Employment Agreements – Miscellaneous considerations
Football Clubs may choose to insert clauses that restrict a player from consulting other medical professionals in cases of an injury, sickness or mental health issues, apart from the medical professionals within the club. While there is no legal bar on this, it may not be in the best interests of the player especially if they intend to consult a medical professional that they trust.
Hence, subject to negotiations, a player can legally mandate for the right to consult a second medical professional, independent from the Club and also require the Club to consider such medical opinions before deciding on the course of treatment for the player. Furthermore, a player can also seek for the right to choose the opinion of such a medical professional of his choosing, without the risk of sanctions or at the risk of being under breach of the contract.
As is common in most employment contracts of football players, a football club is granted the rights to the player’s image rights for commercial purposes – barring exceptional circumstances, in cases of well established professional players who have personal endorsement and image right deals.
Such a condition however does not extend to the brand or type of football boots that a player wears during a match. Clubs do not have the right to regulate this and players should be vigilant to ensure that the image right clauses specifically permit them to enter into separate boot deals if necessary.
As a pre-contract is effectively a promise to enter into a contract at a future date, and does not represent a final employment contract, football clubs are permitted to condition the validity of a pre-contract to the successful passing of a medical examination. This is because clubs are required to undertake all possible steps prior to entering into an employment contract with a player regarding the players fitness. Such a burden cannot be passed on to the player in the employment contract.
In such pre-contracts however, the wording and intention of the parties is important. To avoid any risk of a possible breach of Article 18 par. 4 of the FIFA RSTP, parties must ensure that they genuinely intend to conduct further negotiations (to enter into a final contract) after the player undergoes and passes the medical examination. Otherwise, without further negotiations, especially on the essential terms (“essentialia negotii”), the pre-contract could be viewed as the final employment contract itself and such condition as a breach of Article 18 par. 4 of the FIFA RSTP.
Notable jurisprudence:
- Mke Ankaragücü Spor Külübü v. J
“the FIFA Regulations and Swiss law do not provide a specific, explicit definition of a “pre-contract”. The notion is however well known in legal practice and the Panel would define it as the reciprocal commitment of at least two parties to enter later into a contract, a sort of ‘promise to contract’. The clear distinction between a ‘precontract’ and a ‘contract’ is that the parties to the ‘precontract’ have not agreed on the essential elements of the contract or at least the ‘precontract’ does not reflect the final agreement. On the contrary, if the interpretation of the pre-contract leads to the conclusion that the parties agreed on all the essential elements of the final contract, on the basis of the general principles applicable to the conclusion of a contract as defined under Article 1 et seq. of the Swiss Code of Obligations (SCO), the ‘precontract’ would be nothing else but the final contract.”
“Whereas, it is clear why definite employment contracts cannot be made subject to a successful medical examination…, the Panel fails to see why a pre-contract cannot be made subject to such condition. Indeed, specifically in the matter at hand, the Panel finds that it was not unreasonable for the Player and the Club to want some kind of certainty in the form of a ‘pre-contract’ before having the Player come over to China to subject himself to a medical examination.”
In general, a player does not have just cause to terminate the employment contract with a club upon the club’s relegation. The player can only do so if he enters into a mutual termination agreement with the club, or the club agrees to transfer the player to another club, or if the contract itself provides for the consequences of the validity of the employment contract upon relegation of the club.
Clubs that operate in the lower regions of the league often include relegation clauses in their employment contracts with players to protect themselves from very high salary burdens as a result of the relegation. The inclusion of such relegation clauses not only benefits clubs but also players as they can protect their sports career by not being contractually obliged to play in a lower league.
There are broadly two kinds of relegation clauses:
- Relegation clauses whereby the contractual relationship of the parties automatically ends in case of a relegation to a lower league. This clause is of a causal nature, namely, not depending on the will of the parties. Both the club and the player can benefit from this type of clause.
- Relegation clauses that do not lead to the automatic termination of the player contract. Such clauses often provide for one of the parties to have a unilateral right to terminate the contractual relationship in case of a relegation.
Such clauses have been examined in various cases of FIFA and CAS. The following are the main principles to examine while determining the validity of a relegation clause:
- Relegation clauses are deemed as valid when they are non-potestative in nature. This means that the relegation clause was not dependent on the will of one of the parties under the contract.
- In case of a potestative condition (i.e. where the relegation is dependent on the will of one of the parties), it has been deemed as not-valid by the FIFA DRC.
- Another key principle of a valid relegation clause is the requirement of reciprocity. The relegation clause must not provide an advantage to one party over the other. In other words, both parties must benefit from the clause.
- Lastly, the relegation clause has to be included in the employment contract itself, and it will not suffice if the relegation clause is included in the internal regulations of the football association.
