Love Me, Love Me Not: Understanding Baseball’s Salary Arbitration

Once the World Series concludes, each team has fans and front office personnel that wonder what the upcoming off-season will bring for their club.

The thoughts of adding Jason Bay’s bat or John Lackey’s arm will dance in their heads like a child waiting for toys on Christmas Eve.

However, many fans run into the same problem when dreaming—figuring out how much money teams will have after clubs go through arbitration.

So, uh, what is arbitration?

The average baseball players qualifies for arbitration when their contract goes up and they have had a total of 3 years, and less than 6 years, of big league service time. Each year of service time comprises 172 days. If a player has over 6 years, they are eligible for free agency.

There’s also something called a Super 2, where after a player is also eligible if he has played only two years and his stats are in the top 17 percent of all players, according to MLB-sponsored rankings.

There are some big-name players that will be eligible for arbitration this year—the New York Yankees’ Hideki Matsui, the St. Louis Cardinals’ Matt Holliday, and the Atlanta Braves’ Adam LaRoche (by way of the Boston Red Sox).

To describe how the process works, we’ll use shortstop Erick Aybar of the Los Angeles Angels.

Aybar made $460,000 this past year. Now that he has three years in the league, he and his agent will decide how much he is worth, as will the Angels.

The Angels cannot make an offer of anything less than 80% of Aybar’s salary this year, and no less than 70% of his salary from 2008.

If the Angels simply don’t want Aybar anymore, they could do something called non-tendering a player which means they don’t feel he is worth this process and are willing for him to leave.

If they make this decision, Aybar is no longer property of the Angels and becomes a free agent.

Since Aybar has taken over as the full-time shortstop for the Angels, he won’t be non-tendered. What this does mean, though, is that the Angels must decide what they believe is a fair contract—and so will Aybar and his agent.

The two sides will be able to negotiate all the way up to February 21, 2010. However, by January 15th there must be an agreement of a contract, or else they both file for arbitration.

At an arbitration hearing there is a panel of arbitrators, or in other words, a non-biased group. They will decide if it’s the team’s offer or the player’s offer that is appropriate.

Whichever side wins, the player will then be given a guaranteed one-year contract for the amount agreed upon.

Confused enough? That’s arbitration.