Last year, the Yankees signed 21-year-old Cuban left-hander Omar Luis to a $4M signing bonus, their last big money international pickup before the new spending restrictions were implemented. A visa issue kept him in Haiti for several months, but the southpaw made it to the United States this summer and pitched for one of the team’s two Rookie Gulf Coast League affiliates. He is one of their better pitching prospects at the moment.

According to Ben Badler, a contract snafu leaves Luis exposed in next month’s Rule 5 Draft even though he signed his first contract just last year. Players typically are not eligible for the Rule 5 Draft until they’ve played at least four and usually five years professionally. It’s complicated, so I’ll let Badler explain:

The Yankees signed Cuban lefthander Omar Luis last year for a $4 million bonus, with an official contract date of July 1, 2012, the day before the inaugural $2.9 million international bonus pools went into effect.

However, Luis and several other Cuban players also represented by Praver Shapiro Sports Management who were claiming permanent residency in Haiti ran into visa issues and were unable to get into the United States. When Luis arrived in the U.S. this year after spending eight months in Haiti, an unknown issue popped up in his physical, which led the Yankees to void the contract.

Luis signed a new contract with the Yankees for a reduced bonus—$2.5 million—on April 9, 2013. Since Luis signed his second contract with his original team and the Yankees did not place him on their 40-man roster, he is available in the Rule 5 draft, which is Dec. 12.

…

The timing of Luis’ two contracts also forced MLB to make a decision regarding whether his contract would be subject to the international bonus pools. While his April 2013 contract falls within the 2012-13 signing window where every team had a $2.9 million bonus pool, because his initial agreement came just before the new system kicked in, MLB determined that Luis’ new contract was exempt from the bonus pools.

Badler notes this is not unprecedented. The Brewers, Reds, and Mariners have had players go through similar situations in recent years.

The immediate impact is negligible. Luis had a 5.68 ERA and 43/29 K/BB in 31.2 innings at lowest level of the minors this past season, so even if a team loves his stuff grabs him in the Rule 5 Draft, it’s extremely unlikely he’ll stick in the big leagues for all of next season. Jumping from the rookie ball to the big leagues almost certainly will not happen, at least not successfully.

This is a problem long-term, however. Luis will be Rule 5 Draft eligible every offseason from here on out, so even though he won’t be able to stick in MLB right now, that might not be the case next year. The Yankees will likely have to add him to the 40-man roster and start burning through his minor league options sooner than expected. That means they might have to try to develop him pretty quickly.

Furthermore, if Luis is selected in the Rule 5 Draft and returned to the Yankees at any point, he will have been outrighted off the 40-man roster. The first time that happens is no big deal, but the second time will allow him to elect free agency over returning to New York. He could leverage that into a new contract, which two-time Rule 5 Draft guys have done before (though none were as good a prospect as Luis). That too could force the club to add Luis to the 40-man sooner than they would like.

This sounds like a really unique and unfortunate set of circumstances. I suppose the Yankees could have kept him on the original $4M deal rather than negotiate a lower bonus, but if there’s something in the physical they didn’t like, then they should protect themselves. We’re talking about a ton of money here. It sounds like their options were either deal with the contract/40-man headache or not get the player. Seems like an obvious choice to me.