Arbitration Decision: Derek Jeter

Normally the Yankees would have another week or so before they had to decide whether to offer Derek Jeter, along with their other free agents, salary arbitration. Unless something happens to any of their free agents in the next week that won’t change the decision process. The difference is that we learn their intentions a bit earlier. In the past couple of years that has meant little, as the Yankees haven’t offered any of their free agents arbitration. This year, though, we could see a couple.

Earlier in the month Mike looked at some of the arbitration decisions and determined that the Yankees probably shouldn’t offer it to anyone except maybe Lance Berkman. I disagree. I don’t see any downside in offering it to Derek Jeter. He and the Yankees are working through a negotiation, and the offer of salary arbitration can act as an advantage for the Yankees. At this point, with no contract on the near horizon, they should certainly make the offer.

If Jeter declines

The Yankees have reportedly offered Jeter three years and $45 million. That’s just an opening gambit. There is no way the Jeter camp accepts. The Yankees know this. But the Yankees also know that few, if any, other teams would put this much on the table if Jeter decided to solicit offers. Adding an arbitration offer would create an even larger advantage.

If Jeter declines arbitration, teams would then have to not only beat three years at $45 million, but would also have to sacrifice a first round draft pick. True, the bottom 15 teams would have to sacrifice only a second rounder, but take a look at the draft order. Would Jeter sign with any of the teams with protected picks? Perhaps the Dodgers, but it doesn’t sound as though they have much money. But starting with the Tigers teams would have to give up their first rounder. Would they be willing to beat the contract and give up the pick? If the first is unlikely, the second makes it a no-contest.

The Yankees already have the leverage in this negotiation. They’ve made Jeter an offer well above what the open market would provide. Jeter risks tarnishing his image by picking up his ball and going to another team for less money. The Yankees might take a temporary PR hit for not bringing back their captain, but they will have offered him the most money. If they keep winning, they will recover from any black eyes. Offering arbitration only adds to this leverage.

If Jeter accepts

The chances of Jeter accepting arbitration are quite slim. From what we’ve heard he wants a deal of at least four years. Accepting arbitration would not only mean he gets just one year, but it means he goes through the same charade again next year. This is why offering him arbitration is basically a risk-free decision. The Yankees gain leverage with only a small chance of an adverse effect.

Even if Jeter does accept arbitration, is that so bad for the Yankees? They’d still have time to work out a deal between now and the February hearing. All it would do is guarantee Jeter’s spot on the 2011 team at a certain salary. Since he made $22 million last year I presume that he wouldn’t submit a figure of over $25 million; the Yankees will probably offer that same $22 million and would likely win if Jeter went over $25 million. That’s what happens when you have your worst season at age 36.

Given the upside and downside of the decision, I can’t see any reason for the Yankees to not offer arbitration. By not offering it they make Jeter slightly more attractive to other teams. I don’t think that will ever become a factor, but negotiations can go bust at any time. In the unlikely event that Jeter or the Yankees decide to walk away from the table, the draft pick compensation will at least give the Yankees something should Jeter decide to sign elsewhere. It’s not much compared to what Jeter could bring them in 2011, but it’s certainly better than getting nothing should things go horribly wrong.