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Salary arbitration: A necessary evil

An inside look at the salary arbitration process through those who have experienced it on both sides.

New York Daily News via Getty Images

GLENDALE -- Kenley Jansen and the Dodgers reached a contract agreement last Tuesday, avoiding a hearing that was scheduled for Feb. 18 in Tampa, all part of the necessary evil that is salary arbitration.

The Dodgers haven't had an arbitration hearing in seven years, since prevailing against relief pitcher Joe Beimel in 2007. They came closest to another hearing in 2009, but agreed to a contract with Andre Ethier just outside the room minutes before the scheduled hearing.

The ultimate goal is for both player and team to meet somewhere in the middle, but Dodgers general manager Ned Colletti and assistant GM Alex Tamin spend hours of preparation just in case a hearing is needed.

"We're always prepared to go. You have to prepare to go if you're going to be involved in the process," Colletti said. "We have a good group that goes. Alex before he came here had a great record, a great perspective on preparing a case, doing a case, prevailing in a case. You go when you have a disagreement you can't resolve."

Jansen filed in January for a salary of $5.05 million in his first year of eligibility for arbitration, for players with between three and six years of service time (and in some cases, over two years of service time). The Dodgers countered at $3.5 million, meaning their $4.3 million settlement was just north of the midpoint of $4.275 million.

"The process is there to solve an answer that two parties can't come up with on their own. It's never personal, just a difference of opinion." -Ned Colletti

The midpoint is really the key to the entire process, as both player and team gravitate toward a common ground somewhere in the middle. But there is constant negotiation, and there is game theory in the salary exchange numbers ultimately filed, trying to pick both a winnable position and simultaneously guessing what the other side's number will be.

"It seems like everybody knows what the number is," said manager Don Mattingly, who went through the process as a player.

In 1985 Mattingly won the American League MVP, hitting .324/.371/.567 (a 156 OPS+) with 35 home runs and led the majors with both 48 doubles and 145 RBI. He was seeking $1.5 million in arbitration in 1986, while the Yankees countered at $1.25 million. The two sides settled at $1.375 million, the exact midpoint.

By settling the two sides avoided a hearing, which was nearly the same process then as it is today. A three-person panel hears arguments from both player and club representatives (back in 1987, there was only one arbitrator, not three) and in the end picks either one number or the other, with no in between.

Mattingly followed up his MVP campaign with arguably an even better year in 1986, hitting .352/.394/.573 (a 161 OPS+) and led the majors in hits (238), doubles (53) and total bases (388). He filed for salary arbitration at $1.975 million, and the Yankees countered at $1.7 million.

"I had just put up two huge years. What we were asking for compared to my years [service time, under four years at the time], was way over," Mattingly said. "They showed all these guys with similar salaries [Mike Schmidt, Ozzie Smith among them] that had 12, 13 years. That was basically their whole argument, that I hadn't played very long."

The argument didn't work, as Mattingly won the case. Yankees owner George Steinbrenner was not happy. Per the Los Angeles Times in 1987:

"I don't think any player is worth $2 million a year," he said. "I don't think any player is worth $1.5 million a year.

"But I wasn't surprised by this because I've been dealing with unions and arbitrators for 35 years and they love to get a big case like this. They love to make a name for themselves and to set precedent.

"Salaries are starting to come down now, but arbitration is still the cancer of baseball."

More Steinbrenner the same day from the New York Post:

''The monkey is clearly on his back,'' Steinbrenner said by telephone from Tampa. ''He has to deliver a championship for the Yankees like Reggie Jackson did when he was the highest-paid Yankee. The pressure is on him. I expect he'll carry us to a World Series championship, or at least the pennant.''

Then, offering his new view of Mattingly, the owner added: ''He's like all the rest of them now. He can't play little Jack Armstrong of Evansville, Ind. He goes into the category of modern-player-with-agent looking for the bucks. Money means everything to him.''

With 27 years of distance, Mattingly is able to laugh about the process now.

