A Beginner’s Guide to MLB Salary Arbitration
With the Major League Baseball season coming to an end, a lucky few of us baseball fans are still holding on to dreams of World Series greatness for our beloved clubs. For others, the playoffs are just a dreaded reminder of a season best soon forgotten. For those people, the events of the coming off-season tend to be of more interest than playoff baseball, and for good reason – it’s the time when teams decide which players to keep, which players to drop, which players to trade, and, most importantly, how much to pay their players.
As unbelievable as it may sound, players and their respective teams don’t always see eye-to-eye with regards to what a player should be paid for his services. Historically, this difference of opinion was resolved under a reserve clause in the player’s contract that gave the team complete leverage.  Currently, we have a salary structure in Major League Baseball that attempts to balance power equally between a team and player. One of the more important tools for a young player to ensure adequate compensation, based on his performance and value to his team, is the process of salary arbitration.
THE BASIC MLB SALARY STRUCTURE
Before getting into detail about MLB salary arbitration, it’s valuable to have a basic understanding of the salary structure in Major League Baseball.
There are three categories of which each professional player can potentially fall in, depending on the amount of Major League playing time they have accrued.
“Pre-arbitration eligible” players are those who have under three years (seasons) of service. These players have no leverage and are typically paid close to the league minimum.
“Arbitration eligible” players have attained three years of service. Players considered “Super Twos” are also eligible for salary arbitration. “Super Twos” have accrued two years of service and 86 days of service in the previous season, and rank in the top 17% in performance compared to players with more than two, but less than three, years of service. These players have some leverage based on their previous seasons performance, and are eligible to arbitrate with their team for a greater salary, if they wish to.
“Free agents” are players who have accrued six seasons worth of service time. These players tend to have the greatest degree of leverage, and are open to seek offers from competing teams – whereas a player in the previous two categories must negotiate with the team that holds his contract. 
WHAT IS SALARY ARBITRATION?
Salary arbitration, in the simplest terms, is a system by which salary disputes between a player and his team can be resolved. The system was first adopted in 1973, in the collective bargaining agreement between the player’s union and the owners, and was implemented in the 1974 season. Previous to then, if an owner and a player failed to reach an agreement for the next season’s contract, a reserve clause allowed the team to renew the player’s contract under the terms of the previous year. 
Since the inception of salary arbitration, arbitrators have ruled on 500 disputes. Of those 500 decisions, 214 were for the player, and 286 for the club. Like a typical legal proceeding, though, the parties have the option to settle their dispute pre-arbitration by coming to an agreement on the following year’s salary. In fact, the vast majority – approximately 90% – of players eligible for arbitration reach an agreement before an arbitration hearing.  The number of players filing for an arbitration hearing reached it’s lowest number in 2013, when an unprecedented ZERO players arbitrated salary. 
This year, 103 players will be eligible for salary arbitration. The notables include Dee Gordon (Los Angeles Dodgers), Josh Harrison (Pittsburg Pirates), and Josh Donaldson (Oakland Athletics).  For the top tier players such as these, it is almost certain that an agreement will be reached pre-arbitration.
THE MLB SALARY ARBITRATION PROCESS
Salary arbitration in Major League Baseball is done in a format called “final offer arbitration” (FOA). FOA is a type of arbitration in which each party submits a proposal to an arbitrator, and the arbitrator then chooses one proposal over the other, based on what the arbitrator deems to be “correct.” The arbitrator is not asked to, nor may she, reach a compromise that lies between the proposals. The arbitrator’s job is to determine whether the player’s value is above or below the midpoint between the player’s and team’s proposal. If the value is greater than the midpoint, then the player’s proposal wins out; if the value is lower than the midpoint, then the team’s proposal wins out. 
In determining whether the value of a player is greater or less than the midpoint between proposals, an arbitrator has certain criterion that can be considered. This criterion includes the player’s contributions in the previous season, the length and consistency of the player’s career contributions, comparative baseball salaries, the player’s physical or mental defects, the recent performance of the team, and the player’s past compensation.
Information that may NOT be used during an arbitration hearing includes the financial situations of the player and the team, press comments, testimonials, or similar material about the performance of the player or team. 
SALARY ARBITRATION TODAY
With teams wanting to reduce the risk associated with going to salary arbitration, there has been a recent development of teams signing premier, young players to long-term contracts before the player becomes arbitration-eligible. Hanley Ramirez signed a six-year, $70M contact with the Marlins at the beginning of his third year; Ryan Braun signed to a seven-year contract for $45M after his first season with the Brewers; and Evan Longoria signed a nine-year, $44M contract with the Rays just one week into his professional career. 
Considering how many premier players will be eligible for arbitration this year and next, it will be interesting to see how many players choose to go to arbitration, and how many teams will settle early to secure their young talent for the long-term.
 Primm, Adam. “SALARY ARBITRATION INDUCED SETTLEMENT IN MAJOR LEAGUE BASEBALL: THE NEW TREND.” Sports Lawyers Journal Spring (2010)  Edmonds, Ed. “A MOST INTERESTING PART OF BASEBALL’S MONETARY STRUCTURE – SALARY ARBITRATION IN ITS THIRTY-FIFTH YEAR.” Marquette Sports Law Review (Fall 2009)  http://mlb.mlb.com/pa/info/faq.jsp#record  http://www.forbes.com/sites/tomvanriper/2013/02/21/baseball-pitches-arbitration-shutout-in-2013/  http://www.spotrac.com/arbitration-tracker/2015/