Baseball Arbitration

BY: ELLIOT WEISS

Major League Baseball conducted its first salary arbitration hearing on February 11, 1974.[1. Roger I. Abrams, The Money Pitch: Baseball Free Agency and Salary Arbitration 143 (2000).] The hearing was between Minnesota Twins pitcher Dick Woodson, Twins owner Clark Griffith, and the Major League Baseball Players Association, marking the first arbitration proceeding conducted during the thirty eight years since the beginning of baseball’s single or final offer arbitration system.[2. Maury Brown, Breaking Down How Salary Arbitration Functions in MLB, BIZOFBASEBALL.COM.] While salary arbitration is an interesting part of baseball’s monetary structure, the system has generated negative reactions among team owners. Despite a number of attempts to eliminate the process altogether through negotiations with the Players Association, the basic structure has changed little since its adoption in 1973.[3. Id.]

The salary structure in Major League Baseball (MLB) divides all players into three groups. The first group is controlled under the reserve system, which includes players who are bound to one team and lack any leverage with respect to their one employer. [4. 2012-2016 BASIC AGREEMENT (last visited on Oct. 13, 2012).]  These types of players include those with limited major league experience and are usually paid close to the league minimum. The second group includes all players who have accrued enough service time to satisfy the criteria to become eligible for arbitration. Players first become eligible if they have three years of credited experience.[5. Id.] However, a category called “Super-Twos” provides those in the top 17% of this particular class of players who have at least two, but less than three, years of credited experience the ability to achieve arbitration eligibility within two to three years of professional performance. The “Super-Twos” players are usually the ones receiving heavy media coverage and often enjoy the opportunity to seek a measure of their actual market value. The third group includes players with six years of service who have attained free agent status.

When owners provide arbitration to players, it essentially functions as a contract offer, contingent on the value determined at the league proceeding. If the player declines arbitration, they generally become available to other teams via the free agent market.[6. Id.] Despite the general goal of determining accurate value in these proceedings, owners often do not provide arbitration to players because they expect that the salary levels produced by the process will far exceed the amount that the team wants to pay a player.

Critics argue that the dollar value placed on major league baseball talent has become over-valued.  They argue that the process of arbitration, which was originally seen as a solution for players who entered into adhesion contracts with major league teams, has expanded the value of the players’ market. The potentially high salaries agreed to in these proceedings have become a genuine concern for team owners. Team owners often feel that the process of salary arbitration has the potential to unjustly benefit players and facilitate a trending rise in the salaries offered in these player contracts.

The contending argument would be that team owners are getting more comfortable with increased salary levels in conjunction with the availability of lucrative television licensing deals. These deals have often provided new money for owners to spend on talented players in arbitration hearings. However, a contract between two parties requires that the player agree to participate in the arbitration process. Players with substantial marketability tend to decline arbitration because they do not want to limit their negotiations to only one team. Instead, they often prefer to test the market, permitting teams to bid up the price.[7. Id.]

Following the 2012 season, Buster Posey (the potential 2012 N.L. batting champion) of the San Francisco Giants is now eligible for arbitration as a member of the second group within the MLB salary structure system. Baltimore Orioles catcher Matt Wieters is also now eligible as a second group player. Miami Marlins monster hitting outfielder Giacarlo Stanton may also be recognized as a Super-Twos player, making him eligible to participate in arbitration for this coming year, instead of at the end of the 2013 season. Regardless of the classification, all three players stand to be potential big-winning positional players in arbitration this year, which should reflect a significant percentage increase in their earnings.

One comment

  1. I find Baseball Salary Arbitration to be a very unique and interesting feature in professional sports. Your analysis is a little off, but the majority of it is correct. When a player becomes eligible for arbitration (whether a super two or 3+ player) it is his responsibility to submit for salary arbitration. His refusal to do so will only allow the team to retain him for another year of a minimal salary. Now, the team is the one who has the ultimate option. If the team decides to not go to arbitration, the player will become a free agent. This is ultimately a double edged sword for the player because the rest of the teams in MLB will know that even though the original team maintained control over their player until after they accrue 6 years of service time, they decided to release their own guy. This will take away from the bargaining power of the player and he will likely not receive a high salary anyway. However, even if the team and player decide to go to arbitration, settle before arbitration, or forego arbitration all together. The player remains tied to the team under the reserve clause for the first six years.

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