Rule 4 Compensation Draft Picks

MLB RULE 4 DRAFT COMPENSATION DRAFT PICK 

A Rule 4 Draft compensation pick is awarded to a club if the club is unable to sign a player selected in one of the first three rounds of the MLB Rule 4 Draft (including compensation draft picks between rounds 1-2, 2-3, and 3-4, Competitive Balance draft picks, draft picks awarded to a club after the club loses an Article XX-B MLB Free-Agent Qualified Player, and draft picks assigned to clubs from the SBP forfeited draft pick lottery).

A club must offer a drafted player at least 40% of the slot value in order to be eligible to receive a compensation draft pick if the player does not sign. 
EXCEPTION: A club is required to offer a drafted player at least 40% of the slot value in order to be eligible to receive a compensation draft pick if the player does not sign - UNLESS - the drafted player is one of the Top 50 pitchers designated by the MLB Commissioner's office prior to the draft and the pitcher declined to submit an MRI

If a player selected prior to the 3rd round of the Rule 4 Draft does not sign, the club receives an extra compensation selection in the next Rule 4 Draft, one slot lower than where the club selected the previous season.

If a player selected in the 3rd round of the draft does not sign, the club receives an extra compensation selection after the 3rd round in the next Rule 4 Draft, with clubs selecting in inverse order of league standings from the previous season. (In the case of two clubs finishing with the same winning percentage the previous season, league standings from two seasons back will be used to break the tie. If the clubs are still tied, league standings from three seasons back, four seasons back, etc, will be used to break the tie).
NOTE: In 2020 (only), if a player selected in the 3rd round of the Rule 4 Draft does not sign, the club receives an extra compensation selection in the next Rule 4 Draft, one slot lower than where the club selected the previous season rather than after the conclusion of the 3rd round. 

A club would receive another compensation pick in the next Rule 4 Draft after that if a player selected with an extra compensation pick does not sign (same slot as the extra compensation draft pick for a player not signed after being selected prior to the 3rd round, and between the 3rd round compensation picks and the 4th round for a compensation draft pick not signed after being selected after the 3rd round), but there is no additional compensation pick awarded the following season (three years removed from the original draft pick) if a club is unable to sign that player.

A compensation draft pick awarded to a club after the club is unable to sign a player selected in a previous draft is NOT subject to forfeiture if that club signs an Article XX-B player who was extended a Qualifying Offer from another club.

ARTICLE XX-B FREE-AGENT / QUALIFYING OFFER COMPENSATION DRAFT PICK 

A club will receive a compensation draft pick if another MLB club signs an Article XX-B free-agent prior to the next Rule 4 Draft (First-Year Player Draft) if the club extended a Qualifying Offer to the player and the player declined the offer.   

Beginning with the 2018 MLB Rule 4 Draft, Article XX-B Qualified Player Compensation draft picks will be slotted between the 2nd & 3rd round of the draft (immediately after Competitive Balance Round "B"), between Rounds 1 & 2 (prior to Competitive Balance Round "A") for any club receiving revenue sharing funds that loses a Qualified Player who signs a major league contract worth more than $50M, and between rounds 4 & 5 for Competitive Balance Tax payers (club's payroll exceeds the so-called "Luxury Tax").

If a player selected with a draft pick awarded as the result of a club losing a Qualified Player does not sign, the club receives a compensation selection in the next Rule 4 Draft, one slot lower than where the club selected the previous season. There is no further compensation if a player selected with that compensation draft pick does not sign.

A compensation draft pick awarded to a club after losing an Article XX-B Qualified Player to another club is subject to forfeiture if that club signs a player who was extended a Qualifying Offer from another MLB club.