We’ve heard of the Rule 5 draft… What is it?

September 26, 2012; Denver, CO, USA; Chicago Cubs pitcher

(52) delivers a pitch during the fifth inning against the Colorado Rockies at Coors Field. Mandatory Credit: Chris Humphreys-USA TODAY Sports

Most baseball fans – even casual baseball fans – know of the annual GM Winter Meetings that take place during each offseason. That being said, the Rule 5 draft, which coincides with the Winter Meetings, is often misunderstood by fans around the game.

Before we explain the recent Rule 5 draft happenings concerning the Cubs, here’s a little breakdown of how the Rule 5 draft functions.

As mentioned, it takes place during the Winter Meetings each year, with the aim of preventing organizations from essentially stockpiling talent throughout their respective minor league systems when other teams may seek the talent for their big league clubs.

The draft order – which is the same as the June amateur draft, based on winning percentage from lowest-to-highest – will come into play only if the teams have available roster spots on their 40-man rosters. If a team does not have a clear spot on their 40-man roster, then it cannot participate in that year’s Rule 5 draft.

However, there are exemption periods and one qualification players must meet to be eligible for the Rule 5 draft.

Players not currently on an organization’s 40-man roster and meet one of the following criteria are eligible for the Rule 5 draft, according to MLB.com.

“Players who were signed when they were 19 or older and have played in professional baseball for four years are eligible, as are players who were signed at 18 and have played for five years.”

Should a player meet these criteria and he is selected by an organization in the Rule 5 draft, this ‘new’ organization must pay $50,000 to the team from which he was selected.

Stay with me, folks. We’re almost done.

Once this player is drafted by a new organization in the Rule 5 draft, he must stay on this club’s 25-man big league roster all season long. Otherwise, he must be offered back to the original team at half price. These players can also be traded, but the same roster rules would apply to the team acquiring the Rule 5-selected player.

The same concept is applied to the lower-levels of Minor League Baseball. Organizations can draft players from AA or lower, but must play for the selecting club’s AAA affiliate the following season. This costs $12,000. Players from A teams or lower may also be selected to play for a new team’s AA affiliate at a cost of $4,000.

So why is this relevant now?

According to multiple media reports today, the Cubs will give up their pick in the Rule 5 draft this year to settle a grievance with the Philadelphia Phillies, stemming from the amount of time reliever Lendy Castillo spent on the disabled list in 2012.

Castillo was selected by the Cubs in December 2011 from the Phillies. The following season, Castillo spent the majority of the season on the disabled list with an injured groin, appearing in a total of 13 games for Chicago.

Rule 5 draftees – as noted – are supposed to spend the entire year on the organization’s 25-man big league roster. However, after 90 days, the club can place the player on the disabled list – something that has become commonplace throughout Major League Baseball concerning Rule 5 picks. Two years ago, Castillo was placed on the DL in mid-May with what was labeled a “strained groin.” He came off the disabled list roughly three months later, pitching in a trio of games in both August and September that season.

Castillo, a right-handed reliever, spent all of last season in the minors after spending roughly three months on the disabled list the year prior.  In 2012, he went 0-1 in 13 games for Chicago, pitching to the tune of a 7.88 ERA.

It should be noted, however, that while the success rate for Rule 5 picks is relatively low, Hector Rendon – who is expected to be a major piece of Chicago’s 2014 relief corps – came to the Cubs in that manner. Furthermore, the Cubs were not planning on acquiring anyone via the Rule 5 draft this year.