Explaining Baseball Arbitration

We touched on this last year around this time, but TomTom made a good point that most people have no idea what the baseball arbitration is all about, so here is a breakdown from MLBPlayers.com...

What Players Are Eligible for Arbitration?

A player and club who cannot agree on a contract may agree to salary arbitration, provided that the player has enough service time in the majors. To be eligible for arbitration you must have:

(1) At least 3 but less than 6 years of service in Major League Baseball;

(2) Less than three years or service, but at least two years with at least 86 days of service in the immediately preceding season. These players are known as "Super 2s". These players must also rank in the top 17% in service, of the players with at least two but less than three years of MLB service.

(3) Players who have filed for free agency may also go through the arbitration process if their former team makes an offer of arbitration and the player accepts.
The Club's Arbitration Offer Requirements

(4) A club must offer contracts to players under its control by no later than December 12;

(5) If a player has filed for free agency, his former club must offer him arbitration by December 1. If the player accepts by December 7, the player is placed back on the team's roster, and the two sides may continue to negotiate or go to an arbitration hearing. If the free agent player declines the arbitration offer, the sides may continue to negotiate.

(6) The club's salary offer to a player under its control may not be less than 80% of the player's total compensation from the prior year, and may not be less than 70% of his compensation from 2 years earlier.


These rules, however, do not apply to free agents who are offered arbitration.
The Arbitration Procedure and the Arbitration Hearing Arbitration works as follows: In January, the player and the club each submit a salary figure to a three-person panel of professional arbitrators. hearings are conducted between the 1st and 20th day of February.

At the hearing, each party has one hour to present its case to the panel, and then has an additional 30 minutes for rebuttal. The player must attend the hearing, but is usually represented by his agent. A club executive or attorney usually represents the team.

The arbitration is a “high-low” proceeding, during which each side presents its case for why the player should be awarded the requested salary in the upcoming season. In deciding to award the higher or lower salary, the panel may consider the following criteria:

(1) the player’s contribution to the club in terms of performance and leadership;

(2) the club’s record and its attendance;

(3) any and all of the player’s “special accomplishments,” including All-Star game appearances, awards won, and postseason performance;

(4) the salaries of comparable players in the player’s service-time class and, for players with less than five years of service, the class one year ahead of him.


The parties may not refer to team finances, previous offers made during negotiations, comments from the press or salaries in other sports or occupations.
The panel, without opinion, awards the player a one-year, non-guaranteed contract at one salary or the other. If the player is cut within 16 days before the season begins, he is entitled only to 30 days’ termination pay. If the player is cut during spring training but after the 16th day before the season begins, he is entitled only to 45 days’ termination pay.


If you're thinking that the panel might side with the player more often, think again. Heading into 2010 the arbitrators have ruled in favor of the player 207 times and in favor of the team 280 times. 90% of the players filing for arbitration reach a deal with the team before ever getting to a hearing, which seems surprising considering that the team has been favored 280 times to 209 times for players, in the 35 years of arbitration in baseball.

Fun Fact: Ryan Howard has the record for largest arbitration payout for a first-time eligible player when he received $10 million in 2009. Tim Lincecum filed a claim for $13 million this week. Something to keep an eye on....