The Arbitration Clown Show

I was exposed to many aspects of front office operations during my eight years with the Astros, but one thing I never touched was arbitration.

I consider it one of my greatest career achievements.

With hearings and rulings in the news, I’m reminded of how much everyone hates the damn thing. Teams hate it, players hate it, agents hate it, and maybe that’s actually proof it works in its own way, but the most frustrating aspect is that nobody really understands the logic behind the rulings themselves. In private conversations, some executives have suggested to me that one “might as well flip a coin.” An agent called the entire process “archaic.” Another team executive called it a “colossal waste of time.” Contacts from both sides relayed stories of being quite sure that they had won or lost after the hearing, only to end up with the opposite ruling from the three-person panel. Both sides have stories of waiting for results, dreading them when the last two cases have been in their side’s favor because they fear the next result being a simple make-up call.

The whole thing seems rather, well, arbitrary.

Adding to the frustration is the cost of the hearing itself, in terms of time, money, or both. Many teams utilize outside counsel to handle the hearing process, while others keep it in-house, assigning a group of people within baseball operations to spend weeks of manpower on the process. They travel to Arizona or Florida, staying up until all hours of the night preparing their PowerPoint deck and going on several late-night runs to Kinko’s. They do it because they have to, but does all that work have any effect on one’s chances of winning or losing the hearing? I never saw any direct evidence that it did.

Once while in a meeting, frustrated with a couple arbitration outcomes, I stated that we should cut our work on arbitration by 99% and simply show up with one slide that said “We think that [Player X] deserves [insert filing number here],” and have that be the entirety of the presentation. I was convinced that such a move would have zero impact on the club’s winning percentage. I called the whole process, as seen from my mixed status as both an outsider and an insider, a clown show.

So with the sudden ability to talk more to others in the industry about the subject, I decided to call some folks and ask them their impressions of the process, and I started with a tongue-in-cheek question inspired by those team days: If you were a team or agent and in lieu of a traditional presentation, you hired a circus clown to simply hold up your filing number, would it really have any effect on your chances of winning or losing the case?

“No,” one prominent agent answered immediately. “I think it would,” contradicted another player rep. “That’s ridiculous,” said a National League exec. “I don’t know. I think so?” laughed another NL official. “Are we assuming the clown is permitted to enter the hearing room?” asked another source in order to better prepare a more detailed answer.

By far, the biggest frustration with the process from both sides is the lack of transparency. When the ruling comes down, teams and agents are informed via email whether they won or lost. There is no reason given, no briefing. No supporting or dissenting opinions. Both sides are simply left in the dark as to what they did right or wrong.

“I’ve sat through a lot of these and I still have no idea what matters,” said one frustrated American League executive. “It’s this group of non-experts I’m appealing to and I have no idea what I’m supposed to put in front of them to improve my chances of winning.” An NL official agreed. “I don’t know what’s driving their decisions, and I don’t think anyone really does,” he said.

“It’s ridiculous,” added another NL exec. “Ignoring the clown aspect for now, I like the idea of just throwing the number down on both sides and letting the panel do, well, whatever it is they do. The case prep and arguments seem to have little bearing on the decision at the end of the day.”

The importance of that case prep and the arguments is the subject of considerable debate.

“I think you have to put together a professional and somewhat coherent presentation in order to get your odds within a certain range,” said one general manager. An AL executive added, “I’ve certainly been in cases where once the materials were on the table, you realize your chances have been helped or hurt.”

One agent argued that the case and materials matter, but what lies beyond that in terms of trial theory is more important. “There’s a human factor to this,” explained the player representative. “It’s a panel of three, and they’re three human beings. You can just say numbers and they tell the story and determine the outcome, but the human element serves as a tie-breaker. With any trial you have the factor. Do you like the defendant? Is this someone you can find empathy for? It’s not just black and white.”

While the clown might struggle to get one’s side into the necessary range, once you get there, most agree that it’s anyone’s game.

“Yes, once you get into the acceptable range, it’s feels completely arbitrary,” quipped one GM. “You can move the needle to 60/40, but that’s about it,” added another. An AL executive agreed with the 60/40 notion, adding, “It’s built into the name, the arbitrariness.”

But what gets you into that range? If not the presentation, is there something else? One agent said the real driving factor is the filing figure itself.

“Seventy-five percent of this comes down to the number you file,” said one agent. “The hearing is 25% at best.” In reaction to that statement, a frustrated AL official said, “Sure, 75/25 sounds right, but we just said we don’t know what matters, so who knows? What if that number is really 95 percent? Then the clown doesn’t effect the outcome.”

Most would argue that the system is bad, but that doesn’t mean it isn’t working as intended. “The structure is designed this way on purpose,” said a NL executive. “They want it like this so that there’s a disincentive to go to hearing.” One agent agreed. “Agents love control, and in arbitration, you give up that control, so you work hard to avoid it.”

The larger question is why are teams and agents the ones battling it out in the first place? The dollar figures teams file are largely driven by recommendations (industry term: recs) from MLB’s Labor Relations Department. The figures agents file are largely driven by recs provided by the union. If you were able to go to a hearing in person, on the team side you would see two or three team representatives surrounded by eight to 10 LRD members, while on the other side would be the agent, an assistant or two, often the player, and eight to 10 staff members from the union. Both sides are outnumbered by the generators of the recs, so why not let them battle it out, and decouple an emotional battle from the team/player relationship?

Teams and agents have largely become middlemen in the arbitration battle, with the two sides staring down the barrels at each other amidst tension created not by them, but by an LRD that puts salary savings and the precedent it sets over everything, as evidenced by the 2019 revelation of The Belt, which was awarded to the team that saves the most money in arbitration, and also the union itself, which continues to be more aggressive in negotiations after the debacle that was the 2016 CBA.

“A team can win the hearing, but lose the player,” said one agent. “You are trying to benefit the team, but you are hurting the team. You are saying negative things about your player, in front of the player and the whole thing can turn counterproductive.” One team executive took a more cynical view, pointing out that agents need arbitration, as it’s the only time between the draft and free agency when they can make money for their clients.

So the clown is out, but only probably, and both sides agree that they’d like to see a more rational, transparent system under the next CBA.

“I would have been on board with your clown idea until I actually went through a hearing for the first time. The panel takes it pretty seriously,” concluded one GM. “I don’t know,” said another GM initially resistant to the circus performer idea. “Maybe my thoughts about this would all change if the clown showed up in a suit and tie.”

Fine, put ‘em in suits, but from there, send in the clowns.