Inside the strategy that's turning arbitration upside down

Friday February 7th, 2014

Star Braves closer Craig Kimbrel could represent an interesting test case of teams' file-to-go strategy.
David Goldman/AP

Darwin Barney and the Chicago Cubs agreed on a one-year contract on Thursday. The negotiations proceeded as they very often do when they involve players like him, who have accumulated enough major league service time to be eligible for salary arbitration but do not yet have the six years required to become a free agent. On Jan. 17, the parties formally exchanged the salary figures between which a three-person panel drawn from the National Academy of Arbitrators would have had to decide had Barney's case gone to a half-day hearing, which would have been held between now and Feb. 21. The Cubs offered $1.8 million, probably too little for an everyday second baseman who, according to some metrics, is the league's best defender at his position. Barney and his agents asked for $2.8 million, likely far too much for a player who batted .208 last year. The sides settled on a salary of $2.3 million, thereby avoiding arbitration. It is no coincidence that the figure represents the exact midpoint between the Cubs' offer and Barney's request.

Nobody likes going to arbitration. "It's a pain in the neck for everyone," says a source who has been involved in several hearings. Most clubs, like the Cubs, will do whatever they can to settle with a player before his case is heard. Preparing for hearings, which are held in hotel conference rooms in either Florida (in even years) or Arizona (in odd ones), is both distracting and time-consuming. Club officials must devote attention to them that would undoubtedly be better spent getting ready for the upcoming season.

The hearings themselves, while these days usually more clinically data-driven and less emotional than in eras past, are unpleasant. Each side receives an hour to present its case, and then each delivers a 30-minute rebuttal. That means that a club must spend an hour and a half outlining the flaws possessed by an otherwise valued employee, to the otherwise valued employee's face. They are also risky, as the loser often leaves the room knowing that his strategy has cost him or his team hundreds of thousands of dollars, and sometimes millions.

Still, were Darwin Barney a member of one of a small but growing contingent of clubs, he could have been certain that once he submitted his salary demand his negotiation would have ended not with a lucrative settlement but in a conference room in St. Petersburg. These clubs have instituted a policy called, alternately, "file-to-go" or "file and trial," which means that once they have officially exchanged arbitration figures with a player, they will no longer negotiate with him. His salary will be decided in a hearing.

The White Sox were the creators of the policy, in 2001. They were soon joined by the Marlins, and the Blue Jays, Braves and Rays later followed suit. (The only exception to the policy, for at least some of these five teams, comes when a post-filing player is willing to sign a multi-year deal, as were the Braves' Freddie Freeman and Jason Heyward earlier this week.) Four other teams are now file-to-go on a case-by-case basis: the Brewers, Indians, Nationals and Pirates.

The policy, at first glance, appears to be both counterintuitive and counterproductive. Why would clubs compel themselves to do something that none of them really wants to do, which is to go to arbitration with their players? One part of the answer is that the file-to-go clubs have found that the policy actually helps them to avoid going to hearings, and to instead reach settlements with arbitration-eligible players that come earlier in the off-season and are friendlier to the team than they might otherwise have been.

Most agents like to delay seriously engaging in negotiations on their clients' behalf until after arbitration figures have been submitted, thereby establishing, as in Barney's case, a formal "midpoint" -- one that is often artificially inflated by the agents' intentionally high demands, as the number has been submitted with the knowledge that a settlement is the most likely outcome. This option has been removed from the playbook of agents who are dealing with file-to-go teams, and the result is most often a settlement that has not been influenced by a midpoint of questionable provenance.

This winter, the five firmly file-to-go teams had a combined 29 players file for arbitration, including among them superstars like the Rays' David Price and the Marlins' Giancarlo Stanton. Of the 39 players who ended up exchanging arbitration figures with their clubs, just three came from those five teams. Now that Freeman and Heyward have signed extensions, only one -- Braves' closer Craig Kimbrel -- remains unsigned.

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A second factor driving the file-to-go clubs is that they believe that should their policy result in arbitration, it will make the results of those hearings less damaging even if they lose them. This is because it forces players and agents to file realistic numbers with which the arbitration panel might be inclined to agree. The signature example here involves a pair of young superstars who reached arbitration eligibility in consecutive years: Miguel Cabrera, with the Marlins in 2007, and Ryan Howard, with the Phillies in 2008.

