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Free-agent compensation system is unfair

Jeff Passan
Yahoo Sports

Based on the formula that determines free-agent compensation in big league baseball, the following equations are true:

Josh Willingham(notes) > Ryan Howard(notes)
Sergio Romo(notes) > Troy Tulowitzki(notes)

Howard is a former MVP and perennial candidate for the award with Philadelphia. Willingham is an outfielder who for the season's first three months couldn't crack the everyday lineup of the worst team in baseball.

Tulowitzki is Colorado's franchise shortstop, the rare 24-year-old around whom a team can build. Romo is a relief pitcher for whom the San Francisco Giants had such little regard they designated him for assignment last year.

In the world of baseball's player rankings, the feared slugger loses to the inconsistent outfielder and the disposable reliever bests the brilliant shortstop – and the broken system is not changing soon. Leaders from Major League Baseball and the players' association said this week that the rankings, a collectively bargained item that assigns value to every player in the major leagues, will not see a major overhaul until after the current labor contract expires in December 2011.

And so baseball is stuck with a system so blatantly outdated that Elias Sports Bureau, the league's official statistician, is embarrassed to compute them. The Elias rankings, as they are commonly known, aren't actually ranked by Elias. MLB provides the formula, one source said, and Elias just does the math.

The rankings aren't some arbitrary numbers for barstool debate, either. They contribute significantly to teams' approaches entering the offseason and at the trade deadline. Players are divided into five positional groups – first basemen, outfielders and designated hitters; second and third basemen and shortstops; catchers; starting pitchers; and relief pitchers – and ranked on a 100-point scale.

The top 20 percent of players in each group are classified as Type A. Somehow Willingham is ahead of Howard, who just recently made the cut, and Romo is there despite a 4.85 ERA. Teams can offer their free agents the option of going to arbitration, in which the player receives a one-year contract with no more than a 20 percent pay decrease. If a Type A free agent turns down arbitration and signs elsewhere, his former team receives two compensatory draft picks. Type B players (like Tulowitzki) rank in the top 40 percent and fetch one draft pick. The remainders do not garner any compensation.

Draft choices are valuable currency, and they're the reason that second baseman Orlando Hudson(notes), shortstop Orlando Cabrera(notes) and reliever Juan Cruz(notes) remained unsigned until late in spring training this year. All three were Type A free agents. Teams wanted them, but no one wanted to give up an early draft pick, as teams signing Type A's must (first round for teams picking 16th through 30th, second round for those picking first through 15th; Type Bs do not cost the signing team a pick ). As the free-agent market cratered and multiyear deals dried up, the trio was left with relative table scraps when teams leapt at a bargain, compensation be damned. Before Cruz signed with the Kansas City Royals on Feb. 28, the union and MLB had discussed tweaking the rules to keep the compensation from getting in the way of a deal.

How a system so dysfunctional remains in place is simple, leaders from MLB and the union said: Free-agent compensation is not a big enough issue in the minds of either side to re-jigger it before 2011.

"The bargaining parties at the end of this basic agreement should take a hard look at all issues related to draft-choice compensation, including the particulars of the Elias rankings," said Michael Weiner, the union's general counsel slated to take over as executive director when Don Fehr retires in the coming months. "More immediately, the parties should turn their attention to irrationalities associated with the Elias rankings, such as the relief-pitcher rankings. It's not in the interest of clubs or players for the Elias rankings to be out of touch with the way the market actually values players."

Middle relievers, such as Cruz, do face the biggest troubles. Because relief pitching tends to be affordable, teams can offer arbitration to a free agent without risking a huge financial hit if the player accepts. Most Type A players would rather pursue a multiyear deal, and teams are loath to give up first- or second-round draft picks for a middle reliever who might not have near the impact of a closer, let alone a player taken with the forfeited draft pick.

Strange typecasting

Examples of the absurdity of MLB's free-agent rankings.

