this might help:
http://members.aol.com/indiansreport/FA ... ation.html
When does a Player Qualify for Free Agency?
To qualify as a major league free agent, a player must have at least six (6) full years of major league service.
How about minor league free agency?
To qualify as a minor league free agent, a player is eligible for minor league free agency if he is not on the major league 40-man roster and has gone through six renewable contracts. Hence, the term "six-year minor league free agent". Although that term is a bit of a misnomer as the key is the "renewable contracts" not just the number of a years a player has been in the minor leagues.
Example: A player is drafted in the June 2000 draft and signs his INITIAL contract. He stays with the organization and every year his contract is renewed. His first "renewable" contract would be for the 2001 season. Once he completes six "renewable" contracts, he would be eligible for minor league free-agency provided he is not on a major league 40-man roster by that time. So in this example, the player would not be eligible for minor league free agency until after the 2006 season and his sixth renewable contract (2001, 2002, 2003, 2004, 2005, 2006) and seventh year in the organization.
Players waived during their renewable contract period become minor league free agents after their new contracts expire, although teams do have the option of signing the player for however many years remain before the expiration of their sixth renewable contract. For example, a player is released by the Reds after his third renewable contract. The Indians sign him and have the option of a one-year, two-year, or three-year contract since the player would have three renewable years left. If they sign him for one or two years, the player becomes a free-agent once that contract expires.
What are Free Agent Compensation Rankings?
During the offseason, the Elias Sports Bureau compiles rankings of all major league players based upon their previous two years stats. The players are ranked by position, so first basemen are not compared to second basemen, etc., and then broken down into Type A, Type B, Type C, and the rest (call these guys the Professors and Mary Anns)
-- Type A players are players rated in the top 30 percent of all players at their position.
-- Type B players are players rated in the 31-50 percentile for their position.
-- Type C players are players rated in the 51-60 percentile for their position.
Important note: Since the players are only compared to players at their own position, the allocation of type A and B players might seem inconsistent from one position to another.
If a team offers arbitration to a player and he signs with another team, the original team receives the following as compensation:
Type A: The signing teams first-round pick as well as a supplemental "sandwich" pick between the first and second rounds. The signing teams pick is top 15 protected so if that pick is in the top 15 of the first round, the signing team will keep the first-round pick and lose a second-round pick instead.
Type B: Same as type A except no sandwich pick.
Type C: Supplemental "sandwich" pick between the second and third round.
The Rest: No compensation is provided.
If a club fails to offer arbitration to their free agent, they receive nothing when the player signs with another club. This brings up the question of why a club would not always offer a player arbitration. The answer is, they simply are afraid he might accept it. It’s a gamble some clubs are not willing to take, even if it appears likely the player is heading out of town.
When does a player qualify for salary arbitration?
Any player with three or more full years of major league service is eligible for salary arbitration. In addition, a group of players known as "super-two" players are eligible for arbitration. These players must be among the top 17 percent in total major league service of all players between two and three years of major league service and have accumulated a minimum of 86 days of major league service in the previous season.
Players are eligible for arbitration from years three-six of their major league service. After that, they have earned the right to be major league free agents.
Time spent on the major league disabled list counts as major league service.