J.D. Davis released, loses most of his $6.9 million salary after Giants exercise a loophole

Major League Baseball players scored what they considered a long-sought victory when the last Collective Bargaining Agreement was ratified prior to the 2022 season. For the first time, one-year contracts for arbitration-eligible players — encompassing most players with greater than 2 1/2 and fewer than six years of service time — would be fully guaranteed.

But there was a loophole. And it didn’t take long for a team to exploit it.

The Giants were that team. Third baseman J.D. Davis was the ensnared party.

In a dramatic reversal of fortune, the Giants placed Davis on unconditional release waivers on Monday, cutting ties with a player who had won a $6.9 million salary when he beat them in an arbitration hearing in February. Because the provision in the CBA specifically does not guarantee arbitration salaries arrived at through a hearing, the Giants owe Davis just 30 days of termination pay, which amounts to a little more than $1.1 million.

It’s an uncommon decision that will be viewed as ruthless and cold-blooded by many in the industry. Others will view it as a pragmatic decision that is well within the rights of teams under the CBA. What’s not in dispute is that Davis, who played in a team-high 144 games last season but became redundant after the signing of free-agent third baseman Matt Chapman, has been thrust into an insecure position two weeks before Opening Day: with no team and suddenly receiving only 16 percent of the salary that an independent panel had just determined he was worth.

Giants president of baseball operations Farhan Zaidi, who appeared on a hastily arranged Zoom call with reporters on Monday, said the team attempted to trade Davis with no traction. The Giants placed Davis on outright waivers this past weekend in the hopes that another club would claim him and speed the process along.

“As soon as we got the word he went unclaimed on outright waivers, we decided to make this move,” Zaidi said. “It just boils down to role and other guys we had ahead of J.D. in terms of at-bats. If we had a 28- or 30-man roster, we’d keep everybody. But given the reality of our roster constraints, this was just the move we decided to make.

“Everything we’ve done in this case is well within our rights as a team,” Zaidi continued. “And that’s recognized. It’s very cut and dried in the CBA.”

At issue will be how actively the Giants exploited those rules, and how much of it might have been premeditated.

The Giants recently defaulted to what has become an industry-wide “file-and-trial” policy among teams in which all negotiations stop after the deadline for clubs and players to exchange salary figures to be presented at a hearing. The policy is meant to be a deterrent to negotiations reaching the hearing stage, Zaidi said. Davis said last month that he would have happily accepted the Giants’ filing figure of $6.55 million prior to the hearing. But the team was not willing to reopen negotiations after the exchange.

Zaidi said Monday that the Giants “negotiate all our arbitration cases in good faith” and that Davis could have accepted the club’s offer prior to the exchange of figures.

Davis’ agent, Matt Hannaford, disputed that characterization. Hannaford said the Giants made one offer to Davis that GM Pete Putila sent in a text message that arrived one hour before the filing deadline. The club’s offer was for “hundreds of thousands” less than what the team filed at, Hannaford said.

“In my 22 years in the business I’ve never seen a club in arbitration make their one and only offer less than an hour before the exchange deadline that ended up hundreds of thousands of dollars below their filing number,” Hannaford said. “The way the Giants negotiated gave J.D. no choice but to go to a hearing, which he did, and which we won.”

Industry sources indicated that it was unlikely that Davis, who is now an unrestricted free agent, would have grounds to file a grievance.

“It’s unfortunate the club has handled things the way they have, but I’m confident in the player J.D. is and the value he will bring to his next team,” Hannaford said. “I know he will end up in a better situation when all is said and done.”

Zaidi, asked to corroborate Hannaford’s account, said the Giants formally offered Davis “just slightly under $6.4 million, matching the raise of what we believed to be one of the most relevant comps in the case.” Zaidi said the club did not consider it a best-and-final offer but Davis’ representatives did not respond until 10 minutes before the deadline nor did they make what club officials considered a formal counter, saying only that the number “has to start with a 7.”

