An introduction to Major League Baseball’s salary arbitration process

The 2018 Major League Baseball (MLB) season is fully underway after what was a rather odd and contentious offseason for MLB players. The “Hot Stove,” as the baseball offseason is colloquially known, was rather cold during the winter of 2017-2018. While there were some big names traded (Giancarlo Stanton¹, Andrew McCutchen², and Marcell Ozuna³) and a big international signing (Shohei Ohtani⁴), the dearth of big free agent signings, all with talk of potential collusion⁵ by the owners, turned out to be the biggest story of the winter.

While the free agent market was slow this offseason, there was a notable increase⁶ in salary arbitrations going to hearing. While salary arbitrations usually don’t generate the same interest and fanfare as mega million-dollar free agent signings, the upward trend most certainly has the attention of the baseball world⁷. In fact, given the ever-changing economics of baseball, salary arbitration may indeed become the favored way for players to cash in on their talents early in their careers. All the more so if large free agent contracts for veteran players continue to fall out of favor with Major League owners.

This article will focus on baseball’s salary arbitration process, looking at:

• its history;

• the technical process as set forth in 2017-2021 Basic Agreement between Major League Baseball and the Major League Baseball Players Association, otherwise known as the Collective Bargaining Agreement (CBA); and

• the implications of the use of the arbitration process this offseason and into future years.

As one of only two professional sports leagues to utilize salary arbitration as part of its collectively bargained agreement (The National Hockey League is the other⁸), it is important to understand the role salary arbitration currently plays in baseball’s economic model.