Type A
Taylor Buchholz(notes) Hasn't thrown a pitch in 365 days
Orlando Cabrera(notes) .675 OPS last among AL regulars
Jesse Carlson(notes) Sporting 4.79 ERA
Joey Devine(notes) Hasn't pitched this season
Troy Glaus(notes) First hit of the season came Thursday
Bengie Molina(notes) His OBP is unacceptable for any position
Sergio Romo(notes) > The reason these rankings must change
Type B
Carl Crawford(notes) .308 average, 55 SB, peerless defense
Aaron Hill(notes) 31 home runs as a second baseman
Carlos Pena(notes) AL home run leader and an OBP fiend
Mark Reynolds(notes) Ranks behind David Eckstein(notes). Seriously
Troy Tulowitzki(notes) Another injury casualty, but still
Joey Votto(notes) He's behind Josh Willingham how?

The parties continue to discuss ways around the problem. They have considered changing the Elias ranking formula only for relief pitchers. They could allow a sign-and-trade deal, where a player re-ups with his old team, then gets traded to the new one for players in lieu of a draft pick. Among those projected as Type A middle relievers this offseason: Octavio Dotel(notes), John Grabow(notes), Kevin Gregg(notes), LaTroy Hawkins(notes) and Darren Oliver(notes).

"Everybody agrees the issue is largely a relief-pitcher problem," said Rob Manfred, MLB's lead labor lawyer. "There are two separate issues. [The other] is how many players are subject to compensation. That's a collective-bargaining issue. Compensation is good for the clubs. The union doesn't like it because it burdens free agency.

"That ain't going to change until 2011."

The issue of compensation isn't necessarily hard and fast. During the last labor negotiations, the union pushed to end draft-pick compensation. MLB officials wanted to institute a so-called slotting system, where each draft pick gets paid a fixed dollar amount. Neither side budged. The issue was tabled.

And so baseball is left with a system that mostly gets things right but whiffs badly, too. The point system, which an enterprising fan reverse engineered for those interested in the full rankings, uses two years' worth of only basic statistics: batting average, home runs, RBIs, on-base percentage, plate appearances and, for infielders and catchers, fielding percentage. It's not any better for pitchers: innings, wins, ERA and strikeouts, among a handful of categories.

The groupings aren't much better. The importance of a center fielder far exceeds that of a first baseman, and yet they're ranked against one another. Because catchers have their own category, Bengie Molina – he of the .278 on-base percentage – is a Type A, while American League home run leader Carlos Pena is a Type B. And no one can argue that a relief pitcher such as Sergio Romo is more valuable than an ace – say, Brandon Webb(notes), a Type B.

Except maybe Sergio Romo.

Beyond the ranking ridiculousness, players other than relievers are affected by their status. Following last season, Boston offered catcher Jason Varitek(notes) arbitration – and handcuffed him to Fenway Park in doing so. Varitek, coming off a poor season and still with Type A classification, would've fit any number of places outside of Boston – except for that compensatory pick he'd cost. He ended up re-signing with the Red Sox for $5 million, a 44 percent pay cut.

None of this should impact this offseason's elite hitters, such as Matt Holliday(notes) and Jason Bay(notes), and shouldn't work its way to Bobby Abreu(notes), whose on-base skills could land him a multiyear deal despite turning 36 before opening day. How it trickles down to Chicago Cubs starter Rich Harden(notes) could prove interesting.

When healthy, Harden is one of baseball's best pitchers. He's just got someone poking and prodding a voodoo doll of him. As prodigious as Harden's numbers are, his file of MRIs might be more impressive. So if the Cubs offer arbitration and he declines, will a team really give Harden a multiyear deal, knowing not only that he'll want significant money but that he'll cost a draft choice as well?

Minnesota considered that at the waiver trade deadline before opting against acquiring Harden. Because of the Type A tag, the cost was too high. The Cubs wanted significant return because they would have dealt Harden and the potential first-round pick from him signing elsewhere. Minnesota was unwilling to take the leap.

Nor are the two parties who rely on the Elias rankings, no matter how obsolete. Fixing the relief-pitching issue is one thing – a must. Revamping it all will be even longer overdue.