MLB Player Arbitration: How Does It Work, & Why Does It Exist?

[Maddie Landis]

Image courtesy of © Rob Schumacher/The Republic / USA TODAY NETWORK via Imagn Images

What is arbitration?

Let’s zoom out for a moment. Arbitration is a binding alternative dispute resolution (ADR). Other forms include mediation and negotiation, separate from litigation. 

In the litigation, a judge presides over formal hearings. Litigation involves specific, structured procedures. Outcomes are legally binding, determined by a judge. ADR is less formal than litigation, cheaper, quicker, and aimed at preserving working relationships between parties. 

Arbitration entails parties presenting their case before a qualified arbitrator outside of a formal court. So, what is an arbitrator? An arbitrator is a neutral third party who oversees legal disputes. Arbitrators have subject-matter expertise in the areas they oversee. Arbitrators can be practicing attorneys. However, in some cases, they could be an expert in their field. The construction industry is rife with conflict; many disputes are resolved through arbitration. In a complex construction dispute, an engineer with relevant experience could serve as an arbitrator. ADR was a key component of the infamous Boston Big Dig Project. 

Arbitrators can work alone or in groups, sometimes called a panel. The Judicial Arbitration and Mediation Services (JAMS) and the American Arbitration Association (AAA) are two of the leading organizations that help administer arbitration hearings.

Why is arbitration necessary in MLB?

Arbitration is determined by a player’s major league service time. Players are paid pre-arbitration salaries (typically the league minimum salary) during their first three years of major league service time. One year of service time equals 172 days in a year. After six years of major league service time, players enter free agency. The fourth through sixth years are the player’s arbitration years. In most cases, players and their respective teams agree on a salary number and don’t have to enter the salary arbitration procedure. 

Super two players are an exception: 

Quote

“Players with two but less than three years of Major League service shall be eli- gible for salary arbitration if: (a) he has accumulated at least 86 days of service during the immediately preceding season; and (b) he ranks in the top 22% (rounded to the nearest whole number) in total service in the class of Players who have at least two but less than three years of Major League service, however accumulated, but with at least 86 days of service accumulated during the immediately preceding season. If two or more Players are tied at 22%, all such Players shall be eligible.”

If a player and their team can’t agree on a salary, they exchange numbers. The deadline changes each year and is outlined in the CBA. In 2026, it is set for Friday, January 9th. Players and teams can settle before their hearing dates, which take place between January 26th and February 20th, per the current CBA. Hearings take place in the Tampa Bay/St. Petersburg, Florida, or Phoenix, Arizona.

What separates baseball arbitration from other arbitration forms is that the arbitration panel must choose one of the two figures. Unlike in other forms of arbitration, there is no “splitting the baby” or reaching a midpoint. That said, players and teams sometimes agree to settle at a midpoint. 

What happens during a salary arbitration hearing?

The MLB Players Association (MLBPA) and MLB Labor Relations Department (LRD) annually select arbitrators for hearings. If the MLBPA and LRD can’t reach an agreement by January 1st, they jointly request a list of qualified arbitrators from the AAA.

Hearings are held before a panel of three arbitrators. The MLBPA and LRD appoint one of the arbitrators to chair the panel.

At the beginning of the hearing, the parties exchange their initial presentations. The player goes first, then the club. The initial presentations have a one-hour limit. After a short break, the player has 30 minutes to present their rebuttal and summation, followed by the club’s rebuttal and summation. The player may offer a brief surrebuttal to address new issues raised by the club. At the panel’s discretion, the club may also be granted a brief subrebuttal to respond to any new issues raised by the player. 

The panel has 24 hours after the conclusion of the hearing to inform the MLBPA and the LRD of the final decision. This period provides time to reach a settlement. 

Who presents the cases?

Agents represent players, and front office personnel (General Manager, Assistant GM, etc.) can vary based on the organization. Some organizations hire specialty consulting services (attorneys) to assist with the salary arbitration process. 

What are the presentation materials?

Each side presents evidence supporting their filed salary number. The CBA outlines admissible and inadmissible evidence. 

Admissible evidence includes:

• The quality of the Player’s contribution to his Club during the past season (including but not limited to his overall performance, special qualities of leadership, and public appeal)
• The length and consistency of his career contribution
• The record of the Player’s past compensation
• Comparative baseball salaries
• The existence of any physical or mental defects on the part of the Player
• The recent performance record of the Club, including but not limited to its League standing and attendance, as an indication of public acceptance

Inadmissible includes: 

• The financial position of the Player and the Club
• Press comments, testimonials, or similar material bearing on the performance of either the Player or the Club, except that recognized annual Player awards for playing excellence shall not be excluded
• Offers made by either Player or Club prior to arbitration
• The cost to the Parties of their representatives, attorneys, etc.
• The existence of the Pre-Arbitration Performance Bonus Program described in Article XV(D), including the criteria and any amounts earned pursuant to the Program
• Statistics and data generated through the use of performance technology, wearable technology, or “Statcast”

Player representatives do not have access to the same proprietary data that teams do. While some Statcast data is publicly available, allowing it as evidence would give teams an unfair advantage in hearings.

What are the pros of baseball arbitration?

The primary advantage is that teams can’t lowball their players. Since arbitrators can’t split the baby, teams are forced to present a competitive offer. In most cases, teams and players settle before arbitration hearings, so they’re more likely to preserve their relationship.

The arbitration process allows players to potentially earn more in salary, sometimes far beyond the minimum wage, before hitting free agency. For teams, the arbitration process is quicker than litigation and allows teams to resolve salary disputes before spring training. 

Unlike public court proceedings, the process is private and confidential.

What are the cons of baseball arbitration?

If a player and their team go to a hearing, both parties risk losing and being locked into an unfavorable salary.

Baseball is an arduous, mental game. Teams can become very critical in their hearings, and players may feel devalued by hearing their flaws dissected in a formal setting. It’s not unheard of for a team to trade its player after a contentious hearing. 

Arbitrators don't issue written opinions, so there's no formal explanation or guidance behind their decisions. However, comparable players are given significant weight in hearings. For example, if Tarik Skubal were to go to a hearing with the Tigers, Jacob deGrom's 2019 salary increase would serve as a key reference point. Without official rulings to cite, fans like you and me are left to dissect and interpret hearing outcomes on our own.

As corny as it sounds, baseball’s arbitration process holds a special place in my heart. I practice dispute resolution professionally, edited an American Bar Association piece on dispute resolution, and previously worked as a salary arbitration intern. I hope this breakdown makes the process a little more digestible.

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