Covid-19: Football clubs’ possibility to unilaterally reduce salary salary
1. Background
As a result of the Covid-19/Coronavirus pandemic, governments and football associations around the world have implemented measures that heavily affect football, and currently football matches in most countries are suspended. As a direct consequence of the suspended football matches, a number of football clubs have taken actions in order to reduce their salary costs. Clubs can of course reduce their players wages if they obtain their players’ consent. If a club decides to reduce a player’s salaries without the player’s consent, this will constitute a violation of the contract and they will risk that the player leaves without a transfer fee. They will also risk having to pay compensation to the player involved, and a sporting sanction. However, terminating a contract due to missing or reduced salaries will also constitute a risk for the player.
2. Regulation of football players’ contracts
Football players’ contracts are regulated in FIFA’s Regulations on the Status and Transfer of Players (RSTP) which in short states that if a player wants to change club / employer during the contract period, he is dependent on the two involved clubs agreeing on a transfer, typically as the new club agrees to pay a transfer fee.
FIFA's transfer regulations came into force in 2001, following an agreement between FIFA and the EU. The background for this agreement model was the Bosman ruling handed down by the European Court of Justice in 1995. The case concerned a player in a Belgian second division club who, after his contract expired, wanted a transfer to a French club. His Belgian club did not accept the transfer fee offered by the French club and refused the player to leave the club. The Bosman ruling confirms that a player is entitled to a free transfer to another club in the EU/EEA area when the contract has expired. The Bosman case challenged the special system of transfers practiced by football in all years, where the employee's ability to change employer was dependent on the consent of the existing club. The judgment made it necessary to make provisions that regulated the extent to which the clubs could demand a transfer fee for their players. For FIFA, it was important to maintain the transfer system, to ensure that the clubs can educate and train players, knowing that they could get a transfer fee if the player agrees to transfer to another club.
From 1995 to 2001, the EU and FIFA worked together on a new transfer system. FIFA's transfer regulations came into force in 2001, and have undergone some changes since then, but the main principles are the same. Central to FIFA's termination provisions is that the contract must be respected. The contract can only be unilaterally terminated if there is just cause. The possibility of terminating the contract for both parties will have to be assessed on a concrete basis. It is also worth noting that the jurisprudence from the FIFA Dispute Resolution Chamber (DRC) and Court of Arbitration for Sport (CAS) shows that there will be just cause only if the contracting party has failed to fulfil its contractual obligations. Thus, it will not be possible for the club to terminate players’ contracts due to circumstances at the club, e.g. the club’s financial position due to the Covid-19/Coronavirus pandemic.
Non-payment of salaries will constitute a violation of the club’s contractual obligations. Whether this breach is sufficient for a player to be able to terminate the contract with just cause needs to be considered on a case-to-case basis. A party’s behaviour that is in violation of the terms of the player’s contract does not necessarily justify the termination of a contract for just cause. However, should the violation be considered material, persist for a long time or seen in relation with other violations, then the breach of the player’s contract might well have reached such a level that the party suffering the breach is entitled to terminate the contract unilaterally. If player terminates his contract with just cause, due to the club’s unilateral salary reduction or other variations, the player will be free to sign for another club and his former club will be liable to pay him compensation. In such a situation, the club will, in addition to being liable to pay compensation, risk sporting sanctions. However, if the player terminates his contract without just cause, although the club has violated its contractual obligations, the player is liable to pay compensation to the club, and also risk sporting sanctions. For sporting sanctions to be imposed one must be within the protected period of three / two years. In practice, the player risks suspension whilst the club may be excluded from one or more transfer windows.
To what extent late or reduced salary payments constitute a just cause for a player to terminate his contract has been assessed by FIFA’s Dispute Resolution Chamber (DRC) and the Court of Arbitration for Sport, (CAS) on a number of occasions. However, in 2018 FIFA adopted a new provision, Article 14bis, in the RSTP. The first paragraph of the provision states in brief that if a club is more than two months late with salary payments, then the player will be able to terminate the contract with just cause, provided he gives the club 15 days to pay outstanding wages. The provision in the context of reduced or late payments related to the corona situation implies that if a player has had his wages reduced for more than two months and has given the club a 15 day period to pay, the player will be able to terminate the contract with just cause. However, the provision also indicates that if salary payments are less than two months late it will not be sufficient to justify termination with just cause. However, even if the conditions for terminating the contract with just cause are not met according to art. 14bis, it is possible that salary payments that are less than two months late could justify a termination with just cause according to art. 14, especially if the club has failed to fulfil other parts of its contractual obligations.
3. Dispute resolution
Which dispute resolution bodies will be competent to settle a dispute between the club and player regarding late or reduced payment as a result of the Covid-19/Coronavirus pandemic will depend primarily on whether the player in question is a citizen of the country the club is based in. If the player is a citizen to the country he plays his football in, a dispute should be raised according to national legislation or the national association’s regulations. FIFA’s Dispute Resolution Chamber (DRC) has the competence to consider disputes between a player and a club of an international dimension, inter alia all contractual disputes between clubs and foreign players. The DRC consists of 24 arbitrators appointed by the FIFA Council, 12 of whom are appointed by representatives of the players, and 12 who are appointed by representatives of the clubs.
Any decision by DRC can be appealed to Court of Arbitration for Sport, (CAS), according to Art 63 of FIFA's statutes. The framework for CAS's competence, as well as provisions on procedures, deadlines etc. is regulated in the CAS-code. CAS will be able to operate as a court of appeal in disputes that have been dealt with by a judicial body of the former body of sport. There are two prerequisites for CAS to handle these cases. First, the statutes or provisions of the sports organization in question, e.g. FIFA or UEFA, recognize CAS as the appeal body for the case type in question. Second, all other internal legal remedies must be exhausted.
For further information on processing cases for CAS, see here.
4. Summary
Reduction to a player’s salaries without the player’s consent, will constitute a violation of the contract but not necessarily a violation which entitles the player to terminate the contract. Although amendments to FIFA’s transfer regulations in 2018 suggest that a player will not have just cause for termination before the payment is two months late, there could be circumstances in each case that could justify early termination. Terminating a contract without just cause could have severe consequences for the player, as he will liable to pay compensation to the club and risk sporting sanctions. If the player has just cause for the termination, the club will be liable to pay compensation to the player, and risk sporting sanctions.