As a 23-year-old in 2006, Cabrera had his third straight extraordinarily productive year. He batted .339 with 26 home runs and 114 RBIs, and his OPS+ of 159 was the league's seventh-best. However, he also played for a file-to-go club, and because he had never before earned more than $472,000 in a season, he was wary of losing any potential earnings in the hearing to which he knew he would be subjected. Cabrera filed at $7.4 million; the Marlins countered at $6.7 million. Though the Marlins lost the hearing, this was one of the rare instances, for that often moribund franchise, in which a loss was really a win. They would have to pay just over 10% more than they had wanted to for the services of a firmly established superstar, one who would the following season set career highs of 34 home runs and 119 RBIs.

Howard reached arbitration the next winter, and with credentials similar to Cabrera's. He had won the NL MVP award in '06, and in '07 he had hit 46 homers and driven in 136 runs. The Phillies officially offered Howard even more than the Marlins had Cabrera -- $7 million -- but Howard's agent, Casey Close, knowing that the Phillies were not file-to-go, came back with a far higher figure: an even $10 million, likely with the idea that the sides would settle somewhere near the midpoint of $8.5 million. Negotiations continued up until the hearing began, but the parties could not come to an agreement. So the hearing happened, and Howard, like Cabrera, won. In this instance, though, Philadelphia had to pay its young star at least 40% more than it had thought fair, money the club might have used to sign one or more additional contributing players.

The Marlins undoubtedly took note of the result of Howard's negotiation, as compared with that of their own with Cabrera, and represent a strong case study. They have continued to steadfastly hew to their policy, even if it means that they have technically "lost" more than their share of hearings, and have participated in others that have involved salary spreads so small that they only appear to be a waste of time.

In 2007, they went to arbitration with Kevin Gregg over $125,000 (he wanted $700,000, they offered $575,000); they won. In 2010, their hearing was against Cody Ross, who wanted $4.45 million to their $4.2 million; Ross won. In 2012, Emilio Bonifacio filed at $2.2 million, and the Marlins at $1.95 million; Bonifacio won.

However, as with Cabrera, the spreads on even those losing cases were so narrow that the Marlins could be sure their policy worked on the whole, even though they have sustained a couple of somewhat more significant losses over the years; to Dan Uggla in 2009 (Uggla won $5.35 million, while the Marlins had offered $4.4 million) and Anibal Sanchez in 2012 (Sanchez won $8 million, against the team's offer of $6.9 million).

If the file-to-go is so effective, why hasn't every team instituted it? There are several reasons. Some clubs believe that they are such skilled negotiators that they have no need for a policy that necessarily limits their options and tactics. Some want to avoid the distraction of ever going into arbitration, even once in a while. Some, especially the large market ones, aren't overly concerned about savings on the scale that the policy might produce, relative to their payrolls as a whole. And some don't think it's worth it, given its potential to antagonize those with whom they must do business year after year.

To that last point: Agents, players and the players' union resent the file-to-go policy, by and large, and have long been trying to devise ways to challenge it. They were not afforded a chance to do so last winter when, for the first time since 1972, not a single arbitration case ended up in a hearing. The next few weeks, though, will likely provide an opportunity. While most of the 16 players who are currently headed for arbitration will likely end up settling, some of them on the proverbial the courthouse steps, at least one of them almost certainly won't: Kimbrel, the Braves' outstanding, 25-year-old closer.

Despite the fact that he plays for a file-to-go team, Kimbrel, who has averaged 46 saves during his three full seasons while striking out nearly 15 batters per nine innings, officially requested $9 million, which is $2.75 million more than a closer who was eligible for arbitration for the first time has ever earned. Atlanta's offer was $6.55 million.

A win for Kimbrel would be important for the players' union in that it would establish a new precedent for the salaries of young closers (even though, as far as young closers go, Kimbrel is one of a kind). It would amount to a shot to the Braves and file-to-go teams like them. A defeat of nearly $2.5 million, on a spread of 37%, would be significant, and it could embolden future players on the Braves, Blue Jays, Marlins, Rays and White Sox to wage arbitration battles against their intransigent clubs.

We are, however, likely several years away from a reversal of the file-to-go trend, even should Kimbrel win his case. More and more teams are likely to implement the policy, to the detriment of the Darwin Barneys of the world. They'll do so because, in general, it works.

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