Home Articles Luis Robert’s Contract Extension is Fair, Not Exploitative

Luis Robert’s Contract Extension is Fair, Not Exploitative

by Sox On 35th Contributors

Written by Brett Schweinberg

The White Sox extension of stud center field prospect Luis Robert was met with almost universal praise. By locking the slugging center fielder in to an eight-year extension reportedly worth up to $88 million, the White Sox were able to guarantee they’d be able to keep around what should be a major part of their rebuild, effectively extending their competitive window.

However, the internet being the internet, some criticized the deal, claiming that the White Sox “underpaid” Robert and fellow young slugger Eloy Jimenez by signing them to these kinds of contracts. 

Some went as far as calling the practice, “exploiting young players.” 

White Sox fans should take these accusations seriously. It ought to be difficult to root for a team, business, or brands that exploits its labor. Even for the, “he’s getting payed millions of dollars to play a game,” crowd, the White Sox cannot afford to gain a reputation for mistreating their players. As the team exits from rebuilding and enters contention mode, signing premier free agents will be necessary, and players are less likely to sign with an organization seen as stingy and financially abusing its players. Major leaguers are, after all, in a union, and we don’t need to give the Manny Machados and Zack Wheelers of the world another reason to sign elsewhere. 

Thankfully, any reasonable analysis reveals that this is not the case. 

For any of this to make sense, it’s necessary to understand how major league rookie contracts work, something most analysts gloss over or assume you understand. In a typical rookie contract under MLB’s current collective bargaining agreement, a player’s first three full years are played at or near the league minimum wage of around $550,000. Once a player has three full seasons of service time, he is eligible for three years of arbitration, where the player is still obligated to sign with the team that owns his rookie contract.

Without going into a full breakdown of how arbitration occurs, a supposedly neutral third party weighs a myriad of factors and invariably decides a player is worth less than full market value. Take Mookie Betts for example. After posting 24.3 WAR over three full and one partial season, Mookie Betts won just $10.5 million in his first arbitration year. He went on to win the MVP that year. Following his MVP season, Betts agreed to play for $20 million, meaning he didn’t think he could gain more in arbitration. Having amassed a staggering 42.0 career WAR, Betts will play for $27.7 million in his last arbitration year in 2020. That’s nothing to sneeze at, but far less than Anthony Rendon’s average annual value of $35 million he got on the open market after garnering 27.3 career WAR beforehand. 

The final wrinkle here is what is often described as, “service time manipulation.” Free agency eligibility requires six full seasons of service time. Teams can prevent a player from reaching that threshold by holding them back a few weeks of their rookie season, effectively gaining a seventh year of control. The tradeoff here is what is known as “Super 2” arbitration, where, the top 22% of players who who have between two and three years of service time enter arbitration a year early. This means that they’ll wind up with four years of arbitration eligibility, but seven years of team control.

Though Super 2 protections were put in place specifically to compensate for service time manipulation, players hate it. Not only does this tactic force players into more arbitration, where they make less than they’d make on the open market, it also means they are a year older when they reach free agency. With age being a key emphasis for free agents, hitting the open market at 27 instead of 28 may ultimately cost a player more money over the life of their second contract than the year of free agency they’ve missed. This is why Kris Bryant has filed a grievance with the Cubs seeking to nullify his last year of mandatory arbitration. 

So, what happens when we rewind and apply this to Luis Robert? His deal with the White Sox buys out his six years of team control and arbitration eligibility for $48 million. The team then has two option years at $20 million each, and a $2 million buyout if they chose to exercise that option in either year. That buyout effectively makes the first six years worth $50 million. If the Sox exercise both options, they never pay that $2 million, and the total value will be $88 million. 

Prior to the signing the extension, Robert was guaranteed virtually nothing. He had three years of service time to accrue before he could earn anything other than the league minimum. Had a he suffered a major injury, turned out to be a bust, or suffered off the field issues during team control, the White Sox could have simply walked away. Instead, Robert is guaranteed $50 million dollars. 