"The year before we were going [to a hearing] too, and we settled about a quarter until midnight of the deadline. We settled," Mattingly remembers. "It got to the same time the next year, and Steinbrenner calls and says, 'Don't worry about it, it's not personal, it's just part of everything we have to do. It's not going to change anything, it will all be great.' Then I figured out it was all good if he won."

Longtime baseball executive Tal Smith argued for the Yankees against Mattingly in 1987, one of over 160 cases in Smith's career (most recently, Smith famously lost to Ryan Howard in 2008, allowing the Phillies first baseman to earn a record $10 million with under three years of service time). Smith remembered a particularly memorable arbitration case with Jim Salisbury of the Philadelphia Inquirer in 2009:

In 1986, he was representing the Kansas City Royals in an arbitration case against pitcher Bret Saberhagen.

After both sides made their arguments, the arbitrator slid a piece of paper over to Saberhagen and requested an autograph.

"That sort of distressed us," Smith said in a telephone interview from his office in Houston, where he runs a consulting business and serves as president of baseball operations for the Astros. "Needless to say, we lost that one."

It's one thing for a player and team to negotiate back and forth on a contract. But for a player to have to sit in a hearing and listen to the team try to convince a third party that they aren't worth as much as they thought can be disconcerting. But only if the player takes it personally.

"Do you like to go? Not necessarily. The process is there to solve an answer that two parties can't come up with on their own," said Colletti. "It's never personal, just a difference of opinion."

Colletti helped prepare the Cubs case against Andre Dawson in 1988 after the outfielder won the National League MVP in 1987. Dawson was a free agent the year before - unable to field offers smack dab in the middle of baseball's collusion scandal - and signed a blank contract with Chicago. After earning a $500,000 base salary in 1987, Dawson sought to top Mattingly's record in 1988, filing at $2 million. The Cubs filed at $1.85 million.

Colletti and Dawson were friends.

"I sat across the table from him and we looked at each other and said, 'What are we doing here?'" Colletti remembered. "We prevailed in the case."

Before the season started, Dawson and the Cubs ultimately agreed to a multi-year deal.

Even with the acrimony from Steinbrenner, Mattingly didn't mind going through arbitration.

"The process didn't bother me at all," Mattingly said. "I always look at arbitration for a player moving up as a can't-lose. If you lose, you still win. You're getting a big raise already. I never took it personal."

It was different for Dodgers bench coach Tim Wallach, a teammate of Dawson in Montreal. Wallach earned $260,000 in 1983 when he hit .269/.335/.434 with 19 home runs and 70 RBI, down from 28 homers and 97 RBI in 1982. He asked for $500,000 in 1984, while Montreal countered at $360,000. The Expos won.

"I was in there, and it's very uncomfortable. I'm glad when guys don't have to go through it. I get it, probably more now than when I played," Wallach said. "They focus on the negative and you focus on the positive, and in this game there's always a lot of negative. It bothered me for a little bit at the time. But after I realized, I do a lot of things I know I need to get better at, it's part of the process."

Wallach said he thought the arbitration process has improved over time, since its inception in 1974. Wallach was one of 10 players to go to a hearing in 1984, the lowest figure of the 1980s.

During the decade, an average of 98 players filed for salary arbitration with 21 hearings per year, per Maury Brown's Biz of Baseball. Since 2010, an average of 134 players have filed each season, with just four hearings per year (that average could be pushed to five this week, with cases for Justin Masterson, Homer Bailey and Brandon Belt still unresolved). In 2013, 133 players filed for arbitration but there were no hearings, the first time that happened.

"It is a different process [now]. It's a good one, because it tends to now get guys more to where they should be," Wallach said. "You go through it, and you certainly didn't want to go through it again."

It's a process Jansen thankfully avoided. Though he was saying all the right things before ultimately signing his one-year deal.

"I don't think about [a hearing]. My mind is not even on that right now," Jansen said last week. "I'm just trying to get ready for the season. I leave that to my agent [Adam Katz]. Right now is his season."

Thankfully for the Dodgers, Katz's season is now over and Jansen can get back to concentrating on his own season.