Trevor Bauer’s $ 102 million deal with the Dodgers is unique – here’s why

The Los Angeles Dodgers recently signed 2020 National League winner Cy Young, Trevor Bauer, with one of the most exclusive contracts in Major League Baseball history.

Bauer agreed to a three-year, $ 102 million contract with the team on Thursday, making him one of the highest-paid players a year, theoretically, as the pact unfolds. It has opt-outs that generate a maximum salary, a postponement and a short-term model structure. But most of all, it has flexibility, something that a player with Bauer’s talent usually avoids.

“This is what this player wanted,” Jon Fetterolf, a partner at litigation firm Zuckerman Spaeder, told CNBC on Thursday. Fetterolf is one of the two MLB co-agents who negotiated the Bauer deal. The other is Rachel Luba, from Luba Sports.

“We ended up closing a three-year deal in which he will earn much more in the first few 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 is unique and this is how it is structured.

Bauer is expected to earn $ 38 million in its first year. If he gives up on the deal, that total will be $ 40 million, as the Dodgers would pay him an extra $ 2 million on his way out.

Dodgers can benefit. If Bauer leaves, they can postpone $ 20 million of salary for future payment – similar to the Mets deal with Bobby Bonilla. There is also a $ 10 million signing bonus factored to be paid out over the 2021 season.

This bonus helps, as the money is only taxed at the player’s state residence, while MLB gambling checks are taxed based on the city where clubs play during the year.

The second year of the deal totals $ 47 million. It’s $ 32 million for the year, but if he gives up, the Dodgers will pay him another $ 15 million.

These salaries make Bauer the highest paid player (per year) in the MLB in 2021 and 2022.

And if Bauer is still a Dodger after two years, he will lose the $ 15 million purchase, but will recover everything with a $ 32 million payment in the last year of the deal. The total: $ 102 million in three years.

“The structure gives him the chance to assess the situation year by year,” said Fetterolf. “It is a different type of contract and it also reflects that he is a different type of person.”

Bauer, 30, made his share of public relations mistakes. But a player of your caliber usually follows the long-term path – taking money and security over several years.

For example, the New York Yankees pitcher, Gerrit Cole, signed a nine-year contract valued at about $ 324 million in 2019. He was 28 at the time, but was closed on his contract until 37. Bauer and Cole were teammates at UCLA, and both were selected at the beginning of the 2011 MLB Draft.

After being drafted and with an MLB club, players take six years to become a free agent and, along the way, start to make the minimum wage of the collective bargaining agreement. Once service time has been reached, players have the right to negotiate with the team on salary and, if they disagree, there is an arbitration panel to determine compensation.

If players do not agree to long-term deals during this window, especially the initial pitchers, they will agree as soon as they arrive at the free agency. Bauer emulated his new teammate, David Price, who followed a similar path for his mega business.

Price dedicated his years of service to the Tampa Bay Rays, endured wage arbitration along the way, and bet on himself with a one-year contract with the Detroit Tigers for the 2015 season. He turned that into a seven-year contract and $ 217 million with the Boston Red Sox at age 30.

Both Price and Bauer were four-year salary arbitration players, negotiated by their clubs, and closed deals for a year before closing mega contracts. Now 35, Price was traded to the Dodgers last February and is set to make $ 32 million in the 2021 season. He will be 37 when the deal ends after the 2022 season.

Fetterolf and Luba were hired to represent several players in the pay arbitration. Fetterolf explained why Bauer chose the short-term model over the long one.

“Theoretically, if you don’t go in most years, in most dollars, he wants to give himself the ability to control his life,” said Fetterolf, using short-term basketball contracts as an example.

“He could have done the most,” said Fetterolf. “He didn’t do that. Why? Because he wants to make sure he’s in the situation he likes. I think it’s different. We see it in basketball. I think one of the reasons we see it in basketball is that these guys can win a lot money off the court, much more than baseball players usually earn, “he continued. “But a lot of these guys want to make sure they are in a situation where they have a chance to win.”

However, not all teams can pay contracts with expensive annual salaries.

Coming from a World Series 2020 victory, the first since 1988, the Dodgers are capitalizing on a championship window. Getting Bauer with that salary will cost the team.

According to Spotrac, the Dodgers have a payroll of $ 234 million, well above the $ 189 million of the Yankees (the second largest) and should be the only team to pay a luxury tax account with a competitive balance . Clubs are taxed dollar for dollar if they exceed $ 210 million in 2021.

But the Dodgers are familiar with taxes, having paid a record $ 43.7 million in 2015. The bet is that Bauer’s business will help the team get their money’s worth with another title, and this time with fans in the stands to make up for it. revenue lost in 2020 due to Covid.

“It has to be a club that sees itself in a (championship) window and receives the salary,” said Fetterolf. “And if that takes them to a World Series and he leaves, so be it. And it will eliminate many baseball teams.”

Asked whether more players should consider the short-term game, if available, Fetterolf said the circumstances differ, but pointed to flexibility as bait.

“A player like Trevor looks at this and says, ‘I prefer to see if I can maximize my annual earnings in advance and also get flexibility along with that.” He said he only charges a 1.5% fee on contracts (MLB’s most notable agents can charge up to 5%) and an hourly rate during negotiations. The fee structure helped Bauer save on agent fees.

“The player is different,” added Fetterolf. “He got the contract he wanted and a record contract at a cheaper price than everyone else. You’re getting filet mignon and you’re paying half the price. That’s not a bad deal.”