The fact is that Major League players are separated by three compensation tiers: 1) Free Agents - players with six or more years of Major League service, 2) Arbitration-Eligible Players - players with between three and six years of Major League service, and 3) Pre-Arbitration players. I would guess that most of you know how the first two work (if not, you can check out my arbitration primer here), so I'm going to focus on #3 which normally doesn't get much attention.
Pre-Arbitration players are those players who have accumulated fewer than three full years of Major League service time (172 days counts as a full year even though the season is actually 183)... except those players in the top 17% of the two year class, which is usually around two years and 130 days. How did that exception get in there? That's collective bargaining for you. Nevertheless, as a quick rule of thumb just think: any player with less than two years and four months of big league time is pre-arbitration.
How Service Time is Calculated
Major League service time does NOT include all time spent on the Major League 40-man roster. It only includes time spent on the Major League 25-man roster, both active and disabled. So, a player who is on the 40-man roster in spring training, gets optioned to AAA in March, and then gets recalled to the big leagues for the month of September will accumulate 30 Major League service days (September only). On the other hand, a player who is placed on the Major League disabled list in spring training and misses the entire season will actually be given a full year of service time.
Salary Guidelines for Pre-Arbitration Players
Why am I writing about this? Well, the free agents sign for whatever they can get on the free market, arbitration eligible players must come to a mutually acceptable agreement with their teams or have their salaries determined by an arbitation panel, but pre-arbitration players get paid whatever the Club wants to pay them... with a couple of caveats:
- The salary must be at least the Major League minimum salary ($400,000 in 2009)
- The salary must be at least 80% of the prior year's compensation
Therefore, by rule, every Club has the right to pay each of these players the Major League minimum as long as the amount satisfies caveat #2 above. However, no Club actually does this.
Rather, Clubs actually "negotiate" each and every one of these deals with the players' agents in order to come to an agreement. I write "negotiate" because at the end of the day it's a pretty one-sided negotiation - the Club maintains all the leverage. It's the absolute reverse of me negotiating with my son over how much time he gets to play on the computer, "Two more minutes, Trevor. How about five, dad? Ok, three. May I pleeeaasse have five minutes? Four. Five, and then I'll let you read me a book." The kid is good, I tell you.
In any event, the player's only recourse is to refuse to agree to the contract in which case his contract will be "renewed" by the Club at a salary of the Club's choosing. Taking a renewal is basically the player's way of saying he doesn't agree with the amount that has been offered, though such a stance doesn't serve any practical purpose (it was once thought that taking renewals would help a player in arbitration but the data doesn't support such a claim).
This structure has given birth to 30 unique payroll scales. Some teams pay their players purely on service time accrued, other teams pay strictly on performance, some pay well above the minimum and some don't venture far from $400k. In the end what is most important is the consistency within any system. Players want to know that they're being treated fairly compared with their peers (don't we all?), and in this case their "peers" refer to their teammates. As they gain more service time, the "peer" group will expand to include players around the league.
The reason I'm writing about this today is that we're coming up on MLB's renewal deadline. In our case, we set our own deadline of the first pitch of the first spring training game, which was a week ago. After all, once the games start, that is where everyone's focus should be.