March 31st, 2013

The $22 million Cy Young clause

The Tigers have had some interesting contract clauses in their big deals under Dave Dombrowski. When they crashed the market and spent big on Ivan Rodriguez in 2004, they protected themselves with a contract clause that allowed them to terminate the deal in either of the first two years if he spent more than five weeks on the disabled list with a lumbar injury. A year later, they put a similar clause into Magglio Ordonez’s massive deal, allowing them a way out after only one season if he spent more than 25 days on the disabled list due to issues with his surgically-repaired knee. That was the peace of mind they bought while they were taking chances on free agents with injury histories, though they weren’t protected when Troy Percival’s arm broke down in 2005 (granted, it was a two-year contract).

Justin Verlander’s new contract has a different type of clause, and it has the potential to put awards balloting in a different spotlight.

The way the contract is written, Verlander clearly wanted the chance to become the first pitcher with a $200 million contract, but the Tigers probably didn’t want to be on the hook for what the Mets and Phillies face with Johan Santana and Roy Halladay, paying massive money for a pitcher beginning the downslide of his career (in fairness, we don’t know for sure if Halladay is sliding quite that far just yet, but he’s making $20 million regardless and just had a miserable Spring Training).

The solution isn’t injury-based, and is indirectly performance-based. It’s awards-based. If Verlander finishes among the top five in AL Cy Young balloting in 2019, his $22 million option for 2020 will vest.

The way they were talking at Friday’s press conference, Verlander and the Tigers are treating it as a performance-based incentive.

“I have a chance to get to the $200 million contract. I just have to earn it,” Verlander said. “I have no problem with that. The opportunity to stay in Detroit and earn $200 million is great. Obviously, it’d be nice if it was guaranteed, but I’ve got to go out there and earn it on the baseball field. That’s how I got this current contract and that’s how I plan to continue the rest of my career.”

This is not the first such awards-based clause in a contract, not even close. It just takes it to a different level. Some examples from recent deals:

  • Before Adam Wainright signed his extension with the Cardinals last week, his old contract included club options for 2012 and 2013 that became guaranteed when he finished in the top five in Cy Young voting in 2010 (he finished second to Roy Halladay). Ironically, an injury clause allowed the Cardinals to void the options when he was on the disabled list in 2011.
  • Santana has a club option for next year that would have become a player option under any number of scenarios, among them if he won a Cy Young award and finished in the top three in another year over the course of the six-year contract, or if he had three top-three finishes.
  • Yu Darvish has an $11 million salary for 2017 that becomes a player option with a Cy Young award and another top-four finish between now and 2016, or a second-place finish and two other top-four placements.

Those last two clauses required multiple Cy Young award finishes over a multi-year stretch. Verlander’s option is a one-shot deal. And dollarwise, none of the other examples have as much riding on them.

It could be tricky spot, but there isn’t much voters can do about it. The Baseball Writers Association of America tried to ward off a situation like this when it passed a rule in 2007 to disqualify any player from a BBWAA-voted award if there was an awards clause in their contract. That was set to take effect in 2013, but the BBWAA had little choice but to rescind it in 2011 because awards clauses have become so common. That said, I have no doubt voters will handle their decision seriously and with integrity. If Verlander deserves consideration, he’ll get it. If he doesn’t, he won’t. And let’s be honest, if Verlander puts up good enough numbers at age 36 to enter the Cy Young conversation, the Tigers will probably be interested in his services for 2020.

It might end up becoming a difficult position for Verlander and the Tigers. Keep in mind that baseball’s awards season takes place just before Thanksgiving, after free agency has already started and when agents are already talking with teams. If a 36-year-old Verlander has a good season in 2019 amidst a year of strong pitching performances, he could be waiting into mid-November to see if he’s on the open market. Even if there are seasons far better than his, all he has to do is finish fifth. Jered Weaver did that with a 13-12 season and 3.01 ERA in 2010, barely beating out Clay Buchholz (17-7, 2.33). Verlander finished in a four-way tie for fifth place in balloting, receiving one vote point along with Erik Bedard, Roy Halladay and Johan Santana.

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