Hardball in the Courtroom: Baseball’s Arbitration Process
Over the course of the winter, Major League teams have been in negotiations with some of their players in what is simply termed “arbitration.” Players and teams exchange figures in order to establish terms on a contract for the upcoming season. While exchanging figures between teams and their own players may seem like an easy transaction, with millions of dollars on the line, these negotiations can often become contentious. As the Yankees proved recently in their negotiations with Dellin Betances, the arbitration process can turn out to be a very ugly and public process.
WHO ENTERS BASEBALL’S COURT?
Most MLB players will never enter the arbitration court. Only a select group of players qualify for arbitration, as entering into the pool of players eligible for arbitration is based upon a player’s service time in the Major Leagues, which is measured by the number of years and days a player has spent on the 25-man MLB roster. When a player enters the league, he will enter on a pre-arbitration contract, and he won’t qualify for arbitration until he hits certain criteria. Generally, a player is under team control for six full seasons. Here’s the contract that a player will qualify for in each offseason, based upon his service time (assuming he hasn’t signed a new contract with his team):
- Less than one year of service time: Pre-arbitration contract
- 1–2 years of service time: Pre-arbitration contract
- 2–3 years of service time: Pre-arbitration contract, unless the player qualifies as a “Super Two.”
- 3–4 years of service time: Arbitration
- 4–5 years of service time: Arbitration
- 5–6 years of service time: Arbitration
- 6+ years of service time: Free Agency
The one major designation that occurs above is the “Super Two” designation, which means a player is eligible for arbitration a year early. In order to qualify as a Super Two, a player must have accumulated more than 2 full seasons of service time and be in the top 17% of players with more than 2 seasons of service time. In terms of years and days, the Super Two designation normally occurs when a players has accumulated 2 years and usually between 128 and 140 days of service time.
The Super Two designation is seen as a positive for players but a negative for the management, as entering arbitration a year early most certainly means an inflated salary. Unfortunately for the players, their management is well aware of this fact, as they will tend to hold their biggest prospects in the minors to avoid the player gaining the Super Two status. Often, this is chalked up to a player “needing more seasoning,” but when players entering arbitration a year early could cost a team millions of dollars, teams tend to sugarcoat their reasoning for not calling up their best prospects.
PREPARING FOR THE TRIAL
Once a player has qualified for arbitration, the team has the option to go through arbitration with the player, or simply “non-tender” the player, which means the player becomes a free agent because the team has decided that the player’s value is significantly less than what he would’ve earned by entering arbitration. If a team enters arbitration with a player, both the player and the team will submit a salary figure, in which the deadline is usually in January.
After both sides have submitted their figures, they have until the date of the arbitration hearing to have a meeting in the middle of sorts, avoiding the hearing and agreeing to salary terms. In most cases, the team’s terms and the player’s terms are within the same ballpark (pun intended), so it makes negotiations much easier. Some teams employ what is called a “file-and-trial” method, in which they basically claim to be ready to enter an arbitration hearing once the numbers have been exchanged. While in some cases that turns out to not be an absolute claim, some teams are certainly more willing to see the process out through the hearing than others.
If a player and a team are unable to agree to terms before the hearing (which takes place in February), representatives from the team and the player must meet in front of an arbitrator selected from a pool of arbitrators that are agreed upon by the MLB Players’ Association and the Labor Relations Department of the MLB. Once the two sides appear in front of the arbitrator, that’s when the proverbial gloves come off. The team spends their time telling the arbitrator all of the reasons that the player is not worthy of their price, and the player has to spend his time defending their talents and contributions.
In some cases, the trial can cause a strained relationship between the player and the team. During the current offseason, the Yankees went to an arbitration hearing with star reliever Dellin Betances, with the Yankees offering Betances $3 million and Betances aiming to gain a $5 million salary. The Yankees would win a contentious hearing, with the arbitrator ruling that Betances will make $3 million dollars for the 2017 season. Yankees’ President Randy Levine would go extremely public with the negotiations, saying, “That $5 million number? It might as well have been $50 million.” Betances would elaborate on the proceedings, saying, “They take me in a room, and they trash me for about an hour and a half, I thought that was unfair for me.” Normally, these proceedings are kept behind closed doors, but in this case, both sides went public with their sides of the story. Arbitration can either be a tool the two sides can use to gradually increase a player’s salary, but it some cases, the trial can cause irreparable damage between the two sides.
See also:
http://bleacherreport.com/articles/329705-baseball-arbitration-101-that-goofy-game-for-dopey-lawyers
https://www.nytimes.com/2017/02/18/sports/baseball/yankees-dellin-betances-arbitration-.html?_r=0
