In 2008, 112 Major League Baseball players were involved in the arbitration process, the largest number since 1993. Before players and clubs exchanged figures on January 15, sixty-four of these players had agreed to contracts with their clubs. Of the remaining 48 players, only eight players actually went to an arbitration hearing.
With six of the eight decisions in favor of the clubs (75%), it was the 12th straight year that the majority of the decisions went in the direction of the organizations. Since the first hearings were held in 1974, the clubs have won on 279 occasions (58%) and the players have prevailed 205 times (42%).
There are two situations where arbitration can come into play. By far the most common is the one involving players, still under control of their clubs, with three to six years of major league service (MLS), plus the 17% most senior MLS-2 players, referred to as “Super Twos”. Of the 112 players in the arbitration process this year, 109 were in this category.
The other situation involves free agents. When a player with six or more years of major league service files for free agency, his club has the option of offering arbitration. The club must offer arbitration in order to receive compensation in the form of draft picks if the player signs with another organization.
If the player accepts arbitration, he is no longer considered a free agent and he becomes bound to that club. If a player refuses arbitration, as most players do, he is a free agent who can sign with any organization, including the one for which he played last year.
The three free agents who accepted arbitration this year were Michael Barrett of San Diego, Andy Pettitte (right) of the New York Yankees and Mark Loretta of Houston. Barrett and Pettitte quickly reached contract agreements with their clubs. However, Loretta’s case went to a hearing on February 18. This is only the second time since 1991 that a potential free agent reached the point of the hearing.
The arbitration process is designed to promote a settlement at a salary in line with that of other players with comparable performance and service time. With one exception, the results this year continue to indicate that the process is working as intended.
Players eligible for arbitration for the first time receive a large increase in salary since they have no leverage in their pre-arbitration years when their salaries are under control of the clubs. Players who have been through the process before also generally receive salary increases depending on their performance in the preceding year.
Players that settle prior to hearings are sometimes able to negotiate multi-year contracts that buy out future arbitration or free agency years. They are also frequently able to include performance bonuses, based on playing time, and awards bonuses in their contracts.
The big winner in the arbitration process this year was first baseman Justin Morneau of Minnesota who signed a six-year contract for $80 million, with the Twins buying out his remaining two years of arbitration and three years of free agency. Among first time arbitration-eligible players, second baseman Robinson Cano of the Yankees landed the biggest contract ($30 million for four years).
St. Louis native Ryan Howard (a Super-Two) of Philadelphia (right) presumably resisted the Phillies efforts to sign him to a multi-year contract and took the team to an arbitration hearing, where he was awarded the $10 million he requested rather than the $7 million filed by Philadelphia. It was by far the highest figure ever paid to a first-time eligible player.
To win his case, Howard’s agent, Casey Close, had to convince the arbitration panel that Howard’s special accomplishments allowed the relevance of his salary to players without regard to service. Within 30 seconds of his presentation, Close was comparing Howard to Babe Ruth and other notable sluggers from the past. He apparently sold his case even though Howard was not selected to the All-Star team in 2007 when his production declined and he set a new major league record by striking out 199 times.
Arbitrators, like chicks, dig the long ball.
Editor’s note: All three arbitration-eligible members of the St. Louis Cardinals came to terms prior to hearings being scheduled. Rick Ankiel and Todd Wellemeyer settled for one-year contracts that include an additional $100,000 in appearance bonuses while catcher Yadier Molina agreed to a four-year deal that covers his first free agent year plus an option for a fifth season. Ankiel settled even before amounts were formally exchanged.
Bill Gilbert is a baseball analyst and writer and member of the Society for American Baseball Research (SABR).