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. 
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