This negates a massive risk that Robert was otherwise obligated to take on himself. Ask  Mark Prior or Delmon Young how they would feel today had this offer been placed in front of them before their rookie year. The Tampa Bay Rays would not have been wrong in signing Josh Hamilton to this type of deal prior to his rookie year, but an unfortunate spate of addiction issues meant he did not achieve his potential until after he left the organization. 

In addition to that guaranteed $50 million, Robert and his agent negotiated away the White Sox ability to manipulate Robert’s service time. Though an eight year deal, this realistically means that Robert is only giving up one year of free agency. In that sense, the White Sox can only be given credit for agreeing not to exploit a loophole they’re entitled to exploit, but it is nonetheless a huge win for Robert.  

Of course the White Sox aren’t doing any of this out of the goodness of their hearts, and are getting their own benefits on the back end of the deal. By agreeing to guarantee the front end of the contract, the White Sox were able to negotiate two years of club options at $20 million each. If Robert pans out, this could be a bargain for the White Sox. It is worth considering, however, that neither of this year’s top free agent outfielders in Nicholas Castellanos or Marcell Ozuna appear likely to net $20 million per year. Though contract values are sure to inflate over the next six years, it’s still going to take a very good ballplayer to be worth that kind of money. If “LouBob” doesn’t turn out to be well above average, the White Sox could end up turning down the options they negotiated for and will have assumed $50 million in risk for nothing. Moreover, given that the White Sox could have manipulated Robert’s service time, that first option year could just as easily have been a fourth year of “Super 2” arbitration eligibility, and the odds of Robert landing $20 million in arbitration is also slim.

No matter which way it gets sliced, this deal, at least per the terms of the rookie contract structure, is very fair. The White Sox and Robert, who negotiated this deal through an agent, soberly assessed the various risks each side was taking, weighed them against expected benefits, assigned values, and struck a deal. According to a good faith effort to roughly assign values, From The 108’s Beef Loaf estimated this contract comes at a 14% discount for the White Sox. That’s not a lot of discount to get for fronting $50 million. 

While the deal is certainly reasonable within the confines of the collective bargaining agreement, this doesn’t necessarily answer the underlying question: Is the deal fair? 

In comparing Robert’s deal to players who have recently made it out of their service time and into free agency, the answer appears to be yes. 

It’s important not to gloss over the first column of that graphic, where neither Rendon, Harper or Machado made $50 million during their service time. Though some inflation is necessary to factor in, this deal already pays Robert like he will be as good as any of these players during team control. Think of how good Robert would have to be for this deal to be a bad bet for his arbitration years. Mookie Betts is set to earn right around $60 million and could easily surpass 50 WAR. In their first eight years in the majors total, Rendon made $103.5 million, Machado made $98.1 million, and Harper made $86.9 million. In other words, even if the White Sox pick up both options, Robert will still make more than Bryce Harper over his first 8 years. Better yet, at least for Robert, the White Sox already paid him a $26 million signing bonus when he left Cuba.  So, in effect, he’s guaranteed $76 million and could make up to $114 million. That dwarfs even what Rendon will make after a record-breaking free agency contract for a position player.

With all of that in mind, it’s almost impossible to say that, relative to other players in the MLB system, Robert’s compensation is unfair. The question then becomes whether or his compensation under the CBA is “fair” within the general meaning of the word. It is almost impossible to say that any system in which an employee is paid drastically under their market value for the first six years of their employment is fair. On the other hand, the collective bargaining agreement is what the MLB players union negotiated and agreed to. How can that be unfair? 

While the rookie contract portion of the MLB’s union agreement is hard to reconcile, other areas of the agreement make up for it, which may best be seen by comparison to other major sports. The NFL has a hard salary cap, and contractual money is typically not guaranteed. The NHL also has a hard salary cap so hard that only a handful of players make over $10 million a year. The NBA has max contracts regardless of how much a player is truly worth, and a luxury tax that is far more punitive and kicks in at a far lower rate than MLB’s. Though rookie contracts are shorter in all of those sports, the potential for earning later in their careers is much higher. 

