MLB Contracts

MLB Contracts Arizona Phil

Tendering Contracts to Unsigned Players on MLB Reserve List

Tendering Contracts to Unsigned Players on MLB Reserve List

If an unsigned player on an MLB Reserve List is not tendered a contract by 8 PM (Eastern) on the Friday prior to Thanksgiving (November 17th in 2023), the player is said to be "Non-Tendered," he is immediately removed from his club's MLB 40-man roster, and he becomes an unrestricted free-agent, free to sign a major league or minor league contract with any club, including the club that non-tendered the player.
NOTE: Prior to 2022, the MLB contract tender date was December 2nd.   

A "Non-Tendered" player receives no termination pay, and the player's former club receives no compensation if the player subsequently signs with another club.

Unlike players who receive an outright release, a player who is not tendered a contract is not placed on waivers prior to becoming a free-agent.  

Each unsigned player on an MLB 40-man roster who is tendered a contract must be offered at least the MLB minimum salary ($700,000 in 2022, $720,000 in 2023, $740,000 in 2024, $760,000 in 2025, and $780,000 in 2026) and (with a couple of exceptions) at least 80% of the player's previous season's salary, and at least 70% of the player's salary from two seasons back.

Some players have a "minor league split" salary in their contract which they are paid if they are sent to the minors. In most cases, a player's minor league "split" salary must be at least 50% of the player's salary (what the player was actually paid) from the previous season. The one exception is if a free-agent signs a major league contract with a minor league "split" salary, the "50% rule" does not apply. 

The minor league "split" minimum salary is $114,100 in 2022, $117,400 in 2023, $120,600 in 2024, $123,900 in 2025, and $127,100 in 2026, and the minor league "split" minimum salary for players who are on an MLB Reserve List for the first time is $57,200 in 2022, $58,800 in 2023, $60,300 in 2024, $62,000 in 2025, and $63,600 in 2026. 

Arizona Phil

Performance-Incentive Bonuses

Performance-Incentive Bonuses

Performance-incentive bonuses are permitted in Major League contracts, but a bonus cannot be based on batting or pitching skill, or where the club finishes in the standings.

A performance-incentive bonus can, however, be tied to days spent on an MLB Active List during the MLB regular season, and/or Games Played, Games Started, Games Finished, and/or Innings Pitched for pitchers, or Games Played, Games Started, and/or Plate Appearances for position players. Awards such as MVP, Cy Young, Silver Slugger, and/or Gold Glove, and/or being named to an All-Star team, can also be tied to an incentive bonus. 

MLB PRE-ARBITRATION BONUS POOL PROGRAM

Beginning in 2022, there will be a $50M pool established by MLB clubs each season to provide bonuses for pre-arbitration (auto-renewal) players: 

$2.5M if player wins MVP or Cy Young Award;
$1.75M if player finishes 2nd in MVP or Cy Young Award; 
$1.5M if player finishes 3rd in MVP or Cy Young Award voting; 
$1M if player finishes 4th or 5th in MVP or Cy Young Award voting; 
$750K if player wins Rookie of the Year;
$500K if player finishes 2nd in Rookie of the Year voting; 
$1M if player is named to All-MLB 1st team; 
$500K if player is named to All-MLB 2nd team.
NOTE: A player can only receive one bonus per season. If a player is eligible for more than one bonus in a given season, he will receive the highest bonus.

Each MLB club will contribute $1.67M to the bonus pool each season, and the money contributed to the bonus pool counts against a club's Competitive Balance Tax (CBT) liability, no matter how many of the club's players might have received a bonus, and/or if none of the club's players received a bonus.

Any amount of the $50M in bonus money not automatically awarded to players in a season will be distributed to the Top 100 pre-arbitration players based on a player's WAR as determined jointly by MLB & MLBPA.     

Arizona Phil

Arbitration-Eligible Players

Arbitration-Eligible Players

An unsigned player under club control who has accrued at least three but less than six years of MLB Service Time is automatically eligible for salary arbitration.

Also, any unsigned player with at least two years but less than three years of MLB Service Time who accrued at least 86 days of MLB Service Time during the previous season can qualify for salary arbitration as a so-called "Super Two" if the player is among the top 22% in MLB Service Time of players in that group (rounded to the nearest whole number). And if  two or more players are tied with the same MLB Service Time just above the "Super Two" threshold, all of the players with that accrued MLB ST would get "Super Two" status even if that means the number of players with "Super Two" status exceeds 22%.   
NOTE: The "Super Two" threshold post-2022 is two years plus 128 days of MLB Service Time (or 2+128). Because it is based on a percentage, the "Super Two" threshold fluctuates from year-to-year (it was  2+116 post-2021, 2+125 post-2020, 2+115 post-2019, 2+134 MLB ST post-2018, 2+123 post-2017, 2+131 post-2016, 2+130 post-2015, 2+133 post-2014, 2+122 post-2013, 2+140 post-2012, 2+145 post-2011, 2+122 in 2010, and 2+139 in 2009). 

