The Weekly Rant (11/18): Harper and the Nationals

This past weekend, Adam Kilgore of the Washington Post reported that the Washington Nationals had an unresolved contractual issue with star outfielder Bryce Harper. The problem stems from the 2010 contract Harper and agent Scott Boras negotiated for the No.1 overall pick. The sides agreed to terms on a five-year, $9.9MM major league contract, the largest ever for an amateur position player.

One term that the parties could not agree on was what would happen if (when) Harper qualified for arbitration at some point during the length of the contract. Apparently, Boras agreed to resolve the issue later via a side letter, an instrument that I doubt is common in baseball negotiations.  

The disagreement could involve a relatively large amount of money. Harper, like many players who inked major league contracts as amateurs before the practice was prohibited, would prefer an opt-out clause when he reaches arbitration.  The team would prefer that he play out the remainder of his contract under the negotiated terms.

The reason why the stakes are so high lies in the nuances of arbitration.  Normally a player must have three seasons of service time to become eligible for salary arbitration. Under these normal conditions, a player would go through the process three times and then be eligible for free agency.  But a player may also qualify for arbitration if they have if they are among the top echelon of players in terms of service time for those with two full years under their belts.  Harper will almost certainly qualify as one of these "Super-Two" players after the 2014 season.

Under his current contract, he would stand to make $2.25MM in 2015.  Even if he played poorly or missed significant time with injury, he would likely still better that amount through arbitration.  If he played well and stayed healthy in 2014, he could potentially set a Super-Two record and make several million more than his current contract would dictate.

But it doesn't end after one season.  Arbitrators (whether intentionally or not) use the previous season's salary as a baseline to be raised by that season's performance.  And since Harper would under normal conditions qualify for arbitration four times, he would basically miss out on the initial loss four times.

Additionally, arbitrators have not treated salaries from deals like Harper's equitably to those of players who were received their salary though arbitration.  As Matt Swartz of MLBTR notes:
 

Another thing I learned in my projections for 2012 was that previous salary did not matter much for first-time eligible players. My biggest overestimates included projecting David Price at $7.8MM instead of his actual $4.35 million salary and Rick Porcello for $4.2MM instead of his actual $3.1MM, since I thought hefty Major League deals given to draft picks would give these players a leg up going into arbitration. This is not true, as I have since learned.

This issue could have big implications for Bryce Harper, further increasing his sides desire for arbitration.  It's easy to envision a scenario in which Harper could gain or miss out on upwards of $5MM by having to play under his current contract in 2015.

The Nationals had to understand these complications when they promoted Harper so early in 2012, and raising the possibility of arbitration in year five of his deal.  Now they may be in the uncomfortable position of going to grievance arbitration with their young star.  Depending on if either side has any kind of advantage in the particular language of the side letter or negotiations, a settlement may be the team's best option.

The club should be wary of granting arbitration in 2015, but a raise on his contractual salary would be easier to swallow.  From Harper's point-of-view, it's unlikely grievance arbitration or a settlement would grant the kind of money he stands to lose through all four years of arbitration  No panel would give him say, $2.5 MM, before they would just go ahead and grant him arbitration.

At first blush, a Scott Boras extension seems unlikely.  But by agreeing to give up multiple arbitration season, he could allow the Nationals to spread out some of the settlement. The extension, is as some writers have suggested more of a possibility than before the issue came to light.

The result of this dispute likely won't affect possible free agent negotiations between the two sides however. The Nationals will likely have to make the highest offer to land Harper five years from now no matter how generous or cheap they are in 2013.