Last October, the White Sox signed Cuban first baseman Jose Abreu to a six-year pact with a $68M guarantee. For 2014, that worked out to a $7M salary, although it's probably more fair to consider the average annual value of the deal ($11.33M) per season, given that part of the guarantee came in the form of a $10M signing bonus.
We can probably all agree that any way you look at the dollars involved, the Abreu contract has been a coup for Chicago so far. Despite a DL stint earlier this season that will limit his games played total to 146 or fewer, Abreu is a top twenty position player in terms of fWAR. He's tied for 4th in the majors in home runs, and is also ranked 4th in wRC+, with a 164 mark that makes him one of the game's most elite hitters. The FanGraphs "Dollars" statistic puts Abreu's value around $28M; if he continues to produce at his current pace, his production could eclipse his total cost in early 2016, with more than three and a half seasons to go on his deal.
The White Sox appear to have done very well with the Abreu signing. But Yasmany Tomas should take notice: The White Sox didn't do quite as well as the $68M guarantee would make it seem. See, Abreu's contract allows him to opt out of guaranteed salaries in favor of arbitration for the 2017, 2018 and 2019 seasons. And while his salaries for those seasons are higher than his salary for 2014, what he'd make for that three-year period ($34M) is the exact equivalent of three years' worth of the deal's average annual salary. If he opted for arbitration, the salaries couldn't really go lower, and they almost certainly will go higher.
The true minimum guaranteed to Abreu
Quick warning: the gory "contract interpretation" that follows was done without the actual contract. I'm trusting what is reported at Cot's Baseball Contracts, FanGraphs and published reports on terms, and applying them under the CBA currently in force. The CBA, of course, could change prior to the first potential arbitration year, and the four corners of the contract itself could alter some of this analysis. There are some conclusions that can be confidently drawn (although this does not constitute legal advice), despite the fact that guaranteeing access to arbitration is unusual (normally, the club can non-tender an arbitration-eligible player). But keep in mind: if the contract permits the White Sox to non-tender Abreu after he has opted for arbitration, the analysis below would change quite a bit.
The discrepancy between what Abreu was slated to make and what he could end up making is significant. Here are two ways of looking at the guaranteed aspects of his deal, compared to an opt-out scenario:
The absolute minimum for the opt-out scenario is higher than $34M (the sum of the bonus and 2014-2016 salaries) because even if Abreu went year to year in arbitration, Article VI Part B of the Collective Bargaining Agreement would kick in, prohibiting gross reductions in his salary. For major league players with the service time to match, the CBA prohibits clubs from tendering, signing or renewing a player under reserve at a salary representing a reduction in excess of 20% from the salary paid the player the season before or a reduction in excess of 30% from the season before that.
To make things as simple as possible, let's exclude the effect of the signing bonus for a moment. For 2017, the White Sox would be required to pay Abreu at least 80% of his 2016 salary or 70% of his 2015 salary. In that case, it would be the 20% rule that would kick in, and they couldn't pay him less than $8M. The next year, it would be the 30% rule that would kick in, keeping his salary from dropping any lower than $7M. In 2019, it could drop to $5.6M.
But there is a signing bonus, and that affects the actual minimum salaries that Abreu could be paid. It's possible that the signing bonus could change the practical salaries for 2015 and 2016 as if it were prorated for just the three year period of 2014-2016; it's also possible that only one-sixth of the bonus is assigned to his salary for each of those years. Less likely, the contract could exclude the signing bonus from this calculation (although I don't think that would be effectual under the CBA).
In the absence of contract language, figuring out whether the CBA calls for prorating the bonus over the six-year (2014-2019) or three-year (2014-2016) period is, in my opinion, asking the CBA to do something it wasn't designed to address. So let's take the more conservative (six-year) route. For purposes of determining a maximum reduction in arbitration for 2017, we'll treat the 2015 salary as being $1.67M + $7M = $8.67M, and the 2016 salary as being $1.67M + $10M = $11.67M.
That would mean that arbitration could only reduce Abreu's 2016 salary to $9.34M. From there, it could only go down to $7.47M in 2017, and $6.54M in 2018. If he elected arbitration rather than the guaranteed salaries for 2017-2019, Abreu could only reduce his compensation from $34M to $23.35M.
Now, do I think that could happen? Of course not. As long as Abreu can play, he won't get the maximum reduction. The CBA governs what can and cannot be considered by arbitrators in picking between the two proposals (club and player) they're presented with, but one of the permissible criteria is "the existence of any physical or mental defects on the part of the Player." Basically, he'd have to opt for arbitration, then get injured in some serious way before the hearing (or, more practically, before numbers were exchanged). Even a career-threatening injury in early 2017 after opting for arbitration would see him make more than $6.5M in 2019.
