Sports Arbitration – A Specialized Playing Field

by RyanD on September 21, 2012

Sports arbitration is the process by which the player and the team meet with a neutral third party to decide on salary. Arbitration is generally a last-ditch effort to come to an agreement after usually months of disparate offers between the two parties.

How It Works

Once the parties have engaged the process, each side tries to make their case. Hard facts like statistics and overall performance from previous seasons will be weighed with injuries, time missed and the player’s length of time with the team. The uncomfortable part is when the player’s leadership abilities, general attitude, and impact to the team’s success come into play, often ruffling feathers. Comparable players’ salaries are then considered, but player and team may have very different views as to whom the player compares. The arbitrator then makes a decision based on the information laid out.

Different Leagues, Different Rules

In the NHL, each side has 90 minutes to make their case and then there are two rounds of rebuttals. 48 hours later the arbitrator hands down the decision, which the team must accept if it comes under what’s called the “walk away number.” If the decision is over that amount, the team has the option to accept or walk away. In MLB arbitration, the process is similar to the NHL’s, but the arbitrator must choose either the salary amount submitted by the player or the team. If the two sides have radically different idea of worth, one side will certainly be disappointed with the ruling. The 2008 Ryan Howard ruling is one of the best examples of this, as Howard submitted $10 million over two years when the Phillies only submitted $7 million for the same period of time. The arbitrator had decided Howard deserved a salary similar to Miguel Cabrera, who was due for $7.4 million over the same timeframe, and wouldn’t accept the Phillies’ proposal because it came in under Cabrera’s salary. Thus, Howard walked away with his submission, a record at the time.

An Unfriendly Process

Franchise owners tend to try to avoid arbitration because it’s not a favorable process for the team. In the endeavor to get the arbitrator to accept their proposal, the team must list out essentially all of the faults and shortcomings of the player – a process that doesn’t necessarily warm the heart of a player already feeling undervalued by the team. In the NHL, arbitration is very rarely actually engaged, as more often the players and teams set to go to arbitration agree on an amount right before the process is set to start.

Different Types of Arbitration

In addition to individual contract arbitration, the league and player’s associations can enter into arbitration over items falling under a Collective Bargaining Agreement. Most recently, the NBA and the NBA Player’s Association entered arbitration for a decision on waived players retention of their Bird Rights, which allow a team to exceed the cap to retain their own players, if the player in question has been with the team for the previous three consecutive seasons. Traded players had retained their Bird Rights, and the union was arguing that waived players should as well, while the league wanted it reset upon waiver. Arbitration ruled in June 2012 that waived players will retain their Bird Rights. Sports arbitration is a process making headlines more and more as contracts are becoming richer and more complex. Arbitrators are first lawyers generally working in labor relations who move into the sports field after arbitrating labor cases. Sports arbitrators receive salaries commensurate with experience.

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