Passan: Why record-setting money will fly in MLB salary arbitration
With $3 million at stake, the Boston Red Sox wanted to create the most compelling argument possible against Mookie Betts without alienating or insulting him. So last January, as they tried to convince a three-person arbitration panel that Betts deserved the $7.5 million salary they were offering and not the $10.5 million he requested, the Red Sox fashioned a novel approach in the typically staid, lawyerly arbitration room: They played a video talking about how good Kris Bryant was.
The purpose, multiple sources in the room told ESPN, was not simply to lavish praise on the Chicago Cubs‘ third baseman but to make their case: As great as Mookie Betts may be, he isn’t Kris Bryant. And in the world of arbitration — an opaque, wonky process that determines salaries for about a quarter of the league every year and has taken on significantly more meaning as economic turmoil roils the baseball landscape — the single most important factor is comparable players.
So when Betts won the first case of 2018, a year that saw the most hearings since 1990, it wasn’t merely a victory for him or a sign that Bryant, and his $10.85 million salary, was indeed a fair parallel. It reminded players that with the free-agent market spiraling and pre-free agency contract extensions increasingly rare, arbitration is among the last avenues for players to seek salary gains amid the sport’s financial correction.
That’s what makes the next 48 hours so compelling. At 1 p.m. ET on Friday, the 175 or so players eligible for arbitration will have settled on a salary for 2019 or reached an impasse that leads to a hearing. With all 30 teams adopting the so-called file-and-trial approach — if the sides file a number, they’ll head to trial, cutting out the post-exchange-date negotiations that were prevalent even five years ago — Friday marks an underappreciated day on the baseball calendar.
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One on which Colorado Rockies third baseman Nolan Arenado will set a record for arbitration salary — or head to trial in February. And where the first-time-eligible class of Francisco Lindor, Carlos Correa, Javier Baez, Trevor Story and Corey Seager represents the biggest influx of talent — let alone talent from a single position — into the arbitration system in years. The leaps taken by Cy Young Award-winning starter Jacob deGrom and lockdown closer Blake Treinen could portend significant raises as well.
Then there’s the case of Betts, who followed his leap in arbitration with one on the field. The arbitration system gives special favor to those with hardware, and Betts is coming off a season in which he won the American League Most Valuable Player and a World Series. Will he seek to beat Max Scherzer‘s record $8.8 million raise for players already in arbitration? Might he see Arenado’s $17.75 million salary as a third-time-eligible player and settle in that neighborhood to mitigate the risk of a trial? Could he go for broke and file for $20 million-plus, looking to set a new benchmark in a landscape where they’re few and far between?
“I hope every damn agent holds the line,” one agent with arbitration-eligible clients told ESPN. “This would be a wonderful year to see if they can do it. And if not? Go to trial.”
The biggest question is just that: With the arbitration system in some ways serving as a microcosm of the rest of the labor market for players — with less manpower than the well-organized league office, fractious goals for players adversely affecting others and the risk in front of sometimes-inconsistent panels palpable — just how aggressive can the players afford to be?
In a mission statement distributed among some players, Jeff Berry, who helps run the baseball division at CAA, outlined a number of steps he believes are necessary to rectify the imbalance of power in the relationship between MLB and the union. It was no surprise that his first target was arbitration. “[A]ttacking the arb system,” Berry wrote in the memo, which was obtained by ESPN’s Buster Olney, “is an ideal battleground for MLBPA/players/agents to take a unified stand and to feel empowered and proactive rather than victimized.”
The use of arbitration as a potential weapon in a burgeoning labor conflict runs in contrast with the system’s intention. Arbitration exists to bring sides with disparate goals together in hopes of compromise. The players want the highest salary possible. The clubs want to pay players as little as possible. Détente is somewhere in the middle, and following the labor wars of the 1980s, it was the standard.
Amid the freeze of the free-agent market last winter, 22 players went to trial, one of the highest numbers since the advent of the system in 1974. Still, it amounted to barely 10 percent of those eligible for arbitration, illustrating the point some hawkish agents make: Players could upend the system the way clubs have free agency and have tried to do to arbitration by adopting file-and-trial practices.
Whether that would be prudent is a different question altogether. A number of factors make the scenario, enticing though it may be, a near impossibility. First is the scourge of the union: bad settlements. While MLB works diligently and impressively to coordinate the arbitration targets of its 30 teams — this behavior is sanctioned under the collective bargaining agreement and not considered collusive — agents occasionally make far-under-target settlements. The effect, in a comparison-based system, is devastating: A bad settlement can linger and depress prices at a particular position for years.
Further, while some of the brightest minds at the MLBPA focus on arbitration, the sharp and efficient MLB labor relations department (plus the sheer quantitative power housed in clubs’ supercomputers and the minds of those who run them) leads to a theoretical inflection point of cases. The union did well balancing 22 cases last year, winning 12. The league historically has won well more than 50 percent of cases. At 30 or 35 cases, or even more, the volume could leave the players at a disadvantage.
