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In professional sports, a free agent is a player who is eligible to sign with any club or franchise, i.e. not under contract to any specific team. The term is also used in reference to a player who is under contract at present, but who is allowed to solicit contract offers from other teams. In some circumstances, the free agent's options are limited by league rules.
The term came into wider use after sports leagues stopped using a "reserve clause", which provided a repetitive option for the club to renew the contract for one or more years but did not allow the player to terminate it.
Unrestricted free agents are players without a team. They have either been released from their club, had the term of their contract expire without a renewal, or were not chosen in a league's draft of amateur players. These players, generally speaking, are free to entertain offers from all other teams and to decide with whom to sign a new contract.
Commonly referred to as the (because only ONE allowed per team each year) "Designated Franchise Player" in the NFL. The specific rules of restricted free agency vary among the major professional sports, but in principle it means that a player is free to solicit offers from other teams for new contracts. However, before this player is allowed to sign with the new club, the current club has a chance to match (or come within 10% in some leagues) the terms of the new contract in which case the player must remain with the original team. In some leagues, if the original team decides not to match the other team's offer for the restricted free agent, the new team provides some number of draft selections to the original team as compensation for losing the player.
Players who are not drafted in a league's annual draft of amateur players are considered to be unrestricted free agents and are free to sign contracts with any team. In most North American professional sports, players are drafted by sequentially aligning each team from worst to best (according to the teams' records in the immediately preceding season alone, sometimes with a draft lottery factor to avoid having teams intentionally lose their last games to gain higher draft position) and allowing said teams to claim rights to the top players entering the league that year. Players that pass through an entire draft (usually several rounds) without being selected by any of the league's teams become unrestricted free agents, and these players are sometimes identified simply as an undrafted free agent or undrafted sportsperson and are free to sign with any team they choose. The term "undrafted free agent" is most common in the National Football League, where rookies enter directly into the NFL and do not play in a minor league system. It can also occasionally be seen in the National Hockey League, which increasingly uses college hockey as a source; the NHL Entry Draft usually drafts players during high school age (i.e., junior leagues), which allows overlooked players who excel at the college level to bypass the draft and sign directly with the NHL.
In the European Union, the 1995 Bosman ruling by the European Court of Justice established the right of free agency for association football players in all EU member nations. The Bosman ruling has since been extended to cover other professional sports and players from Eastern Europe. Players were still tied to their clubs unless their contract ran out until the Webster ruling allowed players the opportunity to move between nations, though it does not free players to move within the national league in which they currently play.
In professional association football, a free agent is a player that has been released by a professional association football club and now is no longer affiliated with any club, but has not finished his or her professional career.
Free agents do not have to be signed during the normal transfer window that is implemented in some countries' leagues. If they are signed by a team, the team signing them does not have to pay any fees - sometimes this is known as "a free transfer".
If a player is released from their club when the transfer window is closed, they cannot sign for another team until the window reopens. A notable case of this being Sol Campbell who in September 2009 was released from Notts County, just after a month from signing on a free transfer. He signed for his former club Arsenal in January 2010, after spending a few months training with the team to maintain his fitness.
Out-of-contract players who are not within the top 25% paid players at their club will become unrestricted free agents after eight seasons of service at one club; out-of-contract players who are within the top 25% paid players at their club become restricted free agents after eight seasons, then become unrestricted free agents after ten seasons. Clubs receive compensation in the form of draft picks for the loss of out-of-contract free agents. Players who are delisted will become unrestricted free agents, regardless of length of service; clubs are not compensated for the transfer of such free agents.
In Major League Baseball, free agents were previously classified as either Type A, Type B, or unclassified. Type A free agents were those determined by the Elias Sports Bureau to be in the top 20% of all players based on the previous two seasons. Type B free agents were those in the next 20%. Unclassified free agents were those remaining in the bottom 60% of players.
