Artist: Steven Bisig
By: Patrick Stephens
This offseason, Tarik Skubal tested the boundaries of Major League Baseball’s (“MLB”) collectively bargained arbitration system, and his decision was rewarded with a record-setting $32 million salary. This article analyzes Skubal’s case under the frameworks of labor and employment law, focusing on salary arbitration as a third-party wage-determination system within MLB’s Collective Bargaining Agreement (“CBA”). While arbitration awards are not binding precedent, Skubal’s case may mark a turning point in the system’s strategic dynamics. Further, this article examines how the decision could reshape party behavior, strain the system’s original purpose, and influence the upcoming labor dispute as the current CBA approaches expiration.
Tarik Skubal’s final appearance of the 2025 Major League Baseball (“MLB”) season came on the road in a winner-take-all Game 5 of the ALDS, and his performance was exactly what Detroit had come to expect from the back-to-back Cy Young award winner.[1] Yet, even as he delivered on the mound, questions remained about Skubal’s future in Detroit.[2] Skubal was entering his third year of arbitration eligibility, which means his 2026 salary was set to be determined by the final-offer salary arbitration system laid out in MLB’s CBA.[3]
The National Labor Relations Act (“NLRA”), or the Wagner Act, is a foundational United States labor law that guaranteed private-sector employees the right to form unions, bargain collectively, and strike.[4] Since the NLRA passed in 1935, American policy has sought to promote collective bargaining to protect employees from the anticompetitive practices of their employers.[5] To align with the NLRA, the players, under newly elected leader Marvin Miller, voted to unionize and negotiated their first CBA in 1968, setting up the original foundation for the negotiation of employment terms between the players and the clubs.[6]
Historically, employers in professional baseball have operated outside of antitrust scrutiny due to the Supreme Court’s holding in Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs.[7] The Supreme Court held that professional baseball is not subject to federal antitrust laws because it does not constitute interstate commerce under the Sherman Act.[8] This decision would subsequently restrict players’ ability to negotiate with multiple employers in a competitive labor market and enabled teams holding their rights to suppress salaries below the level that would otherwise prevail under free competition.[9] However, in 1974, the MLB’s salary arbitration system was introduced as part of a revolution to counter baseball’s monopsonistic structure by giving players under team control an earlier path to negotiate their salaries.[10] This system was critical, as without it, players would be subject to a single team’s control for nearly a decade without any recourse to argue for higher pay.[11]
Salary arbitration functions as a mechanism to approximate market wages in a system where players lack traditional open market bargaining power.[12] By increasing the risk of either side taking extreme positions, this alternative dispute resolution (“ADR”) mechanism encourages reasonable filings and promotes pre-hearing settlements.[13] The process centers on the early-January “Exchange Date,” where absent a negotiated agreement, both sides must submit a proposed salary they will argue in a hearing.[14] A three-member panel hears both arguments and then must choose between one of the submitted figures, with no compromise in between.[15] This structure, known as final-offer arbitration (“FOA”), incentivizes both sides to file near the projected award, narrowing them toward a common midpoint.[16]
The hearings rely heavily on comparable players’ salaries, effectively using past awards as soft salary boundaries.[17] Generally, settlements are favorable, as hearings can strain player-club relationships by requiring teams to argue that a player is not worth his request in the his presence.[18] In some instances, the adversarial dispute hearings leave lingering tensions that ultimately contribute to the team and player parting ways.[19] The clear risks of filing unreasonable figures, and the soft salary boundaries, have created a confined wage determination system that in theory incentivizes parties to stay within the limits.[20]
Tarik Skubal’s unique dominance and awards made him the perfect candidate to test the limits of salary arbitration, and he did so at the 2026 exchange date by filing a record-breaking $32 million proposed salary, while the Detroit Tigers countered with $19 million.[21] The $13 million difference set another record as being the largest difference between figures in the system’s extensive history.[22] For Skubal, pushing the boundary paid off, as a panel of three arbitrators awarded Skubal the $32 million he filed for.[23] While Skubal’s award was an anomaly, its significance lies in signaling a shift in MLB salary arbitration, raising not only his pay but the perceived ceiling for future awards.[24] While Skubal’s pedigree is unique, future players and their representatives may nevertheless view aggressive filings as a viable strategy.[25] Although the arbitration system has traditionally rewarded reasonable positions and discouraged extremes, this panel’s decision may call that tradition into question.[26] If the success of aggressive filing figures increases, the incentive structure that defines FOA will begin to erode, encouraging extreme filings that undermine the ADR mechanism’s core principles of risk aversion, compromise, and pre-hearing settlement.[27]
