The two sides must now hammer out a deal or go their separate ways. The Yankees have reportedly offered Jeter a three-year deal for $45 million.
If the Yankees had offered arbitration, the shortstop could have accepted a one-year salary set by an arbitrator or signed elsewhere. If he walked, the Yankees would have received two draft picks. But by offering the Yanks risked a hearing based on Jeter's 2010 salary of $21 million, considerably more than they are willing to pay him for 2011.
Jeter's agent, Casey Close, recently called Jeter's negotiations with the Yankees "baffling." He argued that the team is not looking at Jeter's 16-year body of work in New York and is instead focusing on his age and off year in 2010.
Yankees GM Brian Cashman told New York media on Monday that he is indeed factoring in Jeter's age and recent performance in contract negotiations. A lifetime .314 hitter who has been named to 11 All-Star teams, the 36-year-old Jeter batted only .270 last season.
Cashman said there "is nothing baffling about our position here," according to The New York Times.
"We have been very honest and direct with them -- meaning Derek and Casey," he said. "We have told them directly, face to face, how we came up with our offer, and we have made it clear to them that our primary focus is his on-the-field performance."
Jeter is coming off a 10-year, $189 million contract. Close has compared Jeter's contribution to the Yankees with Babe Ruth's and had indicated that he wants more than three years and a higher average salary than the Yankees have reportedly offered.
But Cashman has countered that 32-year-old shortstop Jimmy Rollins will make $8.5 million in 2011; 32-year-old Rafael Furcal will make $12 million; and 26-year-old Hanley Ramirez will earn $11 million.
Yankees managing general partner Hal Steinbrenner had said weeks ago that negotiations with Jeter could become "messy" and that he hoped to conclude talks by Christmas. Now, he's not so sure.
"But it will take as long as it takes," Steinbrenner said, according to the Times. "The important thing is we don't make it personal."
Information from The Associated Press was used in this report.