Teams that lost a Type A free agent to whom they had offered arbitration received the top draft pick from the team that signed the free agent, plus a supplemental draft pick in the upcoming draft as compensation. Teams losing Type B free agents to whom they had offered arbitration received only a supplemental pick as compensation.
Teams that have lost unclassified free agents, or who did not offer arbitration to classified free agents, did not receive any compensation.
The current collective bargaining agreement between MLB and its players union, signed on November 22, 2011 and taking effect with the 2012 season, dramatically changed free agent compensation. Players are no longer classified by type. Instead, a team will only be able to receive draft pick compensation if it makes its former player an offer at least equal to the average of the 125 richest contracts. However, if a player is traded during the final season of his contract, his new team will be ineligible to receive any draft pick compensation.
Restricted free agents (RFAs) are players who have three or fewer accrued seasons of service and whose contracts have expired. RFAs have received qualifying offers from their old clubs and are free to negotiate with any club until a deadline which occurs approximately a week prior to the NFL Draft (for 2010 the deadline was April 15), at which time their rights revert to their original club. If a player accepts an offer from a new club, the old club will have the right to match the offer and retain the player. If the old club elects not to match the offer, it may receive draft-choice compensation depending on the level of the qualifying offer made to the player.
Unrestricted free agents are players with expired contracts that have completed four or more accrued seasons of service. They are free to sign with any franchise.
Undrafted free agents are players eligible for the NFL Draft but who are not selected; they can negotiate and sign with any team.
Plan B free agency was a type of free agency that became active in the National Football League in February 1989. Plan B free agency permitted all teams in the NFL to preserve limited rights of no more than 37 total players a season; if a player was a protected Plan B free agent, he was incapable of signing with another team without providing his old team the first opportunity to sign him again. The rest of the players were left unprotected, liberated to negotiate contracts with the rest of the teams in the league.
Eight players sued the NFL in U.S. federal court, stating that Plan B was an unlawful restraint of trade. In 1992, a jury found that Plan B violated antitrust laws and awarded damages to these players.
In the NHL, between 2005 and 2008, the age of unrestricted free agency declined from 31 to 27. As of 2008, any player who is at least 27 years old or has at least seven years of service as an NHL player, and whose contract has expired, will become an unrestricted free agent. On July 1 of each year the free agency period begins, and unrestricted free agents are free to negotiate and sign contracts with any team. Under the old collective agreement, which expired in 2004, draft picks were awarded as compensation when a team lost an unrestricted free agent; however, under the current CBA teams losing unrestricted free agents do not receive any compensation.
In addition, any player at least 22 years of age who has not been selected in the NHL Draft can sign with any team as a free agent.
Any player who is not entry-level, but does not meet the qualifications of unrestricted free agency becomes a restricted free agent when his contract expires.
The economics of free agency are disadvantageous for team owners; it can lead to bidding wars—and increased player salaries mean decreased owner profits. Restrictions on free agency have therefore been preferred by North American team owners since the abolition of the reserve clause. For example, a draft can be used to keep young and talented players from generating bidding wars and causing higher player salaries throughout the league. Furthermore, some teams which play in large market cities, and hence have a larger revenue stream, would be able to outbid other teams for talented players. Some leagues, such as the National Football League and the National Basketball Association have imposed salary cap rules in order to avert such bidding wars.
In Europe, the wages of the top players have increased dramatically since the Bosman ruling, although this is partly because of increased television revenues. As in North America, the number of transfers involving a fee are on the decline since clubs can wait for players to finish their contracts and become unrestricted. Also in Major League Baseball the larger and more successful teams often trump the lesser income teams from lack of a salary cap.
In some leagues, free agency has deadlines. For example, under the most recent NHL Collective Bargaining Agreement, restricted free agents who do not sign contracts by December 1 of a given year will be ineligible to play in the National Hockey League for the balance of that season. However, other leagues (such as the National Basketball Association) have no such restrictions.
In Europe, players can only move during transfer windows—during the close season and half-way through the league season. There are exceptions for unsigned professional players in the lower divisions.