Beyond filing strategy, Skubal’s award may also influence how comparable players are selected and presented in dispute hearings.[28] While many MLB executives and analysts questioned Detroit’s $19 million filing figure as undervaluing Skubal’s achievements, the Tigers were relying on past awards that have functioned as informal precedent within the system.[29] As the game evolves and inflation rises, however, those past awards become outdated, creating a structural lag that keeps arbitration compensation below market value.[30] Skubal’s representatives challenged the backward-looking methodology and the dated precedent, effectively setting a modern benchmark for the game’s young elites to rely on within a constrained wage determination system. [31] Further, it raises the question whether clubs and players should still anchor their arguments to aging comparables in a rapidly evolving employment market.[32]
Moreover, these widespread impacts may never be realized due to the upcoming renegotiation of the CBA following the 2026 season.[33] Salary arbitration was a subject of the debate during the last labor negotiations, as the league sought to replace it with a performance-based model that the MLB Player’s Association (“MLBPA”) resisted.[34] In many ways, Skubal’s salary battle could be a precursor to an even more contentious labor dispute surrounding the new CBA.[35] It is without question that this most recent decision will push the league and owners to again call for changes to the ADR system, especially with this decision increasing future wage volatility and decreasing cost control.[36] Whether the union will be open to a change is something that remains uncertain; however, it is hard to imagine they will be following such a monumental victory for the MLBPA.[37] If no rule changes occur as a result of the upcoming labor dispute, clubs will respond by extending more players’ contracts prior to arbitration, attempting to regain the cost certainty that arbitration once provided.[38]
Tarik Skubal’s record breaking $32 million arbitration award will be remembered not just as a statistical outlier, but as a turning point for MLB’s arbitration system. While awards do not create binding precedent, they influence strategies used within a confined ADR system that relies primarily on player comparables. The upcoming CBA labor negotiations present an opportunity for the league and MLBPA to revisit this wage determination structure which substitutes for an open labor market. If unchanged, players are likely to employ more aggressive filing figures, building off Skubal’s decision and challenging MLB’s reliance on outdated benchmarks in an evolving labor market. In response, clubs will likely pursue more pre-arbitration contract extensions to regain cost certainty and to mitigate risk. By testing the foundational purposes of the ADR system, Skubal’s award disrupts the longstanding tradition of encouraging settlements and may signal a defining moment in the evolution of baseball’s fifty-year-old wage determination system.
Student Biography:
Patrick Stephens is a 2L at Suffolk University Law School and currently serves as Vice President of Sports for the Suffolk Sports and Entertainment Law Association (SELA). His interests include salary arbitration, player representation, and baseball analytics. Outside of school, Patrick can usually be found at the nearest ballpark or golf course. He can be reached at patrick.stephens@su.suffolk.edu.
Disclaimer:
The Suffolk Law Sports & Entertainment Law Association Blog is a student-run publication intended to encourage discussion, analysis, and enjoyment of issues related to sports and entertainment law. The content published on the Blog is for informational and educational purposes only and is not intended to constitute legal advice. The views and opinions expressed are those of the individual author and do not necessarily reflect the views of Suffolk University Law School, the Sports & Entertainment Law Association, or any affiliated faculty, staff, or students. Nothing on this Blog should be construed as creating an attorney–client relationship.
[1] See Jason Beck, Tigers use pitching chaos over 8 1/3 frames as ‘pen gives its all in extras’, MLB, https://www.mlb.com/news/tigers-seven-relievers-in-alds-game-5-loss. (last visited Feb. 3, 2026).
[2] See Mark Feinsand, MLB executives debate if Skubal gets traded this offseason, MLB, https://www.mlb.com/news/mlb-executives-debate-whether-tigers-will-trade-tarik-skubal (last visited Nov. 12, 2025).
[3] See Mike Axisa, Everything to know about Tarik Skubal’s contract dispute with Tigers, including impact for potential trade, CBS Sports, https://www.cbssports.com/mlb/news/tarik-skubal-contract-dispute-tigers-what-to-know. (last visited Jan. 9, 2026). (In the MLB, players are generally eligible for salary arbitration after three years of MLB service.) See Salary Arbitration and Arbitration Eligibility, MLB, https://www.mlb.com/glossary/transactions/salary-arbitration (last visited Apr. 6, 2026).
[4] See 1935 passage of the Wagner Act, Nat’l. Lab. Relations Bd. https://www.nlrb.gov/about-nlrb/who-we-are/our-history/1935-passage-of-the-wagner-act (last visited Apr. 1, 2026); see generally National Labor Relations Act, 29 U.S.C. §§ 151-169 (1935).
