Ryan T. Campbell is currently a Master's Candidate at New York University's Tisch Center for Hospitality, Tourism and Sports Management. As a Western Canadian, he is a man without a team, but loves the game of baseball just the same.

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With the MLB off-season about to get in to full swing, it is a good idea to cover some of the concepts that go along with this period. What we will look at today is the rules and regulations behind free agency and arbitration.


Free Agency
MLB players are eligible for free agency after they have accumulated six years of service time on a major league roster or the disabled list. These players are free to sign with any team, although the team that signs them may have to give up a compensatory draft pick in order to sign the player. Free agents are separated in to three groups:

Type A: These players are ranked in the top 20% of players in their positional group by the Elias Sports Bureau. A team who signs a Type A free agent must give their first round pick to the team that is losing the player, and this team also receives a supplementary sandwich pick between the first and second round.

Type B: These players are ranked in the next 20% by the Elias Sports Bureau, and the signing team does not forfeit any draft picks. However, the team that loses this player received a sandwich pick as compensation.

Unclassified: These are the remaining free agents, and no compensatory picks are awarded.

A drawback to this system are that since each team only has one first round pick to give up, some teams may lose a Type A free agent without receiving a first round pick as compensation. This happened to the Milwaukee Brewers this past off-season when the New York Yankees signed Type A free agents Mark Teixeira and CC Sabathia. Because Teixeira was ranked higher by Elias, the first round pick went to the Angels while the Brewers only received the Yankees second round pick along with the sandwich pick. The Blue Jays were hit even worse, as AJ Burnett, another Yankees Type A signing, was ranked lower than Teixeira and Sabathia, and the Jays received a third round pick as compensation.

Another problem that needs to be addressed is the fact that many Type A free agents are not receiving contract offers because teams are no longer willing to give up their first round pick to sign high-priced free agents. Last off-season, this left players like Orlando Cabrera and Juan Cruz in limbo, as many teams did not think it would make sense to give up a first round pick to sign them.

Arbitration
Before reaching free agency, MLB players are eligible for a pay raise through arbitration. Players are eligible for arbitration if they have more than three years of service time, but less than the six years required for free agency. There is also an exception to this rule. MLB players that rank in the top 17% of service time that have more than two years but less than three years of experience are also eligible for arbitration, and are referred to as "Super Twos". This is why you see top prospects like Ryan Braun not being called up until May, as there team wants to ensure that they do not accumulate enough service time over their first three seasons to become Super Twos.

The arbitration process itself is pretty simple. Both the team and the player submit a salary that they think the player should play for the following season. The two sides argue their position to the arbitrator, who makes the final decision on which offer is the most fair given comparable wages among players with similar service time and ability. This contract is binding. Of course, the team and player are also able to sign a contract on their own without going to arbitration. The team can also non-tender the player if they do not want to risk having to give them a pay raise in arbitration, which would make the player a free agent.

Players with more than six years of service may also be offered arbitration by the team. This will allow the team to receive a compensatory draft pick if the player signs elsewhere. The player may also accept this arbitration offer, although in this case the contract awarded by the arbitrator is non-binding, and the player can be cut in Spring Training without receiving payment.

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