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February 7, 2012

Bizball

Salary Arbitration Picture Postcards

by Maury Brown

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I’ve been informed (more than once, mind you), that “readers are not interested in salary arbitration.” Which I find stupefying; I can’t believe those watching the game closely aren’t paying (close) attention. Saying that there is no interest in salary arbitration in MLB is kind of like saying there is no interest in free agency. After all, Marvin Miller has said that salary arbitration, not free agency, has likely had a larger impact on the game.

Maybe it’s because the majority of the players involved are rank-and-file. Or, unlike free agency, salaries are (mostly) constrained within certain confines of “comping” to other players and their salaries. Maybe, it’s just that salary arbitration isn’t “sexy.” Whatever. That seems bogus. Readers should care for the same reason that owners, GMs, and MLB organizations care: it influences roster outcomes.

Let’s put it this way: if you have a limited budget and a fair number of players in salary arbitration that are in their third (or possibly fourth, if they were a Super Two at some stage) time through the salary arbitration process, the amount paid out to players can be significant. That influences total player payroll and how much clubs can, or cannot, spend in free agency.

Even if you have players just entering the system, the amount allocated to them can dramatically influence budget. Remember, for the first three years that a player is on an MLB roster, clubs are only required to pay them the league minimum. Once a player hits salary arbitration eligibility, those same players can see salary increase anywhere from 300 percent to as much as 1,000 percent if they are a star player (Ryan Howard’s record salary arbitration case saw his pay increase from $900,000 in his last year of club control to $10 million after winning his salary arbitration case—an increase in salary of 1,011 percent!)

Put another way, months are spent within organizations and agencies prepping for salary arbitration cases. This year there were 142 players that filed, and you can bet that every club and agent took measures to ensure that if any one of those players went all the way to a hearing, they’d be prepared to make their case.

Here’s some food for thought on this year’s class:

  • At publication, there are 17 players left in the process (Brad Bergesen, Adam Jones – BAL; David Ortiz – BOS; Asdrubal Cabrera – CLE; Alex Gordon – KC; Alexi Casilla – MIN; Elvis Andrus, Nelson Cruz, Mike Napoli – TX; Casey Janssen – TOR; Craig Breslow – AZ; Jed Lowrie – HOU; Clayton Kershaw – LAD; Emilio Bonifacio – MIA; Jose Veras – MIL; Garrett Jones, Casey McGehee – PIT)
  • Out of the 142 players that filed for salary arbitration, the majority reached deals before player-asking and the club-offering figures are exchanged. This year, just 43 players exchanged salary figures with their clubs. That tells you how much effort is placed in reaching deals before salary figures are exchanged. Once those numbers are filed, clubs and players then have the mid-point between the two as that “compromise” location to work from.
  • Of the 125 players that have since reached deals or have gone through hearings, salaries have gone up 75 percent from 2011 ($128,473,900 in salary for 2011 compared to $224,372,000 that will be earned in 2012)
  • The salary exchange date is a form of leverage for some clubs. Case in point: the Rays, who have employed a “file and go” system. While clubs and players can negotiate right up to the second a hearing is to take place, the Rays have told players, “If you file an exchange figure, there’s no negotiating. We’ll see you at the hearing.” When the outcome of hearings are either the figure the player is seeking or the figure the club is offering—no compromise, it’s either one or the other—this tactic works as a deterrent to keep players from filing.
  • How has it worked for the Rays? With Tampa Bay beating Jeff Niemann this year, they are still a perfect 6-0 in salary arbitration cases that have gone to hearing.
  • Clubs have gotten the upper hand in hearings over the last few years. As of publication, clubs have won two hearings (Nationals over John Lannan, Rays over Niemann) and the players one (Anibal Sanchez beat the Marlins).
  • Since 1974, clubs have beat the players 288-213 in 501 salary arbitration hearings.
  • The Indians have gone to salary arbitration a total of 13 times since 1974 but have not been involved in a hearing before arbitrators since 1991, when they had two hearings (Greg Swindell and Jerry Browne). This streak of not going to a hearing is something the Indians are exceptionally proud of, but this year, it could be in jeopardy. Currently, shortstop Asdrubal Cabrera and the Tribe are scheduled to go to hearing. The Indians say that they are continuing to work toward a long-term deal, but if they do go to hearing, the Blue Jays will wind up with the longest streak without a hearing (none since 1997 with Bill Risley).
  • Watch the Dodgers closely. They still haven’t reached a deal with NL Cy Young winner Clayton Kershaw. The Dodgers are offering $6.5 million while Kershaw is seeking $10 million. If a deal is reached before a hearing, a key bit of data is the mid-point between the two of $8.25 million. It’s a dangerous bit of chicken the sides are playing: that $3.5 million difference is a lot to lose should the sides go to a hearing. Consider this: Kershaw is a first-time salary arbitration player. If he were to go to a hearing and win, his $10 million decision would tie him for the highest ever for a first-time salary arbitration player with Ryan Howard’s 2008 win over the Phillies.
  • How have the Dodgers fared in salary arbitration hearings? Not bad. They have a 70 percent win record, going 14-6 over 20 cases since 1974.

