Financial terms were not disclosed, but according to multiple reports the deal is worth $34 million. The vesting option for the 2021 season is worth $17 million, according to reports.
Happ, 36, was arguably the Yankees' most reliable pitcher down the stretch. He went 7-0 with a 2.69 ERA after being acquired in a July 26 trade with the Toronto Blue Jays, and he won the first five games he appeared in with the Yankees.
The 12-year veteran is 47-21 with a 3.44 ERA in 88 starts over the last three seasons. He is projected to be part of a rotation that includes Luis Severino, Masahiro Tanaka, CC Sabathia and James Paxton, acquired from Seattle in a trade.
Happ's success in his career against Boston was viewed as a major asset for the Yankees in their fruitless chase for the American League East title. He went 1-1 with a 1.99 ERA in four starts against the Red Sox last season. In the final week of the regular season, during the Yankees' series finale at Boston, Happ gave up a grand slam in an otherwise solid six-inning, seven-strikeout performance. He didn't fare as well when starting Game 1 of the AL Division Series against Boston just a week later, lasting just two innings for his shortest postseason start, a 5-4 win by the champion Red Sox.
Happ was a first-time All-Star and had a 3.65 ERA and a 17-6 record in 31 starts last season for Toronto and New York. Happ has also pitched 10 postseason games with Toronto and Philadelphia.
Happ has a career record of 109-82 and a 3.90 ERA. He has played for the Philadelphia Phillies, Houston Astros, Seattle Mariners and Pittsburgh Pirates, as well as the Blue Jays and Yankees. He was traded to Houston in a 2010 deal that brought Roy Oswalt to Philadelphia.
The Yankees announced the contract Monday.
The New York Post reported last week that the option will vest for 2021 if Happ pitches 165 innings or makes 27 starts in 2020.