Each team’s penalty for signing a qualified free agent

Since we just looked at what draft compensation teams would receive if they lost a free agent who declined a qualifying offer, now it’s time to figure out what each team would have to give up to land a free agent oblige who rejects the QO.

To recap the mechanics: If a free agent has played the entire 2024 season for a team and has never received a qualifying offer in the past, he is eligible to have a QO issued within five days of the end of the World Series. The qualifying offer is a one-year contract worth the average salary of the majors’ 125 highest-paid players, and this winter the QO is worth $21.05 million. An eligible free agent can simply accept the QO and thus avoid free agency entirely, but if he declines the QO, his former team must now receive some draft pick compensation if the free agent signs elsewhere. This only applies to eligible free agents from other teams, as a club can re-sign its own eligible free agents without penalty.

Here’s the (mostly predetermined) rundown of what each team will get if one of their eligible free agents actually moves to another club…

Recipient of the revenue share: Diamondbacks, Rockies, Reds, Brewers, Pirates, Marlins, Athletics, Mariners, Tigers, Royals, Twins, Guardians, Orioles, Rays

Should one of these clubs sign a qualified free agent, they will have to forgo their third-highest selection in the 2025 draft. Since most of these smaller teams are part of the Competitive Balance bonus rounds of the draft, their third-highest selection likely does not translate to their third-round selection, and the situation could become even more complicated if one of the teams trades for their CBR picks. Competitive Balance picks are the only draft picks eligible for trade, as we saw last winter when the Orioles made their CBR-A pick available to the Brewers as part of the draft Corbin Burnes Trade package.

It’s relatively rare for teams in this group to splurge on an expensive free agent, although Baltimore is expected to increase its spending under new owner David Rubenstein. The Tigers also have plenty of salary cap space and could look to build more aggressively around their young core after Detroit unexpectedly advanced to the ALDS this season.

Teams that do not receive revenue sharing funds and that have not paid the competition balance tax: Padres, Cardinals, Nationals, Angels, White Sox, Red Sox

To sign a qualified free agent, these teams would have to give up their second-highest pick of the 2025 draft as well as $500,000 from their bonus pool during the next international signing period.

The White Sox and now the Cardinals are both rebuilding. You can never rule out the Padres making a spectacular signing, but that seems unlikely considering the team has many of its impending free agents to manage and San Diego made a point of increasing the luxury tax cap last offseason fall below. Angels owner Arte Moreno said his club plans to compete in 2025 and the payroll will increase, although that may not translate into the signing of a qualifying free agent given how often the Halos have been burned over such signings in the past became .

Washington and Boston are both borderline candidates for a big free agent signing. The Nats are still technically in rebuilding mode, but could decide it’s time to add some key veteran support to an intriguing mix of younger players. The Red Sox have generally stayed away from pursuing expensive free agents in recent years. However, since they haven’t had a winning season since 2021, owners may be ready to buy more aggressively at the higher end of the market again.

Team in limbo: Blue Jay, juveniles

As mentioned in the last post, it won’t be known until December (when the luxury tax numbers are officially calculated by the league) whether the Jays and Cubs managed to get under the $237 million tax threshold. Roster Resource has both teams slightly above the threshold, while Cot’s Baseball Contracts has the Cubs slightly above and the Blue Jays slightly below. So, given the narrow margin, we will wait for the league to announce its numbers before placing the two clubs in either of the previous or next categories.

Needless to say, both clubs are hoping for a shake-up of their luxury tax status and reduced penalties for signing free agents who reject the QO. The Jays and Cubs are also two of the teams under the most pressure to win in 2025, and therefore could be more open to a big addition to turn things around. If MLB’s calculations show Toronto and Chicago have exceeded the threshold this year, they will join the next group of…

Competitive balance sheet taxpayers: Dodgers, Giants, Mets, Phillies, Braves, Astros, Rangers, Yankees

As expected, these teams face the highest penalties. To sign a free agent who declines the QO, these clubs would have to give up $1 million in international bonus pool money as well as two draft picks – their second and fifth highest selections in the 2025 draft.

Astros GM Dana Brown said to his team: “Maybe you need to be a little more creative” with their spending, considering how many big contracts are already on the books. The same goes for the Phillies and Braves, but it’s also easy to see both teams remaining aggressive after coming up short in the playoffs. The Rangers still have a lot of money to spend, but given the uncertain situation with broadcast revenue, they could spend money but still stay under the luxury tax threshold. San Francisco will be a fascinating team to watch right now Buster Posey runs the front office and how the Giants have already spent a lot of money trying to keep an impending free agent on the roster through an extension Matt Chapman.

Since the re-signing Juan Soto or sign again Teoscar Hernandez would cost nothing in QO penalties, retaining these hitters should be a top priority for the Yankees and Dodgers, with other free agents perhaps as backup plans if Soto or Hernandez sign elsewhere. Things were relatively quiet for the Mets during David Stearns’ first winter as president of baseball operations. If owner Steve Cohen wants to continue the club’s playoff run, even bigger spending could be on the cards.

Given this, the higher penalties for CBT payers may have a deterrent effect, particularly on qualified free agents. That doesn’t mean the Yankees wouldn’t try to keep Soto or something similar, but teams may prefer to get their big upgrades through trades or perhaps with free agents whose services don’t come with a QO.

If a club signs more than one qualified free agent, it must also forego its next highest draft pick. Signing two QO-rejecting free agents would require the revenue sharing group to give up its third- and fourth-highest picks in the 2024 draft. The teams that did not exceed the CBT or receive revenue sharing funds would have to forgo their second and third highest picks as well as $500,000 more from their international bonus pool. Luxury taxpayers would face the harsher penalty if they lost four draft picks – their second, third, fifth and sixth highest selections.