Besides gaining the right to request salary arbitration and have that right four times instead of just three times, being a "Super Two" player also means the player can elect free-agency if outrighted even though he has not yet accrued three years of MLB Service Time and even if he has not been outrighted previously in his career (however, unlike a player who has accrued at least three years of MLB Service Time and/or has been outrighted previously in his career and who therefore has the option to elect free-agency immediately or else defer the choice until after the conclusion of the MLB regular season, a "Super Two ' player who has not been outrighted previously in his career must make his choice immediately upon being outrighted). 

CUBS PLAYERS ELIGIBLE FOR SALARY ARBITRATION POST-2023: (last updated 1-11-2024)
Adbert Alzolay, RHP (SIGNED 1/11)
Mark Leiter Jr, RHP (SIGNED 1/11)
Nick Madrigal, INF (SIGNED 1/11)
Julian Merryweather, RHP (SIGNED 1/11)
Justin Steele, LHP ("Super Two") (SIGNED 1/11)
Mike Tauchman, OF (Signed 1/11)
Patrick Wisdom, INF-OF (SIGNED 11/17) 

If a club and a player eligible for salary arbitration cannot agree on a contract, the player can request the Major League Baseball Players Association (MLBPA) to file for salary arbitration. The MLBPA is responsible for delivering all requests for salary arbitration to the MLB Labor Relations Department (MLB LRD) on the Tuesday immediately prior to the second Friday of January. Once salary arbitration has been requested, the player submits his desired salary to the MLBPA, the club submits its salary offer to the MLB LRD, and the MLBPA and MLB LRD exchange the two figures on the second Friday of January. The MLBPA and MLB LRD then schedule a hearing with a three-person arbitration panel. Hearings are held on various dates during the three weeks prior to the start of MLB Spring Training.
NOTE: The date on which the MLBPA and MLB LRD exchange player salary requests and club offers for players requesting salary arbitration has been moved up to the second Thursday in January in 2024. 
 
The club's offer must be at least the MLB minimum salary, and, in most cases, must be at least 80% of the player's previous year's salary and at least 70% of the player's salary from two seasons back. However, if the player received a raise in excess of 50% by a salary arbitration panel the previous season, a 20% maximum salary reduction from the previous season and a 30% maximum salary reduction from two seasons back does not apply, and the club only has to offer at least the MLB minimum salary.

UNSIGNED FOR 2024 - RECEIVED RAISE IN EXCESS OF 50% BY ARBITRATION PANEL IN PRIOR SEASON: (last updated 11-6-2023)
NONE

After arbitration has been requested, the player and the club can continue to negotiate back & forth, and the player can withdraw from the process any time up until the hearing. And in fact this frequently happens, as the player and the club will often agree to just "split the difference" (something the panel cannot do). 
NOTE: Beginning in 2022, if an arbitration-eligible player signs a contract prior to a hearing, the contract is fully guaranteed. 

If the matter does go to a hearing, the arbitration panel must choose either the club's offer or the player's figure, and win or lose, the player is awarded a standard one-year MLB contract with no "minor league split" salary or incentive/performance bonuses. Also, the contract is not guaranteed, so if the player is released during Spring Training, the club would only owe the player 30 days or 45 days salary as termination pay, depending on when the player is released. (A player on an MLB Reserve List signed to a non-guaranteed contract who is released more than 15 days prior to Opening Day receives 30 days salary as termination pay, a player on an MLB Reserve List signed to a non-guaranteed contract who is released 15 or fewer days prior to Opening Day receives 45 days salary as termination pay, and a player on an MLB Reserve List who is released during the MLB regular season receives 100% of his salary as termination pay). 
NOTE: The Major League Baseball Players Association (MLBPA) is very sensitive about salary arbitration, so if a player is awarded a contract by an arbitration panel and then is subsequently released by his club prior to or during Spring Training, the MLBPA will almost always file a grievance on behalf of the player, claiming the player was released for economic reasons only (which is not permitted), and asking that the released player receive 100% of his salary as termination pay. In that situation, a club would have to show (by submitting official Spring Training game stats) that the released player was out-performed in Spring Training games by another player (or players) competing for that roster spot.

Arizona Phil

Pre-Arbitration (Auto-Renewal) Players

Pre-Arbitration (Auto-Renewal) Players

An unsigned player under club control who does not yet qualify for salary arbitration ultimately has to either accept the club's offer or just not play.

A club will negotiate with the player up to a point, but if the player has not signed a contract for the current season by March 1st, the club has the right to unilaterally dictate the player's salary and renew the player's contract from the previous season (albeit for an amount not less than the MLB minimum salary, and not less than 80% of the player's salary from the previous season and not less than 70% of the player's salary from two season's back). 

