Restricted Free Agency, Anyone?

You’re probably aware of the Dellin Betances arbitration case and the interesting comments Yankees president Randy Levine made afterward. FanGraphs’ Nicolas Stellini wrote about the situation over the weekend.

No player or team likes going through the arbitration. Both parties try to avoid the process if at all possible, as it can create animosity between the camps.

And if you’re a player, you’re perhaps increasingly motivated to avoid allowing a panel of arbitrators determine your salary. Historically, teams beat players in the majority of arbitration cases, according to data compiled by Maury Brown:

Moreover, Brown reported this week that the advantage in favor of the owners has widened in recent years. The process increasingly seems to favor clubs — in part, perhaps, because arbitrators remain behind the times in how they evaluate performance.

Consider this David Laurila Baseball Prospectus Q&A from 2012 with long-time arbitrator Roger Abrams. Abrams suggests that the information presented to arbitrators is typically “not quite sabermetrics” and that arbitrators are not “baseball specialists.”

DL: You used the phrase “not quite sabermetrics,” but can it be assumed that more advanced statistics are presented today than in years past?

RA: It’s a mixed bag. What you don’t want to do is confuse the arbitrators, and some of the sabermetric stuff can be rather confusing. On the other hand, arbitrators can understand the importance of a strikeout-to-walk ratio. They can understand why ERA is a critical stat as opposed to wins and losses, which are meaningless–the pitcher doesn’t win or lose the game; the club wins or loses the game. The pitcher is responsible for earned runs. That is very simple-minded sabermetrics, and that is helpful in salary arbitration. Of course, it’s all glossied up in the submissions, which, frankly, you don’t have enough time to read within 24 hours, let alone digest.

Now, maybe arbitrators are slowly changing how they evaluate performance, but, at best, it’s a slow process that’s probably not caught up to better ways of understanding and measuring player value.

At a time when owners are making gains in percentage of revenue share, the arbitration process — especially in early arbitration years — is one more force working against players.

So does that mean everybody would be OK just eliminating the arbitration system? I’m guessing the answer is “No,” but I do think the players union would benefit from replacing the current system with something that exists in other major pro sports — namely, restricted free agency.

Interestingly enough, baseball owners once had a similar notion. In the winter of 1994, owners briefly ended the arbitration system and replaced it with restricted free agency. Consider this, written by Mr. Murray Chass for the New York Times on November 27 of that same year:

When the owners, as expected, declare an impasse and implement their salary cap proposal, they will also eliminate salary arbitration, establish a salary scale for players in their first four years in the major leagues and create a new class of free agents — players who have been in the majors at least four years but fewer than six… Clubs will have the right of first refusal, meaning a club can retain a player by matching an offer from another club. With most of the best new free agents, offers from other clubs most likely only will drive up the price for their own clubs because their clubs will do what’s necessary to keep them.

Imagine an alternate universe where Carlos Correa, Bryce Harper, Francisco Lindor, Noah Syndergaard, and Mike Trout — and all young stars — become free agents after four seasons of service time. There would be much less incentive for stars to sign club-friendly deals that buy out not only arbitration years and also some free-agency years, too. Players would hit the market, albeit a restricted one, much sooner, earning their true value earlier in careers.

Ironically, the players might have been better agreeing to the owner’s deal in 1994, assuming the cap was accompanied by a floor to ensure that revenues were evenly split. Sure, in the aftermath of the strike, players ended up protecting the earning potential of the top 1% of their constituency, but over the last two decades owners have gradually increased their share of revenues.

Outside of changes to the qualifying offer, not much seemed to help players in the new CBA. The new agreement did little address the owners’ increasing share of revenues or baseball’s shrinking middle class, a trend on which I reported last month.

Players, perhaps, are eventually going to have to fight for significant changes to increase their share of revenue. I’m guessing the majority of owners would no longer be in favor of swapping arbitration for a restricted version of free agency. While changing or eliminating arbitration — an entrenched and owner-favorable mechanism — seems quite difficult, it’s one of a number of elements working against players’ share of revenues today.

A Cleveland native, FanGraphs writer Travis Sawchik is the author of the New York Times bestselling book, Big Data Baseball. He also contributes to The Athletic Cleveland, and has written for the Pittsburgh Tribune-Review, among other outlets. Follow him on Twitter @Travis_Sawchik.

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7 years ago

This would greatly benefit the players, but not baseball as a whole. I couldn’t even begin to fathom the deals that the Trouts and Harpers of the world could get at age 23-24 from teams like the Dodgers and Yankees. There’s no way small market teams would be able to keep their own players past 4 years, unless there was a hard salary cap to restrict these mega deals.

7 years ago
Reply to  bampton

Or at least a great compensation system for them if they lose.

It would perhaps makes sense to have a scaled compensation system starting from the bottom market teams up. Similar to what the new system has but would probably need a little bit more.

Say the X smallest market teams that lose a player to un/restricted free agency would get 2-3 draft picks (not taking from anyone else).

7 years ago
Reply to  Shauncore

In addition to draft picks, a sort of posting tax would be useful too.

For instance, a 50% tax on player salary up to $100 million would go straight from the new team to the old team.

This would work mostly for lower-ish contract deals. Say Starling Marte never signs his low-value deal with the Pirates, and the Dodgers offer him 5 and 120 guaranteed after this season (life changing, mostly market-rate money that still offers him a chance to get paid again at 33).

The Pirates can either match and get him at what’s still probably a low salary for his production (admittedly out of their budget) or get the last two years of his service time bought out for $60 mil and picks. That’s a 5-year, $180mil outlay for the Dodgers, but if Marte is worth 20-25 wins over that period (not an unreasonable projection) then they’re still not making that much of an overpay.

For the Pirates, what’s more valuable, two years of prime Starling Marte, or $60mil up front with draft picks that are probably worth $25-30mil? Probably Marte, but the value is at least close.

For mega-deals that Trout or Harper would elicit, the rules might have to be different. Or maybe not. Maybe a $250mil two-year tax on a $500mil Mike Trout deal is a fair price you’d have to pay to bid on him in a relatively closed market.

This is an interesting concept.

7 years ago
Reply to  jonvanderlugt

I like this, but I’d like to see the tax scale with years of eligibility, similar to current arb. So like: 75% first year, 50% second, 25% third.

It establishes a market value and clears up a lot of uncertainty, while still incentivizing teams to develop successful starters. If you kill the team control aspects of the league currently, you’ll see cut budgets for development. The flipside to long team control is a deep, expensive development system so teams can control valuable assets.

7 years ago
Reply to  bampton

There’s no such thing as a small market team and no financial parity problem that can’t be solved with some form of revenue sharing.

Conrad Parrishmember
7 years ago
Reply to  bampton

Get that capitalist crap out of here

7 years ago
Reply to  bampton

What would happen is teams would try and sign players to MLB deals while in the minors and fast track them to the majors. Insurance would cover the risk. There would be more free agents so the increase in supply would limit salaries, and teams would reduce what they pay for players past their peak. MLB would still pay 40-50% of their revenue in payroll but it gets distributed more evenly. The game probably gets younger