One of MLB’s top free agents came off the board late Monday night as the Chicago White Sox signed closer Liam Hendriks to a three-year, $39-million deal with a $15-million club option that carries a $15-million buyout. It’s a unique contract structure that guarantees Hendriks $54 million regardless of whether the White Sox exercise that 2024 option or not.
Considering how many teams are reluctant to spend in response to a year of lost revenue, and that Cleveland closer Brad Hand and his $10-million 2021 club option went ominously unclaimed on waivers earlier this off-season, Hendriks did quite well here. It’s a comparable guarantee to the three-year, $52-million deal Wade Davis signed with the Colorado Rockies as a similarly 31-year-old closer three winters ago. (Just don’t ask Colorado how that deal panned out from their perspective).
What do we make of all this? And what does it mean for the Toronto Blue Jays, a team that had interest in Hendriks? Let’s get into it with these three thoughts on the deal.
Good for Liam Hendriks
So seldom is it that a reliever gets paid in this game, any pact such as this one is cause for celebration. But Hendriks has travelled a particularly winding road to reach this life-changing moment. And fans ought to be absolutely thrilled for him.
Signed as an undrafted free agent when George W. Bush was President and the first generation iPhone was still in development, Hendriks debuted professionally in the unforgiving Gulf Coast League and made stops at each minor-league level before finally reaching MLB four years later. Over the next decade he transitioned from starting to relieving, served as a member of six different organizations, was designated for assignment four times, traded three times, and, as recently as June of 2018, outrighted to the minors after going unclaimed on waivers.
Then he became baseball’s best high-leverage reliever. After returning to the majors from that outright assignment, Hendriks went off in an Oakland A’s uniform, pitching to a 1.79 ERA from the beginning of 2019 on with exceptional peripherals of 13.1 K/9 and 2.0 BB/9. He pitched in nearly half of Oakland’s games over that span, leading all MLB relievers with 108.1 innings pitched (if you exclude Tampa Bay’s Jalen Beeks, who was throwing bulk outings behind openers).
And Hendriks was huge when it counted, like when he helped eliminate his new White Sox teammates from the wild card round last October, striking out the side to earn the Game 3 save after throwing 49 (!!!) pitches in another do-or-die Oakland win the day prior. Hendriks’ final pitch in that Game 3 outing was a 98-m.p.h. fastball dotted on the outside corner. Two pitches earlier, he hit 99.
Liam Hendriks, Overpowering 3 Pitch K (all 99mph Fastballs).pic.twitter.com/fRAel0n7WK
— Rob Friedman (@PitchingNinja) October 1, 2020
Now, he’ll be among MLB’s highest-paid relievers, on a club that featured only 22 players earning a base salary of $8-million or more in 2020. Hendriks himself has earned just $7.45-million over the last two seasons combined. With 5.2 fWAR accumulated over that span, he’s been among the 27 most productive pitchers in the game -- producing more WAR than Clayton Kershaw, Noah Syndergaard, Masahiro Tanaka and Blake Snell.
That’s a lot of surplus value reaped by the A’s. And in another, much darker timeline, Hendriks is a younger pitcher not yet eligible for free agency who would earn only a marginal increase on his 2020 salary through arbitration. Or he blows out his arm throwing all those high-90s fastballs before he ever accrues the six years of service time required to hit the open market. Or his performance dips due to the inevitable wear-and-tear associated with his incredible volume of usage, and teams relying on projection systems that can only reasonably predict that performance to continue suffering are hesitant to commit to him for more than year, or a year with a club option, or a couple years at a very low rate with performance bonuses that could increase his salary if Hendriks was given the opportunity -- which is controlled entirely by the club -- to reach them. Or he doesn’t get picked up at all after one of his many designations for assignment and is forced to pursue work overseas.
That’s what makes it so unlikely and incredible that Hendriks will now be getting his surplus-value paid back. It’s something that almost never happens for players of his ilk. A miracle confluence of timing, performance, durability, and determination. And a great day for him.
About that unique structure
There is, of course, a catch. There’s always a catch. But this one might just work out for both club and athlete.
Hendriks is guaranteed $54-million under his deal, $39-million of which he’ll receive over the next three years. The final $15-million comes in the form of a club option for 2024, which carries with it an equal $15-million buy-out the White Sox would owe Hendriks should they opt not to pick up the option. The catch is that the $15-million buy-out would be paid over the subsequent 10 years.
The best deals are the ones that allow both sides to come away from the negotiation feeling happy with the pact and I think this creative structure accomplishes just that. Hendriks is happy because he gets his guaranteed money. The White Sox are happy because they get to front-load their competitive balance tax hit at a time their roster is relatively efficient and reserve the option of lessening their 2024 payroll by deferring the final 27.8 per cent of the deal if Hendriks declines substantially or gets hurt.
That scenario would open a roster spot and create financial flexibility, should the White Sox need it to replace Hendriks with a better performing reliever, or to improve another deficient area of the roster, or to stay under the competitive balance tax as their payroll grows further inflated, or, more cynically and perhaps realistically, to slash payroll and rebuild.
Either way, Hendriks will get his money. I just hope he also got a guarantee of interest on the deferral payments commensurate with inflation, because $15-million in 2034 won’t be worth the same as $15-million 10 years prior.
