Organizational meetings: offering arbitrationBy
The Yankees brass are in Tampa today, solidifying their strategy heading into the off-season. While they’ll talk about which players they want to target in free agency and trades, there’s not much they can act on at this point. They’ll probably go hard after CC and kick the tires on Jake Peavy, but nothing can happen on that front for a bit. The first issue they can control in the here and now is Damaso Marte‘s option. The other issue is of whether to offer arbitration to pending free agents.
The following players will be eligible to file for free agency after the World Series: Ivan Rodriguez, Jason Giambi, Bobby Abreu, Mike Mussina, Andy Pettite, Carl Pavano, and possibly Marte. The Yankees have the option of offering each one of them arbitration prior to the December 1 deadline. Here’s a quick rundown of the process.
If the Yankees decide to offer arbitration, the player has the option to accept or decline. They must make this decision by December 7, a day ahead of the Winter Meetings. If they accept, the teams can hammer out a deal, or they can go to an arbitration hearing. Same deal as players with three to five years of service time; each side submits their offer, presents their case, and the judge picks one. In this case, the contract is non-guaranteed. The Yankees have the option to release the player in Spring Training and will only be liable for 30 to 45 days of service pay, according to Brian Cashman.
If the player declines arbitration, he can sign with any team he wishes. However, with the declining of arbitration comes compensation for the Yankees. If the player is judged as a Type A free agent, in the top 20 percent of his position, then the Yankees are entitled to the first round pick of the team that signs him. That is, unless they finished in the bottom 15 of the league. Those picks are protected. In that case, the Yankees would get the team’s second round pick. In any case, the Yankees would get a supplemental first round pick as well. If the player is classified as Type B, top 21 to 40 percent at his position, the Yankees would get a first round supplemental pick and nothing from the acquiring team.
If a player signs with another team prior to the December 1 deadline, it is assumed that the team offered him arbitration and he declined, meaning the team is entitled to the corresponding picks. This happened last year with Tom Glavine. The Braves signed him prior to December 1, and therefore had to surrender their first rounder to the Mets.
There are downsides to offering a player arbitration. As we’ve mentioned before, no player’s salary can be reduced by more than 20 percent in an arbitration hearing. This is the reason why the Yankees will not offer Jason Giambi arbitration, unless there is a handshake agreement, which we will discuss in a second. Giambi made $21 million in 2008, so his salary cannot fall below $16.8 million. If they offered him arbitration, he would probably accept. Remember, though, that the Yankees still owe Giambi $5 million as a buyout of his 2009 option for $22 million. That in essence puts the option at $17 million. So if the Yankees intended to keep Giambi, they’d simply pick it up, rather than go through the arbitration process.
Update: I was just reading through the CBA and came across this paragraph, under the rules for free agency. Emphasis mine.
If the Player accepts the offer to arbitrate, he shall be a signed player for the next season and the parties will conduct a salary arbitration proceeding under Article VI; provided, however, that the rules concerning maximum salary reduction set forth in Article VI shall be inapplicable and the parties shall be required to exchange figures on the last day established for the exchange of salary arbitration figures under Article VI.
So I’ve been wrong all this time. There are no rules for salary reduction for players with more than six years of service time.
The handshake agreement was common under the old collective bargaining agreement. This was more for utility than compensation, though. If a team failed to offer one of its own free agents arbitration, they had a deadline on negotiations, usually in mid-December. After that, the team could not re-open negotiations until May of the following year. If they did offer arbitration, however, they would have a early- to mid-January deadline to negotiate. The Yankees did this following the 2005 season with Bernie Williams. While there’s nothing to say the Yankees couldn’t work out a handshake agreement for Giambi to decline arbitration, I don’t see why he would do it. Bernie did because it gave him more time to work out a deal to return to the Yanks. For Giambi, it would be the final indicator of his exit from the Bronx.
The other downside to arbitration is that even though you can release a player in Spring Training and only be responsible for a small portion of his salary, he still takes up a 40-man roster spot all winter. This can be critical for teams with players eligible for the Rule 5 draft. You don’t want to lose a player like, say, Alan Horne, because you didn’t have enough 40-man spots on account of offering Pudge arbitration. The Yanks could use some 40-man spots to protect the likes of J.B. Cox, Horne, and Chris Garcia. Chad Jennings breaks down the Rule-5 eligible guys.