[5] See generally National Labor Relations Act, supra note 4.
[6] See Mark Amour & Dan Levitt, A History of the MLBPA’s Collective Bargaining Agreement: Part 1, The Hardball Times (Nov. 7, 2016), https://tht.fangraphs.com/a-history-of-the-mlbpa-collective-bargaining-agreement-part-1/. “A collective bargaining agreement is a legal document, negotiated between management and a labor union, that defines the terms and conditions of employment.” Id.
[7] 259 U.S. 200 (1922) (holding that staging baseball games is not interstate commerce and therefore not subject to antitrust laws).
[8] See id. at 209 (describing baseball games as “purely state affairs”).
[9] See L. Edward Martin, IV, A Century of Turmoil: Examining the Modern Effects of MLB’s Antitrust Exemption on Labor Relations In Major And Minor League Baseball, 61 Hous. L. Rev. 1025, 1029 (2024) (discussing the impacts the Supreme Courts decision had on professional baseball). See also Marc Edelman & John T. Holden, Baseball’s Anticompetitive Antitrust Exemption, 65 B.C. L. Rev. 1695, 1706 (2024) (detailing the history of the exemption from antitrust laws).
[10] See Edelman & Holden, supra note 9,at 1710. See Bill Gilbert, Salary Arbitration: Burden or Benefit, Soc’y. Amer. Baseball Rsch. https://sabr.org/journal/article/salary-arbitration-burden-or-benefit/ (last visited Mar. 4, 2026).
[11] See Edelman & Holden, supra note 9, at 1710. See also Jeff Passan, What Tarik Skubal’s record arbitration case could mean for MLB, ESPN, https://www.espn.com/mlb/story/_/id/47538606/mlb-2026-tarik-skubal-detroit-tigers-record-arbitration-contract. (last visited Jan. 8, 2026).
[12] See Jeff Monhait, Baseball Arbitration: An ADR Success, 4 Harv. J. Sports & Ent. L. 105, 139 (describing salary arbitration as a successful substitute for a competitive market and the benefits and drawbacks of the labor framework).
[13] See Passan, supra note 11 (discussing the importance of past awards and how players have historically favored settlements over risk). See also Brien M. Wassner, Major League Baseball’s Answer to Salary Disputes and the Strike, 6 Vand. J. Ent. and Tech. l. 5, 10 (2020) (noting how final offer arbitration systems encourages settlements and reasonable positions because of the very real risk concerns).
[14] See Lucas Waterson, MLB Salary Arbitration: Basics, Colum. Soc’y for Baseball Rsch. (Jan. 17, 2023), https://sbr.studentgroups.columbia.edu/news/mlb-salary-arbitration-basics. See also Passan, supra note 11 (explaining the three-person panel for arbitration).
[15] See Passan, supra note 11.
[16] See Max Bazerman & Daniel Kahneman, How to Make the Other Side Play Fair, 94 Har. Bus. Rev 76, 77 (Sep. 2016) (discussing how FOA promotes reasonability and pushes both sides to anchor initial offers closer to one another).
[17] See Passan, supra note 11.
[18] See Max Rieper, The arbitration system is stupid and should be overhauled, Royals Review (Jan. 14, 2026), https://www.royalsreview.com/royals-editorial-opinion-reaction/92440/the-arbitration-system-is-stupid-and-should-be-overhauled (discussing the adversarial nature that these hearings create between players and their clubs). See also Zachary Rotman, How does MLB arbitration work? Explaining the salary-setting process, Fansided (Feb. 2, 2026), https://fansided.com/mlb/how-does-mlb-arbitration-work-explaining-the-salary-setting-process (detailing negatives of the final offer arbitration system and how players often are made to feel devalued).
[19] See Associated Press, Corbin Burnes: Arbitration hurt relationship with Brewers, ESPN (Feb. 16, 2023), https://www.espn.com/mlb/story/_/id/35674271/corbin-burnes-arbitration-hurt-relationship-brewers (discussing a case between Corbin Burnes and the Brewers which ultimately contributed to his trade).
[20] See generally Wassner, supra note 13, at 5–10.
[21] See Tim Stebbins, Skubal, Tigers far apart after exchanging arbitration figures, MLB (Jan. 8, 2026), https://www.mlb.com/news/tigers-tarik-skubal-exchange-arbitration-figures; see also Ken Rosenthal, How Tarik Skubal’s case could test the norms of MLB’s arbitration system, N.Y. Times (Jan. 12, 2026), https://www.nytimes.com/athletic/6962108/2026/01/12/tarik-skubal-arbitration-detroit-tigers-scott-boras/.
