The Los Angeles Dodgers sent shockwaves through the baseball world during the offseason with their signing of Shohei Ohtani to a 10-year, $700 million contract. The deal includes unprecedented deferrals as $680 million of the total value will be paid out from 2034-43.
The Dodgers have utilized this strategy several times under president of baseball operations Andrew Friedman as Mookie Betts’ and Freddie Freeman’s respective contracts feature a combined $172 million in deferred salary. They also deferred some salary to Teoscar Hernández.
More recently, the Dodgers re-signed Will Smith to a 10-year, $140 million contract extension that includes $50 million in deferrals.
Friedman explained that the team is usually open to deferring contracts because it gives them different options for getting deals done, via Fabian Ardaya and Ken Rosenthal of The Athletic:
“By offering a number of different options, we can get a feel for the different levels that are more important to them, which then helps us to hone in on a certain structure,” president of baseball operations Andrew Friedman told The Athletic. “It’s really just another lever in a contract. We don’t have a hard and fast rule.”
Contract deferrals were first introduced as part of the collective bargaining agreement (CBA) in 1985. They are beneficial as teams can lower their short-term cash obligations and save on the luxury tax.
Prior to Ohtani’s record-setting deal, Bobby Bonilla had perhaps the most famous deferral-heavy contract in MLB history. The New York Mets are currently paying him just over $1.19 million on July 1 every year until 2035, despite last playing for the team in 1999.
California State Controller wants cap on contract deferrals following Dodgers deal
With Ohtani slated to pay less in taxes due to his contract deferrals, California State Controller Malia M. Cohen is concerned that other athletes could follow this trend and called on Congress to pass legislation that would prohibit these kind of deals.
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