Major League Baseball and the MLBPA are currently working on a new collective bargaining agreement, however, Joel Sherman of the New York Post cites two executives who indicate that part of the new agreement will eliminate compensation for Type-B free-agents.
Under the current system, MLB teams have until Nov. 23 to offer Type-A and Type-B free-agents who played with their team the previous year arbitration. If both sides agree to arbitration, then the team and the player are forced to either agree upon a new contract or take the case to arbitration court for a judge to decide compensation.
If arbitration is offered by a team but it is rejected by the player, which is usually done when a player wishes to test the free-agent waters, then clubs get awarded compensation draft picks if their player signs with another team. Traditionally Type-A players produce first round compensation picks, while Type-B players produce a sandwich pick between the first and second round.
The system was initially set in place to maintain a competitive balance between the teams that could afford to woo big name free-agents and those that rely on the draft to build teams on homegrown talent. It has been claimed by some that the system discourages teams from signing Type-B free agents, however, because some teams do not view the compensation that they would be required to award another team to be worth the reward of signing the player.