Salary Arbitration

In certain specific instances, a player and team may choose to go through a salary arbitration hearing in order to determine that player’s salary for the upcoming season.

Players are eligible for arbitration hearings if they meet any of the following requirements:

● They have at least three full seasons of MLB service time, and less than six. Players with six or more years of service time become free agents after their contracts have expired, while players with less than six seasons are under team-control. Up until players have acquired three seasons of service time, their salary is determined solely by their team. For years three through six, players can take their salary demands to an arbitration panel if they can’t reach an agreement with their team.

● If they have less then three full seasons of MLB service time, but are within the top 22% of players with more than two years of service time. This is called the “Super Two” exception, and it often leads to top prospects being held down in the minor leagues until they have passed the Super Two threshold. For more on this, see our Super Two page.

If a player qualifies for arbitration, they can still reach a contract agreement with their team and choose not to go to a hearing. If the two sides cannot reach an agreement, though, both sides submit their salary request to an arbitration panel. A hearing is conducted, and both sides are allowed to state why they believe the player’s salary should be set at the level they specified. The arbitration panel — an unbiased, third party — then decides which case is stronger, and awards the player the salary they deem most appropriate.

Arbitration panels are notoriously old school, and tend to make their decisions based on player comparisons and traditional statistics like RBIs and Wins. If you are interested in finding arbitration comps for specific players, you can search past historical results using MLB Trade Rumors’ arbitration tracker tool.

It used to be that teams could offer soon-to-be free agents arbitration, and their draft pick compensation would be determined by if a player accepted or declined the offer. That has changed with the new CBA — see: Draft Pick Compensation for more details — and now teams can’t offer their free agents arbitration.

Teams must offer eligible players arbitration by December 12th, or else those players are non-tendered and released. After then, players and teams have until January 17th to reach an agreement, or else both sides must submit their salary demands to an arbitration panel. Hearings are conducted throughout the first few weeks of February.

Links for Further Reading

Arbitration – Biz of Baseball