Arbitration Station

Red Sox offered arbitration to RHP Pedro Martinez, RHP Derek Lowe, C Jason Varitek, SS Orlando Cabrera, RHP Pedro Astacio, LHP Mike Myers, INF Pokey Reese and 1B David McCarty.
What is arbitration?

Baseball arbitration is a method used in different contexts in addition to major league baseball players’ salary disputes (webcourt.com, 1996). This occurs when there is a deadlock in the amount of the salary to be paid to the player in the dispute. There are four principles to follow in order to come to a resolution in baseball arbitration (Arbitration Advocacy):
– Provide the arbitrator with all of the information and deadlines
– Don’t bring up items that are “new” to the arbitrator or arguments where he/she must decide what is admissible
– Arbitrators will use their experience to everyone’s advantage in order to come up with a positive solution for both parties
– Arbitration awards are final—You try your case once when you enter the arbitration arena
The basic idea and process behind baseball arbitration is that each party, management and the player, submits a dollar amount to the arbitrator. Once the session is over, the arbitrator will favor a dollar amount and from there he will decide the new salary of that player.
Baseball has only one arbitrator and his name is Shyam Das. The reason there is only one arbitrator in baseball is because in the past, Major League Baseball (MLB) had arbitrators for each team. The problem with this was that when the owners lost a major arbitration, the owners would end up firing the arbitrator and hiring someone that might side their way easier (Freedman, 2001). Another problem was that the arbitrator’s job was in the hands of both parties. Either party could fire him/her at any time. To break it down, arbitrator’s jobs can be very short.
To every arbitration case, there is a winner and loser. In one example of the player winning an arbitration case, the Edmonton Oilers defensemen, Jason Smith, was awarded a hefty sum of money after his dispute. In August of 2002, Smith was asking for a $2.8 million contract after his previous contract of $1.525 million while the owners proposed an offer of $1.95 million (Lebrun, 2002). After this dispute, the arbitrator for this case settled in Smith’s favor for a contract of $2.3 million. After the case, the Oilers’s owners were upset with the decision. They figured that defensive players generally, were not paid like offensive players because of their skills out on the ice. The owners only wanted an increase of $500,000 dollars to keep Smith around the $2 million mark (Lebrun, 2002). On the other hand, Smith and his agent found the offer to be fair. As a 10-year veteran, Smith as making less than the league average salary (Lebrun, 2002). The final decision by the arbitrator in this case came down to one point: market value. The arbitrator found Smith to be under market value and went in his favor (Lebrun, 2002).
Another example of an arbitration case involves the recent dispute between shortstop Orlando Cabrera and the Montreal Expos organization. Cabrera was coming off a fantastic season after winning a Golden Glove award (Ticker, 2002). Cabrera was seeking a $3.1 million contract after a measly $340,000 in 2001. The owner’s amount was not disclosed, but the case went in their favor anyway. The arbitrator came to a final amount of $2.4 million that, personally, doesn’t seem like a loss to Cabrera since he’s making 4 times as much as he did the previous year. This amount given by the arbitrator will be Cabrera’s new contract. (Baseball Arbitration)

A player may not make less than the league minimum of $300,000.
Players with one or two years of service time and players between two and three years of service time (except for the 17% with the most service time) can have their contracts renewed automatically by the team if they cannot come to an agreement. When renewing a contract, a team cannot reduce a player’s pay by more than 20% from the prior year or 30% from the year before that.
Players with 3, 4, or 5 years of service time and the top 17% of the 2 year players may opt for arbitration in order to come to a contract.
The club’ proposal may not be less than 80% of the player’s salary the previous year. The exception here is that if a player won an arbitration award the prior year that resulted in a 50% or greater salary increase, there is no maximum paycut allowed in the proposal.
Arguments that are not allowed in an arbitration hearing include the state of the team’s finances, previous offers made during salary negotiations between the player and the team, any press comments or testimonials with the exception of media-supported awards like the MVP Award or salaries in other sports or occupations.
A player with a non-guaranteed contract or an arbitration award may be released up until the 15th day of spring training with 30 days’ pay or from the 16th day of spring training until the opening of the season with 45 days’ pay.
When a player is claimed on waivers, the new team takes on the contract. When a player is released in the middle of a guaranteed contract, the new team only has to pay league minimum with the old team footing the rest of the bill. (Transplanted Cubs Fan, now part of the MVN Cubs)

