Josh Donaldson’s agents miscalculated in baseball arbitration

By John Lott

TORONTO — Josh Donaldson just received an 860 per cent raise. In the weird world of baseball wages, one might plausibly argue that he remains underpaid. Certainly, his agent thinks so.

Meanwhile, the Toronto Blue Jays, who employ him, are laughing. They deftly played the odds, relying on precedent and winning an arbitration match in which Donaldson’s representatives overplayed their hand.

A bona fide star, Donaldson made US$500,000 — the major-league minimum — last year in his second full season as a member of the Oakland Athletics. In arbitration this month with their newly acquired slugger, the Blue Jays’ offered US$4.3-million. Donaldson’s agency countered with US$5.75-million. The three-person arbitration panel had to pick one figure or the other — no midpoint, no compromise. On Friday, the panel sided with the Jays.

Had his agency filed a figure between US$5.1-million and US$5.3-million, Donaldson might well have won. But his asking price put him on the wrong side of history.

Acquired from Oakland in a November trade, Donaldson is by most measures one of the top three third basemen in Major League Baseball. He is a power hitter and exquisite defender. If he were a free agent, he would spark a bidding war and might well secure a salary in the US$6-million range for the first year of a multi-year contract.

But at 29, Donaldson is also a late-blooming star. He has just over two seasons of big-league service time. MLB rules prevent him from becoming a free agent and testing the open market until he has reached six seasons of major league service, which will come after the 2018 season.

Those four remaining years of club control represented a key reason the Blue Jays were willing to give up Brett Lawrie and three lesser players for Donaldson, whose 14.1 WAR rating was the best among third basemen over the past two years, according to Fangraphs.com.

MLB does not have a salary cap, but it certainly constrains the average player’s earning power during his early years. That period of club control gives teams a chance for a return on its original investment in a prospect, while the threat of arbitration gives the player the opportunity to win something akin to merit pay, or land a multi-year contract.

Normally, a player is ineligible for arbitration until after his third year. But Donaldson was a “Super Two” ? arbitration-eligible because his service time fell in the top 22 per cent of players with two-plus years of MLB experience. His performance guaranteed him a hefty raise. Several experts suggested he would get about US$4.5-million on a one-year deal — and with four years of club control, the Jays were certainly not ready to offer a multi-year deal.

Clubs, player agents and arbitration panels look to comparable players — “comps” ? when assessing a player’s value. This year, there were two third basemen — Cincinnati’s Todd Frazier and Seattle’s Kyle Seager — who were obvious comps for Donaldson. Each is a durable power hitter with three years’ service time. (When looking at comps, arbitrators are barred from considering players whose service time exceeds the subject player’s ? Donaldson in this case — by more than a year.)

Considering their performances over the past two years, Donaldson is clearly the best of the three. (See table below.) Give a GM the choice, and Donaldson gets the nod.

In December, Seager avoided arbitration by signing a seven-year, US$100-million contract. His salary in the first year: US$4.5-million.

Four days before Donaldson’s hearing, Frazier avoided arbitration by signing a two-year, US$12-million contract. His salary in the first year: $4.5-million.

Arguably, Donaldson is worth more than that. But his agency, MVP Sports, effectively scuttled that likelihood by asking for too much.

In an excellent post Saturday on the Donaldson case, blogger Shawn Brody of BaseballEssential.com cited a heap of precedent to document this point.

“(All of these players who put up similar numbers to Donaldson in their seasons leading up to their first arbitration year got paid no more than $5.1-million, which was the midpoint of Donaldson’s arbitration hearing,” Brody wrote. “This means that while the mid-to-upper $4-million range was a rational salary for Donaldson, by asking for $5.75-million he left the panel with little choice but to side with the team. There’s more support as far as comparisons go for a salary below his $5.1-million midpoint than there is for a salary above.

“Had Donaldson filed for around $5.4 million, he surely would’ve won, as that would have lowered the midpoint to $4.85 million. It would’ve been easier to convince the panel that he deserved a salary above that midpoint, as there is a greater past precedent.”

(Brody is a first-year business management major — and pitcher — at Howard Payne University in Brownwood, Texas. He seems to have a future in baseball analysis if he doesn’t make it on the mound.)

Brody might be stretching when he postulates that a $US5.4-million ask would have been a winner for Donaldson. But his key point remains robust: arbitrators stick to precedent. And one precedent is that when in doubt, arbitrators favour the club.

Donaldson knew he would get a big raise. Had his agency asked for a little less, he would have earned a little more and improved his bargaining position over his remaining arbitration years.

It is doubtful that Donaldson will harbour post-arbitration acrimony against the Jays as he enters spring training. If he is annoyed at anybody, perhaps his target should be his agency, MVP Sports Group.

MVP’s top gun is Dan Lozano, whose clients include Albert Pujols and Joey Votto. Donaldson might yet join that elite class of performers, but his arbitration case delayed his opportunity to make their kind of money.