Covid-19: Unilateral termination of football contracts

SOME people believe football is a matter of life and death… I can assure you, it is much, much more important than that, |said former Liverpool Manager, Bill Shankly. It has always been overlooked that players are employees with their own livelihoods on the line – predominantly given the relatively short career of the average professional footballer.  With so much at stake – both on and off the pitch – it comes as no real shock that disputes repeatedly arise between players and clubs. The COVID-19 outbreak has disrupted everyday activities around the world and has been declared a pandemic by the World Health Organization. This is an unprecedented situation for football, the pandemic has clearly had a major influence on the revenues of clubs since matches cannot be played. Also, factors such as excessive transfer spending and the global financial crisis have led to the issue of unpaid wages in football becoming increasingly common around the world. The issue is particularly bad in countries that have been hit hardest by the current financial climate caused by the pandemic; Nigeria in particular. Apparently, not all professional players are highly paid and so any delay in payment of wages can have a significant impact on their lives.

For instance, on July 7, it was reported by several media outlets that a Nigerian professional league footballer, Aliko Mustapha. terminated his contract with Katsina United over outstanding salaries and allowances. Sources revealed that the management of Katsina United only paid two months’ salary out of the seven months they are owing the players. This trend is common in most African countries, especially Nigeria. Although many players grudgingly choose to remain in these clubs despite outstanding salaries of several months; mostly not as a form of solidarity to the club, but due to the rate of unemployment in the nation and or the inability to quickly get a new club – this, I tag; an abusive relationship.  This article seeks to examine the unilateral termination of football contract due to breach of contractual terms which amount to just cause as a result of outstanding payments. And the effect of Covid-19 on football contracts including the measures put in place by FIFA to reduce some of the effects.

Generally, a contract is an agreement (usually between two parties or more) giving rise to obligations on the part of both parties which are enforced or recognized by law. A football contract just like any other contract is formed when there is an offer to play football, acceptance of that offer, and consideration. Consideration is that- agreed upon exchange of negotiationbetween the parties. For example, when a club contracts with a professional footballer to play for the team, in exchange for payment.

With respect to football, for an employment contract to be considered as valid and binding, from DRC jurisprudence it follows that it must at least contain the name of the parties, the object, the duration of the employment relationship, the salary and the signatures of the parties concerned; the so-called essentialia negotii.This was the Dispute Resolution Chamber  (this is one of the decision-making bodies of FIFA which hears football disputes between clubs and players, or between clubs, whether employment-related disputes or other contractual disputes) decision of 10 May 2012 RC 10 May 2012, no. 512476, in which the DRC Judge emphasized that; for an employment contract to be considered as valid and binding, it must at least contain the abovementioned elements, i.e. the name of the parties, the object, the duration of the employment relationship, the salary and the signatures of the parties. Hence, no valid and binding employment contract will be established if the contract does not contain any of the essentialia negotii. Once the parties have come to an agreement regarding the terms of the contract, they are both legally obligated to fulfill their obligations under the contract. If they fail to do so, they have breached the contract and can be held liable by the DRC, CAS or in a court of law- as the case may be.

Terminating a contract means legally ending the contract the expiration of the duration of the contract. There are a variety of reasons why parties often terminate contracts. When and how the contract is terminated, in view of facts and the provisions of the contract or governing regulations, will determine whether any of the parties has any liability for breach of contract before it was terminated. After a contract is terminated, one or both parties might be liable for breach of the terms of the contract before the termination.

Asidebringing a contractual claim for unpaid wages, the ultimate legal action a player can take is to argue that he has the right to terminate his contract so he can then sign for another club. Article 13 of FIFA’s Regulations on the Status and Transfer of Players (“the RSTP”) provides that a contract between a player and a club can only be terminated on expiry of the term of the contract or by mutual agreement. However, Article 14 of the RSTP allows for a contract to be terminated without any consequences where there is just cause. Just cause is not defined by the RSTP however the commentary on the RSTP explains “behaviour that is in violation of the terms of an employment contract still cannot justify the termination of a contract for just cause. However, should the violation persist over a long time or should many violations be cumulated over a certain period of time, then it is most probable that the breach of contract has reached such a level that the party suffering the breach is entitled to terminate the contract unilaterally.”

The DRC and the CAS are of the view that, as a general rule, the persistent failure of a club to pay the salary of a player during a certain period shall be considered an unjustified breach of an employment contract by the club. In that case, there is the presence of just cause for the player, as a result of which he may unilaterally terminate the contract without having to pay any compensation or risking sanctions being imposed on him by FIFA.The breach of contract must, for that reason, be serious to justify termination of the contract. Non-payment of wages can constitute just cause for termination of the contract given that a club’s obligation to pay a player’s wages is its main responsibility as an employer and if this responsibility is breached, it can cause the employee’s confidence in the employer to perform the terms of the contract to be lost.