With that in mind, let’s walk through what the Red Sox did. If we assume that every single person that arbitration was offered to accepts then what would be the minimum they would earn in 2005? (Players do not have to accept, if they decline and sign with another team than the arbitration-offering team gets value via draft picks. If they decline arbitration, the team has until January 8th to come to terms on contracts. Should the Jan. 8th deadline pass, then the players will not be returning to the team for the 2005 season. Players have until December 19th to accept offers of arbitration or not. If they accept, the team and players can negotiate on a contract right up until the arbitration deadline.) The minimum that the Red Sox can argue for in arbitration is 80% of the previous year’s salary. The below numbers show the minimum that the Red Sox can offer.
Pedro Martinez can earn no less than $14 million dollars, or what he said he would be looking for in the off-season, which was $13-$14 million dollars. Is it possible that Pedro could accept, considering he would make a minimum of $14 million over a year? No question. So far the highest offer to Pedro is from the Mets, $38 million over 3 years, or 12 2/3s million per year. If it’s about the money, Pedro will go for the $14 million. He could (and probably will) make more than $14 million. If Pedro submits the number of $17 million, the arbitrator could be willing to award it to Pedro.
Derek Lowe can earn no less than $4 million dollars. Considering that Lowe wants $48 million over 4 years, I doubt he will be accepting arbitration because then he probably would make less than $10 million given his awful regular season campaign.
Jason Varitek can earn no less than $5.36 million. Also another candidate to most likely decline arbitration, but this allows the Red Sox to negotiate and most likely come to an agreement with Varitek. The sides are $2 million a year apart on contract negotiations. If he goes to arbitration, he will see a jump, as the team would certainly not offer $5.36 million, that would be lowballing Varitek.
Orlando Cabrera can get no less than $4.8 million. Since Cabrera suceeded this past year coming over from the AL, he could see a jump to about $8 million, a little more than market value for a shortstop right now (Nomar just signed for 1 year witht the Cubs for $8 million). Considering the Red Sox want to keep the window for shortstop open for Hanley Ramirez, the Red Sox are probably hoping Cabrera accepts arbitration.
Pedro Astacio is a surprise, because he really didn’t do much this past year and certainly wouldn’t be high on the list to make Opening Day. The Red Sox may really like Astacio and think he has something in the tank. Astacio can make no less than $300,000 and if he doesn’t make the Opening Day roster, we can release him for 45-days pay.
Mike Myers was offered arbitration, something I am happy they did. This pretty much ensures Myers is coming back because no team will offer a multi-year contract to Myers, and the least the Red Sox can offer him is $440,000. Considering he made $550,000 last year, this is pretty much a foregone conclusion that Myers accepts arbitration or at least signs with the Sox.
Pokey Reese will most likely decline arbitration considering that he wants to start. If he accepted arbitration, the least he could make is $800,000. I would love to see Pokey back, but I am not banking on it.
And now, a surprise. David McCarty. Apparently the Sox like the fact he could take the ball on the mound if needed, and offers defense at first. Perhaps this is a precursor to showing that Millar or Mientkiewicz could be gone, putting them in the market for a first-base backup. We can always release McCarty with pay much like Astacio.
Some of the lesser free agents (Myers, Astacio, Reese, McCarty) might be candidates to accept, but it’s possible that the Red Sox have worked out agreements with each to decline the offer. Why would they decline the offer, you ask? The reason the Red Sox offered arbitration to most of these lesser free agents is to keep the window open for resigning them open a little longer. They would probably get a little more monetary value to decline arbitration.
Red Sox declined to offer arbitration to RHP Scott Williamson, RHP Terry Adams, RHP Curtis Leskanic, RHP Ramiro Mendoza, INF Ricky Gutierrez and DH Ellis Burks.
Most of these are no surprise. Ellis Burks is retiring, Ricky Gutierrez is replaceable, Ramiro Mendoza is a no-brainer, Leskanic the Mechanic will probably retire, and Terry Adams just did not produce. The only one I am marginally upset about is Scott Williamson. This means we can’t resign him to a contract with the opportunity of him pitching in 2006. He had Tommy John surgery, so is out for most of 2005. I was hoping we could sign him to a two-year contract, with the minimum amount paid him in 2005 with a heavily laden incentive contract for 2006. Williamson will find another team. It’s a shame this injury had to happen to such a great reliever.
If any of the big free agents decide to sign with another team, the Red Sox will get compensentation via draft picks, which is something. Now that the arbitration deadline has passed, the hot stove is going to start heating up. People who were not offered arbitration will start signing in droves, and those that were offered arbitration will have to decide whether or not they want to forego years for money when they accept or decline arbitration. After the December 19th deadline passes, we’ll pretty much know who is coming back to the Red Sox and who is not.