Roster Rules - Free Agency

Free Agency actually started this morning at 12 AM EST, so we'll go over that topic next.

After a player has completed 6 full seasons in the major leagues, they can file for free agency. Free agency allows a player to negotiate with any team they chose. A player can also become a free agent if they are released by their previous team. Since major league contracts are guaranteed, if a player is released, any team that signs him during the remainder of that contract will only be required to pay the player the minimum salary, and his old team will be on the hook for the rest.

Free Agents may be subject to compensation as well, under the following system:

All players at the end of each season are ranked by the Elias Sports Bureau. They are broken into groups by league, and by similar positional group:

Catchers
1B-OF-DH
2B-3B-SS
Starting Pitchers
Relief Pitchers

MLB Trade Rumors has a breakdown of exactly what they look at for each player. Keith Law of ESPN.com also went into this in quite a bit of detail.

What the end result of this process is that each player is given a ranking:
Type A: Top 30% of their position group
Type B: Top 50%, but outside the top 30% of their position group
All Others: Bottom 50%

Type A free agents, if signed by a different team, earn for their previous team compensation in the form of:

• The first round draft pick of the team that signed the player (if the pick is #16 or higher), OR
  
• The second round draft pick of the team that signed the player (if their first round pick is from picks #1 through #15), AND
• A "sandwich" pick in between the 1st and 2nd rounds.
• These are all in the June Rule 4 draft. (To be discussed in a later post)

Type B free agents, if signed by a different team, earn for their previous team the following:

• A "sandwich" pick in between the 1st and 2nd rounds.

All other free agents which do not qualify as Type A or Type B will not earn their previous team any compensation. Also, any team which re-signs a player that had been on their team prior to filing for free agency does not earn any compensation for that team (since there is no loss to the team).

The key with any compensation is this: The player's previous team must offer the player arbitration by the deadline (usually in the first week of December), or the player must sign prior to December 1st. If neither of these conditions are met, then there is no compensation.

MLB Trade Rumors also has some examples about this as well.