year. (Although that compensation pick, if unsigned, is not subject to compensation, which keeps clubs from using it over and over.) Clubs have for years wanted a system of prescribed, slotted bonuses for every high pick but learned early in the negotiations that the union would not accept it, so instead focused on stronger compensation rules.

"The concern with clubs was to get that club that was drafting as much leverage that they can have, so they can select the best player they possibly can," said former Cubs president Andy MacPhail, a member of ownership’s negotiation team. To the extent that bonus offers will probably either decrease or not grow as quickly because teams can walk away more comfortably, union executive director Donald Fehr said, "It will clearly have an effect. It will clearly not put (players) in the position that they would have been in had slotting been accepted. You have to find compromises."

One other change to the amateur draft is a uniform signing date of Aug. 15 for all players (other than college seniors), replacing the longtime and clumsy deadline of the moment a player literally attends his first four-year college class. In addition to creating some order for all involved--from teams to players to college coaches wanting an earlier idea of their incoming class--this also eliminates the junior-college, draft-and-follow rule in which players who attended two-year schools could sign with their drafting club until one week before the following draft.

Several ideas that have been discussed over the years, such as the trading of draft picks and an either supplemental or combined draft of all players worldwide, were not adopted. Also, the draft will continue to be held in June rather than be moved to July.

"The changes in the draft will help the teams in the bottom of the industry," MLB CEO Bob DuPuy said, "because they’re getting better draft picks."

Some changes have been made to the draft-pick compensation afforded teams which lose major league free agents. Type C free agents have been eliminated, while teams that lose Type B free agents, which had previously received a pick from the signing club, will now get a sandwich pick between the first and second rounds. (This was pursued by the union to remove the disincentive for teams to sign those players.) Those changes go into effect immediately.

The number of players deemed Type A and B has been tweaked as well. Type A free agents, whose former team continues to receive a first- or second-round pick from the signing club as well as an extra pick between the first and second rounds, will be reduced from the 30 percent of players (as determined by a statistical formula) to 20; the Type B band is reduced from 31-50 percent to 21-40.

These changes will take effect next offseason, allowing clubs which lose free agents this winter the same compensation they had always expected. Teams must still offer players salary arbitration to receive draft-pick compensation, though the deadline for that offer was moved up from Dec. 7 to Dec. 1.

The first-year player draft, also known as the Rule 4 draft, was not the only draft process altered by the new CBA. The major league portion of the Rule 5 draft will be affected by giving teams one extra year to protect players from it.

Rather than teams being allowed three years (for players signed at age 19 or older) or four years (for players 18 and younger) before leaving them off the 40-man roster subjects them to the Rule 5 draft, those periods have been lengthened to four and five. Ownership considered this a significant boost in their efforts to operate their minor league systems more effectively.

"It gives the clubs more flexibility with their roster," said MacPhail, who added that the cost to select a player ($50,000) or get him back from the selecting club ($25,000) remain the same.

"Anytime you can give them more tools to operate as efficiently as they possibly can is something we strive to do," he continued. "There are a lot of kids at that stage where you’re just not quite sure whether you want to get that clock ticking--the last thing you want to do is take a talented 22-year-old kid who’s not ready and you develop him for somebody else. Or often you’ll see guys taken out of A-ball who aren’t close but they get plucked out of the Midwest League. You try to let the developing clubs get as much time as they possibly can to make the best decisions they can."

This rule applies to this current offseason, meaning that many minor league players who had expected to either be placed on the 40-man roster or be subject to the Rule 5 draft will have to wait another year. The union did negotiate a higher minimum salary for 40-man roster players optioned to the minor leagues ($30,000 next year), but acknowledged that this was a significant concession to ownership.

"That was one of the major things we had to give up, no question about it--to me it was the worst thing we had to give up," said Diamondbacks infielder Craig Counsell, a player representative to the union negotiating team. "Some players, especially immediately, are going to be hurt by that--this year. But in the end, you have to give up something to get something."