What Does Arbitration Mean in Baseball?

Baseball arbitration is a legal process of determining a player’s salary when the player and the team cannot come to an agreement as to the salary amount. Both the player and the team submit their proposed one-year salary contracts to a neutral arbitrator who then chooses one based on the player’s merit and statistical information.

An arbitration panel consists of three neutral parties who listen to both sides. Both players and teams are given one hour to present their cases and a half hour to rebut the opposing side. The arbitrators then compile the player’s statistics and contributions to the team and compare them to other players with similar merit. Finally, the player is awarded the salary that the arbitration panel decides is closest to other players to whom he is comparable. The arbitration panel chooses one of the two offers; there are no adjustments to salaries once submitted.

Many factors determine if a player is eligible for salary arbitration. A player is eligible after three years with a team, prior to which he plays under the agreed offered-salary contract. After six years of active status with a team, a player can file to become a free agent or can accept an offered arbitration process to avoid free-agent status.