Quite a few criteria need to be met in order to establish a valid just cause for a player to validly and unilaterally terminate his contract with the club. I will briefly look at certain guidelines that have been pronounced by the DRC (and the CAS; Court of Arbitration for Sport) jurisprudence to determine under which circumstances just cause actually exists if a club does not pay a player his salary for a substantial period of time.

Generally, the persistent failure of a club to pay the salary of a player without just cause shall be considered an unjustified breach of an employment contract by the club. In a DRC decision of 10 June 2004, no. 64133, the Chamber noted that on the date of receipt of the player’s claim on 16 February 2004, the club had not paid the player’s monthly salary for over four months and two of the four instalments pertaining to the signing-on fee remained unpaid. Therefore, the DRC concurred that the club had indeed seriously neglected its financial obligations towards the player. The Chamber also decided that the club had committed a unilateral breach of the employment contract without just cause.

However, the term persistent failure must be carefully considered; this has caused a lot of discrepancies in the decisions of the DRC as well as CAS. In a DRC decision of 23 March 2006, no. 36460, the DRC decided that the non-payment of one monthly salary is not just cause for a player to leave his club without permission. It was also reiterated in a DRC decision of 26 October 2006, no. 1061207. See CAS 2005/A/893 Metsu v. Al-Ain Sports Club, award of 16 February 2006. The DRC added that the alleged outstanding amount of USD 6000 which is equivalent to one and a half months of the player’s salary could not be considered in the present case as substantial enough to justify a premature termination of an employment contract. The DRC concluded that the relevant alleged outstanding salary did not constitute just cause for the unilateral termination of the contract.

In its jurisprudence regarding outstanding salary, the DRC refers to general principles of labour law that the persistent failure of a club (employer) to respect its contractual obligations towards a player (employee) without just cause is to be considered as an unjustified breach of an employment contract by the club. Considering this principle, in a case before the DRC of 12 January 2007, the Chamber had to deliberate whether or not the behaviour of the club was to be considered as a persistent failure to comply with its contractual obligations towards the player. In the present case, the club concerned had not paid the player’s salary from November 2003 to May 2004, i.e. over 7 months. Therefore, it was decided that the behaviour of the club had to be considered as a persistent failure to comply with its financial obligations towards the player. In this decision, the DRC also decided that the relevant compensation to be paid by the club was also subject to the behavior (that is, whether or not the player has acted in good faith) of the player concerned.

The Chamber did decide that the non-payment of the salary over 7 months was to be considered as an unjustified breach of an employment contract by the club, and the club had to pay USD 35,000 to the player due to outstanding salary.Also, in a DRC decision of 7 September 2011 no. 9111901, the DRC however, again recalled that it had, on numerous occasions, upheld the unilateral termination of an employment contract by players who had, depending on the particular circumstances of the relevant case at hand, not received their salaries for two or more months.See Article 14 bis of the RSTP

             PRIOR NOTICE

It is important to warn the club in writing before terminating the contract. This is confirmed by the DRC in its decision of 10 August 2007, no. 87745. In this DRC case on the precondition of a written warning prior to termination of the employment contract, the members of the Chamber pointed out that, even without being stipulated in an employment contract, this was a procedure regularly confirmed and applied by the DRC and the CAS. The DRC held that, even in the absence of a clause prescribing a written warning prior to the termination of an employment contract for arrears of salary, according to the jurisprudence of the CAS it was questionable whether delayed payments of salary justified an extraordinary contract termination without prior warning. The DRC deemed it of importance to point out that a decisive element determined by the CAS in this respect was whether the debtor simply refused to make a payment or whether there were circumstances which could easily be resolved by a warning notice. In an important DRC decision of 24 November 2011, no. 1111796, the DRC points out that two conditions need to be met: the salary which is paid late by the club is not insubstantial or completely secondary; and the player must, prior to terminating the employment contract, issue the club with a warning, in other words, drawn the club’s attention to the violation of the contractual terms.

             GOOD FAITH

It is imperative that a player offers his services during the contractual period in good faith. On the other hand, a club is obliged to remunerate a player, as agreed between the parties, for the period of time during which he has rendered his services to the club, except the club can justify the non-payment of the agreed remuneration. If no payment of the salary is made repeatedly by the date designated in the employment contract, this may obviously cause the player’s confidence to be lost in the proper fulfilment of future obligations by the club. In an award of 23 February 2009, the CAS decided that an employment contract which has been concluded for a fixed term can only be terminated prior to expiry of the term of the contract if there is just cause.

Just cause exists when the party who terminated, cannot be expected to continue the employment relationship in good faith. See CAS 2008/A/1517 Ionikos FC v. C., award of 23 February 2009.

