On Salary Arbitration
Our resident labor law guru covers a D.C. conference on salary arbitration and baseball.
On November 21, 2002 the Litigation Section/Alternative Dispute Resolution Committee; Arts, Entertainment and Sports Law Section; and Labor and Employment Law Section of the DC Bar held a brown bag lunch entitled Bottom of the 9th to discuss the baseball salary arbitration system.
The three panelists were Herb Fishgold, who worked under William Usery to mediate the 1994-5 strike at the behest of President Clinton, Roger Kaplan, who is a salary arbitrator for MLB, and Virginia Seitz, outside counsel to the Major League Baseball Players Association since 1987. Professor Charles Craver of George Washington University served as moderator, but admitted at the beginning, he knew virtually nothing of the subject.
Seitz began by explaining the background of the reserve system in baseball and how arbitration was negotiated as part of the first Collective Bargaining Agreement by Marvin Miller. She explained that in 1976, after the Messersmith-McNally decision, arbitration was available to players with two to six years Major League service. If a club desired to retain a player with that amount of service, they were required to tender a contract to the player by mid-December, and up until mid-January, the player could either accept the offer, or request arbitration. The current date is January 15. On January 18 the MLBPA and the PRC (Player Relations Committee) simultaneously exchange numbers.
Seitz continued that as part of the 1985 CBA the Union gave up year two. She theorized that in 1990 the lockout was primarily due to the Union?s desire and eventual achievement of the "Super Two" class of arbitration eligibles. These are the top 17% of players after year two of service. In 1995, Seitz continued, the panel was increased from one arbitrator to three. During the most recent CBA negotiations, management proposed to eliminate Super Two status and to be able to walk away from the process after numbers were exchanged. The Union proposed that arbitration begin after year one of service. None of these changes were agreed to.
Seitz concluded by stating the Union?s position as it relates to arbitration, "No club can ever be forced to engage in salary arbitration." Kaplan began by stating that most arbitration hearings are a win-lose proposition, however in deciding the Andruw Jones case, he realized that it was not a win-lose proposition for Jones, who would have received $6.4M had Kaplan and one of his colleagues ruled against Jones. Kaplan continued, "The process works, 90-99% of cases settle prior to going to panel."
Having worked as a baseball arbitrator for seven years, he feels that a three member panel is better than a one-arbitrator decision, because it is now less likely for the parties to fire the arbitrator as they did in the Derek Jeter decision.
Kaplan explained that the process does not allow for evidence objections and that no advance evidence is provided to the arbitrators. Although the Agent or Player Representative is first, there is no preponderance of the evidence test. The Agent presents for one hour, then the Club presents for an hour. Each party receives one-half hour for rebuttals, which are presented by the MLBPA and the PRC.
Kaplan recounted that in the beginning the arbitrators were not familiar with baseball. One asked the parties, "What does ERA stand for?" Now the arbitrators are quite familiar with baseball. The arbitrators rotate teams, so they don?t get to arbitrate the same players year after year.
Kaplan concluded by explaining how he decided the Andruw Jones case. He said that since the Braves offered $6.4M and Jones requested $8.2M, the question he and the other members of the panel asked was, "Is Andruw Jones worth a penny more than the midpoint, more than $7.3M." They concluded that he was, and he was awarded $8.2M.
[This is due to the structure of the process, which is known as final offer arbitration. The panel does not have the authority to "split the baby" as in the Biblical tale of Solomon. Instead, the panel must select which is more appropriate between the offers presented by the parties. - ef]
Fishgold spoke about the beginnings of arbitration. He recounted a story of arbitrator Thomas Roberts visiting a hotel in Florida during spring training and coming upon Fernando Valenzuela in the lobby. Fernando was eating and trying to avoid autograph seekers, so when Roberts interrupted his meal Fernando gave a very gruff look. Roberts did not waiver. He said, Fernando, don?t you remember me; I was the arbitrator in your hearing last year? Fernando immediately jumped up and gave Roberts a huge bear hug. According to Fishgold, Roberts? decision was the first to award a player $1M in an arbitration hearing.
