Five Things We Learned from Arbitration Deadline Day
Last Friday was the deadline for all 155 arbitration-eligible players who have been tendered contracts to either agree to terms with their teams, or file desired salary figures ahead of an arbitration hearing. At the hearing, an arbitrator chooses either the figure submitted by the player or by the team; they cannot choose any other dollar amount. Those hearings will take place in the coming weeks. It might not be the most exciting day of the offseason, but it is a very necessary one as we move toward spring, and it certainly results in a high volume of transactions. By our count, 140 players reached agreements; you can see them all in our Offseason Tracker. Just click on the player to find out the amounts. Here’s what we learned from the contracts that did — and did not — get signed last Friday.
Some Clarity Emerged Surrounding Potential Trades
Trade rumors continue to circle Mookie Betts, Kris Bryant, and Francisco Lindor, and determining an official salary number for 2020 could be useful in setting up potential trades. Teams aren’t going to let a few million dollars stand in the way when negotiating the trade of a superstar, but knowing that Mookie Betts will make exactly $27 million (breaking Nolan Arenado’s final-year arbitration record of $26 million) provides some clarity. It also ensures that any team that trades for him would not have to go through the arbitration process with a player they just acquired. Francisco Lindor is still two years away from free agency and his $17.5 million salary is a bargain for Cleveland, just as it would be for any team looking to trade for him. Kris Bryant’s $18.6 million figure is an exception here. While we now know what he’ll be making in 2020, his grievance against the Cubs for service time manipulation has yet to be decided, and the chance that Bryant could be a free agent after 2020 instead of 2021 will likely continue to prevent meaningful negotiations.
File and Trial Produces Settlements and Unnecessary Arbitration
Several years ago, teams began to adopt an arbitration strategy where they would elect not to negotiate single-season salaries once arbitration figures had been exchanged. This strategy, called File and Trial, meant that any agreement needed to come before the arbitration deadline. Exchanging figures was no longer another step in an attempted settlement prior to a hearing, but instead, effectively ended negotiations. The strategy was designed to spur early settlements and extract lower figures from players, as they needed to ensure that they submitted a figure likely to result in an arbitrator siding with them in a hearing. The strategy has been successful, but its utility will come into question over the coming weeks.
Settlements mean fewer contentious arbitration hearings, but it also results in quite a few hearings that don’t really seem necessary. Of the 15 players to exchange arbitration numbers, five are within $500,000 of each other and another six are within $1 million. With continued negotiation, settlements should be easy, but instead players and teams will spend time and money arguing over relatively small amounts. Teams probably view the File and Trial strategy as being worth its use by gaining favorable settlements and lower exchanged figures, but the unnecessary hearings are a bad side-effect.
Contract Extensions Are Possible
A notable exception to the File and Trial strategy is teams coming to multi-year agreements with players. There are several candidates for a contract extension this season, either for a year or two of arbitration, or for something bigger that stretches into a player’s free agent seasons. José Berríos, who filed for $4.4 million to the Twins’ $4.025 million, is one player who might agree to a deal similar to the ones Luis Severino and Aaron Nola signed a year ago. Max Muncy ($4.675 million to $4 million) and Andrew Benintendi ($4.15 million to $3.4 million) are two hitters who might be interested in bigger guarantees to at least cover a few seasons of arbitration and get a little more security. The Phillies might be interested in locking up J.T. Realmuto long-term, keeping him away from free agency at the end of the season.
Peak Arbitrariness in Arbitration Comes From Relievers
Because traditional statistics like saves pay the best in arbitration, the salary numbers for relievers don’t always match up with real life production. A few years ago, Dellin Betances was one of the best relievers in all of baseball, but likely lost his hearing because he wasn’t a closer. Even teams and players have difficulty finding the right amount to pay relievers in arbitration. Of the 15 hearings expected this year, five feature relievers, including two of the six featuring the largest salary differentials. Josh Hader has asked for $6.4 million while the Brewers submitted $4.1 million. Hader’s case will be similar to Betances’, though he will at least have one season as full-time closer. Héctor Neris finds himself on the opposite end of things, having compiled a good number of saves as a slightly above-average reliever. He’s requested $5.2 million in arbitration after making $1.8 million last year, while the Phillies have countered with $4.25 million. Shane Greene, Archie Bradley, and Pedro Báez also exchanged figures.
