Brewers taking new approach to arbitration
'File and go' strategy used with Estrada and Francisco, saving club on payroll
MILWAUKEE -- When the Brewers signed Marco Estrada and Juan Francisco in the hours before the sides were to file arbitration figures, it reflected a quiet but consequential change in the way the team has been doing business with its arbitration-eligible players.
The Brewers have joined a tide of teams leaning toward a strategy referred to as "file and go," or "file and trial." Club officials argue that the change, which has been in place for Milwaukee's last three arbitration cycles, creates a more sensible negotiation and will save hundreds of thousands of payroll dollars over the long term.
"I think we've gotten much better deals since we've taken this position," said Brewers vice president of business development Teddy Werner, the team's arbitration guru.
Before he elaborates, here is a reminder of how arbitration works: Eligible players are generally those with at least three years of Major League service but not the six years required to reach free agency. For the first time in their careers, these players have some leverage to negotiate a salary comparable to peers with similar service time and statistics, or so-called "comps." Sometimes, the comps are clear, and the sides reach an agreement. But if they do not reach an agreement by mid-January, each side is required to file a one-year salary proposal, and everyone begins preparing for a hearing in February.
Hearings are unpleasant procedures. They last three hours, during which each side defends its proposal to a three-member panel of judges, who choose either one figure or the other. The player is almost always present to hear his employer point out his shortcomings.
In the absence of "file and go," the sides continue negotiations right to the moment a hearing begins, and the Brewers were very successful over the years at avoiding them, going from 1998-2010 without a single hearing. Brady Clark, J.J. Hardy and Shaun Marcum were among the players who settled on the doorstep, usually at or near the midpoint of figures filed back in January.
But Werner wondered what price these "arbitrary" midpoints carried.
"Let's say, hypothetically, that we thought a guy was worth $1.5 million," Werner said. "So we file at $1.3 [million] and the player files at $2 [million], and even though an objective person would say the 'right' number is $1.5 million, the negotiation starts moving toward this midpoint of $1.65 million.
"Well, from the club's perspective, that's just not a fair number. We're only talking about $1.65 million because the player has filed an artificially high number to try to move the negotiation up a little bit. Look, I get it. If I was on the same side, I would try to do the same thing."
Clubs can do the same thing, Werner conceded, by filing an artificially low number meant to drive down the midpoint. But there is a danger to both sides in the event a case actually goes to a hearing room, and officials are forced to defend a figure they are not entirely comfortable with.
So the Brewers changed their policy.
With "file and go," if the sides do not have a deal at the deadline to exchange figures, they go to a hearing. No more negotiations.
"It doesn't mean you're going to win every case. Hey, it doesn't mean you're going to win any cases," Werner said. "But what you're going to get is a pre-exchange date negotiation that is far more fair and reasonable. The party on the other side knows that if we don't have a deal by Jan. 20 or whatever the exact date is, the club is going to file a very serious number and go to a hearing. Nobody wants to do that, but they know that when push comes to shove, we are going to do that. You get better negotiations.
"I firmly believe that, over time, this is going to work. In Year 1, it may not work out. In Year 2, you may lose a case. But even when you lose a case, you're losing a case at a more reasonable number. Over a five-year period, you are saving so much money."
The reaction from agents, Werner said, is that, "they don't like it. I think it takes a little of the leverage away from them, so they can [no longer] stall, stall, stall and then file a really high number on the exchange date in the hopes that it will push the club to meet at an artificially high midpoint. Even if we don't meet at the midpoint and we meet somewhere below that, my guess is the number is still high, and the agent can act like, 'OK, we tossed you one here, club, so we could get a deal done.'"
Estrada, one of the two players who went into arbitration with the Brewers this year, characterized the process as reasonably painless.
"This was my second one, and they had already started this last year, so I didn't even really know what the process was before," Estrada said. "I thought this was just how it worked. It was fine. We've agreed both times so far, and even though it came down to the wire, we were always really close. At times I was like, 'Oh man, I may have to go into court here,' but the next day they would be even closer. At the wire, they gave us a best offer, and it was good enough to take."
He signed for $3.325 million.
For some clubs, like the Miami Marlins, the policy is strict. But Werner said the Brewers were open to exceptions, as happened in 2012, the first year this policy was in place, when it was clear to all parties that Marcum's salary was going to be dictated by then-Marlins pitcher Anibal Sanchez and then-Cubs pitcher Matt Garza. Sanchez's hearing was scheduled after Marcum's, so he was a challenging comp. When Garza and the Cubs settled on a deal on the morning of Feb. 3, the Brewers reached a compromise with Marcum, literally minutes before his hearing was to begin.
But the Brewers did go to a hearing that year with reliever Jose Veras, when the panel sided with the Brewers' $2 million offer in that case, over Veras' request for $2.35 million. Club officials viewed Veras' request as perfectly reasonable, said Werner, who revealed that one of the Brewers' offers before the filing date that, with makeable incentives, could have actually earned Veras in excess of $2.35 million. Werner believes that Veras' eventual filing figure was influenced downward by the "file to go" policy.
"There are so many variables in this process that you can't say anything is going to be black and white," Werner said. "But the reason we've gone in this direction is we feel it's really the only way to have some control over the process."