Arbitration Is Broken Because Owners Broke It
2:34 PM EST on February 21, 2023
Arbitration hearings—a salary-setting process available to a subset of MLB players who have not yet qualified for free agency—have tended in recent years to favor teams over players. The process is relatively straightfoward, if painful: The player and the team each propose a salary for the upcoming season, and those figures plus supporting arguments are presented to a panel of arbiters, and that panel picks one number or the other. This year the panel chose the teams' proposals in 13 of 19 hearings. Last season, in a pandemic-delayed process, the panel sided with teams in nine of 13 hearings. In 2021, teams won five of nine hearings. The process is slowly but unmistakably tilting in favor of management.
The process also almost inevitably wounds the relationship between the player and the team. Teams submit qualifying offers and bother with the administrative hassle of arbitration for players they want to keep, but then they have to go into a room with that player and an arbiter and present a PowerPoint about how much worse that player is than comparable players who might make just a few hundred thousand dollars more in salary. And then a week later they have to greet that player at spring training and resume a professional relationship as if everything is just swell.
This is as degrading as it sounds. In 2018, for example, Marcus Stroman went into arbitration having solidified himself as the Opening Day starter for the Toronto Blue Jays. Stroman and the Blue Jays were $400,000 apart on salary proposals, or roughly one quarter of one percent of Toronto's 2018 team payroll. The team won the hearing, but in the process deeply offended their best young pitcher. "The negative things that were said against me, by my own team," said Stroman in a since-deleted tweet, "will never leave my mind." Last week it was Corbin Burnes, insanely good ace pitcher of the Milwaukee Brewers, who had to sit and listen to his own team blame him for the team's disappointing 2022 season. Players whose negotiations make it all the way to a hearing are routinely walking out of their hearings with these insults tacked onto the injury of disappointing salary figures.
You might conclude from this that teams and owners love arbitration and players hate it. And, to be sure, there are some players who hate it. Shortstop Bo Bichette, who averted arbitration last week by agreeing to a new three-year contract with the Blue Jays, called arbitration "an incredibly flawed process, one that isn't very good for the game."
Cardinals reliever Ryan Helsley, who lost his arbitration case last week and came out of the hearing bruised by what he heard from the team, called for the process to be replaced with "some kind of algorithm" that would "avoid that confrontation" between teams and owners. Bichette and Helsley have in common the feeling that owners and players should be on friendly terms, and that arbitration's big flaw is that it disrupts a harmonious coexistence. "There's no reason to pit owners and executives against players," says Bichette. "As players and as owners we should be striving to have a good relationship between boss and employee."
Helsley's suggestion, in particular, is notable for matching exactly the proposal owners have made for replacing arbitration. A league spokesperson told Ken Rosenthal of The Athletic Monday that owners would naturally love to replace a process that forces them to openly justify, and face the consequences of, their efforts to tamp down players' salaries. "We continue to believe that the salary arbitration system creates unnecessary acrimony between Clubs and players and wastes an enormous amount of time and money," says the league. MLB blames the union for rejecting the "formulaic approach" that owners proposed for replacing arbitration during 2022 CBA negotiations.
As explained by Marc Normandin in 2019, the arbitration process is already hobbled by the collusion of owners. Something like 24 of MLB's 30 teams generally decline to bid on the game's biggest free agents, and in any given winter up to a third of MLB's teams decline even to bid anything serious on any free agents from the league's middle class. The intended effect—and owners are forming up an Economic Reform Committee precisely because this effect is being subverted by the two or three owners out there who are actually willing to spend money to win baseball games—is the suppressing of player salaries at every income tier. MLB uses a type of arbitration called "final offer arbitration," (FOA) meaning that the arbiter must choose between the two proposals, with no room for compromise. This type of arbitration is thought to discourage extreme-seeming proposals, because the arbiter cannot work out a salary figure that balances the two offers. And because arbitration figures are dependent at least in part on projected free-agent values, owners make their money coming and going: Service-time thresholds and manipulation keep good young players under team control long enough to drive down the salaries of mid-career non-superstars; and the depressed salaries of mid-career non-superstars keep the comps in the palatable range for players stuck in arbitration.
So the current model seems to slightly disadvantage players, in particular as teams become more ruthless in their dealings. More and more teams are opting for what is known as the "file-and-trial" approach to arbitration, where teams refuse to negotiate after they've filed their salary offer at the deadline. Teams simply have more resources to devote toward building a presentation for arbitration panels, and the league has been determined to weed out arbitrators who decide in favor of players. Some teams hire outside counsel expressly to handle arbitration cases; others assign whole groups of people "from within baseball operations" to "spend weeks of manpower on the process," "staying up until all hours of the night" preparing PowerPoint decks. Players, meanwhile, have their agents, and agents have whole rosters of clients. Owners prefer the asymmetry—they want the process to be painful and unfair, not just because it saves them a few hundred thousand dollars in salary every spring. In the long run a humiliating and seemingly broken process might ultimately convince enough players from baseball's middle class that there's no point in fighting the math of management.
But that doesn't mean that arbitration, as a model, is broken. It means mostly that owners want to break it, and while they're working at it they want it to seem that it is already broken. The problem with player salaries is ownership; the solution isn't to replace arbitration with ownership's own algorithm. The solution, short of getting rid of owners altogether, is probably some combination of lowering service-time thresholds, eliminating service-time manipulation, and implementing a strict salary floor to force cheapskate owners to spend money in free agency, fattening up the middle class so that comparable salary figures more accurately reflect what, say, Burnes and Stroman are actually worth. They could probably also overhaul the arbitration process itself, switching from FOA—which has been shown to motivate early settlements—to a model that allows the panel to choose from within a salary range, defined at its extremes by the competing proposals. Needless to say, these are all proposals that owners would spike.
It would be too strong to describe Bichette and Helsley as straight-up bootlickers, but it is pretty disheartening to hear those takes so soon after owners preemptively shut down the entire damn league for leverage in negotiating a new collective bargaining agreement, motivated in large part by a desire to maintain their stranglehold on the salaries and agency of valuable young players. Players make the game of baseball; owners are disgusting billionaire parasites, adding precisely nothing to the sport but suckered onto it in order to extract a share of its profits, and empowered by wealth to obscure financials, reorder priorities, and sink otherwise respectable outfits into the depths of humiliating non-competition in order to pursue their own prerogatives. The correct moral orientation would have players striving to thwart every single maneuver owners make to extract even a single penny from the sport, on principle. Arbitration may sting, but it sure beats the hell out of the only alternatives ownership would ever support.