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.