These players are the ones who have a "minor league split" salary in their contract, which the player is paid if he is sent to the minors. A player's "minor league split" salary must be at least equal to the 2023 MLB "minor league split" minimum salary and must be at least 50% of the player's salary (what the player was actually paid) from the previous season.
NOTE: If a free-agent signs a major league contract with a minor league "split" salary, the "50% rule" does not apply.

POST-2023 CUBS PRE-ARBITRATION (AUTO-RENEWAL) PLAYERS: (last updated 2-27-2024)
Kevin Alcantara, OF
Miguel Amaya, C
Michael Arias, RHP 
Javier Assad, RHP 
Ben Brown, RHP
Michael Busch, INF
Alexander Canario, OF 
Pete Crow-Armstrong, OF
Jose Cuas, RHP 
Brennen Davis, OF
Porter Hodge, RHP 
Caleb Kilian, RHP
Luke Little, LHP 
Miles Mastrobuoni, INF-OF
Matt Mervis, 1B 
Christopher Morel, INF
Daniel Palencia, RHP 
Keegan Thompson, RHP  
Luis Vazquez, INF 
Hayden Wesneski, RHP 
Jordan Wicks, LHP

Arizona Phil

Competitive Balance Tax

Competitive Balance Tax

The Competitive Balance Tax (CBT) threshold will be $230M in 2022, $233M in 2023, $237M in 2024, $241M in 2025, and $244M in 2026. 

CALCULATING A CLUB'S COMPETITIVE BALANCE TAX (CBT) LIABILITY

For the purpose of calculating a club's CBT liability, a club's MLB payroll consists of the Average Annual Value (AAV) of player salaries  and bonuses earned by players on the club's MLB Reserve List (40-man roster) and MLB 60-day Injured List. 
NOTE: Beginning in 2022, if a club acquires a player signed to a multi-year contract via trade or waiver claim and the player's salary varies from year-to-year (the contract is either "front-loaded" or "back-loaded"), the AAV liability for the acquiring club is whatever salary is left to be paid at the time of the trade or waiver claim. 
CoViD-19 EXCEPTION: A club's 2020 MLB payroll is the value of the aggregate contracts prior to salaries being pro-rated due to the truncated season.  

In addition, MLB Player Benefit Costs (PBC), the AAV of "legacy salaries" paid to players who are no longer on the club's MLB 40-man roster (such as a player who has been released or outrighted to the minors, or who is being paid a deferred salary after becoming a free-agent), and money contributed to the Pre-Arbitration Bonus Pool are considered to be part of the club's payroll when calculating the CBT.   

FINANCIAL PENALTIES FOR EXCEEDING COMPETITIVE BALANCE TAX

A club whose payroll from the just-concluded MLB season exceeded the Competitive Balance Tax (CBT) threshold by any amount up to $20M will pay a 20% tax on the portion of the payroll that exceeded the CBT threshold, or a 30% tax on the portion of the payroll from the just concluded MLB season in excess of the threshold up to $20M for any club that also exceeded the threshold the season prior to the just concluded season, or a 50% tax on the portion of the payroll from the just-concluded MLB season in excess of the threshold up to $20M for any club that also exceeded the threshold in the two seasons prior to the just completed season.
 
A club whose payroll from the just-concluded MLB season exceeded the CBT threshold by more than $20M up to $40M will pay an additional surcharge of 32% on the portion of the club's payroll from the just concluded MLB season in excess of $20M up to $40M over the threshold, or an additional surcharge of 42% on the portion of the club's payroll from the just concluded MLB season in excess of $20M up to $40M for any club that was also over the threshold in the season prior to the just concluded season, or an additional surcharge of 62% on the portion of the club's payroll from the just concluded MLB reason in excess of $20M up to $40M  for any club that was also over the threshold for two seasons prior to the just concluded season. 

A club whose payroll from the just-concluded MLB season exceeded the CBT threshold by more than $40M up to $60M will pay an additional surcharge of 62.5% on the portion of the club's payroll from the previous season in excess of $40M up to $60M, or an additional surcharge of 75% on the portion of the club's payroll from the previous season in excess of $40M up to $60M for a club that was also over the threshold in the season prior to the just concluded season, or an additional surcharge of 95% on the portion of the club's payroll from the previous season in excess of $40M up to $60M for a club that was also over the threshold for two seasons prior to the just completed season.  

A club whose payroll from the just concluded MLB season exceeded the CBT threshold by more than $60M will pay an additional surcharge of 80% for the portion of the payroll in excess of $60M over the CBT threshold, or an additional surcharge of 90% for the portion of the payroll in excess of $60M over the CBT threshold if the club that was also more than $60M over the threshold in the  season prior to the just completed season, or an additional surcharge of 110% for the portion of the payroll in excess of $60M if the club was also more than $60M over the threshold in the two seasons prior to the just completed season. 

Arizona Phil