REDUCING THE EFFECTS OF COVID 19 ON PLAYERS AND FOOTBALL CLUBS

It is no news that some contractual obligations n in football contracts have been difficult or almost impossible to perform in many countries of the world, due to the corona virus pandemic. Unfortunately, Nigeria is also included as the Nigerian Professional Football League has been put on hold.The COVID-19 pandemic has clearly had a major impact on the revenues of football clubs since matches cannot be played. Also, the obligations placed on the parties will potentially be made impossible: players and coaches will be unable to work, and clubs will be unable to provide work. Football, like other sectors of the economy, has to find fair and equitable solutions tailored to these situations, hopefully with a view to protecting jobs and achieving a fair and equitable balance of interests between players and clubs.

However, following the unprecedented disruption caused by COVID-19 at all levels of football, FIFA has worked on a series of recommendations and guidelines to address some of the key practical issues arising from the pandemic, especially the contract of football players and the transfer system generally. This has been done in consultation with different stakeholders through a task force chaired by the FIFA Vice-President and chairman of the FIFA Football Stakeholders Committee, Vittorio Montagliani, including representatives of clubs, players, leagues, national associations and confederations. Accordingly, FIFA strongly encourages clubs and players to work together to find agreements and solutions during the period when football is suspended. Hence: THE FIFA COVID-19 FOOTBALL REGULATORY ISSUES – V 1.0 wherein a set of principles have been unanimously agreed by the task force and was endorsed by the Bureau of the FIFA Council. While it is primarily up to the relevant parties at national level to find solutions to fit the circumstances in their own country, FIFA recommends looking at all aspects of each situation in an even handed manner, including what government measures are there to support clubs and players, whether pay should be deferred or reduced and what insurance coverage may exist. In this way, FIFA hopes that it will be able to find solutions that are fair and balanced for both sides.

Thus, in order to guarantee some form of salary payment to players and coaches, avoid litigation, protect contractual stability, and ensure clubs do not go bankrupt, while considering the financial impact of COVID-19 on clubs, it is proposed that: Clubs and employees (players and coaches) be strongly encouraged to work together to find appropriate collective agreements on a club or league basis regarding employment conditions for any period where the competition is suspended due to the COVID-19 outbreak. Such agreements should address, without limitation: remuneration (where applicable salary deferrals and/or limitation, protection mechanisms, etc.) and other benefits, government aid programmes, conditions during contract extensions, etc.

Unilateral decisions to vary agreements will only be recognized where they are made in accordance with national law or are permissible within CBA structures or another collective agreement mechanism. Where clubs and employees cannot reach an agreement, and national law does not address the situation or collective agreements with a player’s union are not an option or not applicable, Unilateral decisions to vary terms and conditions of contracts will only be recognized by FIFA’s Dispute Resolution Chamber (DRC) or Players’ Status Committee (PSC) where they were made in good faith, are reasonable and proportionate. Alternatively, the FIFA Covid -19 regulations stipulate that all agreements between clubs and employees should be “suspended” during any suspension of competitions (i.e. suspension of football activities), provided proper insurance coverage is maintained, and adequate alternative income support arrangements can be found for employees during the period in question.

CONCLUSION

Subsequent to the guidelines put in place by FIFA, in a situation where the club intentionally omits and persists in failing to pay the salary of the player in time over a lengthy period, in the opinion of both committees (DRC and CAS) the player is entitled to unilaterally terminate the contract and will consequently be free to leave the club. However, the player must adhere to the criteria and stipulations discussed above. On the other hand, in a situation where a club is faced with difficulties to paying salaries; it is necessary to have a round-table negotiation with her players and staff on the way forward; notably, a pay cut for a period of time. The neccesity of a negotiation is simply because potestative actions are not allow in football contracts; In other words, an act or clause that contain obligations in which fulfilment are conditional upon an event that one party controls entirely, cannot be considered since they generally limit the rights of the other contractual party in an excessive manner and lead to an unjustified disadvantage of the latter towards the other. See DCR 28th March 2015, No. 0314132.

RECOMMENDATIONS

The writer recommends that football players – especially in Nigeria and most African countries, be educated on the need to consider the unprecedented situation these football clubs are plunged into. On the other hand, football clubs should examine, consider and seek to implement THE FIFA COVID-19 FOOTBALL REGULATORY ISSUES – V 1.0 in dealing (a round-table negotiation) with her players in this circumstance in order to attain an equitable balance amongst each other (players and the club). Also, the national football federation of countries in this bracket should establish a committee to cater for the welfare of football players; and see that all clubs under her authority comply strictly with the guidelines provided by FIFA.

• Mohammed, a student of Law at the University of Ilorin, writes in via Oluwasesanmohammed@gmail.com

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