New CBA Will Bring Sweeping Changes To Talent Acquisition

Peace has been declared in major league baseball for another five years. Now teams and players will see if it brings prosperity.

Baseball's new Collective Bargaining Agreement ensures the sport will have more than 20 years without a single labor stoppage. That's great news for anyone who remembers the disaster of the canceled World Series in 1994. But in the initial hours after the new CBA was announced, scouting directors and other front-office types weren't basking in the glow of a new deal.

The new CBA will assure the most significant changes since the secondary drafts were eliminated in 1987. And the initial reaction was quite negative from many in the industry as scouts (and agents) feared that restrictive luxury tax rules would make it more difficult to sign top talent. But as more details have emerged, many teams seem to have come around to at least some of the changes.

While baseball won't have a hard slotting system present in other sports—in which every selection in a draft gets a designated, non-negotiable bonus payment—teams will have specified budgets for drafts and international signings.

Under the new system, each club will get an aggregate bonus pool for the first 10 rounds of the draft, based on all of its picks—each of which will be assigned a value. While clubs will not be required to stick to the value of each pick, they will be expected to come in under the overall budget number.

"I think it will make a difference; you're no longer going to be able to sign players after top rounds," one National League crosschecker said via text message. "Teams with the philosophy to spend and accept risks no longer benefit, and it hurts small-market clubs who choose to develop (their) organization through (the) draft.

"I'm not excited about this . . . More kids will end up in college, similar to pre-2005. The bar has been set high on payout of high school players. If a player slips to the third round, the chances of signing him away from an SEC or ACC school will be very slim now. Hey, at least it will be fun again to scout Team USA and the Cape (Cod League)."

Under the new rules, teams that exceed the signing budget by up to 5 percent will pay a 75 percent tax on the overage. Teams that go over by 5-10 percent will pay the same tax and lose a first-round pick in the next year's draft. Teams that go over by 10-15 percent will pay a 100 percent tax and lose a first- and second-round pick. And finally, teams that go over by more than 15 percent will pay the 100 percent tax and lose their first-round picks in the next two drafts.

Notably, if you don't sign one of your picks in the first 10 rounds, you can't spend that money on other picks. You lose that allotment from your signing allowance. Also, any bonus for more than $100,000 for a pick after the 10th round also counts as part of a team's signing allowance.

International signings will have a similar pool, with similar penalties. Going over by up to 5 percent kicks in the 75 percent tax; 5-10 percent includes the same tax and a loss of the right to sign more than one player for a bonus of more than $500,000. Go over by 10-15 percent and a team incurs the 100 percent tax and can't sign any player for more than $500,000. Going over by more than 15 percent draws the 100 percent tax and prohibition to sign any player for more than $250,000.

"This is an attempt to get back to the point where $500,000 is a lot of money," an NL scouting director said. "We've pushed this so far that a seven-figure bonus isn't that much money."

Many scouting directors believe the new rules will place more emphasis on having good area scouts. While crosscheckers, scouting directors and general managers have plenty of input into deciding who a team takes in the early rounds, it's the area scout who has to figure out how much money it will take to sign a prospective draftee.

Revamped Compensation

In addition to the signing bonus pool, the new CBA also changes free agent compensation and seeks to award more picks to low-revenue teams.

Starting in 2012, the familiar Type A and Type B free agents, based on the Elias ranking system, will be eliminated. Now the only free agents subject to compensation will be those who are offered contracts equal to the average salary of the 125 highest-paid players in the game as they enter the free-agent process. Players also have to be with a team for an entire season to be subject to compensation, so pending free agents who are traded at midseason will not generate extra picks for the teams that acquire them.

A team that signs one of those free agents will give up its first-round pick. Unlike before, when the top 15 overall picks were protected, now only the top 10 are protected. In those cases, the team will lose its second-highest selection (not necessarily its second-round pick, as before).

Baseball will also add a lottery for six extra picks following both the first and second rounds, which will not take effect until the 2013 draft. Teams that are in the bottom 10 in revenue and/or market size go into a pool for six picks after the first round, with odds of winning based on the prior season's winning percentage. Teams that don't get one of those picks—and any other team that receives money from revenue sharing—then goes into another lottery for six picks after the second round. The odds of winning are based on prior season winning percentage.

Many More Changes

There are plenty of other changes in store for the draft, including:

• The signing deadline will move from Aug. 15 to somewhere between July 12-18, depending on the timing of the All-Star Game. This move was a no-brainer that both sides wanted. So many players waited until the deadline to sign under the current system—101 came to terms on the final day in 2011—that several of the draft's top talents signed too late to play in the minors until the following season.

• Picks won in the competitive balance lottery can be traded, though no other picks can be. On the international side, teams can also trade some of their signing allowance.

• Any draft tax collected will be redistributed to teams under MLB's revenue-sharing plan, and any draft picks surrendered will be awarded in a lottery weighted by a club's winning percentage and revenues the previous year. The catch is that any team that goes over its draft cap is ineligible to receive draft-tax cash or a forfeited draft pick—another stick to discourage teams from going over the limit.

• Draftees are no longer eligible to sign big league deals, as five of them did in 2011. The main effect of this change is that clubs won't be able to skirt the draft cap by reducing a player's bonus and making it up to him with guaranteed major league salaries.

• The CBA summary also states: "Top 200 prospects will be subject to a predraft drug test and will participate in a predraft medical program." The top 200 prospects already are drug tested, but the medical program is new.

While it's unclear exactly what form it will take or if and how players will be compelled to attend, it's a step in the right direction that could avoid the snafus that led to 2010 first-round picks Barret Loux and Dylan Covey not signing.

• Speaking of Loux, there is now a provision that if a player fails a physical and the team fails to offer him 40 percent of the assigned value of his pick, he becomes a free agent. In that case, the club's draft cap would be reduced by the value of his selection. Loux was declared a free agent after a similar situation in 2010.

• The draft has been reduced from 50 to 40 rounds.

• Any attempt to circumvent the draft cap, such as an under-the-table agreement, is expressly prohibited.

• Teams get an extra year of protection for compensation picks for failure to sign draftees from the first three rounds. For example, the Blue Jays get the 22nd pick in 2012 after not signing No. 21 overall choice Tyler Beede in 2011. If Toronto can't come to terms with the compensation selection, it would get another one in 2013.

Much Still To Do

As significant as these changes are, the union and the owners were still working to finalize the details. Executives at the Winter Meetings attended working groups where provisions of the CBA were explained, but the actual final language of the CBA had yet to be finalized.

While the CBA gives the parameters of the draft changes, the two sides have to agree to the details, then get lawyers to put them on paper for the official rules. When it comes to the draft, many of those details have been hammered out. But on the international side much is still to be done.

The two sides have appointed an international talent committee (members include union chief Michael Weiner and MLB executive vice president Rob Manfred as well as three other people from each side) to hammer out details on a potential international draft, the best age to set as a signing minimum for international players and many other details. The two sides will also look at either forming another league or adding MLB-run clubs to the Dominican Summer League to help unsigned players develop.

The new agreement does not commit baseball to an international draft, but the language makes it clear that baseball is headed in that direction. The international talent committee will also look at whether an international draft should be separate from the June draft and whether Puerto Rico should be part of an international draft.

The new CBA will require players be registered with MLB to sign out of Latin American. That has raised complaints from some scouts who fear it will make it too easy for hidden talent to be discovered by other scouts. MLB's reasoning for the registration is simple. After seeing numerous Latin American signees dinged for false identities and birthdates, it is looking for ways to ensure that the players identities are verified.