Arbitration Rules of Baseball

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Major League Baseball uses arbitrators to settle both salary disputes and disciplinary appeals. In each case, both players and teams are bound to specific procedures, and the arbitrators themselves have restrictions that can limit their options when ruling. Once the decision is made, the matter is considered to be settled.

The Basics

  • In arbitration, both sides in a disagreement agree to let an independent third party rule on the matter. Once an arbitration hearing takes place, the arbitrator’s decision in the matter is binding. In the collective bargaining agreement between the players and management, a list of acceptable arbitrators is agreed to by both parties, though either side can later insist that one be removed.

Salary Arbitration Basics

  • Players become eligible for salary arbitration after three years of service, and remain eligible until they reach six years of service. The exception are the so-called “super twos” -- the players with between two and three years of service who fall into the top 22 percent of total days of Major League Baseball service time. Teams sometimes keep players in the minor leagues at the start of the season in the hopes of avoiding that designation, since players salaries almost always rise in arbitration. In addition, players with more than six years of service whose contract has expired may be offered arbitration by their teams. If a player declines that offer, he becomes a free agent.

Making the Offer

  • Baseball teams aren’t quite free to offer any salary they choose when they take a player to arbitration. A team can’t offer a salary less than the player’s total compensation the previous year, and it also can’t offer less than 70 percent of what the player made two years ago. Even if a player has a terrible year, his salary can’t be cut as part of the arbitration process, though it can remain the same. On the other hand, an arbitrator makes his decision based on precedent and what other players of similar experience and ability are making. Therefore, a player with three years of experience who asks for $20 million is very unlikely to get it, as that would far exceed the record annual salary for a fourth-year player.

Rules for the Hearing

  • In salary arbitration, both the player and the team submit their salary figure to a three-person arbitration panel, which both sides agree is impartial and will make the final decision. Both player and team representatives testify at a hearing, in which they justify their numbers. Each gets one hour to make its case, and then 30 minutes afterwards for a rebuttal. The arbitrator then picks one side or the other. The arbitrator can’t pick a figure in the middle, but players and teams often settle for a salary at the midpoint of the two extremes prior to a hearing. Often, the act of filing for arbitration and exchanging salary figures proved to be the basics for a negotiated agreement.

Disciplinary Procedures

  • Arbitration also comes into play as part of the disciplinary process. Players who test positive for banned substances or who are disciplined by the commissioner using his “best interests of the game” clause can appeal, in which case the matter goes before an arbitration panel. This can take the form of a single arbitrator or a three-person panel, which hears both sides and makes the final decision. Players can appeal whether the discipline is justified at all, or seek to have the punishment imposed by the commissioner or team reduced.

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