Come to think of it, maybe that’s what tips this unique option in favour of the club. If the White Sox don’t pick up the option, and Hendriks isn’t receiving interest on those deferrals, then the White Sox will be paying him $15-million in 2024 dollars over the following 10 years, which will actually be worth progressively less in present day value as time goes on.
On the other hand, maybe Hendriks could see some benefit from this, too, particularly if his primary residence is in a zero per cent income tax state such as Florida -- where he currently lives -- at the time he’s receiving his deferral payments. That way, instead of paying Illinois income taxes -- currently a flat rate of 4.95 per cent -- on his $15-million earnings in 2024, he’d keep that tax money in his pocket, which could, in a circuitous way, help compensate for the natural drag on his earnings that inflation will produce over the course of 10 years.
But as is certainly now clear, I am not an accountant -- and having already ventured far beyond my depth, I will go no further. But one does wonder if we could see more deferral structures like this in the future, particularly for teams bumping up against the competitive balance tax (Hello, New York Mets), and particularly for players signing with teams in high-income tax states such as California. Or even teams that play in a foreign country with its own tax implications such as the Toronto Blue Jays.
Oh, and about those Blue Jays.
Should the Blue Jays have out-bid the White Sox?
The Blue Jays had obvious interest in Hendriks, meeting with him recently at the club’s new player development facility in Dunedin, Fla. And Hendriks making the two-and-a-half-hour trek -- assuming no traffic, mind you -- from his home in Fort Myers for that meeting suggests the interest was mutual. Which makes sense. He’s already served two tours of duty with the organization and, as a member of the 2015 AL East champions, knows exactly how extraordinary the experience of winning with Canada’s team can be. His wife’s even from Montreal.
But let’s put Hendriks’ point of view aside and think team perspective. A $54-million commitment to a soon-to-be 32-year-old who relies on velocity and has carried a heavier workload than any other reliever over the last two seasons is… a lot.
The Blue Jays had the payroll to make it work and have an obvious need at the back-end of their bullpen, which will have to be addressed prior to opening day, but… it’s a lot. And when you layer in the heightened risk associated with commitments like these for relief pitchers, the most volatile and injury-prone performers in the game, beating Chicago’s offer with a guarantee in excess of $54-million would have been… a lot.
So, it’s easy to see how the Blue Jays decided it made sense to let this fish get away. And while Hendriks would have been a nice luxury for Toronto to have, he was far from a necessary one for a team still emerging from a rebuild, particularly considering how his price could have prevented the club from addressing needs elsewhere around the diamond.
Plus, if the Blue Jays have proven anything over the last several seasons, it’s that they can identify untapped potential in the middle and lower tiers of the relief market, and possess the resources -- namely, pitching coach Pete Walker and bullpen coach Matt Buschmann -- to help those players realize it. It’s not out of the question that the Blue Jays could find one or two pitchers who will replicate a significant portion of Hendriks’ 2021 production with only a fraction of the $13.5-million the new White Sox closer will average annually over the course of his deal.
Just last winter, Rafael Dolis was unearthed in Japan. A.J. Cole and Anthony Bass were similarly low-cost, high-reward success stories. Daniel Hudson was picked off the scrap heap at the end of 2019 spring training and went on to pitch in the World Series. David Phelps was signed to a creative deal coming off Tommy John surgery and eventually traded for Thomas Hatch. Seung-hwan Oh, Dominic Leone, Joe Smith -- the list goes on.
The Blue Jays have done fine work in that market and deserve the benefit of the doubt that they’ll find similar value among the many, many, many remaining free agent relievers. A time will come when the team has to be bolder, making the kind of move the White Sox did to acquire a premium arm at a premium price to augment an already in-contention roster. But is that time now?
Probably not. The Blue Jays have too many question marks in other areas, such as the outfield, infield, catching, and rotation, which, come to think of it, is all the other areas. Hendriks is a great piece for a well-rounded White Sox team that is now projected for the most WAR in the AL Central -- and the fifth-most in baseball -- by FanGraphs. The Blue Jays hope to be in that conversation someday soon. But that day is not here yet.
So, for now, that $13.5-million ought to be invested elsewhere as the Blue Jays continue to build towards something greater. Maybe it’s a long-term pact with George Springer or DJ LeMahieu, who would each fill more pressing needs. Maybe it’s a big splash for JT Realmuto whose free agency offers the rare opportunity to acquire baseball’s best player at its most important position. Maybe part of it goes to Marcus Semien to hold down third base for a season until Jordan Groshans or Austin Martin is MLB ready, with the rest used to help cover the $20-million Sonny Gray’s owed over the next two seasons after he’s acquired in a trade to bolster the rotation.
The Blue Jays obviously have money to spend this winter and are seemingly staring at a unique opportunity to bid on premium free agent talent at a time when some of MLB’s most traditional big spenders are practicing austerity. That’s what makes it understandably frustrating for the club’s fanbase to see another off-season target like Hendriks end up elsewhere.
But that money’s finite. And the front office’s goal is to stretch its dollars as far as possible, reaping maximum value while maintaining future flexibility to continue adding to the roster and possibly extend key pieces of a promising young core. Making a three-or-four-year, $54-million commitment to a veteran reliever doesn’t exactly line up with that priority. And with so many legitimate avenues to significantly improve a young-and-emerging roster still open this winter, it’s clear why the Blue Jays were content to continue waiting for a more optimal opportunity. Despite how frustrating it can be to wait along with them.