Maury Brown is an author of Baseball Prospectus. 
Click here to see Maury's other articles. You can contact Maury by clicking here

Related Content:  Arbitration,  Salary Arbitration,  Hearings,  Salary

16 comments have been left for this article. (Click to hide comments)

BP Comment Quick Links

tlpacker

I think the salary arb stuff is fascinating. Please keep writing about it.

Feb 07, 2012 06:59 AM
rating: 5
 
BP staff member Maury Brown
BP staff

Thanks!!

I got a question around Ortiz. Here's some numbers around his case.

He's a free agent that was offered, and accepted salary arbitration. His Major League Service Time (MLST) through the 2011 season was 13.048.

Ortiz is seeking $16,500,000 while the Red Sox have offered $12,650,000. The mid-point is $14,575,000 and he earned $12,500,000 last season.

If they're still negotiating (and from all I have heard, they are -- there is no deal, yet), it's around that mid-point number.

Feb 07, 2012 07:25 AM
 
ofMontreal

Thanks Maury. I too find it very interesting but more to the point agree with your position. Just because the constituents don't seem to care doesn't mean you shouldn't cover it! That's just bad business in my book, editor types.

Feb 07, 2012 08:41 AM
rating: 1
 
DDriesen

Had a funny conversation with the arbitrator who was to hear Lincecum's case a year or two ago. They settled at the last minute but Lincecum's representative was kind enough to show him what would have been Exhibits A and B - Linc's 2 Cy Young awards. That is what I call persuasive evidence...

Feb 07, 2012 09:06 AM
rating: 1
 
BP staff member Maury Brown
BP staff

Making a case as to how important salary arbitration is in the overall for some clubs...

The Padres had 11 players in salary arb this year:

John Baker
Luke Gregerson
Chase Headley
Nick Hundley
Dustin Moseley
Carlos Quentin
Clayton Richard
Tim Stauffer
Joe Thatcher
William Venable
Edinson Volquez

There 2011 salary total was $13,501,000. For 2012, these players will now be paid $27,050,500.

Opening Day payroll for the Padres last year was $45,869,140. The 2011 salaries accounted for 29% of the total. Those players now would account for 59% of the total if Opening Day 2011 player payroll were to remain static.

Salary arbitration matters... big time for many clubs.

Feb 07, 2012 09:38 AM
 
BP staff member Maury Brown
BP staff

"Their 2011 salary total..." Nice typo, Maury

Feb 07, 2012 09:40 AM
 
cburnell

Do you have a list of the arbitrators involved in the remaining hearings?

Feb 07, 2012 10:00 AM
rating: 0
 
BP staff member Maury Brown
BP staff

I don't as that info is not released.

Feb 07, 2012 10:05 AM
 
BP staff member Jason Wojciechowski
BP staff

Ed Edmonds at the Sports Law Blog follows the arbitration process quite closely every year and somehow finds out the names of the arbitrators. He's got this data far enough back that he has won-loss records for those arbitrators as well.

His website with lots of arbitration info is supposed to be at this link, but something's happened to it.

Feb 07, 2012 15:50 PM
 
BP staff member Jason Wojciechowski
BP staff

This isn't in direct response to the question and Maury's answer, I should note. I don't think Ed has access to future arbitrators, either. I just mean to point out an additional resource for those interested in arbitration.

Feb 07, 2012 15:52 PM
 
Brock Dahlke

This may be a very elementary question, but could you explain how Ortiz gets to do arbitration as that much of an experienced player?

Feb 07, 2012 12:55 PM
rating: 0
 
BP staff member Maury Brown
BP staff

Players that are free agent eligible can be offered salary arbitration. There are normally 2 or 3 each year that accept. Ortiz is one of those players this year. He took them up knowing that he'd be guaranteed a deal this year and in Boston. In other words safe money over gambling in FA.

Feb 07, 2012 15:31 PM
 
Brock Dahlke

Thanks

Feb 08, 2012 23:44 PM
rating: 0
 
BP staff member Maury Brown
BP staff

Then there were 16... Kershaw and Dodgers agree to a 2/$19M deal. $500K signing bonus. $7.5M in '12, $11M in '13

Feb 07, 2012 15:35 PM
 
bravejason

“readers are not interested in salary arbitration.”

I have trouble believing this to be true, at least for this website. After all, when the links at the top of the page include one labeled "Salaries" and one labeled "Transactions" it's hard to imagine that there could be no interest in salary arbitration. Perhaps whoever said that meant "the majority of readers...", or "the plurality of readers...", or maybe "salary arbitration articles have relatively low page hit totals".

Regardless, I agree with you that arbitration is an important topic that bears following.

Feb 13, 2012 11:45 AM
rating: 0
 
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