By Emilee White
In October 2022, Angels pitcher Shohei Ohtani signed a $30 million one-year contract to avoid going into arbitration with his team. It also set a record for the highest-paid contract for an arbitration-eligible player, topping Mookie Betts’ $27 million from the Boston Red Sox in 2020. But what does any of this even mean?
According to MLB.com, salary arbitration is when players and their teams enter a negotiation period over salaries. Players reach arbitration eligibility after three years of service time in MLB. Once contracts end, players and their teams start the process of drafting up new contracts with payment being the biggest point.
During this time, while the two entities go back and forth on salary, players and their teams also look at other “comparable” players’ contracts that were signed recently to help back up their negotiations. This means that a new contract could potentially reflect a decrease in pay — a player could receive a pay cut upwards of 20 percent.
This is all done in front of a panel of “arbitrators”, who then, after hearing both sides, decide what kind of compensation will be given in the contract. Typically, both players and teams strive to avoid arbitration by signing one-year or multi-year contracts.
Once a player enters their arbitration-eligible years — and depending on the kind of contract that is signed — they stay eligible each offseason for six years. After the six-year mark, players then become eligible for free agency. While Ohtani’s negotiated deal is the highest paid for a one-year contract in MLB history, it isn’t the first time players received payouts to avoid arbitration.
Players like Betts (he signed a 12-year contract with the Los Angeles Dodgers and got $365 million following his trade from the Red Sox), Gerrit Cole (he got $324 million in a nine-year contract with the New York Yankees), and Mike Trout (agreed to a 12-year contract for $426 million) all signed multi-year contracts with their respective teams. Ohtani is certainly on the up and up to becoming the highest-paid MLB player ever, but is there a chance he can be topped? Only time will tell.
Photo Credit: Conor P. Fitzgerald
