Salary Arbitration Mumbo Jumbo

While you weren’t looking, the salary arbitration season has shifted into its final phase. From the 1st (yesterday) until Feb 18, hearings commence in the process that has been in place since 1974. By then, the final 18 players that have yet to reach agreements will have done so through negotiations with their clubs, or through the hearing process where a player’s asking salary and the club’s offering salary are picked – there is no middle ground (see this salary arbitration figure tracker for details). For the uninitiated, here’s how the process works:

A player with three or more years of service, but less than six years, may file for salary arbitration. Free agents can also be offered salary arbitration, which they can accept, or decline and opt for free agency. Of the 34 free agents in Major League Baseball that were offered salary arbitration this year, just two players, then Texas Ranger and now Toronto Blue Jay RHP Frank Francisco and Toronto Blue Jays reliever Jason Frasor accepted the offers from their clubs (here’s a listing of every free agent that accepted salary arbitration and exchanged figures over the last 20 years).

In addition, a player can be classified as a “Super Two” and be eligible for arbitration with less than three years of service. This may read like a stereo manual, but here’s how the Super 2 is defined: A player with at least two but less than three years of Major League service shall be eligible for salary arbitration if he has accumulated at least 86 days of service during the immediately preceding season and he ranks in the top 17 percent in total service in the class of Players who have at least two but less than three years of Major League service, however accumulated, but with at least 86 days of service accumulated during the immediately preceding season.

As an educated lot, you’re sure to understand how salary arbitration can impact a club’s bottom line, how free agency money flows, and what players might, or might not, get multi-year deals.

The system is designed to pull players and clubs into compromise, and this year is no different. To put this in context, on Feb 1 last year, when salary arbitration hearings kicked off, there were 18 players left to reach deals. This year, the number is identical. And as mentioned, players can continue to negotiate up till the time their hearing commences, some right outside the hearing room doors. Last year, there were a total of 8 hearings, with the owners winning 5 and the players taking 3 cases (see the salary arb scorecard). Only one club has said that they will absolutely be going to hearing with one of their players. The Astros have said they are going to a hearing with Hunter Pence, but even then, it’s possible that the club might reach a deal. We’ll see.

Here’s some context within the process to date: There were 117 potential salary arbitration eligible players in the process. To date, with the 18 players still outstanding, they see an average 2011 salary of $3,231,745, an increase of 81 percent from the total those same players earned last season. But that number is likely to grow; plus, when you think about it, in most multi-year deals, the initial year of an agreement sees lower pay than at the end, which is called back loading. There’s also Bautista and Hamilton as players that could pull in significant deals before we get to hearing.

For the players that have exchanged figures, their salary increase has been significantly more. Those 16 players that have now reached deals in advance of hearing are seeing an average raise of 222% from what they made last year.

Players that enter salary arbitration for the first time account for the majority of these eye-popping salary increases. If you think about it, it makes sense: for 3 years, the player has been under club control. Here’s this year’s poster child for the massive increases.

The 2009 NL MVP, Reds 1B Joey Votto made $525,000 last season. As part of his 3-year, $38 million deal brokered on January 16, the first-time salary arb player with 3.027 of Major League Service Time, will see a 2011 salary of $5.5 million, or an increase of 947.62% from last year’s salary.

Votto’s is far and away the highest increase for a first time arb player this year, but others include Jair Jurrjens (577.08%), Martin Prado (604.55%), Adam Jones (598.92%), Johnny Cueto (664.04%), and Shin-Soo Choo (762.07%), to name a few.

There were four Super 2s this year, and all have reached 1-year deals in advance of salary arbitration. Of the four, three of them were pitchers. Jim Johnson of the Orioles ($975K, up 121.59% from 2010), Chris Perez of the Indians ($2.225 million, up 425.01% from ’10), Felipe Paulino ($790K, up 90.36% from ‘10), and Ian Stewart ($2,228,750, up 446.26% from ’10) of the Rockies, and Armando Galarraga, who reached a $2.3 million deal (up 475% from last season) with the Tigers before being traded to the D-backs for Kevin Eichhorn and Ryan Robowski.

Along the way there has been one record-setting contract. Closer Jonathan Papelbon reached a 1-year, $12 million contract that avoided arbitration with the Red Sox. It is the largest 1-year deal for a salary given a salary arb relief pitcher that was not a FA (Roger Clemens $18 million deal with the Astros in 2005 is the current record), and the second-highest 1-year deal for all pitchers behind only Carlos Zambrano’s $12.4 million deal with the Cubs in 2007.

All this is just a small fraction of the story. Look for Paul Swydan and I to slice and dice further in upcoming articles. Oh, and by the way… Drop this one on your friends: To date, total contract dollars, which include 1-year, and multi-year contract varieties, total $331,373,750. And just think, there’s still Josh Hamilton, Jose Bautista, Rickie Weeks, Hunter Pence……