February 20, 2017

Prospectus Feature

Arbitration Clash

by Jarrett Seidler

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The arbitration process sucks. It sucks for the team. It sucks for the player. The player, his agent, and key front office personnel go into a room where their lawyers and contractors argue why the player is worse or better than he initially appears. At the end of the day, three professional arbitrators who don’t necessarily have intimate knowledge of MLB player value decide between the player’s submitted salary number and the team's submitted salary number.

These decisions are almost always fitted on a player’s service time, past salary, and the closest comps based on antiquated box score-level stats like wins, saves, batting average, home runs, and RBI, as those stats are generally what the arbitrators understand. The process has been around long enough that there are almost always comparables. Because of this, groups like the Pace Law baseball arbitration team are able to project arbitration awards with stunning accuracy without even being in the room, and an annual national law school arbitration competition occurs with MLB’s system as the model. Often, this is all about a couple hundred-thousand dollars, a pittance in the overall budget of MLB teams.

The Yankees reached arbitration settlements with six of the players they tendered. The seventh was Dellin Betances, one of the best relievers in baseball, entering arbitration for the first time. The Yankees offered $3 million and Betances countered at $5 million. The Yankees are a "file-and-trial" team, which means once the arbitration numbers are officially exchanged they will no longer negotiate a one-year deal.

Economist Matt Swartz of MLB Trade Rumors went a step beyond looking at cases individually and fitted a statistical model to project arbitration salaries across the league, since the comparables are so stable. Swartz’s model for relievers is pretty clear: saves get paid and holds don’t. Swartz also found that the arbitration panel hews so closely to past precedents that a player is unlikely to get more than $1 million beyond the previously highest-paid player for his role and service time, no matter how much better he was than that past comparable. Swartz’s model is generally well-regarded and projected Betances’ median arbitration award at $3.4 million for 2017, far closer to the team filing than the player filing. It’s no surprise that the Yankees won the case, no matter how unfairly light that $3 million number may seem at first glance.

I suspect nothing further would’ve happened here except perhaps a generic disappointment quote from Betances, but then Yankees president Randy Levine went to the media. You certainly wouldn’t be reading about it here on BP—across town, Wilmer Flores’ arbitration victory over the Mets floated through the papers as a couple of sentences in a pre-spring training slice of life story, garnering no major regional or national attention.

Why Levine chose to go after Betances in the media after winning is a question only Levine himself can answer. Arbitration proceedings are often rancorous. It often puts the team in a position where it has to trash its own player for financial advantage, pointing out things like how slow he is to the plate. Occasionally these things boil over; Jerry Blevins’ arbitration win over the Nationals in 2015 was reportedly a factor in his trade a few weeks later to the Mets. This proceeding was apparently particularly bad, but again, the Yankees won.

Because Levine went public, Betances and his agency went public too, and thus we know an enormous amount of on-the-record dirty laundry from the proceedings. Levine claims that Betances was the unwitting tool of his agency and the players' union in trying to rewrite the arbitration process to no longer disfavor setup relievers. In a Trumpian turn, Levine then went after the New York Times and reporter Billy Witz for alleged false reporting on the matter, and implied Betances was as close to being an astronaut as an elite closer. Meanwhile, per Betances’ agent Jim Murray, Levine personally involved himself in the arbitration hearing, making a statement before the Yankees’ presentation inferring that the team’s low ticket sales and lack of playoff success were Betances’ fault. He apparently called Betances by the wrong name and implicitly threatened the arbitration panel if they ruled for Betances.

Levine was absolutely correct about one thing: Betances, his agent, and likely the union were knowingly trying to blow up the salary scale for non-closing relievers in arbitration, and it sure seems like Betances was more than an unwilling accomplice. There’s a simple reason why: it’s broken. We know now that saves are often not representative of the highest-leverage situations in the game. Led by Terry Francona, teams are starting to inch back away from the idea that your best reliever should be saved for one inning with a lead of 1-3 runs. What Betances has done for the Yankees is no less valuable than what the elite closers have been doing for their teams and the baseball world writ large knows that.

The arbitration panel is running 15-20 years behind even conventional wisdom here. Betances should be applauded for costing himself real money to take a whack at a broken system; had he won, it would’ve benefited future players in arbitration using his award as a comparison to the tune of tens of millions or more. Relying so heavily on saves in the arbitration process is also obviously rife for team manipulation. Who controls who gets the saves? By DRA, Betances was the best reliever in baseball in 2016, the seventh-best in 2015, and the third-best in 2014. Betances would have been closing for at least 27 or 28 of the other teams in baseball for the majority of the time he’s been in the majors and probably even deserved the first shot with the Yankees in 2015 as the young incumbent dominant Eighth Inning Guy.

Were he to have racked up 110 or 120 saves over that span, Betances likely would have broken Jonathan Papelbon’s first-year reliever award record of $6.5 million. Assuming Closer Betances gets $7 million as a first-year arbitration salary and using the 40-60-80 guideline, the Yankees will save $18 million over the course of Betances’s arbitration cycle by avoiding using him as a full-time closer. (If anything, that estimate is probably low given salary inflation.) Would it be too cynical to point out that’s almost exactly Aroldis Chapman’s average annual value on his new contract?

The Yankees are free to take whatever position they want in the arbitration process as long as they can get it past the arbiters, of course. When you turn it into a public position, however, it has to hold up to scrutiny. And just two offseasons ago the Yankees signed Andrew Miller, owner of one career save, to a $36 million contract, nearly doubling Scott Linebrink’s previous record for a reliever without closing experience. The Yankees quickly settled him into the closer’s job over their best internal candidate, the one and the same Dellin Betances.

What comes next here? Betances reported to camp, trashed Levine and the organization right back, hinted that he may refuse to take the ball for multiple innings, and said the Yankees have made his future free agent decisions easier. In a few days, he’ll leave the team for up to a month to play for the Dominican Republic in the World Baseball Classic, so the immediate controversy will likely die down quickly.

Time does heal many wounds, and so does Hal Steinbrenner’s checkbook. We don’t even know if Levine will still be with the Yankees organization in November of 2019 when Betances reaches free agency, and Betances and Murray were quick to point out that general manager Brian Cashman and assistant general manager Jean Afterman had remained professional during the process. This is, however, not the first time the Yankees have played hardball with Betances over relative peanuts. Betances and his agent also reportedly approached the Yankees several times proposing a multi-year extension instead of continuing with the arbitration process, and the Yankees declined.

If the Yankees want to solidify a long-term relationship with this player, they’ve been showing it in a very odd way. Then again, one offer with life-changing money quickly fixes every problem the Yankees have created. Could the Yankees end up dealing Betances? Initially, my reaction was “no, of course not.” But I looked at it further, and at this summer’s trade deadline he’s going to be a 29-year-old ace reliever with two-and-a-half years of cheaply priced team control remaining. The Yankees, still on the fringes of the American League playoff chase in 2016, dealt Miller, then a 31-year-old ace reliever with two-and-a-half years of cheaply priced team control remaining, getting an absolutely monstrous haul led by 16th-ranked prospect Clint Frazier and 52nd-ranked prospect Justus Sheffield.

If the Yankees aren’t sitting in a playoff spot come July—PECOTA currently projects them as an 82-80 team—and some team with multiple top prospects is desperate for a cheap super-reliever who can close or act as a versatile bridge, Betances could be on the move. And frankly, this kind of clash with the organization makes it much more palatable to move a local kid who has been a darling of the fan base through his ups and downs since he signed 11 years ago.

Jarrett Seidler is an author of Baseball Prospectus. Follow @jaseidler
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