The business of baseball: MLB Salary Arbitration 101 (part II)
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In our second installment of Appeal Play, a column providing insight on business and legal matters in the world of professional baseball, let’s continue the discussion of MLB Salary Arbitration 101. Part two introduces form of submission, selection of the arbitration panel, the hearing, criteria reviewed and the final decision.
Let’s begin with a quick recap. In part one of MLB Salary Arbitration 101, we discussed eligibility, the reasoning behind filing and proper notice of submission. As previously mentioned, once an eligible player submits to arbitration, the MLB Players Association and MLB Labor Relations Department (LRD) exchange salary figures on behalf of the player and the club respectively.
What is the proper form of submission to arbitration?
Prior to the arbitration hearing, the player and the club each exchange one salary figure for the upcoming major league season. Once the figures have been exchanged, both parties submit the respective figures to the arbitration panel. Essentially, there are two figures considered by the arbitration panel. For example, this year third baseman Chase Headley filed for arbitration and submitted a salary figure of $10.3 million, while his club, the San Diego Padres, submitted a $7.075 million salary figure.
The panel must choose either the player’s figure or the club’s figure to be the player’s compensation for the upcoming season. There is no middle ground. These figures do not necessarily have to be numbers discussed in prior negotiations between the player and the club. If Headley and the Padres do not agree on contract terms prior to the hearing, the panel will select either $10.3 million or $7.075 million as Headley’s compensation for the 2013 major league season.
At the hearing, the player and the club present the panel with a signed Uniform Player’s Contract (contract). All sections of the contract must be complete, except Paragraph 2 for Payment. The delivery of the signed contract to the panel effectively means the player is signed. By submitting to arbitration, the player agrees to abide by the terms and conditions in the contract and submits the issue of salary to the panel and play for the salary awarded by the panel.
How is the arbitration panel selected?
A panel of three arbitrators decides each major league arbitration case. The PA and LRD annually select arbitrators to decide MLB arbitration cases. If the PA and LRD are unable to agree, the arbitrators are selected from a list provided by the American Arbitration Association. The list is pared down to three by the PA and LRD, who then designate one arbitrator to serve as the panel chair. The hearing location is agreed to by the parties, “with preference being given to either Los Angeles, Tampa/Orlando, or Phoenix,” according to the MLB Collective Bargaining Agreement.
How is the arbitration hearing conducted?
Arbitration hearings are private and confidential. Each party is afforded one hour to make an initial presentation of arguments, then half an hour for rebuttal and summation, with the player’s representative presenting first. Despite the presenting order, neither party carries the burden of proof. As a side note, the panel, upon a showing of “substantial cause” or legitimate basis, may postpone the commencement of the hearing. The parties divide the hearing costs equally. The parties independently incur costs for representation and witnesses.
What criteria will the panel review?
The criteria reviewed by the panel, according to the Collective Bargaining Agreement (CBA) will be “the quality of the player’s contribution to his club during the past season.” The panel considers the following factors when evaluating the quality of the player’s contribution:
- Overall performance — statistical analysis;
- Length and consistency of career;
- Record of past compensation;
- Existence of any physical or mental deficiencies;
- Leadership qualities and public attraction;
- Recent performance of the club — league standing and attendance;
- *Comparative baseball salaries.
- *Evidence of special accomplishment
Either party may introduce any evidence relevant to building on the criteria mentioned above. While leadership qualities and clubhouse demeanor are quite important, the panel typically focuses on measurable qualities, such as statistics, consistency and past compensation when evaluating a player’s contribution. The panel assigns weight to the evidence presented, as it deems appropriate.
I’m sure you noticed the asterisks (*) next to comparative baseball salaries and evidence of special accomplishment. Each of these factors requires further explanation:
Comparative Baseball Salaries: The panel is provided with a confidential document tabulating the salaries of all major league players from the prior season. The player salary figures are categorized by years of major league service. The panel considers not merely the salary of a single player or group of players, but the salaries of all comparable players.
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