Trevor Bauer # 27 of the Cincinnati Reds celebrates after the last out of the sixth inning in Game 1 of the Wild Card Series between the Cincinnati Reds and Atlanta Braves at Truist Park on Wednesday, September 30, 2020 in Atlanta, Georgia.
Adam Hagy | Major League Baseball | Getty Images
The Los Angeles Dodgers recently signed 2020 National League Cy Young winner Trevor Bauer to one of the most unique contracts in Major League Baseball history.
Bauer agreed on a three-year $ 102 million deal with the team on Thursday, making him theoretically one of the highest paid players per year as the pact unfolds. It has opt-outs that lead to top salary, deferments and a short-term model structure. Most of all, it has flexibility, which a player with Bauer talent usually avoids.
“This is what this player wanted,” Jon Fetterolf, a partner at Zuckerman Spaeder litigation agency, told CNBC on Thursday. Fetterolf is one of two MLB agents who negotiated Bauer’s deal. The other is Rachel Luba from Luba Sports.
“We ended up with a three-year deal where he will make a lot more in the first few years than we have historically,” he added, noting that Bauer could make $ 85 million in the first two years of the deal.
Again, it’s unique, and that’s how it’s structured.
Within the deal
Bauer will make $ 38 million in his first year. If he pulls out of the deal, that total will be $ 40 million, as the Dodgers would pay him an extra $ 2 million if he leaves.
The Dodgers can take advantage of this. If Bauer leaves, they can defer $ 20 million of the salary for future payment – similar to Mets’s agreement with Bobby Bonilla. There is also a $ 10 million signing bonus that will be paid out in the 2021 season.
That bonus helps as the money is taxed only in the player’s hometown, while MLB game checks are taxed based on the city where clubs play during the year.
Year two of the deal totals $ 47 million. It’s $ 32 million for the year, but if he pulls out, the Dodgers will pay him another $ 15 million.
These salaries make Bauer the highest paid player (per year) in MLB for 2021 and 2022.
And if Bauer is still a Dodger after two years, he misses the $ 15 million buyout, but pays it all back with a $ 32 million payment for the deal’s last year. The total: $ 102 million over three years.
“The structure gives him the opportunity to evaluate the situation from year to year,” said Fetterolf. “It’s a different kind of contract, and it also indicates that he’s a different kind of person.”
Short term thinking
Bauer, 30, has made his share of PR mistakes. But a player of his caliber usually goes for the long term: taking money and security over several years.
For example, New York Yankees pitcher Gerrit Cole signed a nine-year deal worth approximately $ 324 million in 2019. He was 28 at the time, but was tied to his contract until the age of 37. Bauer and Cole were teammates at UCLA, and both were selected at the top of the 2011 MLB Draft.
Once drafted and with an MLB club, it takes six years for players to become a free agent, gradually earning the minimum wage of the collective bargaining agreement. Once service time is reached, players have the right to negotiate salary with the team, and if they disagree, there is an arbitration panel to determine compensation.
If players do not agree to long-term deals during that period, especially starting pitchers, they will agree once they reach a free agency. Bauer emulated new teammate, David Price, who took a similar path to his mega deal.
Price spent his years with the Tampa Bay Rays, faced with salary arbitrage along the way, and bet on himself on a one-year deal with the Detroit Tigers for the 2015 season, turning that into a $ 217 million seven-year deal with the Boston Reds. Sox at the age of 30.
Both Price and Bauer were players of four-year salary arbitration, traded by their clubs, making deals for a year before hitting mega contracts. Now 35, Price was traded to the Dodgers in February and is expected to earn $ 32 million for the 2021 season. He will turn 37 when the deal is over after the 2022 season.
Fetterolf and Luba have been hired to represent numerous players in salary arbitration. Fetterolf explained why Bauer chose the short-term model instead of the long-play.
“Theoretically, if you don’t go most years, most dollars, he wants to give himself the ability to control his life,” said Fetterolf, using short-term basketball contracts as an example.
“He could have done the maximum,” said Fetterolf. “He didn’t. Why? Because he wants to make sure he’s in a situation he likes. I think that’s different. That’s what we see in basketball. I think that’s one of the reasons why we’re in it. Seeing basketball, these guys can make so much money off the court, a lot more than baseball players usually make, ”he continued. “But a lot of these guys want to make sure they are in a situation where they have a chance of winning.”
Trevor Bauer # 27 of the Cincinnati Reds will pitch in the third inning against the Milwaukee Brewers at Miller Park on August 7, 2020 in Milwaukee, Wisconsin.
Dylan Buell | Getty Images
Half-priced filet mignon
However, not all teams can afford contracts with expensive salaries per year.
After a win in the 2020 World Series, the first since 1988, the Dodgers benefit from a championship window. Landing Bauer at that salary will cost the team.
According to Spotrac, the Dodgers have a salary of $ 234 million, well above the Yankees’ $ 189 million (second highest) and will be the only team to pay a competitive balance of luxury taxes. Clubs will be taxed dollar for dollar if they exceed $ 210 million by 2021.
But the Dodgers are familiar with taxes and paid a record $ 43.7 million in 2015. The bet is that Bauer’s deal will help the team get their money’s worth with a new title, and this time with fans in the stands to make up for lost earnings in 2020. thanks to Covid.
“It has to be a club that sees itself in a (champion) window and takes the salary,” said Fetterolf. “And if it takes them to a World Series and he leaves, so be it. And it eliminates a lot of teams in baseball.”
Asked if more players should consider the short-term play, if available, Fetterolf said circumstances differ, but pointed to flexibility as a bait.
“A player like Trevor looks at it and says,” I’d rather see if I can maximize my annual earnings in advance and also get flexibility with it. ” He said he only charges a 1.5% fee on contracts (more notable MLB agents can charge up to 5%) and an hourly rate during negotiations. ”The fee structure helped Bauer save on brokerage fees.
“The player is different,” added Fetterolf. He got the contract he wanted and got a record contract at a cheaper rate than everyone else. You get filet mignon and you pay half price. That’s not a bad deal. ‘