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Wednesday, November 27, 2002

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?

Eugene Freedman Posted: November 27, 2002 at 05:00 AM | 7 comment(s) Login to Bookmark
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   1. tangotiger Posted: November 27, 2002 at 01:07 AM (#607423)
Excellent article!

I agree with Seitz that you don't need to know about player value, Linear Weights, or anything like that. It's a question of most similar players, and how much they get. If you have a Rob Deer, then you might need to know a little more about the relative values of things, but for the most part, I don't think you need to worry.

By the way, I think only 4-6 players go through the process every year, from what I remember on Pappas's site. So, the process itself really forces settlement.

the quality of contribution to the club during the last season

Isn't that supposed to be last TWO years? Not sure.

Kaplan recounted the case of a pitcher who was 6-12 ...The pitcher did record 226 IP

No pitcher ever did this. Steve Renko, in 75, went 6-12 with 208 IP. Andujar went 6-16, with 225 IP, but he doesn't fit the rest.

   2. Ephus Posted: November 27, 2002 at 01:07 AM (#607427)
The questions about the weight of SABR-friendly stats (OPS, RARP, etc), miss the point of how the system is designed to work. The parties present evidence and the Panel does not seek independent evidence. If one side believes that the Triple Crown stats do not adequately represent the value of the player, then that side should present 1) the reasons that the Triple Crown stats are misleading and 2) the SABR-friendly stats that paint a more accurate picture. Proving which stats capture the player's performance is just as much an act of advocacy as arguing the comparables.

On the scab front, I hope that the MLBPA does not allow for blanket admission to the Union. There were some compelling articles about players who were tricked into believing that their play in replacement training camp was not crossing the picket line, and they should be reviewed on a case-by-case basis. For the players who decided to cross the picket line, no matter how dire the personal circumstances, I would vote no as a matter of deterrance. The power of the Union is its power to guarantee that a strike would stick, notwithstanding popular opinion or other outside forces. This is in the long term best interests of all of the players. For a counter-example, take a look at the value of long-term contracts in the NFL, i.e. not worth the paper they are written on.
   3. dlf Posted: November 27, 2002 at 01:07 AM (#607428)
I have copies of the Player and Team submissions in a handful of arbitration cases covering the past several seasons including Travis Lee, John Rocker, Dennis Reyes, Damian Miller, Bernie Williams, and Rick Reed. As far as I can tell, the only one that contains any advanced metric is the club's submission in the Bernie Williams case which cites to Bill James' Runs Created and RC/g for Williams and his comps. But there is a wealth of raw data presented for the player in question and his comparables. If two players have similar BA, OBA, SLG, ABs, SB, HR, etc., I'm not sure that the more advanced metrics get any further along the road other than perhaps accounting for park effects.

For one reliever, the team's submission included data for the most recent three years (broken down by season and collectively) for Games, Wins, Holds, Saves, Games Finised, ERA, IP, strand %, K/9, BB/9, H/9, Opponent OPS, days on the DL, and the average inning in which he appeared. That pitcher's submission added total BB, SO, H, ER, R and Losses, broke down those numbers for starts and relief outings, and listed each individual outing in a boxscore-like line. Similar numbers are available for position players.

One note: the management team presenting one case ranked a particular player among his peers (all players with 100+ PA) in the following categories: G, PA, H, R, RBI, HR, TB, SB, BA, OBA, SLG, OPS, R%, RBI%, HR%, BB%, and SO% (I think the last was a typo and should be SB% otherwise the numbers don't work out right). Then that club took the average ranking. That, of course, is a silly stat placing the same "value" on dissimilar items. The player prevailed in that arbitration case and I have not seen any similar "metric" used since then.

I do want to point out that while the arbitration panel is comprised of folks who aren't experts in baseball, that is the norm in all areas of the law. A jury is selected among the general population and, in most cases, an individual will be excluded if they have particular knowledge about the area in dispute. Similarly, the judges are supposed to be generalists rather than specialists in the area of law (and fact) of a particular case.

As an interesting aside, during the initial selection process, the arbitrators are asked about their level of knowledge of the game. Neither side wants to have to explain that a low ERA is good for a pitcher or scoring runs helps a team win games. But I've been told that someone who holds him or herself out as a fan who watches more than a handful of games a year will be excluded from the process.

IIRC, all members of the baseball arbitration panel are members of the National Academy of Arbitrators, a prestigious body comprised of the top labor arbitrators in the US and Canada. As such, they are well versed in the process of deciding disputes arising out of the collective bargaining process. While they are not die hard fans to the level of the regular readers of this site, they do bring a particular area of expertise to the hearing room.

Lastly, I think that Kaplan may have mispoke about rotating teams. The arbitrators are assigned individual players, not particular teams. One arbitrator could hear multiple players from one team over a course of several years. However, the "team" of three arbitrators will be rotated so that rarely will all three sit on two or more panels together and virtually never will do so within any one year.
   4. Walt Davis Posted: November 27, 2002 at 01:07 AM (#607432)
So I'm confused now. I thought those rankings that Elias did, which combine a player's ranking in a number of categories, were used to determine where the player ranked among their peers for arbitration purposes. Are thoes numbers only used to decide A, B, and C free agents?
   5. Eugene Freedman Posted: November 27, 2002 at 01:07 AM (#607436)
Virginia Seitz actually refered to Peter Seitz during her presentation, but did not mention any relation, nor did she say no relation. She left immediately after the discuussion and was not available for questions. That was immediately on my mind.

I should have mentioned that both Fishgold and Kaplan are on various panels that my union has as part of various Collective Bargaining Agreements that we have negotiated. I, however, have not had a case with either thusfar. They are both highly regarded labor arbitrators.

The Elias listings are only for the purposes of free agent compensation and have nothing to do with arbitration.
   6. Shredder Posted: November 29, 2002 at 01:07 AM (#607443)
For the curious, I don't believe either are related to me, either. At least a couple of Seitz's have actually done something important with their lives.

Excellent article as always, Eugene.
   7. David Nieporent (now, with children) Posted: November 29, 2002 at 01:07 AM (#607445)
Excellent article, Eugene. I too was wondering about Virginia-Peter. Guess it will forever remain a mystery.

For other perspectives on the arbitration process -- they don't contradict what Eugene wrote, but rather supplement it -- see Bill James (I think the essay was reproduced in This Time Let's Not Eat the Bones, but I don't remember where it was originally) and also Randy Hendricks' book Inside the Strike Zone.

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