Final-Offer Arbitration in Major League Baseball: An Effective Dispute Resolution Process
By Jeremy Ahdoot
Final-offer arbitration, commonly referred to as “baseball arbitration,” is a process where one or more arbitrators will settle an issue by selecting one of the final offers proposed by disputants.[1] In the 1973-1974 offseason, Major League Baseball (MLB) introduced final-offer arbitration as a mechanism to handle salary disputes between professional baseball players and their teams.[2] To be eligible for salary arbitration, players must have more than three, but less than six, years of service time.[3] One year of service time is completed when a player spends 172 days on a team’s 26-man roster or MLB’s injured list in a given season.[4] An exception exists for “Super Two” players, who are players with greater than two but less than the requisite three years of service.[5]
There are several advantages to baseball arbitration. First, the process is cost-effective, as it resolves salary disputes between parties expediently.[6] Furthermore, baseball arbitration ensures that parties reasonably negotiate with each other.[7] Parties engaged in this process are compelled to offer realistic salary figures based on genuine beliefs of what a player is worth, which certainly promotes fairness.[8] Moreover, baseball arbitration promotes the interests of younger players who may otherwise be paid drastically less without the option to arbitrate. For example, when young phenom Vladimir Guerrero Jr. first became eligible for arbitration, his salary increased from nearly $600,000 to just under $8 million year over year.[9] This major increase can be attributed to Guerrero Jr.’s rapid trajectory, becoming an all-star at age 22, and remaining one of the best players in baseball today. Prior to the 2024-2025 season, Guerrero Jr. won a $19.9 million salary in arbitration.[10] This year, Guerrero Jr. settled his contract before attending arbitration, earning himself $28.5 million for the upcoming season.[11] The arbitration process enables players like Guerrero Jr., who could be much more valuable than their initial deals might suggest, to bargain for their fair market value.
In contrast, critics take issue with the “single-choice model” presented to arbitrators by baseball arbitration, which constrains arbitrators in determining potential outcomes.[12] Perhaps overlooked, baseball arbitration could also create tension between a player and his clubhouse. For instance, after one of baseball’s best pitchers, Corbin Burnes, lost his salary arbitration case with the Milwaukee Brewers nearly two years ago, he expressed hurt and disappointment from the team’s remarks in arbitration.[13] The Brewers ended up trading Burnes to the Baltimore Orioles shortly after.[14]
Ultimately, while there are potential disadvantages, final-offer arbitration is an efficient dispute resolution process that promotes fairness and settlement.[15] As illustrated by decades of MLB contract disputes, despite the prospect of arbitration, the overwhelming majority of players and their respective teams settle disputes before attending an arbitration panel.[16] While baseball arbitration may benefit players more than teams, the procedure promotes rational offers and exposes unreasonableness, which justifies its long-standing use in Major League Baseball.[17]
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[1] Max H. Bazerman & Daniel Kahneman, How to Make the Other Side Play Fair, Harvard Bus. Rev. (Sept. 2016), https://hbr.org/2016/09/how-to-make-the-other-side-play-fair [https://perma.cc/S4HZ-P8UR].
[2] Caitlen Moser, Salary Arbitration in Baseball Contracts, Arb. Brief (Mar. 15, 2024), https://thearbitrationbrief.com/2024/03/15/salary-arbitration-in-baseball-contracts/ [https://perma.cc/BKX3-FU6P].
[3] Salary Arbitration, Major League Baseball https://www.mlb.com/glossary/transactions/salary-arbitration [https://perma.cc/M37N-XHNJ] (last visited Feb. 23, 2025).
[4] Service Time, Major League Baseball, https://www.mlb.com/glossary/transactions/service-time [https://perma.cc/J8UX-DT6Z] (last visited Feb. 23, 2025).
[5] Salary Arbitration, supra note 3.
[6] Jeff Monhait, Baseball Arbitration, 4 Harv. J. Sports & Ent. L. 105, 131 (2013).
[7] Id.
[8] Charles T. Jeremiah, Construction Disputes and ‘Baseball’ Arbitration, Jackson Lewis (June 30, 2024), https://www.jacksonlewis.com/insights/construction-disputes-and-baseball-arbitration [https://perma.cc/SN9C-MRBL].
[9] Vladimir Guerrero Jr., Spotrac, https://www.spotrac.com/mlb/player/earnings/_/id/21295/vladimir-guerrero-jr [https://perma.cc/QP2B-GKPE] (last visited Feb. 23, 2025).
[10] Manny Randhawa, Vlad Jr. Wins Arbitration Hearing Record $19.9M for ’24, Major League Baseball (Feb. 7, 2024), https://www.mlb.com/news/vladimir-guerrero-jr-wins-2024-arbitration-case [https://perma.cc/UY27-2TXK].
[11] Steve Berman, Vladimir Guerrero Jr., Blue Jays Avoid Arbitration with $28.5 Million Deal for 2025, N.Y. Times (Jan. 9, 2025), https://www.nytimes.com/athletic/6051078/2025/01/09/vladimir-guerrero-jr-blue-jays-arbitration-deal/ [https://perma.cc/7UJ8-PEF5].
[12] Monhait, supra note 6, at 139–40.
[13] Pat Graham, Burnes Stung by Brewers’ Words in Salary Arbitration Loss, AP News (Feb. 16, 2023), https://apnews.com/article/mlb-sports-milwaukee-brewers-corbin-burnes-phoenix-7e45114267affad195aa6fafe4e4cea8 [https://perma.cc/W7JX-E85L].
[14] Jake Rill, In Blockbuster Trade, O’s Acquire Burnes from Brewers, Major League Baseball (Feb. 2, 2024), https://www.mlb.com/news/corbin-burnes-traded-to-orioles [https://perma.cc/5AKL-5CKT].
[15] Edna Sussman & Erin Gleason, Everyone Can Be a Winner in Baseball Arbitration: History and Practical Guidance, 91 N.Y. St. B.J. 21, 22 (2019).
[16] Mike Axisa & R.J. Anderson, MLB Arbitration: Vladimir Guerrero Jr., Garrett Crochet, Tarik Skubal Among Those to Earn Big Raises, CBS Sports (Jan. 10, 2025), https://www.cbssports.com/mlb/news/mlb-arbitration-vladimir-guerrero-jr-garrett-crochet-tarik-skubal-among-those-to-earn-big-raises/ [https://perma.cc/F7PV-7PUB].
[17] Max H. Bazerman & Daniel Kahneman, supra note 1.
