Sunday, February 27, 2011

The Andrew Miller Clause: A Poison Pill Provision to Circumvent Waivers

Andrew Miller provides an interesting example of  how the Teams, Agents and the Player's Association can actually hurt a players development.  The case of his Minor League contract with the Boston Red Sox also illustrates how a clever Front Office can negotiate around MLB rules to the benefit of both the player and the team. 

Miller a left-handed pitcher was traded from the Florida Marlins to the Boston Red Sox this off-season.  However because of his contract situation (out of options) he was not tendered a contract by the Red Sox making him a free agent.  As such the Red Sox basically traded a fringe prospect to the Marlins simply for the the right to get to know Miller and try to sell him on signing a minor league deal with the club with the idea of non-tendering him all along.  A curious but very strategic move by the Red Sox.

According to the tremendous reporting by Alex Speier we have some insight into the terms of Miller's minor league contract with the Red Sox.
Miller’s minor league deal calls for him to make a $1.3 million salary if he’s in the big leagues.
This kind of contractual language is not uncommon among veteran players that sign minor league deals.  Financially it is similar to a Major League deal that the player would be able to sign, but because of injury or performance decline issues the Club is not comfortable or doesn't have the current room on the 40-man roster to sign him to a Major League deal.


The most fascinating provision is a unique clause, a Vesting Option on Assignment. 

For instance, according to a source familiar with the terms, the two sides agreed to add a club option that vests should Miller be assigned to another club. That, in turn, ensures that if the Sox were to add him to the big league roster and then send him back to the minors (something that would require exposure to waivers), other teams would be unlikely to claim him unless they were committed to his long-term development.
The term "vesting" means that the option in a player's contract automatically is triggered upon the happening of a certain event. These type of options commonly are written for hitters to vest after reaching a specificed number of plate appearances, and for pitchers often triggered by either a certain number of games startered or appearances.  Waivers  prevent a team from simply stashing players in its minor league affiliates, this both protects players from having their careers potentially stalled, and also protects the other MLB member clubs by giving them access to players to fill out holes on their own rosters.  How does this clause operate and is it gaming the system?


Assignment:  6.(a) The Player agrees that his contract may be assigned by the Club (and reassigned by any assignee Club) to any other Club in accordance with the Major League Rules. The Club and the Player may, without obtaining special approval, agree by special covenant to limit or eliminate the right of the Club to assign this contract. (Schedule A: ML Uniform Player's Contract on CBA pg. 222)
What Miller and the Red Sox have written into his contract is a "special covenant," though in common vernacular they are referred to as clauses. The forms of assignment that would appear implicated in the reported special covenant of Miller's contract are both trades and waiver claims. Assignments are governed by Major League Rule 9 and Waivers are governed by Major League Rule 10.  A summary of these rules can be found as produced by Mike Andrews of  A PDF version of the Rules can be found at The Biz of Baseball.

The protection against assignment via trades protects Miller because he desires to be in the Boston organization because he believes this gives him the best chance to reclaim his career. This is not a no trade clause however, as Boston would still be able to trade him, however this would cause the option to vest, so either the trading team would have to take on the $3 million or Boston would likely have to include money in the trade to help pay for the option.  From Boston's perspective the potential return on Miller as a pitcher if they can get him turned around is far more then the potential return on trading him now while his value is so low. 
“As excited as I was when I got traded here when I got the opportunity, I think I’m more excited now because of the way that my contract is structured. I don’t have to make the team right now,” he said. “Look, I’m no dummy. I can look at the roster. I’d love to be pitching in Boston in April because I’ve pitched my butt off in spring training, I deserve it and I’m ready.
“But my contract is unique. … It just seemed like the right fit. It seemed like the right place to be. I just want to be in the right place, to work with the right people and fulfill what I think is my potential.” ~Andrew Miller to Alex Speier of
 The clause also protects the Red Sox.  If they have the need for Miller at the Major League level they will have to purchase his contract and add him to the roster.  Because he is out of options, if the event arises that they need to send him back to the minors, then they would have to expose him to waivers, and every other Club would have the opportunity to claim him.  By including this clause, if a team claims him, then his $3 million dollar option for next season vests and the team has to absorb that salary.  It is possible that if Miller is pitching well enough a team would take that shot, of course if he is pitching that well Boston would likely keep him with the Major League Club.  Its a calculated risk for the Red Sox.

Reportedly Miller's Vesting Option is for $3M dollars.  $3M represents a significant salary for a reliever.  In this past off-season approximately 20 relief pitchers signed for $3 million dollars Average Annual Value (AAV) or less, while about 18 relief pitchers signed deals with an AAV above $3 million dollars. Miller's recent performance at the MLB level and his likely role with the Red Sox in 2011 if he is called up, suggest that he should be considered as a reliever in the short term.  Clearly the goal of the Red Sox and Miller is to build him back into a starting pitcher with the fall back of him becoming a full time reliever, thus the reason for the special clause in his contract to allow for more development time.  This sort of provision is often used in other sports, particularly with Restricted Free Agent contracts.  Often referred to as a "poison pill," a vesting option or escalators of some sort are included that vest if the player's original club which retains his restricted rights decides to match the offer that a new club makes to the player.

It does raise the question as to why the value of the option is set at $3 million dollars.  Why not make it $7 million or $10 million?  It is arguable that by making the value $3 million dollars, the Red Sox are providing a benefit to Miller.  This middle of the road reliever salary could be argue not to impede the waiver system.  A higher salary could be looked at by the Commissioner's office or the Player's Association as more of an impediment for Miller to be claimed on waivers.  It is within the realm of possibility that a team views Miller as a starter now and is in need of pitching and willing to give him a shot for $3 million dollars.  This would be a low price for a starting pitcher.  However at $7 million or $10 million dollars, no team would be willing to claim Miller of waivers.  This would mean that the Red Sox were able to contract around the entire waiver process, and would seem to be clearly adverse to the spirit of the Major League Rules.

UPDATE: 2/28/11

Alex Speier of responded to a question via Twitter from Senior Editor Chris Hatfield regarding whether the clause in Miller's contract kicks in if assigned to a Red Sox Minor League Affiliate once he is promoted to Boston.

Hatfield's Question: 
Hey, @, Miller's option vests if he is "assigned to another club" from Boston - do you know if that includes Sox minor lg clubs?
Speier's Answer:
@ Nope -- only if he changes organizations. Clause was created specifically so that he can be sent to the minors by the Sox.
Thanks to Alex and Chris for clarification of the Vesting Option.  

Andrew Miller should serve as a cautionary tale to any player entering the Major League Rule 4 Draft.  If you seek a Major League contract or special covenants that require you to be called up to the Majors early, you could burn all of your options and short circuit your development.  Reaching for a few million dollars early on, could cost you tens of millions down the road.




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