In professional sports, a free agent is a player who is eligible to sign freely 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 offers from other teams. In some circumstances, the free agent's options are limited by league rules.
Unrestricted free agents are players without a team.
The specific rules of restricted free agency vary among the major professional sports, but in principle it means that a player is currently signed to one team but is free to solicit contract offers from other teams; however, this player cannot sign with the competing club if the current club matches (or in some leagues, comes within 10% of) the terms of the offered contract.
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 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 allow free players to move within the national league in which they currently play.
In professional association football, a free agent is either a player that has been released by a professional association football club and now is no longer affiliated with any club, or a player whose contract with his or her current club has expired and is thus free to join any other club under the terms of the Bosman ruling.
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.
The Australian Football League introduced free agency at the end of 2012, after having had a brief "ten-year rule" in 1973 (when it was known as the Victorian Football League).
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.
Free agency in MLB came out of the aftermath of the Flood v. Kuhn Supreme Court case. One of the landmark decisions in the aftermath was the Messersmith/McNally Arbitration also known as the Seitz Decision which effectively destroyed the "reserve clause" in baseball.
With the end of the reserve clause, the players and the league negotiated a new CBA in which was signed on July 12, 1976.
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 Collective Bargaining Agreement 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 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 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 from 2012 season, dramatically changed free agent compensation.
Players are no longer classified by type; if a player has six or more years of major-league service (on the team's 40-man roster) and is not under contract for the following season, they are automatically a free agent.
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.
The NFL's current free agency system was introduced on March 1, 1993.
Exclusive-rights free agents (ERFAs) are players with two or fewer seasons of service time and whose contracts have expired.
Restricted free agents (RFAs) are players who have three 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.
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 to 1992.
Eight players sued the NFL in U.S. federal court, stating that Plan B was an unlawful restraint of trade.
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 Entry 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.
Drawbacks for owners
The economics of free agency are disadvantageous for team owners; it can lead to bidding wars—and increased player salaries mean decreased owner profits.
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.
In Europe, players can only move during transfer windows—during the close season and halfway through the league season. There are exceptions for unsigned professional players in the lower divisions.