File and Trial Salary Arbitration Strategy

Another article I read today was this piece by Sports Illustrated’s Ben Reiter about the current trend by teams to adopt a “file and trial” strategy for salary arbitration, which means that once player and team exchange salary arbitration figures, the team will no longer negotiate with the player over the next year’s salary but will instead go to the arbitration hearing and get an arbitrator’s decision.

There has been a lot in the baseball press this off-season about the increase of teams with “file and trial” (also called “file and go [to arbitration]”) strategies, but a lot of the discussion sounds overwrought to me.

Up to this off-season, we’ve gone through a period where teams and players (and their agents) have seemingly gone out of their way to avoid taking salary disputes to arbitration, leading to the 2012/2013 off-season as the first since salary arbitration began in 1974 in which no arbitration hearing was held.  This already appears to be something of a fluke, as we’ve had two salary arbitration decisions this off-season and may have several more before it’s all over.  We may also be due for the pendulum to swing back the other way with more teams electing to go to hearing as a way to hold down player costs.

Owners have long hated salary arbitration because it forces them to give their players big raises whether they like it or not.  At least with free agency, owners can elect not to engage in the bidding wars.  However, in the last decade management has largely found a way to minimize this problem by non-tendering large numbers of arbitration-eligible players.  Non-tendering marginal major league players has been an effective way to keep salaries down for these players, particularly middle relievers.

The purported purpose of the “file and trial” strategy is to make players and their agents more reasonable in their demands for salary increases.  Some teams believe that agents intentionally file excessive arbitration amounts in order to create an artificially high figure from which to compromise with the team’s filed amount, since most settlements after team and player exchange figures come in at or around the midpoint of the two sides’ numbers.

The self-proclaimed “file and trial” teams are the White Sox, the Marlins, the Blue Jays, the Braves, and Rays, with the Marlins being the team in recent years most likely to take cases to arbitration and most likely to lose them.

Four other teams (the Brewers, Indians, Nationals, and Pirates) have been described as “file and trial” teams on a case-by-case basis; however, I don’t really know what this means.  Doesn’t every team willing to take at least some cases to arbitration have a figure for some players which they won’t cross but will instead go to arbitration over?  Also, if teams take a “file and trial” approach on some players but not others, it doesn’t much seem to serve the purpose of getting all players and agents to make reasonable salary negotiation demands.  If a player/agent make what the team considers an unreasonable arbitration filing, can’t every team simply state they won’t go higher than a certain figure and the take the case to hearing if their final offer isn’t accepted?

Anyway, Reiter argues that the Marlins have shown the success of the “file and trial” negotiating strategy even though the Marlins have lost more arbitration cases in recent years than any other team, because, according to Rieter, the filing amounts of the Marlins’ players have been more reasonable.  He offers the examples of Miguel Cabrera‘s 2007 arbitration against the Marlins and Ryan Howard‘s 2008 case against the Phillies as evidence. (Both players won their arbitration cases: Cabrera sought $7.4 million, the Marlins offered $6.7 million; Howard sought $10 million, the Phillies offered $7 million).

I’m not convinced.  First, as good as Cabrera’s numbers were after the 2006 season, his back-of-the-baseball-card statistics which the arbitration process over-values (see my piece from a year ago) were no match for Ryan Howard’s at the end of the 2007 season.  Cabrera came into his arbitration hearing averaging about 30 HRs and 115 RBIs in prior seasons while Howard came in averaging more than 50 HRs and 140 RBIs the prior two seasons.  Howard also had an MVP Award in his pocket, while Cabrera had not yet won either of his.

Also, Howard came into his salary arbitration with a much higher base salary than Cabrera ($900,000 compared to $472,000) the year before.  Some of that was due to the fact that the Marlins refused to pay its young players much over the minimum until they became salary arbitration eligible; however, it also gave Howard an argument that he got paid more in recognition of his exceptional early career performance, which included the afore-mentioned MVP award.  [Howard also had an argument that the Phillies kept him in the minor leagues a year longer than Howard deserved because he was stuck behind Jim Thome and his big contract, but I have no idea if he actually made this kind of argument at the hearing.]

Finally, the contention that Howard and his agent would have asked for less than the $10 million they ultimately won at hearing if the Phillies had been a “file and trial” team cannot possibly be proven and, in fact, lacks any real evidence in support whatsoever.  The only thing we can be sure about is that if Howard and his agent would have accepted to split the difference in filing amounts ($8.5 million), the Phillies made a $1.5 million mistake in refusing to offer it to him.

Another point to make here: the Marlins are such an outlier as major league teams go, that I’m not sure that many other teams are going to pursue their salary arbitration strategies.  The Marlins are regarded throughout MLB as the stingiest team most willing to put immediate annual profits before long-term profits (i.e., trying to build a winning team to increase the value of the franchise).  It’s also common knowledge that since Jeff Loria bought the Marlins in 2002 (or at least since the Marlins won the 2003 World Series), the Marlins have been willing to pay their players less than any other team and are the least concerned about the long-term consequences of nickle-and-diming their players.

[Even the Marlins’ spending spree in the 2011-2012 off-season was about short-term profits.  A good team in a new ballpark (Marlins Park opened in 2012) means immediate sell-outs.]

Next, the Braves’ recent dealings with Freddie Freeman and Jason Heyward don’t suggest that the “file and trial” posture really has all that many teeth.  O.K., the Braves weren’t willing to negotiate further on 2014 salaries alone, but they gave Freeman a contract extension which says resets the bar for future similar players entirely in favor of the players.

Heyward’s two-year contract extension provides that, including the $1 million signing bonus, Heyward gets the $5.5 million in 2014 he filed for, and he gets a second year at $7.8 million.  If Heyward plays in 2014 like he did in 2010 and 2012, the second year will be a bargain; if he plays like he did in 2011 and 2013, it won’t.

Craig Kimbrel‘s case may well go to arbitration, but in any event his situation looks an awful lot like Ryan Howard’s back in 2008: players who played historically well in their first few seasons seeking record-setting amounts that their teams think is just too much given what similar arbitration-status players have made in the recent past.

Finally, Reiter says that players, their agents and the players’ union are considering challenging the “file and trial” strategy, presumably as a refusal by management to negotiate in good faith.  They may be technically right, but unlike collusion against free agents, it doesn’t seem like a violation without its own built-in remedy.  If teams won’t continue to negotiate after salary amounts are exchanged, player and team can simply take the case to arbitration and let a neutral and professional arbitrator decide.  The past record of salary arbitrations over 40 years suggest that the arbitrators make reasonable decisions most of the time.

Explore posts in the same categories: Atlanta Braves, Baseball History, Chicago White Sox, Cleveland Indians, Florida Marlins, Miami Marlins, Milwaukee Brewers, Philadelphia Phillies, Pittsburg Pirates, Tampa Bay Rays, Toronto Blue Jays, Washington Nationals

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