A proposal to fix MLB’s broken service time rules

The practice of organizations manipulating service time to limit how much they’ll need to pay for wins in the distant future has become somewhat commonplace in baseball today. Many are outraged at front offices for not doing what’s right for their players and fans, some actually blame the players for agreeing to this construct in the existing collective bargaining agreement, and some just quietly accept the situation as just something baseball teams do. As we’ve discussed quite a bit around here, Eloy Jimenez has put this debate front-and-center for the White Sox and their fans.

The truth is, the current system is flawed for everyone. Front offices need to choose between naturally letting their players progress and making an optimal budgetary decision, the latter of which results in general managers needing to invent ridiculous fabrications to avoid direct implications of acting in bad faith. The players lose financially, and the fans get frustrated waiting in anticipation for exciting players who are being held down for non-baseball reasons. Owners could potentially see some benefit from general managers exploiting the service time loopholes, but the current defective system is by no means a critical piece in their battle to retain as much of the revenue pie as possible, especially if the budget remains constant regardless of how much is allocated to a particular player.

There are two major issues with the current rules regarding service time. The first is the “six vs. seven years of control” problem which results from the rules described below:

Each Major League regular season will consist of 187 days starting in 2018 (typically 183 days in previous years), and each day spent on the active roster or disabled list earns a player one day of service time. Under the 2017-21 Collective Bargaining Agreement, any player who violates the drug program will no longer receive Major League Service during his suspension, unless his suspension is reduced by 20 or more games under the mitigation provision of the program.

A player is deemed to have reached “one year” of Major League service upon accruing 172 days in a given year. Upon reaching six years of Major League service, a player becomes eligible for free agency at the end of that season (unless he has already signed a contract extension that covers one or more of his free-agent seasons).

A player with five years and 171 days of service time, therefore, is effectively a day of service short of reaching free agency. Teams attempting to manage to this rule will typically wait to promote a player until it is certain that they will accumulate fewer than 171 days of service by the end of the year.

The other problem is the method by which players attain “Super Two” status:

All players with at least three (but less than six) years of Major League service time become eligible for salary arbitration, through which they can earn substantial raises relative to the Major League minimum salary. Additionally, Major League Baseball each year identifies the group of players that ended the prior season with between two and three years of Major League service and at least 86 days of Major League service in that season and designates the top 22 percent — in terms of service time — as arbitration eligible. Those in the top 22 percent — “Super Two” players — are also eligible for salary arbitration despite having less than three years of Major League service.

This rule is perhaps more frustrating because there’s no defined cutoff, as the exact number of days of service needed to become a Super Two player won’t be known until more than two years after the promotion decision needs to be made. The uncertainty causes teams concerned about Super Two status for potential star players to be overly conservative in their promotions.

The problem with both of these rules is that they involve a “cliff date” after which a great deal of equity shifts from the player to the team. One of the two issues would be simple enough to fix with a simple mathematical solution. The other would require radical changes. We’ll start with the easy one.

How to fix the Super Two problem

The rules dictate that a player in the top 22 percent of players between two and three years of service time get to go to arbitration a year early. This rule was put in place presumably to give a benefit to the players most disadvantaged by being held in the minors just long enough to delay their free agency by a year. However, there’s simply no need for there to be a massive gulf in earnings potential between someone with (for example) two years, 130 days of service and someone with two years, 131 days of service. Money is payable in very specific amounts. Salaries can be averaged and blended. The solution here is an interpolation of possible salaries.

Here’s how it could work. Every player with between two and three years of service would begin to be eligible for arbitration (which, for non-Super Two players, would be a year earlier than under the current system). At an arbitration hearing for a player’s first year of arbitration, the player and team would each submit proposed salaries based on comparable salaries of first-year arbitration-eligible players from the recent past, like normal. Once the arbitration salary is determined, the amount the player actually gets paid would be dependent on the percentage of the third year of service completed. Here’s an example:

• MLB service: 2 years, 43 days (exactly 25% of the third year completed)
• Next-year salary, determined without arbitration: $600,000
• Next-year salary, determined with arbitration: $3.0 million
• Difference between salary with and without arbitration: $2.4 million
• Actual salary paid to player: $600,000 + 25% * $2.4 million = $1.2 million

For arbitration hearings beyond the first one, both the player and team would need to submit two amounts, each assuming a different number of arbitration years. For example, the above hypothetical player would go to arbitration again the next year and submit two potential salaries: one assuming it’s his first time at arbitration and one assuming it’s his second. The hearing would determine both salaries, and then the final salary would be determined by interpolating between the two as in the above example.

