Trevor Bauer # 27 of the Cincinnati Reds celebrates after the sixth round final during Game 1 of the Wild Card series between the Cincinnati Reds and the 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 National Cy League League 2020 winner Trevor Bauer to one of the most unique contracts in Major League Baseball history.
Bauer agreed on Thursday to a three-year, $ 102 million contract with the team on Thursday, making him one of the highest paid players in the year, theoretically, as the pact unfolds. It has waiver options that trigger the maximum salary, a postponement and a short-term model structure. But most of all, he has flexibility, which a player of Bauer’s talent usually avoids.
“That’s what this player wanted,” Jon Fetterolf, a partner at litigation firm Zuckerman Spaeder, told CNBC on Thursday. Fetterolf is one of two MLB co-agents who negotiated Bauer’s agreement. The other is Rachel Luba from Luba Sports.
“We have come to a three-year deal, in which it will do much more in the early years than we have seen historically,” he added, noting that Bauer could earn $ 85 million in the first two years of the deal.
Again, it’s unique and here’s how it’s structured.
In the transaction
Bauer is scheduled to earn $ 38 million in his first year. If he gives up the deal, the total amount will become $ 40 million, because the Dodgers would pay him an extra $ 2 million for the exit.
Dodgers can benefit. If Bauer leaves, they can defer $ 20 million for the next paycheck – similar to the Mets deal with Bobby Bonilla. There is also a $ 10 million signing bonus paid in the 2021 season.
This bonus helps because the money is taxed only at the player’s state residence, while MLB game checks are taxed depending on the city where the clubs play during the year.
The second year of the transaction totals $ 47 million. It’s $ 32 million a year, but if he gives up, the Dodgers will pay him another $ 15 million.
These salaries make Bauer the highest paid (per year) MLB player for 2021 and 2022.
And if Bauer is still a Dodger after two years, he misses the $ 15 million acquisition, but recovers it all with a $ 32 million payment for the final year of the transaction. Total: $ 102 million over three years.
“The structure gives him a chance to assess the situation from year to year,” Fetterolf said. “It’s a different kind of contract and it also reflects that it’s a different kind of person.”
Short-term thinking
Bauer, 30, was part of his public relations mistakes. But a player of his caliber usually goes the long way – taking money and security over several years.
For example, New York Yankees pitcher Gerrit Cole signed a nine-year contract worth about $ 324 million in 2019. He was 28 at the time, but was locked into his contract until he was 37. Bauer and Cole were teammates at UCLA and both were selected at the top of the 2011 MLB draft.
Once drafted with an MLB club, players need six years to become a free agent and, along the way, make the minimum wage of the collective agreement. Once the service time is reached, the players have the right to negotiate the salary with the team and, if they do not agree, there is an arbitration group to determine the compensation.
If players do not agree with the long-term transactions in that window, especially beginning players, they will agree once they reach the free agency. Bauer imitated his new teammate, David Price, who took a similar path to his mega business.
Price put in his years of service with the Tampa Bay Rays, endured pay arbitration along the way, and bet on himself with a one-year deal with the Detroit Tigers for the 2015 season. He turned that into a seven-year contract. , $ 217 million, with the Boston Red Sox at the age of 30.
Both Price and Bauer were salary arbitrage players for a period of four years, traded by their clubs and took transactions a year before obtaining mega contracts. Now 35, Price was traded to the Dodgers in February last year and is scheduled to earn $ 32 million for the 2021. He will be 37 when the transaction ends after the 2022 season.
Fetterolf and Luba have been hired to represent numerous players in salary arbitration. Fetterolf explained why Bauer selected the short-term model instead of the long-term model.
“Theoretically, if you don’t go for several years, most of the dollars, he wants to give himself the ability to control his life,” Fetterolf said, using short-term basketball contracts as an example.
“He could have done his best,” Fetterolf said. “He didn’t do that. Why? Because he wants to make sure he’s in a situation that he likes. I think it’s different. We see that in basketball. I think one of the reasons we see him in basketball is these “He can earn so much money on the field, much more than baseball players usually earn,” he continued. “But many of these guys want to make sure they are in a position where they will have a chance to win.”
Trevor Bauer # 27 of the Cincinnati Reds launches in the third half against the Milwaukee Brewers at Miller Park on August 7, 2020 in Milwaukee, Wisconsin.
Dylan Buell | Getty Images
Filet mignon at half price
However, not all teams can afford expensive contracts per year.
Following a victory in the World Series 2020, the first in 1988, the Dodgers capitalize on a championship window. Bauer’s landing at that salary will cost the team.
According to Spotrac, the Dodgers have a salary of 234 million dollars, well over 189 million dollars of the Yankees (the second largest) and will be the only team that will pay a luxury tax bill with a competitive balance. Clubs are taxed dollar for dollar if they exceed $ 210 million by 2021.
But the Dodgers are familiar with the taxes, after paying a record $ 43.7 million in 2015. The bet is that Bauer’s business will help the team make money with another title, and this time with fans in the stands to offset lost revenue in 2020 due to Covid.
“It has to be a club that sees itself in a (championship) window and takes over the salary,” Fetterolf said. “And if he takes them to a World Series and he leaves, so be it. And he eliminates a lot of baseball teams.”
Asked if more players should consider the game in the short term, if available, Fetterolf said circumstances differ, but stressed flexibility as bait.
“A player like Trevor looks at him and says, ‘I’d rather see if I can maximize my annual earnings in advance and also get flexibility. “He said he only charges a 1.5% fee for contracts (more notable MLB agents can charge up to 5%) and an hourly rate during negotiations. The fee structure helped Bauer save on agents’ fees.
“The player is different,” Fetterolf added. “He got the contract he wanted and got a record deal at a cheaper rate than everyone else. Get the filet mignon and pay half the price. It’s not a bad deal.”