Need Some Wednesday Wisdom? Let’s Define Salary Arbitration?

Today Mookie Betts the 24-year-old Boston Red Sox outfielder was awarded the $10.5 million dollars he asked for in his arbitration hearing against his team. The Red Sox had offered Betts only $7.5 million dollars. Betts had a stellar year in Boston winning a Gold Glove, starting for the American League All Star team and finishing sixth in the American League MVP voting.

Betts contract is the largest ever payday for a player in his first year of arbitration eligibility that reached a hearing.  In 2008 Ryan Howard was awarded $10 million dollars in his first year of arbitration with the Philadelphia Phillies.  Kris Bryant was awarded $10.85 million earlier this year by the Chicago Cubs and avoiding salary arbitration in his first year of arbitration.   Howard and Bryant both had MVP awards before beginning arbitration.

So what exactly is salary arbitration?  Major League Baseball’s website defines it in the four paragraphs below.  Yes it’s lengthy but as you can imagine has to be very specific.  I paraphrase it to this, when young player who doesn’t have a contract in place for the upcoming season and a team go before a panel of arbitrators to decide what the player will make. The panel decides if the player will make the figure the team submitted or the figure the player submitted.  Typically teams avoid arbitration  with a contract being signed before the deadline.

Players who have three or more years of Major League service but less than six years of Major League service become eligible for salary arbitration if they do not already have a contract for the next season. Players who have less than three but more than two years of service time can also become arbitration eligible if they meet certain criteria; these are known as “Super Two” players. Players and clubs negotiate over appropriate salaries, primarily based on comparable players who have signed contracts in recent seasons. A player’s salary can indeed be reduced in arbitration — with 20 percent being the maximum amount by which a salary can be cut — although such instances are rare.

If the club and player have not agreed on a salary by a deadline in mid-January, the club and player must exchange salary figures for the upcoming season. Unsurprisingly, the club files a lower number than the player does. After the figures are exchanged, a hearing is scheduled in February. If no one-year or multi-year settlement can be reached by the hearing date, the case is brought before a panel of arbitrators. After hearing arguments from both sides, the panel selects either the salary figure of either the player or the club (but not one in between) as the player’s salary for the upcoming season.

The week prior to the exchange of arbitration figures is when the vast majority of arbitration cases are avoided, either by agreeing to a one- or multi-year contract. Multi-year deals, in these instances, serve as a means to avoid arbitration for each season that is covered under the new contract.

Once a player becomes eligible for salary arbitration, he is eligible each off-season (assuming he is tendered a contract) until he reaches six years of Major League service. At that point, the player becomes eligible for free agency.