Arbitration key to salary escalation

Arbitration key to salary escalation

There has been a debate among those in Major League Baseball as to what is more difficult to deal with from the viewpoint of management -- arbitration or free agency.

If this offseason has proven anything, in my view, it is that the arbitration process is a far greater escalator of salaries than free agency.

When the Washington Nationals reached an agreement Friday with third baseman Ryan Zimmerman on a $3.325 million contract for the 2009 season, the book was closed on this year's arbitration activity.

There were 111 players who filed for arbitration in mid-January, and when these cases were finalized -- with only three actually going to a hearing -- the 100-plus players had been rewarded with an average salary increase of 143 percent.

The case of Zimmerman was reflective of what took place to a large degree this year in that the team and the player settled at the midpoint of the numbers that had been filed -- the Nationals putting forth a figure of $2.75 million and the player and his agent posting a $3.9 million mark.

These figures represented a difference of $1.15 million -- a significant amount of dollars for either side to put at risk -- and thus there was a movement of $575,000 by both parties to arrive at the final salary figure.

Of the 111 players who had filed for arbitration in January, the number ultimately was cut to 46 by signings at the time players exchanged numbers with their clubs.

Once the numbers were exchanged, 12 of the 46 cases were settled at the midpoint.

One of the people who paid close attention to the arbitration process was Maury Brown of the "Biz of Baseball" Web site, and he observed, "The thing that stood out most for me was the number of midpoint deals. They were up from five last year. I see this as a case of players and management looking at the economy and saying, 'Let's meet in the middle and not have to go to a hearing.'"

Brown also pointed out that there were six multi-year deals that were made this year after the exchange of figures, compared to three last year.

The most lucrative multi-year deals this year went to Philadelphia first baseman Ryan Howard (three years, $54 million for an average of $18 million per season) and Baltimore outfielder Nick Markakis (six years, $66 million).

Even with their large investment, the Phillies still face the prospect of Howard being a free agent after three more seasons. Furthermore, his $18 million a season will be a mark that will be used by other players and agents in future arbitration cases.

The arbitration-generated salaries are in sharp contrast to what has happened in this year's free-agent market where a number of high-profile players have had to sign contracts far below their expectations and a number of other "name" players remain on the sidelines without contracts.

"The bar keeps going higher and higher in arbitration cases," said one veteran baseball executive. "Mediocrity is handsomely rewarded and excellence goes out of sight. In my judgment, arbitration killed baseball's salaries, not free agency."

Another executive who has done extensive work in the arbitration process observed, "We did a brutal job on settlements, absolutely horrible."

Despite the frustration that is coming from some of those in baseball's front offices, the arbitration process -- and even the fact that some players with just two-plus years of service are eligible -- is a result of the Collective Bargaining Agreement between the Major League Baseball Players Association and ownership.

When it was all said and done, the only three cases that went to arbitration hearings found the players winning two cases -- Shawn Hill of the Nationals and Dan Uggla of the Florida Marlins -- and the clubs winning one case: Tampa Bay catcher Dioner Navarro.

Navarro had filed a figure of $2.5 million, while his team countered at $2.1 and won.

What is often left out when these figures are reported is the player's salary for the previous year. For Navarro, his salary had been $432,500 in 2008.

When you lose your case and still receive a $1,667,500 raise, you know you are part of a rewarding salary structure.

Fred Claire was a member of the Los Angeles Dodgers from 1969-98, serving the team as executive vice-president and general manager. He is the author of "Fred Claire: My 30 Years in Dodger Blue." This story was not subject to the approval of Major League Baseball or its clubs.