The Most Interesting Cases Involve Soon-To-Be Free Agents
Two of the biggest differentials between exchanged numbers came from George Springer ($22.5 million compared to $17.5 million) and J.T. Realmuto ($12.4 million to $10 million). Springer was held down in the minors for a couple weeks the year before Kris Bryant was; that service time manipulation means that Springer is a free agent after this season instead of last one. It also means that Springer went through the arbitration process four times. A two-year deal in 2018 meant no arbitration a year ago, but in his final year, Springer and his representatives are using his 39 homers and his status as a center fielder to try to top $20 million ahead of free agency. Meanwhile, Realmuto’s status as the game’s best catcher is worth way more than even the $12.4 million he’s asking for. But it is difficult to accumulate big offensive numbers as a backstop, and it can be difficult to substantiate value defensively. Joc Pederson and the Dodgers ($9.5 million to $7.75 million) were also fairly far apart in Pederson’s walk year.
Friday wasn’t the most momentous day on the offseason calendar, but the lead up to it occupies a considerable amount of time and effort for front offices and players as they prepare. The offseason has been filled with free agent signings, but very few trades. With Friday’s deadline finally out of the way, that could change in the coming weeks.
Craig Edwards can be found on twitter @craigjedwards.
When will the Bryant service time situation be resolved?
Approximately never
I’ve said this before but it seems like arbitration expansion is the one area where players ought to be pushing very hard in the next CBA. Instead of 2.1 years of service time, players should be fighting for 1.1, eventually getting as close to zero as they can (they obviously can’t get to zero without tearing up the whole CBA).
Also, I don’t necessarily see the benefit to the players, but it does seem like a lot of the arbitration work can be rationalized so there’s a common framework for what gets rewarded and what doesn’t, which would also avoid messy arbitration battles. That might actually be something the teams could want, although I’d doubt they’d push that hard for it.
I know it doesn’t happen very often, but I wonder whether the non-guaranteed nature of most arbitration contracts doesn’t come in to the thinking in deciding what bid and ask offers. We’ve seen some teams non-tender fairly good players because they thought the salaries in arbitration would be too high. Could this also apply to players on arbitration awards–at least some fear that if they win, they could be cut loose?
Not like I’ve kept track or paid super close attention, but has any player ever been released after their arbitration hearing?
I think even File and Trial, can avoid many possibly contentious hearings by both sides trying to come close via:
(The numbers below should actually probably be % based but for a rough idea)
1. If Player and Team are w/n $500K, the player gets their bid.
2. If Player and Team are $501K-$1M, the contract is for the halfway point btwn bids.
1ex) Pedro Baez $4M LAD $3.5M Pedro is rewarded a $4M 1 year contract
2ex) Max Muncy $4.675M LAD $4M Max is rewarded a $4.3375M 1 year contract
If going solely of actual dollar figures and not % based:
Josh Hader, Joc Pederson, J.T. Realmuto, George Springer
These are the only 4 that exceed $1mil difference.
However, if you use, say, 12.5% and 25% (from Player perspective), for any contract above, say $5m:
Josh Hader $6.4 MIL $4.1M This is a HUGE diff in salary and %, no way to avoid hearing.
Joc Pederson $9.5M LAD $7.75M Avoid arbitration, Joc is rewarded a $8.625M 1 year salary
J.T. Realmuto $12.4M PHI $10M Avoid arbitration, J.T. is rewarded a $11.2M 1 year salary
George Springer $22.5M HOU $17.5M Avoid Arbitration George is rewarded a $20M 1 year salary.
Thus, you can avoid most hearings, both financial and emotional) as long as Players and Teams are close to each other in evaluating what they Player should be paid. The smallest differences going 25% to the Player are well worth it, and in every team’s budget. The close but not really close, going 50-50 are still within every Team’s budget, and while the Player is less happy financially, the most they lost was what they earned as 1st year player. As to the %’s for over $5M, both the 12.5% and 25% are still not too much for any Team to have to find room in the Payroll for, since they have to pay for the bulk of it even if they win normally. As far as the Player, for the 25% diff cases, they should be able to not really notice that in career earnings when all’s said and done. Or at the very least, they should be able sign one more year at the end of their career to make that difference back.
The only cases that can’t be resolved w/o an arbitrator are where the differences are so huge that both sides can’t see eye to eye on the evaluation of the right terms. One might be tempted to use %’s no matter the value aka lower than $5M as well. I’ll leave that analysis for others, esp the reps of both sides for future CBA negotiations. One may even want to tweak the actual %’s. One may even want to have another tier, aka 75/25 player/team. One may even want to get rid of arbitration all together by including 25/75 and 0/100 player/team. I suspect as the latter would not be financially beneficial to the Players, it would only be included for other concessions from the Teams.
