The non-guaranteed nature of arbitration

With the Red Sox recent signing of Jason Varitek, we’ve yet again been exposed to the non-guaranteed aspect of arbitration contracts. As we learned in late October, a player who accepts arbitration is not guaranteed a contract for the following season. This became a big issue in Yankeeland when the team declined to offer arbitration to any of its free agents. Perhaps now we can gain a clearer understanding of the process.

As we learned from Jon Heyman, Varitek didn’t accept arbitration because he “didn’t believe that accepting arbitration would guaranteed him a spot on the team.” This references a recent and similar case, that of Todd Walker and the San Diego Padres. Following the 2006 season the Friars offered Walker, a Type A free agent, arbitration, hoping he would decline and they would pocket the two draft picks when another team signed him. Walker, apparently foreseeing the lack of interest in his services, accepted the offer. Not only that, but he won the arbitration case, winning a $3.95 million salary vs. San Diego’s offer of $2.75 million.

During Spring Training that year, Walker didn’t hit so well. Over 40 at bats he hit just .225 with just one RBI. Battling with him for the second base position were Marcus Giles, who hit .326 with a homer and 4 RBI, and Geoff Blum, who hit .316 with two homers. The Padres used this terminate Walker’s contract, paying him only $971,000. This was under the non-guaranteed clause:

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.

Walker and the Players Association filed a grievance, hoping Walker could recoup the total of his 2007 salary and become an unrestricted free agent. This did not work out well for them. The Padres were able to prove, via simple statistics, that Walker failed “to exhibit sufficient skill or competitive ability.” Walker then signed a minor league deal with the A’s, was eventually called up, but ultimately released (in the move which added Dallas Braden to the 40-man).

Given this case, one might understand why Varitek was wary about his prospects should he accept arbitration. However, it’s not like Walker was a mainstay in San Diego. He was a journeyman at that point. In other words, there was no San Diegan loyalty to Todd Walker like there is a Bostonian loyalty to Jason Varitek. I imagine that Theo might catch some flak if he wanted to release the Super Captain after Spring Training.

In the case of Bobby Abreu, well, I’m not so sure this would have been as cut an dry as the Walker case. First and foremost, Abreu is a much, much better player than Walker. Second, the Yanks would have to bank on Abreu having a poor, poor spring if they wanted to release him. Xavier Nady and Nick Swisher would likely have to outhit him in order for the Yanks to even make a case to release him. Not that Swisher and Nady are necessarily worse than Abreu, but it’s not exactly a slam dunk that they’d outhit him in the spring.

Moreover, because of the difficulty in releasing him, the Yankees, as Brian Cashman said at the time, would have had to consider Abreu a signed player, at a minimum $16 million, for 2009 if he accepted arbitration. Considering what we’ve heard from both Cash and Hal back in December and to this day, that might have been enough for them to pass on Mark Teixeira. That means he goes to Boston, and that changes the entire tenor of the off-season.

Looking back on the Walker case helps frame this arbitration debate. Yes, the Yankees could have offered Abreu arbitration, knowing that if he slipped up in Spring Training they could have released him for a fraction of his 2009 salary. However, that would take not only Bobby slipping up, but his potential replacements outhitting him. If that didn’t happen, the Yankees would undoubtedly have been on the hook for his entire 2009 salary, in addition to carrying him on the roster. Clearly, the Yanks couldn’t trade him without picking up a significant portion of the tab. As such, the Yankees would have to take his salary into consideration when making moves this winter. Clearly, the team had bigger plans.

Receiving two draft picks for Bobby Abreu would have been nice, but they weren’t guaranteed. Given Bobby’s contract demands (well, at least until recently), he might have declined the offer and hit the market, only to have his dreams shattered by a complete lack of demand. On the other hand, his agent might have had an inkling of the winter’s chill climate and advised his client to accept, with the hope of getting his multiyear deal in 2010. That would have significantly hampered the Yankees plans. Given how excited most of us are about the upcoming season, I’m fairly certain we prefer the way things eventually unfolded to the speculated outcome of offering Abreu arbitration and netting the draft picks.