Qualifying Offer | Glossary
MLB Draft compensation
Any team that signs a player who has rejected a qualifying offer is subject to the loss of one or more Draft picks. While a team's highest first-round pick is exempt from forfeiture, any additional first-round picks are eligible. Three tiers of Draft pick forfeiture -- which are based on the financial status of the signing team -- are in place to serve as a penalty for signing a player who rejected a qualifying offer.
(Note: Each pick in the first 10 rounds of the Draft has an assigned value, and the total for each of a club's selections equals what it can spend on signing bonuses for players selected in those rounds without incurring a penalty. When a team forfeits a Draft pick, it also surrenders the accompanying bonus pool money associated that pick, independent from any money forfeited from its international bonus pool per the rules below.)
• A team that exceeded the luxury tax in the preceding season will lose its second- and fifth-highest selections in the following year's Draft as well $1 million from its international bonus pool. If such a team signs multiple qualifying offer free agents, it will forfeit its third- and sixth-highest remaining picks as well. If that team loses a free agent, it will be awarded a Draft pick immediately following the fourth round. The Astros, Cubs and Yankees exceeded the threshold in 2020.
Examples: A team with one pick in each round of the 2021 Rule 4 Draft would lose its second- and fifth-round picks. A team with two first-round picks and one pick in each subsequent round would lose its second-highest first-round pick and its fourth-round pick.
• A team that receives revenue sharing will lose its third-highest selection in the following year's Draft. If it signs two such players, it will also forfeit its fourth-highest remaining pick. If that team loses a free agent, it will be awarded a pick between the first round and Competitive Balance Round A if -- and only if -- the lost player signs for at least $50 million. If the lost player signs for less than $50 million, the team's compensation pick would come after Competitive Balance Round B, which follows the second round.
The following 14 teams qualify for these picks during the 2020-21 offseason: Brewers, D-backs, Indians, Mariners, Marlins, Orioles, Padres, Pirates, Rays, Reds, Rockies, Royals, Tigers and Twins.
Examples: A team with one pick in each round of the 2021 Rule 4 Draft would lose its third-round pick. A team with two first-round picks and one pick in each subsequent round would lose its second-round pick.
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A team that neither exceeded the luxury tax in the preceding season nor receives revenue sharing will lose its second-highest selection in the following year's Draft as well as $500,000 from its international bonus pool. If it signs two such players, it will also forfeit its third-highest remaining pick. If that team loses a free agent, it will be awarded a Draft pick immediately following Competitive Balance Round B. The 13 clubs that fall into this category during the 2020-21 offseason are the Angels, Athletics, Blue Jays, Braves, Cardinals, Dodgers, Giants, Mets, Nationals, Phillies, Rangers, Red Sox and White Sox
Examples: A team with one pick in each round of the 2021 Rule 4 Draft would lose its second-round pick. A team with two first-round picks would lose its second-highest first round-pick.
The Draft-pick compensation is also based on the financial status of the free agent's former team
Like standard Draft picks, compensatory picks in a given tier are ordered in accordance with the previous season's standings. If a team with MLB's worst record and a team with a .500 record both lose a free agent that signs for more than $50 million, the team with the worst record would receive the higher of the two compensatory picks.
Players who are unsigned after the start of the Rule 4 Draft in the year that follows the rejection of their qualifying offer are no longer tied to draft pick compensation and can be signed without their new club needing to forfeit a draft pick.