I don’t hate the idea – I think it seems fair, but I tend to think both sides (players *and* owners) will view the auto-compromise” as a loss.
… player submits $500M, happily accepting halfway between that and any number the team comes up with.
OK, yeah, I think there needs to be a tweak, I was under the false impression that both sides would be at least somewhat realistic. I.E. Since the max avg yearly contract for anyone is short of $40M, that no Player would ask for much more than that.
You can nitpick it to death, but this post was a drawing board, not meant to plug all the holes, just the very solid general idea.
The tweaks, for this hole:
1) The player can not ask for more than any MLB player was ever given on a 1 year contract, ever, tied to inflation. This would still allow Betts to get more than Arenado. This would not let Betts get more than Trout. This sets the ceiling on max reward. This is probably not needed if 2 is implemented.
2) To limit the risk for both sides beyond the midpoint btwn highest possible (say $40M Player unrealistically ask) and lowest possible (league min Team unrealistically offer), if the difference is more than 25%, of each other AND the avg of the Top Entities that guesstimate that the CBA agrees upon, then the contract is worth the avg of whatever the CBA agrees are the Top Entities that guess what the contract of the players will be. I don’t know which side would prefer to be unrealistic to get this number, but I can’t imagine that the difference btwn a realistic bid and win vs realistic bid and loss vs this guesstimate would be too much of a difference to upset the apple cart. You could even go further to try and get both sides to be close and since guesstimates are public avl, and say that if one side is w/i 25% of the guesstimate and the other is not, the one who is w/i 25% gets their contract fully rewarded. Hopefully, I’ve thought of the holes that make it so all parties are realistic.
Rather than go 25% from the Player, when Player and Team are more than $1M apart go with Guesstimate vs bidder:
Scenario 1: Player Realistic/ Team Unrealistic
Player submits $18.75M
Team submits $9M
Guesstimate says $15M
Player is w/i 25% (at 25%)
Team lowballed
Player gets a 1 year contract worth $18.75M, but only $3.75M more than if they were “100% realistic”. The Team spends $3.75M as a penalty for low balling, but it is still big enough for the Player to be realistic to get the reward. The diff can be bigger, but not too much, and it can be smaller, do to what the guesstimate says.
Scenario 2: Player Unrealistic/ Team Realistic
Player submits $21M
Team Submits $11.25M
Guesstimate says $15MIL
Player gets a 1 year contract worth $11.75M, but only $3.25M less than if they were “$100% realistic”. The Team saves $3.25M by being on the edge of being realistic. The Player still should be able to make that up in career earnings, or at least sign one more year at the end.
Scenario 3: Both sides are Unrealistic
Player submits $21M
Team Submits $9M
Guesstimate says $15M
Player gets a 1 year contract for the Guesstimate of $15M. Both sides lose $6M from what they want, not nothing, but still, they were being unrealistic, they shouldn’t have submitted those. If both sides are unrealistic but don’t tie, then the closer one gets the 75/25. Say Player says $21M and Team says $7M, Player is closer and thus 75% of $14M difference makes the salary $17.5M. A bigger penalty for sure by the Team for being unrealistic, and a small reward for the Player to while unrealistic to at least be more realistic vs Team.
Scenario 4: Both sides are Realistic
Player submits $20M
Team Submits $11.25M
Guesstimate says $15M
Both sides are w/n 25%. Now, the CBA could say either Guesstimate is the reward or you could reward the side closer to the guesstimate by giving 75% to that side.
Again, nitpick to death, maybe I didn’t proper math, maybe I didn’t find all holes.
The general idea is what I want out there, the lawyers for both sides can and will nitpick it and negotiate the finer points, if they were to go forward with the general premise.
its borderline criminal the way they get away with paying pennies on the dollar with they are worth. Why do you think these players hold out for months when they become a FA. Because they are trying to recuperate what they lost by the greedy owners and messed up system in place where they were playing for 25% of market value.
The seniority system is somewhat unfair, but it’s also necessary to maintain competitive balance. How is a small market team ever supposed to be able to field a winning team without being able to rely on developing cheap young stars (including signing some to team friendly long-term extensions) before they can hit free agency?
Besides, arbitration provides a lot more than just 25% of market value. The general rule of thumb is that Year One is 40%, Year Two is 60%, and Year 3 is 80%. That’s why we now have the top end guys earning $20M+ in their final year of arbitration eligibility.