Trevor Bauer # 27 of the Cincinnati Reds celebrates after the sixth inning final during the first game 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 Young League 2020 winner Trevor Bauer to secure one of the most unique contracts in Major League Baseball history.
Bauer on Thursday agreed to a three-year, $ 102 million deal with the team, making him one of the highest paid players of the year, theoretically, as the pact unfolds. It has deactivation options that activate the maximum salary, a deferral and a short-term model structure. But most of all, he has flexibility, something a Bauer talent player 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 the Bauer deal. The other is Rachel Luba of Luba Sports.
“We ended up making a three-year deal where it’s going to do a lot more in the early years than we’ve seen historically,” he added, noting that Bauer could earn $ 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 is expected to earn $ 38 million in his first year. If he opts for the deal, that total will turn into $ 40 million, as the Dodgers would pay him an additional $ 2 million on departure.
The Dodgers can benefit. If Bauer leaves, he can defer $ 20 million in salary for future payments, similar to the Mets deal with Bobby Bonilla. There is also a $ 10 million bonus paid during the 2021 season.
This bonus helps, as the money is only taxed at the player’s state residence, while MLB game checks are taxed based on the city where the clubs play during the year.
The second year of the deal totals $ 47 million. That’s $ 32 million a year, but if you don’t participate, the Dodgers will pay you $ 15 million more.
These salaries make Bauer the highest paid (per year) MLB player for 2021 and 2022.
And if Bauer remains Dodger after two years, he misses the $ 15 million purchase, but recovers it all with a $ 32 million payment for the final year of the deal. The total: $ 102 million in three years.
“The structure gives you the opportunity to assess the situation year after 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, has committed his share of public relations mistakes. But a player of his caliber usually travels the route long-term, grabbing money and security for several years.
For example, New York Yankees pitcher Gerrit Cole signed a nine-year deal 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, selected at the top of the 2011 MLB draft.
Once drafted and with an MLB club, players take six years to become a free agent and, along the way, receive the minimum wage from the collective agreement. Once the time of service has been reached, players have the right to negotiate the salary with the team and, if they do not agree, there is an arbitral tribunal to determine the compensation.
If players do not accept long-term offers during this window, especially initial pitchers, they will accept once they arrive at the free agency. Bauer imitated new teammate David Price, who followed a similar path to his mega deal.
Price put his years of service with the Tampa Bay Rays, endured wage arbitrage down the road, and bet on himself with a one-year deal with the Detroit Tigers for the 2015 season. a seven-year, $ 217 million contract with the Boston Red Sox at age 30.
Both Price and Bauer were four-year salary refereeing players, traded by their clubs and hired a year before getting mega contracts. Now 35, Price moved to the Dodgers last February and is expected to earn $ 32 million for the 2021. He will be 37 once the deal 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 one.
“Theoretically, if you don’t go there for almost many years, most dollars, you want to give yourself the ability to control your life,” Fetterolf said, using short-term basketball contracts as an example.
“I could have done my best,” Fetterolf said. “He hasn’t done it. Why? Because he wants to make sure he’s in a situation that he likes. I think that’s different. We see it in basketball. I think one of the reasons we see it in basketball is these guys “He can make so much money off the court, so much more than baseball players usually do,” he said. “But a lot of these guys want to make sure they’re in a situation where they have a chance to win.”
Trevor Bauer # 27 of the Cincinnati Reds pitched in the third inning 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 salary contracts a year.
With the victory in the 2020 World Series, the first for the first time since 1988, the Dodgers take advantage of the championship window. Landing Bauer with this salary will cost the team.
According to Spotrac, the Dodgers have a payroll of $ 234 million, well above the $ 189 million of the Yankees (according to the highest) and will be the only team to pay a competitive-duty luxury tax bill. Clubs tax dollars for dollars if they exceed $ 210 million by 2021.
But the Dodgers are familiar with the taxes, having paid a record $ 43.7 million in 2015. The bet is that the Bauer deal will help the team earn their money with another title, and this time with bleachers to recoup lost revenue in 2020. due to Covid.
“It has to be a club that sees itself in a window (championship) and takes on the salary,” Fetterolf said. “And if he gets to a World Series and leaves, so be it. And he eliminates a lot of baseball teams.”
When asked if more players should consider playing short-term if available, Fetterolf said circumstances differ, but that he pointed to flexibility as a claim.
“A player like Trevor looks at him and says,‘ I’d rather see if I can maximize annual earnings in advance and also get flexibility. ’He said he only charges a 1.5% commission on contracts (the most notable agents in the MLBs can charge up to 5%) and an hourly rate during negotiations.The fee structure helped Bauer save on agent fees.
“The player is different,” Fetterolf added. “He got the contract he wanted and he got a record contract at a cheaper price than the rest. You have a mignon fillet and you’re paying half the price. It’s not a bad deal.”