How Does Baseball Arbitration Work?

In Major League Baseball, arbitration is used to settle off-season contract disputes between teams and certain players. To be eligible for arbitration, a baseball player must meet specific service time requirements. If arbitration is chosen as the method of resolution, each party is given an opportunity to present their salary demands and argue the merits of their case.

How does baseball arbitration work?: Becoming eligible

There are a number of ways a player can become eligible for arbitration. The first group of arbitration-eligible baseball players are those with between three and six years of Major League Baseball service. The top 17% of players who have between two and three years of service are designated "Super 2" arbitration-eligible players. A Super 2 must have served at least 86 days during the prior year. In most years, the Super 2 cutoff point falls at the 128 days of service mark, but it has been as high as 140 days in certain seasons. Any player who has elected to file for free agency may also be eligible for arbitration if their prior team offers it as a resolution method.

How does baseball arbitration work?: Filing for arbitration

Every Major League Baseball team has until December 12th to offer a new contract to players whose last contract has just expired in the previous season. If the player elects to file for free agency, his team only has until December 1st to offer arbitration. If he chooses to accept the arbitration offer prior to December 7th, he returns to the team's active roster and the parties can choose to continue negotiating or go directly to the arbitration hearing. If a free agent turns down the offer for arbitration, the negotiations will continue between the team and player.

How does baseball arbitration work?: The arbitration hearing

Once baseball arbitration has been chosen as the method of resolving a contract dispute, the team and the player must each send in a desired salary figure to the arbitration panel. The actual arbitration hearings take place between February 1st and 20th. While in front of the arbitration panel, the player and team are each given an hour to present their argument. The other party is given a half-hour to rebut his opponent's argument. A team lawyer usually represents the club in the arbitration hearing while the players generally choose their agents as representatives.

How does baseball arbitration work?: The decision

The arbitration panel must then decide which one of the two salary figures is more reasonable. This is not like a mediation hearing where a compromise in the middle can be reached. The player is then offered a one-year contract at the designated salary level. This one year is not guaranteed and the player is only entitled to a limited amount of termination pay if he is cut in the early part of the next baseball season.