Baseball Arbitration 101, Goofy Game for Dopey Lawyers

Jeff SummersCorrespondent IJanuary 20, 2010

PHOENIX - SEPTEMBER 23:  Gerardo Parra #9 of the Arizona Diamondbacks bats during the major league baseball game against the San Francisco Giants at Chase Field on September 23, 2009 in Phoenix, Arizona. The Giants defeated the Diamondbacks 5-2.  (Photo by Christian Petersen/Getty Images)
Christian Petersen/Getty Images

The Arizona Diamondbacks entered the arbitration season with six players eligible. One by one, General Manager Josh Byrnes has whittled down that total. As has been his preference since joining the Arizona Diamondbacks in 2005, Byrnes likes to have players signed to contracts without an arbitration hearing.

Dealing with arbitration is a little like playing with fire. There are times you think you can contain it to your advantage. As soon as you think you’ve mastered it, it comes up and gives you a third degree burn.

For those who may not understand the arbitration process, let me try to explain. The baseball arbitration process was initially developed as a compromise between baseball owners and the players association as an alternative to free agency.

It is hard to imagine there was once a time when free agency did not exist. Before free agency, teams possessed a reserve clause which basically gave the team complete control over a player. The player would negotiate with the team on a contract. If a contract was not agreed upon, the only recourse the player had was to ask to be released or traded. A player could not negotiate with any team other than the one that held his rights.

In 1969, St. Louis Cardinals outfielder Curt Flood legally challenged his trade to the Philadelphia Phillies and the reserve clause that St. Louis held over him. This legal battle resulted in the abolishment of the reserve clause ushering in the free-agency era.

The baseball owners and the players association were now free to negotiate with not just a single team, but with all MLB franchises. Ownership could see this becoming a free-for-all if all players were able to file for free agency.

In an effort to curb some of the movement particularly among players with limited major league service time, the owners offered the concept of arbitration. The eligibility requirements for salary arbitration state:

  1. A player must have at least three, but fewer than six, years of Major League Baseball service.
  2. The top 17 percent of players with at least two, but fewer than three, years of Major League service. These players are referred to as “Super Two” players. To qualify as a “Super Two”, a player must have at least 86 days of service in the previous season. In the past the cutoff point for “Super Two” classification has been between two years 128 days and two years 140 days.
  3. Players who have filed for free agency may elect to utilize the arbitration process if their former teams offered arbitration and the players accepted. The deadline for offering free agent players arbitration is typically the second week in December.

In January, the player, or his representative, and the Major League Baseball club each submit a salary figure. These figures are given to a three-person panel of professional arbitrators. A hearing will be scheduled for early February.

There are a few rules that must be followed by the team when making a salary proposal.

  1. A team must offer a contract to all players under its control by mid-December (typically around Dec. 12)
  2. If a player has filed for free agency, his former team must offer arbitration by Dec. 1. If the player accepts arbitration the player must be placed back on the team’s roster and the two sides negotiate a contract. If no agreement can be reached, an arbitration hearing will be scheduled. If the player declines arbitration, the team is eligible for draft-choice compensation if the player is listed as a Type-A or Type-B free agent and is signed by another team.
  3. The team’s salary offer to the player may not be less than 80 percent of the player’s total compensation from the past year and may not be less than 70 percent of the player’s compensation from two years ago. These stipulations do not apply to free agents who accept arbitration.

The process provides each party one hour to present its case to the panel followed by 30 minutes for rebuttal. Besides the three-person panel the player, his representative (typically an agent, but the player can represent himself), a club executive or representative (usually a lawyer hired by the team).

After each side has presented its case, the panel will decide which salary figure to award. It is an all-or-nothing type of proposition. The arbitration panel will either choose the proposed figure from the player or by the team. There is no middle ground or compromise.

When considering the figures, the panel considers the following criteria:

  1. The player’s contribution to the team which can include performance and leadership qualities.
  2. The club’s win-loss record and its overall attendance.
  3. A player’s “special accomplishments” which could include All-Star game appearances, awards won, and postseason performance.
  4. The salaries of comparable players in the same service-time class. For those players with fewer than five years of service the panel can also compare players with service-time class one year ahead.

The contract awarded in arbitration is for one-year and is non-guaranteed. If the player is released within 16 days before the start of the season he is entitled to 30 days termination pay. If the player is released during Spring Training, but before the 16-day window, the player is given 45 days termination pay.

Whew, for those if you who are still following along, you deserve a special award. Of course the award will have to be decided by a three-person arbitration panel, so don’t hold your breath.

Although the process itself is not really that hard to understand (and Brandon Webb’s sinker really isn’t that hard to hit), it is ripe with danger. Perhaps the most frustrating part of the process is the actual hearing.

The player is required to be in attendance and listen as the team tries to minimize that player’s accomplishments and value to the team. At the end of the process, that same team tells the player how important he is to its success in the upcoming season. It is a hard message to deliver at least with a straight face.

It is this situation that the Arizona Diamondbacks attempt to avoid each year. It is much better to try and resolve contract discrepancies before a hearing takes place. Byrnes has been very successful in accomplishing this during his tenure as the Arizona General Manager.

So far, he has finalized all contracts before the scheduled hearing. There are times such as last season with outfielder Conor Jackson when agreement was reached just hours before the hearing was to begin, but the streak stayed alive.

The Diamondbacks signed shortstop Stephen Drew yesterday, which dropped the number of unsigned arbitration eligible players to one. Byrnes is busy negotiating with starting pitcher Edwin Jackson and his agent Scott Boras, and is hoping to avoid an arbitration hearing.

Hopefully, the two sides will get this done and we can stop talking about contracts and arbitration and start talking about at-bats, and innings pitched. Those I can actually understand.


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