Let’s go through the crop of free agents and speculate on the best course of action.
Ivan Rodriguez: Offer. It’s unknown whether he’ll be a Type A or Type B, though it might be better if he’s a B. That way, there’s no disincentive for another team to sign him. In any event, it’s unlikely that Pudge wants to return. All current signs indicate that Jorge will be ready to go by Opening Day. Why would Pudge want to spend the last few years of his career backing up Jorge when he can get a starting gig elsewhere? Plus, there’s probably a multiyear deal waiting for him somewhere. Chances are he declines. Yet even if he accepts, the Yankees could carry him through the winter and see if there’s a deal to be made. Otherwise, they could just axe him in Spring Training.
Bobby Abreu: Offer. There are worse things than Bobby Abreu on a one-year deal. It might get a bit pricey — he made $16 million in 2008. He’s a Type A, though, and is seeking a multiyear deal. The Yanks won’t give it to him, or at least that’s what they’re indicating. Best to get compensation in that scenario. Bonus: If he signs with the Mets, we’d nab their first rounder, which is one ahead of us. So when we sign our own Type A, it actually works in our favor.
Mike Mussina: Offer. No brainer. Despite reports that Mussina thinks he’d have a better chance elsewhere to get his 300th win, all other indications are that Mussina is Yankees or bust for 2009. He made just $12 million in 2008, so you clearly offer him arbitration. If he accepts, good. If he declines, at least you get something if he does sign elsewhere.
Andy Pettitte: Don’t offer. The man made $16 million last year and didn’t live up to his contract. While I feel he can still be an effective pitcher in 2009, there’s just no need to offer him arbitration. He’s expressed his interest in coming back, and has said he won’t play for another team. Best to just hammer this one out if they’re going to do it.
Carl Pavano: Don’t offer. He has a $13 million option for 2009, which will likely be declined. It’s not like they can pull a Sheffield with him, since in this case they’d have to eat most of not all of his 2009 salary. They’ll take the $1.95 million buyout, the last few million he’ll steal from the Yankees. He made $11 million in 2008, so you can’t take a chance on arbitration. Just let him walk and become someone else’s problem.
Damaso Marte: Offer. If they decline his option, which I still think they should not do, you have to offer him arbitration. He’ll be 34 on Opening Day, and is likely looking for a multiyear deal, so there’s little chance of him accepting. Even if he does, he made $2 million in 2008, so the team could get away with a deal in the case.
Update 2: Radnom asked a good question about the termination pay, which Cashman addressed yesterday. This is the best I’ve been able to come up with from the CBA:
A Player who is tendered a Uniform Player’s Contract which is subsequently terminated by a Club during the period between the end of the championship season and the beginning of the next succeeding spring training under paragraph 7(b)(2) of the Uniform Player’s Contract for failure to exhibit sufficient skill or competitive ability shall be entitled to receive termination pay from the Club in an amount equal to thirty (30) days’ payment at the rate stipulated in paragraph 2 of (1) his Contract for the next succeeding championship season, or (2) if he has no contract for the next succeeding championship season, in an amount equal to thirty (30) days’ payment at the rate stipulated in paragraph 2 of the Contract tendered to him by his Club for the next succeeding championship season.
A Player whose Contract is terminated by a Club under paragraph 7(b)(2) of the Uniform Player’s Contract for failure to exhibit sufficient skill or competitive ability shall be entitled to receive termination pay from the Club in an amount equal to thirty (30) days’ payment at the rate stipulated in paragraph 2 of his Contract, if the termination occurs during spring training but on or before the 16th day prior to the start of the championship season. If the termination occurs during spring training, but subsequent to the 16th day prior to the start of the championship season, the Player’s termination pay shall be in an amount equal to forty-five (45) days’ payment at the rate stipulated in paragraph 2 of his Contract.
Clarifying things a bit more is the section on in-season terminations:
A Player whose Contract is terminated by a Club during the championship season under paragraph 7(b)(2) of the Uniform Player’s Contract for failure to exhibit sufficient skill or competitive ability shall be entitled to receive termination pay from the Club in an amount equal to the unpaid balance of the full salary stipulated in paragraph 2 of his Contract for that season.
So perhaps this does give players a disincentive to accept arbitration.