The Major League Baseball Arbitration Process

Tuesday evening was the deadline for Major League Baseball teams to exchange arbitration numbers with their respective players.  What does this all mean?

When a player makes it to the Major Leagues, their service time clock starts ticking.  In years 1-3 of their service, major league teams control how much they will pay a player.  The league minimum for the 2011 season is $414,000.  Through years 1-3, a team could pay a player that minimum salary.  Oftentimes though, if the player performs better, teams will pay that player more to keep him happy.

In years 4-6 of major league service, a player is kind of like a free agent in terms of what they are paid.  They are still under the control of the major league team, and the player can agree to any terms they want to, or sign a multi-year contract.  In many cases though, teams take years 4-6 on a year-by-year basis with their players.  For all unsigned players in years 4-6 who have not agreed to a contract, salary numbers were exchanged.  The player and his agent will come forth with what they think is a fair offer for the services of the player for the upcoming year, and the team will come forth with their number (the player's agents salary demands are higher than the team's salary offer).  If a middle ground is not reached in the ensuing weeks, an arbitration panel will choose either the player's demand OR the team's offer of the salary.  These trials can often become contentious because the team can say bad things about a player that is on their team to defend the lower salary offer.

If teams know after year 1 of a player's service that they believe they have a star player, they will many times see if the player will agree to a long-term deal so they don't have to deal with the messy arbitration process.  In less than one year into his major league career, Milwaukee Brewers outfielder Ryan Braun signed an 8-year, $45M contract extension.  This gave Braun security, and the Brewers do not have to deal with the arbitration process.

After the 6th year is completed by a major league player, they become an unrestricted free agent and can offer their services to all 30 Major League Baseball teams.