Salary Arbitration

Sportslaw Jargon: Salary Arbitration

Salary Arbitration is a unique feature of major league baseball. It applies to salary disputes between a team and a player which is submitted to a neutral arbitrator (to be increased to a panel of three under the present agreement). Unlike grievance arbitration (click here), salary arbitration is limited to issues of compensation. A salary arbitration system grants the arbitrator the authority to weigh evidence of a player's performance, ability and leadership to render a final decision.

A player or a club is allowed to submit a dispute over a player's salary to binding arbitration after a certain number of years in service have been accumulated by the player (usually between three and six years). The player's statistics are used as the key arbitration tool. Statistics covering productivity, longevity, potential and comparable worth as compared to like-situated players are used. The arbitrator must use these statistics to decide.

The arbitrator has the authority to choose between two amounts: one submitted by the team, the other by the player. There is no room for compromise. Some have criticized this system as bias towards the player, but in recent years, the teams have been quite successful. In the first six arbitration rulings last winter, the owners won five of them (the only loss was the Yankees' Derek Jeter's salary claim).

In the past, stories of the lack of sophistication of arbitrators abounded. One agent told the story that after an arbitration hearing, the arbitrator congratulated both sides. Then the arbitrator turned to the agent and asked what on-base percentage was.