[22] See Cody Stavenhagen, A Tigers-Tarik Skubal arbitration hearing would be fascinating theater. Here’s why, N.Y. Times (Jan. 9, 2026), https://www.nytimes.com/athletic/6957986/2026/01/09/detroit-tigers-tarik-skubal-arbitration-hearing-theater/.
[23] See Ken Rosenthal, The Tigers and MLB picked a fight with Tarik Skubal. Now they’re paying for it, N.Y. Times (Feb. 5, 2026), https://www.nytimes.com/athletic/7025747/2026/02/05/tigers-mlb-tarik-skubal-salary/.
[24] See Cody Christie, How Tarik Skubal Just Blew Up Baseball’s Arbitration Pay Scale, Diamond Centric (Feb. 5, 2026), https://diamondcentric.net/forums/topic/46454-how-tarik-skubal-just-blew-up-baseballs-arbitration-pay-scale/.
[25] Id.
[26] See Wassner, supra note 13, at 7. See also Jake Mintz, Tarik Skubal vs. the Tigers: What the arbitration process means for the ace, the team and future arb cases, yahoo sports (Jan. 28, 2026), https://sports.yahoo.com/mlb/article/tarik-skubal-vs-the-tigers-what-the-arbitration-process-means-for-the-ace-the-team-and-future-arb-cases-224828870.html?guccounter=1 (discussing the future ramifications of this hearing).
[27] See Edward Silverman, Dick Woodson’s Revenge: The Evolution of Salary Arbitration in Major League Baseball, 2013 Pepp. L. Rev. 21, 26 (2013). See generally Jeff Passan, Inside the wild, wonky world of MLB salary arbitration, ESPN (Jan. 10, 2019), https://www.espn.com/mlb/story/_/id/25722707/jeff-passan-wild-wonky-world-mlb-salary-arbitration (describing salary arbitration and how cases can change the dynamics).
[28] See Rosenthal, supra note 23 (discussing how use of comparable players effected this outcome and the impacts that may have).
[29] Id.
[30] Id. (contrasting Skubal’s filing figure with a current contract to show how the values determined within a closed market are questionable when compared to the values in a modern free agent market); see also 2018 Salary Arbitration Guide, Tulane Inst. For Sports L. & Acad. Excellence (2018), https://law.tulane.edu/sites/default/files/Files/TIBAC%20–%202018%20Salary%20Arbitration%20Guide.pdf.
[31] See Passan, supra note 11 (referring to a potential victory as mattering more because it shows players that arbitration can offer more outside of the constraints of the system). See also Cody Stavenhagen, Tarik Skubal awarded $32 million in landmark arbitration victory, N.Y. Times (Feb. 5, 2026), https://www.nytimes.com/athletic/7019362/2026/02/05/tarik-skubal-arbitration-32-million-victory/ (describing the landmark victory as a new ceiling for players to follow); see also Rosenthal, supra note 23 (noting how this was a case of Skubal and his representative attempting to challenge the system).
[32] See Rosenthal, supra note 23 (addressing the fact that this panel’s decision considering the dated comparables could create a new upper boundary for the system as a whole).
[33] See id. (addressing that change could be coming to the system with the next CBA).
[34] See Eric Fisher, Skubal’s Record Arbitration Win Could Change MLB’s Pay System, Front Office Sports (Feb. 5, 2026), https://frontofficesports.com/skubals-record-arbitration-win-could-change-mlbs-pay-system/ (detailing how MLB Salary Arbitration was a contentious point during the 2021-2022 CBA negotiations).
[35] See Rosenthal, supra note 23 (describing the arbitration hearing as a “preliminary to the main event” when referring to the upcoming CBA negotiations).
[36] See Chris Bzozowski, MLB’s Salary Cap Already Exists and It’s Called Arbitration, Medium(Feb. 28, 2026), https://medium.com/@cjbzozowski/mlbs-salary-cap-already-exists-and-it-s-called-arbitration-ba3952098d11 (discussing the importance of salary arbitration to owners and how it caps players earning power). See also Gilbert, supra note 10 (noting the benefit of wage control that arbitration provides owners).
[37] See Cleveland Baseball Talk Podcast: Can the Guardians avoid arbitration with one of their most popular players? (Spotify Podcasts, Jan. 8, 2026).
[38] See Travis Sawchik, What’s behind MLB’s Bizarre Spike In Contract Extensions?, FiveThirtyEight (Apr. 12, 2019), https://fivethirtyeight.com/features/whats-behind-mlbs-bizarre-spike-in-contract-extensions/ (discussing why an increase in arbitration salaries is causing teams to extend more young players prior to arbitration to cap earnings and control costs).
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