Another complicating factor is the cost to agents. Going to trial can be pricey, particularly for smaller agencies that do not have in-house lawyers with enough expertise or experience to argue an arbitration case. Hiring outside counsel costs up to $55,000, an expense that falls on the agent. And when the spread, or the difference between the sides, is minimal and the 5 percent fee on the difference won’t come close to covering the attorney fees, the incentive is clearly to settle — a fact that teams know and leverage.
All of which leads to the awkward dance currently playing out. On Monday and Tuesday, staffers from clubs reached out to agents to introduce themselves, say they are a file-and-trial team and throw out a name they believe is a good comparison. In most cases, there is little substantive movement on Wednesday and Thursday. Only on Friday, the day of the deadline, do the sides seriously engage. It’s by design: Barreling toward a deadline, teams often feel as though they have the advantage, and their willingness to wield it for gain is clear.
Between 8 a.m. and 1 p.m. ET on Friday, team and agent offices, and those of the league and union, will serve as nerve centers for a manic dash. Good and bad settlements will be celebrated and lamented. The ever-narrowing window will be used as a vise in both directions. Some will panic. Some will hold steadfast. And all will know that absent a settlement, they’ll meet a few weeks later in a setting with rulings every bit as binary as ball or strike.
Arbitration cases start at 9 a.m. or 1 p.m. Typically, about 30 people are in the room — 10 on the player’s side, including the player, and 20 on the team’s. Each side brings 12 copies of its brief. The opposing side gets four of the copies, and a number of people then decamp to suites to begin constructing the rebuttal argument that will come later in the hearing.
To begin, the player’s side gets an hour to make its argument. After a 15-minute break, the team gets an hour. Following a 30-minute break, during which both sides finalize their closing arguments, the player’s side gets a 30-minute rebuttal and the team gets the same. Players often sit through a savaging of their accomplishments. Arbitration hearings are not for the weak of heart.
The arguments throughout a case run the gamut. Arbitrators have long rewarded home runs and saves, so they are featured prominently among the players with them, like Oakland’s Khris Davis, who could seek a raise from $10.5 million into the $18 million range. At the same time, the arbitration system is not the antediluvian, abacus-using Luddite-fest it has been portrayed as. The wins above replacement metric is used extensively. So are fielding independent pitching for starters and leverage index for relievers. Statcast data is not allowed in cases, mainly because the league has a far greater plethora of it than the union; and in 2016, when the CBA was signed, the accuracy of spin-rate and launch-angle metrics so vital to modern baseball was not tested out over a large enough sample to warrant their inclusion.
When the presentations are done, the panel of three independent arbitrators renders a winner-take-all decision. Sometimes the spread is hundreds of thousands. Other times it’s millions. And in a moment where the average salary dropped year over year, arbitration, which exists to give raises, is a salve for players amid all the losses elsewhere.
Exactly how much Mookie Betts makes next season is important because it ups the benchmark for the next generation of players to come through arbitration. Is it $18 million? Or $19 million? Maybe $20 million? And what of Arenado? Does he play it safe and seek a raise to beat Josh Donaldson‘s single-season arbitration-salary record of $23 million? Or does he compare his situation to free-agent deals, as those in their final season of arbitration are allowed to, and try to shoot the moon to, say, $27 million? Or $28 million? Or even higher?
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The biggest gains, one longtime arbitration expert noted, are not necessarily made in cases like Betts’ last year or Ryan Howard’s seminal $10 million win in his first year of eligibility in 2008. It’s the strong negotiated settlements that resonate best because they’re admissions from both sides that this is the actual market value and not just a number chosen by three people who happened to like one argument better than another.
It’s why for all the intrigue of trials, and for all the fight the rank and file may want to muster against the league, the settlement, unsexy though it may be, is the backbone of arbitration. It’s moving the ball in three yards and a cloud of dust instead of running the fly pattern on every play.
Because incremental progress is still progress, and the lack thereof in other avenues frightens players. The contraction of the free-agent market is real. If the rationale of teams is they don’t want to spend revenues on players in their 30s, the logical countermove would be to spend it on players in their 20s. And yet the long-term offers being made to pre-arbitration players are similar to those of a decade ago. Revenues have increased by more than 50 percent, and that’s to say nothing of the windfall MLB came into from its internet arm and the coming riches of its gambling partnerships.
So the message from the union to players — particularly the best players — is clear: Be aggressive in arbitration. Push clubs. If they’re unwilling to pay what the union believes is market value before or after arbitration, at very least use the system to ensure they do so during arbitration.
The message from the league to clubs is similar: Be smart, be organized, communicate and function as one. It’s how the league has transitioned from a labor laughingstock to the one that knocks. With Betts and Arenado and the parade of incredible young shortstops, MLB has plenty to lose this arbitration season, particularly in a moment when it’s not accustomed to losing.
That’s the new world order of baseball, one that will be tested in a frenzied five hours on Friday, with big names and big money and big stakes. The league is confident. The players are hopeful. Let the madness begin.