Once enough years have gone by to establish precedent salaries under this new method, the need for interpolating would likely go away, because there will be past examples of players with similar amounts of service for players and teams to use as a benchmark. Players and teams could also agree on a salary number in advance and avoid hearings, similar to how the system works today.

The advantage to the above proposal is that there’s no “cliff date.” A person with two years and one day of service time will go to arbitration a year earlier than someone with two years and zero days, but the player would only be 0.58% “vested” in their salary increase through arbitration, so there wouldn’t be tremendous incentive for teams to avoid that situation. Each day that the team waits to promote a player would result in only a small and roughly uniform amount of cash savings, so no team would be managing to a hypothetical cutoff.

How to fix the “six vs. seven years of control” problem

This one is not as straightforward because the problem can’t be solved by moving the “cliff date” for an extra year of control. It doesn’t matter whether it’s 172 days or 187 days or 91 days. Teams will manage to whatever length of time is written in the rules. Furthermore, we can’t solve the problem by interpolating, because fractional years under contract are completely impractical. There’s no notion of a partial year of control, and the league as we know it would be chaos if players could achieve free agency in May or July.

Since a fractional year of control is not possible, we can turn to its closest approximation: a fractional possibility of an extra year of control. This can be accomplished by a free agency lottery.

This would be a radical change, but there would be obvious benefits. Any player not under a contract extension who has completed at least six full years of service at the end of a season would become a free agent, as before. Any player with at least five years of service at the end of a season could potentially become a free agent, subject to a lottery drawing. The lottery drawing for that player would consist of 172 balls, some of which say “Free Agent” and some of which are blank. The number of balls that say “Free Agent” would be equal to the number of completed days in excess of five full years of service on that player’s ledger. For example, a player with five years, 100 days of service would have 100 “Free Agent” balls and 72 blank balls. One ball would be drawn at random by the commissioner’s office. If a “Free Agent” ball is picked, the player heads to free agency. If a blank ball is picked, the player heads to one final year of arbitration with the team.

The most obvious benefit of this solution would be that there’s no single service cutoff that defines whether a player will be with a team for six or seven years. Another benefit is that it would pass some planning uncertainty to the team and would incentivize them to try to extend the player through the extra year rather than leaving it in the hands of chance. The terms of an extension agreeable to the player would likely be dependent on the number of “Free Agent” balls in the player’s potential lottery drawing, which can effectively convert the problem of discrete-numbered baseball seasons of control to a salary spectrum that rewards partial years of service, as in the Super Two problem above.

(As a final note, if no extensions were to happen, this method would result in players reaching free agency about a half-year earlier on average than in the current system, which would likely not be agreeable to the owners. An alternative would be to move the endpoints by a half year, such that it requires 6.5 years (6 years, 86 days) of service to be guaranteed free agency and any player with over 5.5 years (over 5 years, 86 days) of service would have the potential to reach free agency. The number of “Free Agent” balls in the drawing would then be equal to the number of days of service in excess of 5 years, 86 days.)

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There may be other possible solutions and for all we know, a brilliant alternative to the the current service time rules will emerge from the upcoming collective bargaining agreement. What’s clear, however, is that the system in place is broken and is not good for the game. Fans, players, and even general managers are likely sick of the lying, the downplaying of a prospect’s success, the suppression of a young player’s career, and the artificial barriers in place that prevent everyone from enjoying the best players in the world as soon as they’re ready to compete at the highest level. This season, I’ve ranted entirely too much about the failures of the current rules, so I figured it was about time I proposed a way to actually do something about it.

How about you? How would you fix the system?

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