An unsigned player under club control who has accrued at least three but less than six years of MLB Service Time is automatically eligible for salary arbitration. Also, any unsigned player with at least two years but less than three years of MLB Service Time who accrued at least 86 days of MLB Service Time the previous season can qualify for salary arbitration as a so-called "Super Two" if the player is among the top 22% in MLB Service Time of players in that group.
PROJECTED CUBS SALARY ARBITRATION ELIGIBLE POST-2016: (last updated 5-31-2016)
Jake Arrieta, RHP
Tim Federowicz, C
Justin Grimm, RHP
Tommy LaStella, INF (possible "Super Two" - TBD)
Hector Rondon, RHP
Pedro Strop, RHP
Adam Warren, RHP
If a club and a player eligible for salary arbitration cannot agree on a contract, the player can request the Major League Baseball Players Association (MLBPA) to file for salary arbitration. The MLBPA is responsible for delivering all requests for salary arbitration to the MLB Labor Relations Department (MLB LRD) on the Tuesday immediately prior to the third Friday in January; Once salary arbitration has been requested, the player submits his desired salary to the MLBPA, the club submits its salary offer to the MLB LRD, and the MLBPA and MLB LRD exchange the two figures on the third Friday in January. The MLBPA and MLB LRD then schedule a hearing with a three-person arbitration panel. Hearings are held on various dates during the first three weeks of February.
The club's offer must be at least the MLB minimum salary, and, in most cases, must be at least 80% of the player's previous year's salary and at least 70% of the player's salary from two seasons back. However, if the player received a raise in excess of 50% by a salary arbitration panel the previous season, a 20% maximum salary reduction from the previous season and a 30% maximum salary reduction from two seasons back does not apply, and the club only has to offer at least the MLB minimum salary.
After arbitration has been requested, the player and the club can continue to negotiate back & forth, and the player can withdraw from the process any time up until the hearing. And in fact this frequently happens, as the player and the club will often agree to just "split the difference" (something the panel cannot do). If the matter does go to a hearing, the arbitration panel must choose either the club's offer or the player's figure.
Win or lose, the player is awarded a standard one-year MLB contract with no "minor league split" salary or incentive/performance bonuses. Also, the contract is not guaranteed, so if the player is released during Spring Training, the club would only owe the player 30 days or 45 days salary as termination pay, depending on when the player is released. (A player on an MLB 40-man roster receives 100% of what remains of his salary if he is released during the regular season).
NOTE: The Major League Baseball Players Association (MLBPA) is very sensitive about salary arbitration, so if a player is victorious at an arbitration hearing and is awarded a contract by an arbitration panel and then is subsequently released by his club prior to or during Spring Training, the MLBPA will almost always file a grievance on behalf of the player, claiming the player was released for economic reasons only (which is not permitted), and asking that the released player receive 100% of his salary as termination pay. In that situation, a club would have to show (by submitting official Spring Training game stats) that the released player was out-performed in Spring Training games by another player (or players) competing for that roster spot.