The minor leaguers are sent back to the minors. I the case of established major leaguers who are given these types of deals, in most cases, there is a clause in their contract that if they dont make the roster by a certain date they can opt out of the deal. That's why the Cubs lost Hideo Nomo just before he became a productive major leaguer again. He was pitching at Iowa and had a clause in his minor league contract that he had to be called up or released by a certain date. When that day came the Cubs didn't think he was quite ready for the majors yet, so they asked him to stay at Iowa just a little longer. He refused, so the Cubs released him. On the flip side is Rod Beck, who realized himself that he wasn't ready by the agreed-on date, so he agreed to remain at Iowa (that was when he was living in a camper outside the stadium). Could he not afford rent in Iowa?