To the extent that young MLB players get the short end of a stick, older players reap those benefits. This is classically how unions operate. And, if the players decide this truly is unfair, it can (and frankly, should) be renegotiated in the next round of collective bargaining. Writers lamenting the plight of Luis Robert miss the mark entirely. If ownership is taking home money that should go to the players, it’s not the guys signing lucrative extensions that are mistreated. Instead, it’s the guys spending a decade or more hovering around replacement level that won’t clear $15 million in their career the union needs to be worrying about. 

This deal also has a side benefit for Robert. From age 22 to 25, he was on track to make about $1.5 million. That’s a nice chunk of change, but he has to retire, and is guaranteed nothing beyond that. In other words, he gets his first arbitration year at 26 and isn’t set for life until his late 20’s. By getting more money up front he can start living large, balling out, and buying his parents mansions much sooner. 

This brings to light perhaps the biggest reason it’s hard to call this deal unfair. Even if Luis Robert is the next superstar, the two years of free agency where he gives up at $20 million each (forgetting the service time manipulation issue) could be worth around $40 million, meaning Robert would lose that amount. But if Robert is that good, he is going to be up for a contract that would easily eclipse $300 million. 

Factoring in the $114 million Robert will have earned under the current contract and signing bonus, there is no functional difference for Robert between $414 million under this contract and $444 million had he turned it down. What’s $40 million he could never spend in his lifetime against the the $50 million he’ll make in his 20’s when it matters most? In that scenario, the question isn’t whether it’s fair to Louis Robert; the question is whether it’s fair to his great-great-great-great-great granddaughter. And even there, “fair” is whether or not she’ll get to buy a brand new yacht or inherit one of her family’s fleet. In this light, using the term “exploit” or “underpaid” to describe paying a guy $50 million on top of a $26 million signing bonus is absurd, especially in the context of the person hustling cases of Miller Light up and down the bleachers or the guy huffing exhaust fumes collecting parking fees on Pershing Ave. 

With the question of whether it’s contractually fair and the question of whether it’s morally fair, the last question to answer is whether this deal could affect the White Sox reputation such that free agents might steer clear. This will come down to individual players, though it seems very unlikely.  Certainly, this isn’t the flagrant fleecing the Braves recently gave Ozzie Albies at nine years for $45 million, or even the six-year, $17.6 million extension Evan Longoria signed in his rookie season long ago. It’s also important that the White Sox are agreeing to forego service time manipulation. Who wants to play with a corps of young studs who might not be fully in on the organization that effectively lied for a few weeks to keep them from getting 10’s of millions of dollars? 

Another difference between those players and sports writers slinging shoddy hot takes on Twitter, however, is that the players have been there before. Almost invariably, they’ve had similar offers on the table, parsed the variables with their agents, and realized how tough of a decision it is. They know that they too paid their dues on a rookie contract to get the opportunity to sign for more money than they’ve ever dreamed of. And, of course, the final difference is that they’re going to be looking at playing on this team. 

https://pbs.twimg.com/media/ENeWNnOVAAACwDW?format=jpg&name=900×900

Given that nobody is getting exploited here and how much fun this lineup figures to be, it’s difficult to imagine any player is going to have too many qualms about signing up to play here.


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Featured Photo: Chicago White Sox/Twitter

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Rhino
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Rhino

Kate Feldman is typical of our current sports media. I have never heard of her before that tweet, and now her stupid “hot take” has earned her enough notoriety to get a column in some second-rate city. Talk about “manipulation.” Give it a rest. Luis Robert is set to make more money in his first 8 years than in the whole career of a high-quality brain surgeon. And as far as the deal being unfair, there is legitimate bust potential for every can’t miss prospect. Remember Felix Pie? Corey Patterson? Joel Borchard? Mark Prior? Jim Parque? And on and on… Read more »

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