The main point is this: there's little risk of Abreu seeing less money by opting for arbitration, and even if that risk were to blow back on him, his worst-case scenario is really not that bad. Abreu gets to pocket his signing bonus early, and yet it's very likely he'll benefit from it later by way of it affecting maximum salary reduction calculations. For some of the reasons below, opting for arbitration in 2017 isn't necessarily a no-brainer; still, there's almost no reason for him not to opt for arbitration in 2019, and it's also likely to be a wise choice in 2018.
The true maximum Abreu could receive
Here's where it gets more dicey: It's almost impossible to guess Abreu's future production and the possible inflation that could see the salaries of his future peers rise. It's also nearly impossible to guess how arbitrators will look at this situation, given its rarity.
A big ingredient in the arbitration salary recipe: the salaries of other players. In fact, the CBA requires arbitrators to "give particular attention" to salaries of players on the arbitration ladder, at, under, or one level above the player in question (except for players with 5+ years of service time, in their last year of arbitration). As you can imagine, using the salaries of other first-year arbitration-eligible players, even elite ones, would not necessarily work out so well for Abreu in 2017. Abreu's team can still argue "special accomplishment" and bring to bear the salaries of other players "without regard to service," and in his case, that contention would be far from ridiculous. But it's still up to the arbitrators as to how much they want to weight the "special accomplishment" argument.
The main ingredient in the arbitration salary may always be "quality of the Player's contribution to his Club," including on-field production, and that's good news for Abreu. The 2014 season is almost in the books now, and it was about as good as any first season of a player who went to arbitration.
Forgive me for using a statistic that is unlikely to see the inside of an arbitration room, but that 164 wRC+ mark, if maintained, would set Abreu apart from just about every other first baseman that has gone to arbitration. After up-and-down performance and a 121-wRC+ 2012, Chris Davis put together a massive 2013 campaign, to the tune of a 168 wRC+. MLB Trade Rumors' Matt Swartz projected a $10M salary for 2014 in arbitration for Davis, and Davis ended up agreeing with the Orioles for $10.35M. The range of outcomes for Abreu is obviously very wide, but let's say Abreu sinks to 140 wRC+ production levels in 2015 and 2016. Overall, his production record would still compare favorably to that of Davis, and although Davis was one step further on the arbitration ladder in 2014 than Abreu would be in 2017, that fits within the criteria that could be considered by an arbitrator even without the "special accomplishment" argument.
Perhaps you prefer to look at Freddie Freeman, who was projected by Swartz to get $4.9M as a first-time eligible player after wRC+ marks of 120, 115 and 149. That's also fine. Even in the event that Abreu's stats come down to Earth a bit in the next two years, his record is still likely to look better than Freeman's, and look as good or better than Davis's. Now consider the effect on salaries that could be felt from two more winters of arbitration and three more winters of free agency. Is it really that ridiculous to think that Abreu could get an arbitration salary in 2017 that could rival or top the $10.5M guarantee his contract would offer?
I don't think so. Don't forget that "special accomplishment" clause, and the reality that the arbitrator will know what Abreu was making in 2016. There's a non-zero possibility that an arbitrator would buy a "special accomplishment" argument hook, line and sinker, with a 2017 award of over $15M. More importantly, the club would also know that was a non-zero possibility, and it may be that the White Sox submit a number over $10.5M (wouldn't you?). But unless some very bad things happen, Abreu would almost certainly be in line to best Davis's 2014 salary if he were to opt for arbitration for 2018. $15M? And 2019. $20M? More?
It's well within the realm of possibility that through arbitration, Abreu could end up with something like this:
And it really could be higher, with Abreu making something like $15M, $20M and $25M in the final three years (pushing the total to around $94M). But let's just say that even in terms of present value, Abreu's contract compares favorably to the not-really-seven-year deal agreed on between the Red Sox and Rusney Castillo for $72.5M.
As with other kinds of opt-out clauses, Abreu could help his agent stir the pot as the years advance. Chances are very good that come 2016 or 2017, Abreu and the White Sox will replace some of his current contract or agree to a contract extension locking in some of these rates. But that's not a bad thing, either. When Yasmany Tomas comes to negotiate with teams, it's the Abreu contract — and not the Castillo contract — that could serve as the better model.
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