The Yankees’ (Brief) History Of Contract Extensions

Twenty-eight different contract extensions were signed between teams and players between February-April 2019, and the Yankees were one of the many clubs that joined in on this rush.  Aaron Hicks was a season away from free agency at the time, though the outfielder chose to forego the open market in favor of a contract that paid him $64MM in new money through the 2025 season.  Right-hander Luis Severino inked a four-year, $40MM deal that covered his four arbitration-eligible years as a Super Two player, and the deal also contains a $15MM club option for the 2023 season, which would have been Severino’s first free agent year.

Another extension came after the season, as the Yankees worked out an agreement with Aroldis Chapman that would see the closer decline his opt-out clause in favor of a three-year, $48MM extension that essentially added an extra year (and another $18MM) onto the final two seasons of Chapman’s previous contract.

Three extensions in less than a year is a pretty notable amount of business for any team on the long-term front.  In the Yankees’ case, however, it counts as an absolute flurry given how rarely the Bronx Bombers have engaged in such internal long-term deals.  New York’s three extensions in 2019 came on the heels of only six extensions in the previous 18 years.

The reason for this lack of extension action is simple — it was against team policy.  “I just don’t believe in contract extensions, and that’s throughout the organization, no matter who it is,” managing partner Hal Steinbrenner told the Associated Press and other reporters in 2010.  “Hopefully nobody takes that personally. It’s just business.”

Between the time Steinbrenner officially became the Yankees’ control person in November 2008 and the start of 2019, his anti-extension stance stayed almost completely intact, with two exceptions that somewhat mirrored the Chapman and Hicks situations.  C.C. Sabathia also had a contractual opt-out decision following the 2011 season, though he and the Yankees worked out a new deal that gave the southpaw five years and a guaranteed $122MM to overwrite the previous four years and $92MM remaining on his previous contract.  Prior to the 2014 season, Brett Gardner (like Hicks) was also just a year away from free agency before New York locked him up for a four-year, $52MM extension.

Beyond the Sabathia and Gardner contracts, however, that was it on the extension front.  As Steinbrenner noted, the “no matter who it is” edict even stretched to the likes of Mariano Rivera or Derek Jeter, who both reached the open market before eventually (and, in Jeter’s case, not without some contentious words) re-signing with New York.  Even general manager Brian Cashman’s last three contracts have only been signed after the GM’s previous deals had expired.

Why would the team take such a hard line?  In short, the Yankees always wanted as much flexibility as possible in deciding their future moves, since they had the financial resources to immediately pivot to a better option in free agency or the trade market if such an upgrade was available.  Whereas other teams pursued extensions as a way of locking up young talent into their free agent years or at least getting some cost certainty through arbitration years, such concerns simply weren’t on the Yankees’ radar given their free-spending ways.

Of course, the franchise has become somewhat more cost-conscious in recent years, which likely explains the Bombers’ openness towards extensions in 2019.  After 15 years of overages, the Yankees finally ducked under the Competitive Balance Tax threshold during the 2018 season, allowing them to reset their penalty clock for 2019 (when they surpassed the threshold again).  Though New York didn’t go to the extremes of other big-market clubs like the Cubs or Red Sox in limiting or eliminating their luxury tax payments, the Yankees saw value in getting under the tax line once, plus they had the additional bonus of being able to cut their tax bill while still remaining competitive since so many of the club’s young stars seemingly broke out at the same time.

With the CBT penalty reset, the Yankees had the freedom to explore a tactic like signing Severino through his arbitration years.  The deal was seen at the time as very canny, given that Severino seemed to be a burgeoning ace, and thus in line for an escalating arb price tag.  In Hicks’ case, he may have had extra motivation to sign an extension given how the restrained 2017-18 and 2018-19 free agent markets left a lot of players settling for below-market deals or having long waits on the open market.  Hicks could have preferred the security of just remaining in New York, and his price was apparently satisfactory enough for the Yankees to make the long-term commitment to a player they obviously wanted to retain.

The early returns on both deals, however, haven’t been good.  Injuries limited Hicks to only 59 games in 2019 and he underwent Tommy John surgery last October, putting him out of action until at least June (though he might not miss any game time at all, given the delayed start to the season).  The news was even worse for Severino, who tossed just 12 innings last season due to injuries and then underwent a Tommy John procedure of his own in late February.  The righty now won’t be back on the mound until early in the 2021 campaign.

It isn’t yet clear if the disastrous starts to both of these extensions may have once again made the team wary of such longer-term deals, or if Steinbrenner and the Yankees front office still consider the process to be sound — after all, there’s still plenty of time for Hicks and Severino to make good on their deals.  Since big-picture concerns likely inspired the club’s decision-making towards those extensions in the first place, it’s safe to assume that inevitable changes to the sport’s financial structure will also impact the Yankees’ future approach more so than a pair of Tommy John surgeries.

Both baseball and the world at large are gripped with the uncertainty of the coronavirus pandemic, plus there’s also the fact that the current Collective Bargaining Agreement between MLB and the players’ union is up in December 2021.  With these factors in mind, it isn’t a stretch to say that the way baseball does business could be vastly different two years from now, which could leave the Yankees and several other teams hesitant about committing any more long-term money until things can be figured out.

Working out an extension for, say, Aaron Judge seems to pale in comparison to such matters.  But, when trying to guess whether or not New York will (once the roster freeze is lifted) seek out multi-year deals for the likes of Judge, Gleyber Torres, Gary Sanchez, DJ LeMahieu, Miguel Andujar, or any number of other players, it’s worth noting that the Yankees generally don’t extend players very often, and it wouldn’t be a shock if they return to their old wait-and-see approach.