What is Baseball Arbitration?

Last updated on February 1st, 2023 at 08:41 pm

Baseball arbitration is a three-way deal. To start, players want to make as much money as they can while teams want to pay them as little. When the two sides can’t agree on a term, a third party gets involved, which is the arbitrator.

So, what is an example of baseball arbitration? Why is it called baseball arbitration? Are there any official rules to know?

Here is the complete breakdown to what baseball arbitration is.

Table of Contents

What is an Example of Baseball Arbitration?

An MLB player who is not yet eligible for free agency. After a certain point, a player is set to call his own shots—as long as the player can command the salary on the open market. However, not all players are yet eligible for free agency. According to SportingNews.com, MLB salary arbitration kicks in for salary disputes with players of at least three years in the big leagues, but aren’t eligible to enter free agency quite yet.

A contract dispute. If a player and a team agree on a fair salary, then that’s the end of the story. No arbitration required. But to get players and their proper baseball salaries back in time for spring training, MLB does something it doesn’t do for ordinary free agents. The MLB team steps in to help settle the contract dispute between the two sides. Without that, players might not be ready for the upcoming season, or might not have a fair offer on the table, commensurate with their performance.

When the player meets the requirements for eligibility and they can’t agree on the team as to what a fair contract might be, the process might enter arbitration. From there, independent third-parties will consider what is a fair offer. Typically speaking, a third party uses players with similar statistical performances to gauge a fair salary.

Why is it Called Baseball Arbitration?

To answer that, let’s go to the dictionary definition for arbitration itself: the hearing and determining of a dispute or the settling of differences between parties by a person or persons chosen or agreed to by them. That’s exactly what we’re talking about here. The MLB essentially steps in with an independent arbitrator to decide what would be fair for an arbitration eligible player.

However, we’ve used the word “arbitration” or “arbitrator” as if there were only one person settling disputes. Typically, the case is actually before an arbitration panel of three people. These people tend to be labor lawyers, looking to judge a fair case without any prior interested investment in the outcome. They also take into account different rules, such as the collective bargaining agreement (CBA), the labor rules regarding baseball players, and what the players association has to say on the matter. From there, arbitrators choose a salary figure, typically one a one-year contract, that make sense for both parties.

This period is called “arbitration” because it refers to the entire process of settling contract disputes before Spring training.

What is a Baseball Arbitration Provision?

This is a provision within the CBA that helps guarantee certain eligible players the right to an arbitration procedure, if they feel they need it. Whether you’re the New York Yankees or the Kansas City Royals, every team will have to submit to this process if there is a problem with a player who qualifies for arbitration.

That qualification, as mentioned, can depend on years of service time, also known as years of major league service. In some cases, a player may be a “Super Two” player. This refers to a player who has more than two but fewer than three years of total major league service time, but still ranks as a top player in terms of the arbitration-eligible players for that year. This may result in the player having an extra year of arbitration available to them.

Other Rules of Baseball Arbitration

Past compensation: typically, arbitration does not substantially raise the salary of an MLB player, but it doesn’t lower it significantly either, based on past compensation.
Salary arbitration process: another term for baseball arbitration, as the process settles the appropriate salary for a player.
Binding arbitration: this is another term for the type of arbitration in baseball, when both parties must settle for the money settled. This refers to how each party chooses a number they think is fair, and the arbitration panel selects from these two numbers—and those two numbers alone.

Baseball arbitration can be a major story in the offseason. Everything from the rest of the year—from night baseball games to salary offers the next go-around—may hinge on how salary arbitration played out. Overall, it’s one of the unique quirks of baseball that makes each off-season that much more interesting.

Conclusion: What is Baseball Arbitration?

The Baseball Arbitration Process adds another unique layer to the complexity of baseball. While most fans might hear about an arbitration for a player, they may not know the entire process.

In summary, baseball arbitration is when players are looking to earn more money for which they believe they are worth. Two, a team will look for ways to reduce how much they owe a player. And three, an arbitrator may join the process to help settle the dispute between the two parties.