The one bright spot in losing a prime free agent from your roster is possible remuneration in the form of draft pick compensation. In short, when a stud free agent leaves his team for greener pastures, the team can pick up a draft pick or two from the next year’s draft as a consolation prize for the lost affection.
In long, draft pick compensation is a complicated process with many layers that affect whether the team will actually receive anything when said free agent leaves. Last year, I wrote up an extensive explanation of the draft pick compensation process, and how it impacted then free agents to be, Ted Lilly and Derrek Lee. A relevant sampling:
In order to receive compensation picks for a lost free agent, four things have to happen: (1) the player must be designated as a “Type A” or “Type B” free agent; (2) the player must be offered a one-year contract via salary arbitration; (3) the player must decline the offer of a one-year contract via salary arbitration; and (4) another team must sign the player, knowing that they may be giving up a draft pick to do so. Each step in the process presents significant hurdles.
First, the player must be in the top 20 percent of players at his position (as designated by the Elias Sports Bureau) to qualify as a Type A free agent, or in the top 40 percent, but not the top 20, to qualify as a Type B free agent. The former designation yields the team that loses the player a first round pick (unless the signing team has one of the top 15 picks, in which case it becomes a second round pick) and a sandwich pick between the first and second rounds. The latter designation yields a sandwich pick.
Second, the player’s team must be willing to offer him a contract for the following season without knowing exactly what his salary is going to be. Far more importantly – and far too often overlooked – is the fact that player’s salaries do not decline in arbitration. In fact, by the Collective Bargaining Agreement, a player’s salary in arbitration can be reduced by only as much as 20%. Veterans in particular are treated very well by the arbitration system. And the team offering arbitration must be cognizant of the fact that the player might very well accept the offer of arbitration knowing that, although he’ll get only a one-year contract out of the deal, it will be for a much higher rate than he could procure on the open market.
It goes on from there.
This is all a preface to the notable point today: Aramis Ramirez and Carlos Pena have officially been designated “Type B” free agents, rather than “Type A.” As the quoted bit above explains, the latter designation comes with the possibility of two draft picks, the former with one. Pena ended up a middle of the pack Type B, but Ramirez just missed Type A status – indeed, he was the highest ranked Type B free agent. As the title says, sad trombone.
Nevertheless, the Cubs can still pick up a sandwich pick (between the first and second rounds in 2012) for each of Ramirez and Pena. To do so, the Cubs will have to offer each arbitration.
On Ramirez, the decision is an easy one. Having made $14.6 million in 2011, Ramirez would make about that much in arbitration. Given that he just turned down $16 million from the Cubs, he isn’t going to accept an offer of arbitration. Thus, the Cubs will offer, he will decline, and, when he signs elsewhere, the Cubs will get their pick.
Pena is a much tougher question. The Cubs need a first baseman in 2012, but they may not be willing to spend $10 to $12 million on Pena for the position (Pena made $10 million last year, and would make about that much or more in arbitration). Technically, an arbtration contract is not guaranteed. Pena could be cut in Spring Training, and the Cubs would owe him 45 days’ pay. But, in reality, if Pena accepts, he’s the Cubs’ first baseman for 2012 or he’s traded at the first possible moment.
Further, offering Pena arbitration means the Cubs would have to wait out his decision before making a move in the free agent or trade market for first base. Pena’s decision wouldn’t be due until December 7. That’s a long time to wait when you don’t already have an in-house back-up option.
… or do the Cubs have such an option in Bryan LaHair? Depends on whom you ask, I suppose – but, if the Cubs offer arbitration to Pena, it’s a good bet they view LaHair as a reasonable, emergency back-up plan if Pena declines and the Cubs have already missed out on other options by then. Given Epstein’s stated desire to build from the ground up, you can be certain he’s eying these kind of bonus draft picks quite greedily.