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, to one of the most unique 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 per year, in theory, as the pact unfolds. It features opt-outs that trigger a maximum salary, deferral, and a short-term pattern structure. But most of all, he has flexibility, which a player of Bauer’s talent usually avoids.

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

“We ended up doing a three-year deal where he’s going to earn a lot more in the first few years than we’ve seen in the past,” he added, noting that Bauer could earn $ 85 million in the during the first two years of the agreement.

Again, it’s unique and here’s how it’s structured.

Bauer is expected to earn $ 38 million in the first year. If he pulls out of the deal, that total becomes $ 40 million, as the Dodgers would pay him an additional $ 2 million when he leaves.

The Dodgers can benefit from it. If Bauer leaves, they can defer $ 20 million from salary for a future payment – similar to the Mets’ deal with Bobby Bonilla. There’s also a $ 10million signing bonus that counts towards being paid out in the 2021 season.

This bonus is useful because money is only taxed at the official residence of the player, while MLB game checks are taxed based on the city the clubs play in during the year.

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

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

And if Bauer is still a Dodger after two years, he misses the $ 15 million buyout but recovers it all with a $ 32 million payout for the final year of the deal. The total: $ 102 million over three years.

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

Bauer, 30, has done his fair share of PR mistakes. But a player of his caliber usually goes the long term – taking money and security over several years.

For example, New York Yankees pitcher Gerrit Cole signed a nine-year contract valued at around $ 324 million in 2019. He was 28 at the time, but was locked in his contract until the age of 37. selected to lead the 2011 MLB Draft.

Once drafted and with an MLB club, it takes players six years to become a free agent, and along the way, they earn collective bargaining minimum wage. Once the duty time has been reached, players have the right to negotiate with the team over salary, and if they disagree, there is an arbitration committee to determine compensation.

If players don’t agree to long-term deals during this window, especially newbie pitchers, they’ll be okay once they reach free agency. Bauer emulated his new teammate David Price, who took a similar path to his mega deal.

Price put his years of service with the Tampa Bay Rays on, suffered a salary arbitration along the way and bet on himself with a one-year contract with the Detroit Tigers for the 2015 season. He transformed that in a seven-year, $ 217 million contract with the Boston Red Sox at the age of 30.

Price and Bauer were both four-year salary arbitrators, traded by their clubs, and made one-year deals before hitting mega contracts. Now 35, Price was traded to the Dodgers last February and is expected to earn $ 32 million for the 2021 season. He will be 37 when the deal is struck after the 2022 season.

Fetterolf and Luba have been hired to represent many players in wage arbitration. Fetterolf explained why Bauer chose the short-term model over the long-term model.

“Theoretically, if you’re not going to be going most of the years, most of the dollars, he wants to give himself the ability to control his life,” Fetterolf said, using short-term basketball contracts as an example.

“He could have done the maximum,” Fetterolf said. “He didn’t do that. Why? Because he wants to be sure he’s in a situation he likes. I think it’s different. You see him in basketball. I think one reasons you see it in basketball are these guys. Can make so much money on the court, way more than what baseball players usually make, ”he continued.“ But a lot. of these guys want to make sure they’re in a situation where they have a chance to win. “

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

After winning the 2020 World Series, his first since 1988, the Dodgers are enjoying a championship window. Landing Bauer at this salary will cost the team.

According to Spotrac, the Dodgers have a payroll of $ 234 million, well above the Yankees’ $ 189 million (second highest) and are expected to be the only team to foot a balanced luxury tax bill. Clubs are taxed dollar for dollar if they exceed $ 210 million by 2021.

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

“It has to be a club that sees itself in a (championship) window and takes the salary,” Fetterolf said. “And if that gets them to a World Series and he goes, so be it. And that eliminates a lot of baseball teams.”

When asked if more players should consider the game in the short term if available, Fetterolf said circumstances differ, but pointed to flexibility as a lure.

“A player like Trevor looks at him and says, ‘I’d rather see if I can maximize my annual earnings from the start and also have flexibility. He said he only charged a 1.5% contract fee (more notable MLB agents may charge up to 5%) and an hourly rate during negotiations. The fee structure allowed to Bauer to save on agent fees.

“The player is different,” added Fetterolf. “He got the contract he wanted and a record deal for less than everyone else. You get filet mignon, and you pay half the price. It’s not a bad deal.”