“They then filed at $6.9 (million), and several hours after the deadline, called looking to engage in a settlement,” Zaidi said. “We said that out of fairness to our other negotiations and to maintain credibility with our policy going forward, we were not in a position to negotiate once the exchange deadline had passed.”

Whether or not the Giants steered to this specific outcome so that that Davis’ salary would not be guaranteed, they effectively bought themselves an inexpensive insurance policy in case they were unable to come to terms with Chapman, a four-time Gold Glove third baseman and Scott Boras client who played for manager Bob Melvin in Oakland. It might have made for a heartwarming story when the Giants signed Chapman on March 3 to a three-year, $54 million contract that includes a pair of opt-outs, given that he and Davis were teammates at Cal State Fullerton. But with Jorge Soler and Wilmer Flores taking up all the right-handed at-bats at first base and designated hitter, it was obvious that Davis’ days on the roster were numbered after Chapman joined the team.

Zaidi was unapologetic over Monday’s announcement but acknowledged that the protracted negotiations with Chapman had an unfortunate impact on the club’s ability to find a taker for Davis’ salary.

“If the wheels for this had been put in motion earlier this offseason, it might have been different, but they weren’t and that’s just the reality,” Zaidi said. “It’s harder (for teams) to take on significant chunks of payroll when you’re this far down the road. In that sense, it’s not that much of a surprise. We’ve seen it with some of the free-agent deals over the past few weeks. It’s a different market now than it might have been in the offseason.”

If the Giants had released Davis within 15 days of the season opener, they would have been on the hook for 45 days of termination pay, or $1.66 million. By releasing him 17 days out, they saved roughly an additional $500,000.

It’s rare but not unprecedented for teams to cut arbitration-eligible players prior to opening day. The San Diego Padres released infielder Todd Walker in the spring of 2007, less than a month after an arbitration panel awarded him a $3.95 million salary. Walker received $971,311 in termination pay, instead. Atlanta Braves left-hander James Russell and Chicago Cubs right-hander Justin Grimm are other recent examples of players who lost most of their salaries in the $2-3 million range when their teams released them in the spring. The then-Anaheim Angels blindsided catcher Todd Greene when they released him before Opening Day in 2000, paying out $180,556 of his $650,000 salary.

By losing out on nearly $6 million, Davis becomes perhaps the highest-profile example on record.

It’s possible that if the late-developing nature of free agency persists in future years, it could lead to more teams shuffling the deck in spring training and creating more poor roster fits with arbitration-eligible players who might have been more firmly in the team’s plans in the winter. Although Zaidi maintained that the “file-and-trial” policy is meant to deter hearings, it’s clear now that teams gain a significant advantage even if they lose their case.

Even if Davis becomes the only player caught in the loophole, it’s language that the Players Association almost certainly will seek to change in the next negotiation.

For now, the Giants shaved off nearly $6 million in payroll obligations and now stand roughly $13 million underneath the first luxury tax threshold of $237 million.

Zaidi disputed the notion that the brusque nature of the Davis decision would harm the Giants’ reputation among their own players as well as free agents.

“I completely disagree,” Zaidi said. “Talk to the players on our team about how the organization treats them, about the communication with the manager, coaching staff and front office,” said Zaidi, who also was on the defensive this spring in the wake of critical comments from longtime shortstop Brandon Crawford.

“I push back really strongly on this point. When you part ways with a player no matter the circumstances, it’s often difficult, and it often feels personal to the player. I’ve been in three organizations and seen this a lot. It’s just the reality of the business side of things. As a front-office person you can shout from the rooftops it’s never personal but I understand from a player’s standpoint it’s always going to feel personal. It’s their life and their career.

“To some degree when there’s discontent, frustration, disappointment, a feeling there’s an element of mistreatment, my general feeling is players have the right to express that and we’re not going to get into a public back and forth about that sort of thing. At the same time, to generalize that as a statement on the organization, I would push back very strongly on that. If my word isn’t good enough, talk to players in our organization about how they feel the organization takes care of them, about the level of communication. These are things that are really important to us.”

(Top photo of Davis earlier this spring: Rick Scuteri / USA Today)