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Salary Arbitration is a Necessary Evil in Major League Baseball

Last week, Corbin Burnes lost his salary arbitration case to the Milwaukee Brewers. When speaking to reporters, the 2021 NL Cy Young Award winner voiced his frustrations, stating “Obviously, it's tough to hear. It's tough to take. They're trying to do what they can to win a hearing,'' and "There's no denying that the relationship is definitely hurt from what [transpired] over the last couple weeks. There's really no way of getting around that."

Every offseason, we normally hear at least one episode of a player sounding off like this following a salary arbitration hearing. Whether the player and his representation emerged victorious in the case or not, quotes about “hard feelings” or a “strained relationship” usually surface in the headlines. It’s totally understandable, I mean how would you feel if your employer highlighted your flaws in route to claiming that you aren’t worth what you’re asking for? Despite all the consternation around salary arbitration, however, it's likely not going anywhere anytime soon. Why is that? For the players, it’s a necessary evil to maximize their earnings.

Prior to 1974, the professional baseball labor market was characterized by the so-called “reserve clause,” which tied a player’s services to his current team indefinitely, thereby transferring monopsony power to baseball team owners. The reserve clause was a constant source of friction between players and team owners throughout its history. In essence, if a player wanted a raise, his only option was to ask the team owner to voluntarily give him one. That changed in 1974 when the MLBPA got its first big victory: salary arbitration.

While free agency (which came along in 1976) understandably gets most of the attention in today’s game, salary arbitration is as if not more important for the rank-and-file player. In short, it allows players with more than three (more than 2 in special cases) and less than six years of MLB service time to negotiate their salaries with their teams for the upcoming year. If the players and their representation cannot agree or “settle” on a number with the team, it goes to a hearing where impartial arbitrators decide between the player’s filing number and the team’s filing number.

Inevitably, this puts MLB front offices in a tough spot. Yes, they want to reduce their payrolls as much as possible. But do they want to strain relationships with their players in the process in the process? Absolutely not. As a result, some teams do everything they can to settle and avoid hearings. The Texas Rangers, for example, have not gone to a hearing since 2000.

However, other teams don’t share that approach. A collection of executives and front offices take the “file and trial” strategy where they treat the arbitration figure exchange date as a hard deadline; if the club and player are unable to avoid arbitration prior to exchanging salary figures, the understanding is that the will club no longer negotiate one-year deals with that player and head to hearing.

Oftentimes, these negotiations are over six-figure amounts. While $700,000 or $950,000 is a lot of money to you and me, in the grand scheme of Major League Baseball, it’s not like teams will go under financially if they have to shell out a few more dollars than they originally wanted to. So why do some teams insist on going to arbitration hearings? It’s all about precedent and avoiding subtle increases that future arbitration-eligible players will be compared to.

Arbitration at its core is all about comparison. It’s not intended to give a player a fair salary or what he’d be worth on the open market. That’s what free agency is for. Arbitration salaries are determined by looking back at what players who have accrued a similar amount of service time made in arbitration in recent years. For example, in his hearing, Corbin Burnes’ camp wasn’t arguing that he should make what Justin Verlander, Max Scherzer, or Jacob deGrom will in 2023. Instead, they looked at what the best pitchers with four years of service time made in arbitration and argued why Burnes was worth X amount more than them.

By offering Burnes what he wanted ($10.75 million), the Brewers would’ve laid the groundwork for future players of Burnes' caliber and service time to cash in more than they otherwise would. Since any outlier of a contract can serve as a precedent in the future, clubs and the league as a while) pay very close attention to arbitration salaries. Yes, the $750,000 the Brewers saved on Burnes might not seem like a big deal in a vacuum, but the cumulative effect over time can lead to teams shelling out more and more each year.

Because of all the animosity and ill-will arbitration can create, there has been a push by MLB to get rid of the process entirely. According to Ken Rosenthal of the Athletic, in the last round of bargaining, MLB proposed replacing salary arbitration with a formulaic approach. The players vehemently rejected it, which goes back to my original point: salary arbitration is a necessary evil.

I bet all players would agree that it sucks to hear their teams downplay their abilities to pay them less. At the same time, I bet all players would agree that the pros of arbitration outweigh the cons. It’s crazy to think about in the current landscape, but just 50 years ago, players had zero control over their salaries. Free agency is the goldmine that every player aspires for, but arbitration gives players with less than six years of service time at least some leverage at the negotiating table.

One potential solution could be to take the individual teams out of the process, thereby eliminating the player vs. team element in arbitration. For example, instead of the player negotiating with his team, he could just negotiate with MLB’s lawyers, who would work on behalf of the clubs. In that case, you would hear Corbin Burnes direct his ire to the commissioner’s office, not the team he’ll suit up for in 2023. But that solution doesn’t come without its problems and probably won’t come to fruition anytime soon.

If arbitration is here to stay (which I think it is), don’t expect players to keep their frustrations to themselves, and don’t expect teams to “cave in” at the negotiating table. As someone who loves baseball, is a finance major and is headed to law school, I’m fascinated by salary arbitration. In saying that, I completely understand all the negative side effects that come with it. However, I, along with many on the player’s side believe this: salary arbitration is a necessary evil in Major League Baseball.

Brendan can be found on Twitter @_bbell5

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