Kaplan next explained how he and the other panelists decide cases. In the Jones case, Scott Boras began by providing quotes from Bobby Cox, Barry Bonds, and the man across the table from Boras, John Schuerholtz. Each said that Jones was the best centerfielder he had ever seen. For Kaplan, a New Yorker from the Willie, Mickey, and the Duke era, this was very impressive.
The criteria in determining whether a player is worth the higher or lower figure are without specific weight. They are: the quality of contribution to the club during the last season; the player?s career length and consistency; the record of past compensation; the comparative salaries of players within a class of years; any physical or mental defects; and the recent performance of the club in the standings and attendance figures. Kaplan explained that the last two are very rarely considered.
The decision comes within twenty-four hours of the hearing.
Fishgold recounted the story of a Phillies official during the 1994 strike who explained that if he had the choice of pushing a black button that would guarantee the team would make money, but give them no chance of wining, and pushing a white button, that would guarantee the club would lose $20M but give the team a chance to go to the World Series, he would press the white button.
I asked Kaplan if the arbitrators use more advanced statistics like EQA, Runs Created, Fielding Range, and others, or whether they stick to the traditional stats that he had mentioned earlier, like AVG, HR, and RBI. He only answered that the parties present all the statistics you could believe. Seitz interjected that it?s all based upon comparables. Neither of these answers, of course, addressed the question of whether or not arbitrators are now willing to accept, or knowledgeable enough to accept the more accurate metrics as the most important evidence.
Craver asked, and Kaplan answered that the financial position of the teams is not admissible in the hearing.
I then asked whether the Union had seen fewer tenders recently since more statistically based GMs had taken over, such as in Oakland, Minnesota, and now Boston, where they understand the replacement value of players. Seitz answered that there has been no noticeable downward tick in tenders or arbitration eligibles.
Another audience member asked about whether decisions are always unanimous. Kaplan recounted the case of a pitcher who was 6-12 with a career record of 23-42 and an ERA over 5. He said that the team scored 5-6 runs per game and that the pitcher allowed a .310 BAA. The pitcher did record 226 IP. He and one of the other panelists voted against the player and the third voted that the player should receive his requested $1M raise.
At this point the Chief of Staff for the National Mediation Board hijacked the presentation and began asking questions about the Railway Labor Act. It went on for about 15 minutes and half of the audience left.
Finally, another audience member was allowed to ask a question about the recent negotiations. Seitz said that the Union never considered the same strategy as in 1994 because of the Bush stocked NLRB and the negligible chance for issuance of a 10(j) injunction ordering the parties to the status quo ante had the owners declared impasse and implemented their last offer. She also said that the replacement players are not members of the Union and it is not a Union shop, so they aren?t required to pay dues.
I followed up asking about Brian Daubach and Rick Reed, who were previously rumored to have been admitted to the Union after the CBA was ratified. I also asked about whether the Curt Flood Act had anything to do with the near painless settlement. Seitz explained that none of the scabs had been admitted, and it could not possibly have occurred yet since the Union?s Executive Board won?t meet until December and only they can act on a petition for membership.
Seitz concluded that since the MLBPA will not decertify, like the NLFPA did, the Curt Flood Act actually has no relevance.
After the official presentation ended, I pushed Kaplan again on the subject of which stats he considers. I asked about whether he values OBP more than AVG or HR. He said that they present all of the stats and I wouldn?t believe it. He said that if a guy is in the leaders in OBP he will consider it highly just like he does with HR.
It was a pretty interesting presentation overall. More than anything I learned that the people making the decisions about what players are worth are just casual fans and don?t really know too much about player value. They may be willing to be educated, but how many people are converted to sabermetrics in one hour?
Posted: November 27, 2002 at 05:00 AM | 7 comment(s)
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