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The qualifying offer rules, explained

MLB.com

Any fan can understand and appreciate the excitement of a big offseason addition for his or her favorite team. But sometimes it feels like you need to be schooled in contract law to understand the ins and outs of baseball's Collective Bargaining Agreement, especially in regard to free agents, qualifying offers and Draft-pick compensation.

Here's a handy FAQ to help you understand the new rules and how they apply.

Any fan can understand and appreciate the excitement of a big offseason addition for his or her favorite team. But sometimes it feels like you need to be schooled in contract law to understand the ins and outs of baseball's Collective Bargaining Agreement, especially in regard to free agents, qualifying offers and Draft-pick compensation.

Here's a handy FAQ to help you understand the new rules and how they apply.

Which free agents will be tied to Draft-pick compensation?
Only those who turn down the one-year qualifying offer from their clubs will have compensation attached to them. Those offers must be made by the club within the first five full days after the World Series ends, and players then have 10 days to accept or decline the offer, during which time they can negotiate with other teams. The amount of the qualifying offer is the mean salary of the league's 125 highest-paid players. It was $17.4 million last offseason and will be $17.9 million this time around. To date, only five of the 73 players who have been extended qualifying offers since this system began in 2012 have accepted the offers.

Which players are eligible for the qualifying offer?
Only those who …

A. Have never received a qualifying offer previously in their career, and
B. Have spent the entire season on that team's roster (so in-season acquisitions are ineligible)

The "A" stipulation here applies to several free agents this winter, most notably Nelson Cruz. The "B" stipulation applies to players such as Manny Machado and Cole Hamels. And Daniel Murphy and Mike Moustakas apply for both A and B, having been extended the qualifying offer in the past and been traded this summer.

So who might get a QO this year? Bryce Harper, Patrick Corbin, Dallas Keuchel and Craig Kimbrel would all rate as likely. Same goes for Clayton Kershaw, David Price and Elvis Andrus if they were to opt out of their current contracts (though Price has made it clear he has no intention of doing so). Charlie Morton, A.J. Pollock, Yasmani Grandal, Michael Brantley, Andrew Miller, DJ LeMahieu, Jed Lowrie and Hyun-Jin Ryu are among the more difficult decisions.

What kind of compensation pick will a club that loses such a player receive?
It depends.

Under the previous CBA, if a team made a qualifying offer to a player and he signed elsewhere, it would get a supplemental first-round Draft pick (right after the end of the first round). That all changed in the CBA that went into effect last year.

Under the current rules, if the team that loses the free agent is a revenue-sharing recipient, based on its revenues and market size, then the selection -- if and only if the lost player signs for at least $50 million -- will be awarded a pick between the first round and Competitive Balance Round A of the 2019 MLB Draft. If the player signs for less than $50 million, the compensation pick for those teams would come after Competitive Balance Round B, which follows the second round.

The following 16 teams currently qualify for these picks: A's, Braves, Brewers, D-backs, Indians, Mariners, Marlins, Orioles, Padres, Pirates, Rays, Reds, Rockies, Royals, Tigers and Twins.

If the team that loses the player does not receive revenue sharing and did not exceed the luxury-tax salary threshold the previous season, its compensatory pick will come after Competitive Balance Round B. The value of the player's contract doesn't matter in this case. The 12 clubs that fall into this category are the Angels, Astros, Blue Jays, Cardinals, Cubs, Dodgers, Giants, Mets, Phillies, Rangers, White Sox and Yankees.

If the team that loses the player went over the luxury-tax threshold, the compensation pick will be placed after the fourth round has been completed (as with the previous scenario, it doesn't matter how much the player signs for). The only two clubs that exceeded the threshold in 2018 are the Nationals and Red Sox.

Keep in mind, these team designations can change every season (this year, the Astros and Tigers switched positions in the revenue-sharing payor/payee designations, and the Dodgers, Giants and Yankees all got under the luxury tax threshold). As a quick rule of thumb, Draft-pick compensation breaks down like this:

* General rule: Compensation after Comp Round B (in pick 75-80 range)
* Exception 1: Team paid luxury tax = Compensation after fourth round (mid-100s)
* Exception 2: Team received revenue sharing AND free agent signed for more than $50 million = Compensation after the first round

Are there still penalties for signing players who rejected qualifying offers?
Yes.

Any team that signs a player who has rejected a qualifying offer is subject to the loss of one or more Draft picks. However, a team's highest first-round pick is exempt from forfeiture, which is the most notable change that went into affect with the new system. 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:

• 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 as $1 million from its international bonus pool for the upcoming signing period. If such a team signs multiple qualifying-offer free agents, it will forfeit its third- and sixth-highest remaining picks as well.

Examples: A team with one pick in each round of the 2019 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.

Examples: A team with one pick in each round of the 2019 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.

• 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 for the upcoming signing period. If it signs two such players, it will also forfeit its third-highest remaining pick and an additional $500,000.

Examples: A team with one pick in each round of the 2019 Draft would lose its second-round pick. A team with two first-round picks would lose its second-highest first-round pick.

Anthony Castrovince has been a reporter for MLB.com since 2004. Read his columns and follow him on Twitter at @Castrovince.