Understanding Pre-Arbitration Salaries

While the 2014-15 arbitration process is complete — final results can be found here — you may have noticed that agreements between non-free agent players and teams are still being reported and announced. These deals are being arrived at with players who own 40-man spots but remain shy of the service requirements to reach arbitration eligibility. (I.e., they have less than three years of service and did not qualify as Super Two players.)

Generally, MLBTR does not cover these deals. Not only are there are dozens per team, but they have minimal bearing on the broader market. The reason is simple: the collective bargaining agreement stipulates that teams may simply renew pre-arb players at the league minimum (or any other desired level) if agreement on a price cannot be reached, leaving no obligation for teams to pay more and affording scarcely any leverage to the player. In other words, there is not much to see or think about.

But, as with most things, there are exceptions. Last February, MLBTR’s Tim Dierkes reported that the Rockies had drawn the ire of some agents for only spending a few thousand dollars above the minimum. MLBTR’s Zach Links proceeded to undertake a deep dive on the subject, explaining how different teams use varying types of formulas to arrive at pre-arb salaries — many of which are informed by some combination of service time, playing time, and performance.

Sometimes teams choose to go well above the required levels of pay. The two most notable examples — Ryan Howard’s final pre-arb salary of $900K and Mike Trout’s $1MM pact last year — were followed by extensions. It is difficult to know whether those shows of good faith helped pave the way to longer-term deals, but the teams involved (the Phillies and Angels, respectively) obviously were motivated to go above and beyond for players who were coming off of MVP or MVP-type seasons.

In some cases, players and teams are unable to agree upon a deal, leading the team to simply renew the player at its desired value. This is in large part a symbolic matter, though as Zach and fellow MLBTR writer Steve Adams learned last year, the Astros have taken a $5K deduction (as against the team’s offer) when renewing pre-arb players who declined to reach agreement at the team’s price.

Inability to agree upon a price is but one aspect of a team’s relationship with a player, of course, but tension in the pre-arb process is certainly one possible outcome. Interestingly, Trout had his contract renewed without agreement in the season before his huge pre-arb payday, with his agent blasting the team at the time. The sides were ultimately able to come together on a nine-figure deal, with the prior years’ salaries constituting an element of the jockeying in the lead-up to that contract.

It remains to be seen whether this year will feature any particularly interesting cases. But it is worth noting that several of 2014’s top performers — Corey Kluber of the Indians, Anthony Rendon of the Nationals, and Sonny Gray of the Athletics come to mind — remain shy of arbitration eligibility.