Archive for January 27th, 2009

Should There Be a Cap on Salary Arbitration?

January 27, 2009

The need for arbitration goes as far back as 1886 when the Baseball Arbitration Committee oversaw a case in which Thomas Burns, a third baseman, was seeking re-instatement with hopes of continuing his professional baseball career. Burns was “black- listed” for signing with two different ball clubs, New York and Baltimore. The clubs’ owners felt it was in their best interest to see where they stood in regards to their representation and protection of the controversial player. For some, the idea of an arbitrator settling a player’s contractual terms may seem unnecessary. However, we have seen our share over the years just how essential a third party can be.

On August 12, 1994, major league baseball shut its doors and decided to no longer provide the country with its national pastime. To help solve their disagreements, they called on the U.S government.

“The American people are the real losers,” former President Bill Clinton had said.

At that time, the pending reality for baseball’s return was that both parties, the owners and the players, had to accept binding arbitration.

“The players and owners still remain far apart on their differences,” Mr. Clinton added. “Clearly they are not capable of resolving this strike without an umpire.”

Ball clubs have long hated arbitration because of the uncertainty of arbitrators’ decisions. In 1998, former Arizona Diamondbacks owner, Jerry Colangelo, rejected salary arbitration as “ludicrous” adding: “the sooner it can go the better. What it does is divide, management-ownership, and player-agent.” Players, on the other hand, were neither here nor there with regard to salary arbitration but wanted to make sure that if it was eliminated they would get something in return.

During the strike that canceled the 1994 post-season, a player representative went as far as suggesting that “arbitration was a problem and that it should be eliminated or altered significantly to make it more predictable and dilute the escalation in salaries it had produced.” Other player representatives echoed a different sentiment arguing that “salary arbitration was what kept the system honest and that its effects preserved the salary structure.”

ESPN Baseball Today’s co-host Peter Pasquarelli, on his podcast recently commented on the subject of arbitration by saying that “it triggered the salary boom and that there was no real economic influence on it or real control over it.” He then went on to say that arbitration, “made players very rich, very early in their careers.” “You end up over-paying for key guys that you have to keep in your system,” he said.

Further on in the podcast, Pasquarelli continued to insist that major league baseball take a harder look at salary arbitration. “The league is going to have to start equating the declining free agent salaries to arbitration hearings,” the co-host stated.

Whether it’s 1886 or 2009, the need for an arbitrator has been as much a part of the game as peanuts, popcorn or a game of pepper.