Friday, March 6, 2009

Pre-Arbitration Players

Every year around this time you'll see stories stating that a team reached agreement with about 20 players on one-year contracts. Must have been a busy day.

Compensation Tiers
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.

14 comments:

JimD said...

So what is the Padres' pre-arbritration philosophy?
Thanks for the blog.

sdsuaztec4 said...

Yay! Paul's Back!

Paul DePodesta said...

Yeah, yeah, yeah. I know. I should be giving more regular updates from spring training, but I'm always hesitant to offer any observations so early in the camp.

Actually, made that will be my next post.

Paul DePodesta said...

JimD,

We pay based on performance and we're probably somewhere in the middle of the pack in terms of the dollars.

field39 said...

I understand your reluctance to make any early observations, but I am not under any such restraints.

Up to this point, Cabrera has been overmatched, both at the plate and in the field. How is keeping him on the bench for a year going to do him, or the Padres any good?

If you really like him. Why not make a trade for him and get him down to the minors, where he can play every day?

Itay said...

Paul, a question and a comment:

If the Pads are under a tight budget, why pay "in the middle of the pack in terms of the dollars"?

Also, I must say, I don't like this rule. Not that 400K$ is small money, but I think that every player should be able to negotiate a contract and not be forced by his team to stay under their own condition

Tim said...

Hi Paul,

Could you provide any insight on the team's handling of Kyle Blanks?

I assume you guys are using Adrian's absence for the WBC as an opportunity to get Blanks sharp at first base for the event of an injury that leaves the position open for him. Still, I think it's more and more clear that, given the fact that you do indeed have both players, he should be groomed as a left fielder so that you can actually use them both.

He has proven he's ready for the big leagues this year. I wouldn't blame you for waiting to call him up for the reasons listed in the above entry, allowing you to have his rights for an extra year, but I think it'd be irresponsible on the team's part to ignore the potential of making him a starting left fielder before the 2009 All-Star break.

Maybe the plan is to trade Adrian, and if he can net a nice package to really improve at least one other position that'd make a lot of sense, but having a glut of three valuable players at one position is dicey. Teams know you're in that position, like the Rangers are with their catchers, so improving your players' versatility reduces the need to trade to actually benefit from your assets.

My point is that I feel leaving both players as exclusively first basemen in the Padres organization for all of 2009 would be a big waste of assets, especially after drafting Dykstra. Something's gotta give. You obviously can't discuss trade plans, but are there plans to ready Blanks as an outfielder?

Jim said...

So if your son suddenly decided to become a player agent exclusively for Padres, then the team wouldn't stand a chance in contract negotiations?

Greg said...

I'm confused - I thought September call-ups didn't accrue service time. I know MLB doesn't count those days as affecting rookie status. Are there two different counts of service time?

Steve24 said...

I was reading that Jeremy Guthrie with the Orioles agreed to a contract for less money this year than last going from $770,000 to $650,000. They said part of what he earned in '08 was due to the agreement he signed with the Indians as a signing bonus and the $650,000 is "more in line with what a player having his amount of service time should earn".

In trying to generalize, when you have a player who is clearly the ace of your staff (or at the very least a very important part of your team) how can you use only service time as a means to quantify what that player earns?

I understand the clubs have almost all of the control here but you clearly need to walk a fine line when the player in question is somebody you need to keep around long term. Do/should you make exceptions to the rule?

Does money spent early on ever translate into discounts down the road?

A team like Mil. with P.Fielder could stand to upset the player with what the player perceives is too little money.

A team like Tampa takes the approach of locking up a guy like E.Longoria even before he hits the big leagues. But what if they take a different approach with David Price (perhaps in their mind thinking he's a pitcher and therefore more susceptible to injury).

How and when do you apply this type of approach?

How do you justify locking up one young player and not another when talking to agents and the players themselves? Do you need to draw a hard line in the sand and say "this is how our club deals with young players. Period".

1. How about Heath Bell pitching in the 9th inning for Team USA vs Venezuela in the WBC? Gotta like seeing that even if it was a blow out.

2. Whats the good word on Aki Otsuka? My favorite moment from the last WBC was seeing Aki come in to Hells Bells in Petco Park to close out the game against Cuba.

3. In light of the last two comments, how much discussion goes into what the Padres AV crew does when Heath Bell comes in to close?

The issue with Trevor is already a touchy subject. Do they downplay Bells music? I assume HB is off the table.

What if Trevor comes in to close against the Padres?

jeffreypadre said...

Paul, what is the latest on Allan Dykstra? Where do you see him playing this year? As a local kid, I would sure like to see him do well.

Paul DePodesta said...

Greg,

September counts as Major League service just like any other days. Rookie status, I believe, is more about number of plate appearances than about service days.

Steve24 said...

"Determining rookie status:
A player shall be considered a rookie unless, during a previous season or seasons, he has (a) exceeded 130 at-bats or 50 innings pitched in the Major Leagues; or (b) accumulated more than 45 days on the active roster of a Major League club or clubs during the period of 25-player limit (excluding time in the military service and time on the disabled list)."

Greg said...

"during the period of 25-player limit" - That makes sense. So September service time counts for everything but determining rookie status.

Thanks