The rule 5 draft takes place each year at the end of the winter meetings. The draft order is the reverse of the previous season’s standings, just like the first year player draft. Any team that has space on their 40-man roster can pick a player from the pool of minor league players. Only players not on a 40-man roster can be picked. After picking a player the team must pay $100,000 to their previous organisation.
Eligibility for the rule 5 draft depends on the length of each player’s professional career. Players who signed with their team at age 18 or younger need five years experience or more to be eligible, players who signed at 19 or older only need four years of experience to be eligible.
When a player is picked they must stay on their new team’s active roster or disabled list for the whole of the next season. A rule 5 draftee must pass waivers before they can be demoted . If the player passes waivers they must then be offered back to their original team for $50,000 before they can be removed from the active roster. This means that rule 5 picks are very rarely demoted in their new organisation as the original team will usually take them back.
If the drafted player is active for at least 90 days then they lose these restrictions for the next season. So they can then be demoted to the minor leagues without risking losing them. However, the player must stay on the 40-man roster to be protected from being taken by another team in the next rule 5 draft.
Not all teams take a player in the rule 5 draft every year but it is a chance for rebuilding teams to replenish their roster whilst giving deserving minor league players a chance in to impress on the big stage. The threat of losing useful depth players makes teams put long serving players on their 40-man rosters. If teams choose not to protect a good minor league player then they will likely be taken by another team. Either way minor league players that have shown promise will get a major league opportunity.