Major League Baseball Salary Arbitration

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Major League Baseball Salary Arbitration

• An Examination of the System

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The Decision That Changed the Game

• Curt Floods holdout and the reserve clause
• 1975 McNally Messersmith
• The birth of free agency and arbitration
• The 1975 Baseball Universe and today
• NY Mets Bordick vs. Ordonez example

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Baseball is Unique

• Final-offer salary arbitration
• Club and player submit offers
• Arbitrator picks one closer to real marker value
• No opinion
• No precedents
• No appeals
• The best final offer is the more reasonable one

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A system designed to fail

• Arbitration fixed for settlement
• Best interest of both parties
• Always one winner and one loser
• Hypothetical player negotiation example

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Eligibility requirements

• Players with
• At least 3 years, but fewer than 6 years of MLB
  service
• At least 2 years, but fewer than 6 years of MLB
  service
• Super-twos at least 86 days of service during
  previous season, ranks in top 17 of players in
  service group in terms of MLB service
• Over 6 years service Free Agency

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CriteriaWeight of consideration determined by
arbitrator is arbitrary

• Whats in?
• Past season performance
• Overall performance, leadership and public appeal
• Length and consistency of career contribution
• Past compensation
• Comparative Baseball salaries
• Physical or mental defects
• Recent performance of the club

• Whats out?
• Financial position of the player and the club
• Press comments, media stories, etc.
• Except annual awards
• Offers made prior to arbitration
• The cost of representatives, attorneys, etc.
• Salaries in other sports or occupations

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Pros and Cons

• Why arbitrate?
• Mixed player profile
• Financial resources are not a consideration
• Arbitration sets no precedents
• Valuable for a clubs future negotiations

• Why settle?
• Relationship strain
• Cost of arbitration process
• Restrictions on compensation package

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The Scorecard

• Management has historically done well
• Since 1974 Of 417 cases heard 236 settled in
  favor of the club (57 winning percentage)
• Winning isnt everything
• No player receives less than last years salary
• Most get significantly more
• 2001 144 increase in salaries determined by
  arbitration

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Presenting a Case

• The Major League Scale
• Statistical analysis is key
• Midpoint of two offers determines debate
• Club explains why the player is worth less
• Players agent explains why he is worth more
• 1 Hour presentation by each side
• ½ hour rebuttal

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For instance

• Player demands 2 million
• Owner offers 1 million
• Midpoint of 1.5 million
• Player demands 1.7 million
• Owner offers 1.2 million
• Arbitrator decides fair market value of 1.5
• Player wins and receives 1.7 million for
  one-year contract

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2001 Arbitration Roundup

• 102 players who filed for arbitration
• Owners won 8 of 14 cases decided by an arbitrator
• Atlanta Braves Andruw Jones won his decision
  (8.2 million, new record)
• NY Yankees Derek Jeter avoided arbitration and
  signed for 10 years and 189 million, biggest
  contract of those who filed
• LA Dodgers Chris Donnels got the lowest salary
  300,000

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Questions Please?