Notable jurisprudence:
- Player A v. Club C & Club E[1]
“Clause 29 of the contract provides that “in case of a drop to a lower class, the Parties undertake to renegotiate the terms of this contract. If the parties fail to agree on the new contract provisions the legal relationship between the parties expires”. (Para 6)
“In this context, the Chamber unanimously agreed that the primary issue at stake is determining whether Clause 29 of the employment contract is valid and binding. By way of reminder, the DRC recalled that said Clause established the following: “[i]n case of a drop to a lower class, the Parties undertake to renegotiate the terms of this contract. If the parties fail to agree on the new contract provisions the legal relationship between the parties expires.” (Para 16)
“After a careful evaluation, the deciding body felt that Clause 29, which is also known as a relegation clause in accordance with DRC jurisprudence, left little ambiguity: once the Respondent / Counter-Claimant is relegated, the Claimant / Counter-Respondent and the Respondent / Counter-Claimant renegotiate the terms of the contract. The Chamber further understood that, if no new agreement is reached, the contract expires. In this context, the deciding body further interpreted the relegation clause as signifying that both parties need to be willing to continue the employment relationship. Thus, as per the DRC, the willingness of, e.g. only the Respondent / Counter-Claimant would not be sufficient for the employment relationship to continue.” (Para 17)
“Furthermore, the DRC determined that the relegation clause is both reciprocal and proportionate, i.e. it does not provide an advantage of one party over the other. Furthermore, the Chamber referred to its previous jurisprudence, and recalled that relegation clauses have been declared valid in previous decisions.” (Para 18)
- E. v. Diyarbakirspor Kulübü[2]
“Furthermore, it is important to mention that such relegation clauses are mainly a way of protecting the player’s careers, as their employment opportunities and market values would be reduced by playing in lower divisions during their short-term careers.” (Para 38)
- Aris Limassol FC v. Carl Lombé[3]
“This question, however, is not relevant for the present case, if Article 8 of the Second Contract would have to be considered null and void. Article 8 of the Second Contract has to be regarded as a so called “relegation clause” which is a popular tool widely used with the aim to protect the club from wage burdens as a result of relegation, which would supersede the financial capability. Generally, there is a justifiable interest to adapt the wage structure to the changing sporting and financial environment in the second division, which also ensures that players would receive their salary.” (Para 53)
“But it is to be noted that there are two different types of relegation clauses.” (Para 54)
“On the one hand, there are relegation clauses stating that the contractual relationship of the parties automatically end in the case of relegation of the club, or give both parties the right to terminate the employment contract in case of relegation. From these kinds of relegation clauses do not only benefit clubs but also the players. That is to say, players themselves also could find it desirable to include such a clause in their employment contracts in order to protect their sports career, in that they would not be obliged to play in lower level competition in the case of relegation of their actual club. Therefore, these clauses can be deemed as a valid way to protect mutual interests of both parties of the contract.” (Para 55)
“This view is supported by a CAS 2008/A/1447 para. 38 stating that “relegations clauses are mainly a way protecting the players’ careers, as their employment opportunities and market values would be reduced by playing in lower divisions during their short-term careers.” (Para 56)
“On the other hand, there are relegation clauses which do not automatically lead to the termination of the contractual relationship in case of relegation but only give one party the opportunity to terminate the employment contract without any regulation of compensation for the other party. These kind of clauses bear the risk that they contain an unbalanced right to the discretion of one party only without having any interest of any kind for the other party. Therefore, the Sole Arbitrator needs to analyze the balance of interest according to the specific circumstances in the present case.” (Para 57)
“In the present case, Article 8 of the Second Contract only allowed the Appellant to terminate the employment contract in case of relegation. Moreover, neither in the Second Contract nor in the Supplementary Agreement there is any compensation granted to the Respondent in the case of the termination of the contractual relation. That implies that the Appellant retained full discretion as to whether the employment relationship with the Respondent will continue or will come to an end following the relegation of the Appellant, without protecting any established or substantiated interest of the Respondent.” (Para 58)
“In the light of the above the Sole Arbitrator considers that Article 8 of the Second Contract establishes unbalanced rights in the present circumstances, and is, therefore, contrary to the freedom of workers under Art. 27 para. 2 of the Swiss Civil Code, as well as contrary to the parity of termination rights under Art. 335a of the Swiss Code of Obligations (SFT 102 II 211, p. 218 et alt., CAS 2005/A/983 & 984, para. 88). Therefore, the Appellant could not rely on an act of termination under Article 8 of the Second Contract.” (Para 59)
Buyout clauses and release clauses are often used interchangeably, and act as exceptions to the general rule that a club can prevent a player from leaving in the middle of the term of their contract. The main difference between a buyout clause and a release clause are:
- A buyout clause provides the amount that a player must pay to his club as compensation in order to prematurely terminate the contract.
- A release clause is an undertaking by the club that it has to accept an offer for the player if it receives a bid equal to or higher than a certain amount.
Both the above clauses are negotiating tools that maybe useful to both the player and his club. For instance, a club who foresees the potential of the player, may insert a high buyout provision in a contract to evade or prevent other clubs from poaching the player. Such a clause could also work the other way – it could bring in great transfer revenue for a club. Similarly, a release clause has the same effect on negotiations in the transfer of players. However, a release clause bears significant risk as it is largely dependent on the sporting performance of the player. In case a player fails to meet the value of the release clause, it can be very difficult for a club to find a suitable buying club for the player, especially at the high release clause that has been set in the contract. While the parties can always choose to agree otherwise, such high release clauses may deter other clubs significantly.
[1] DRC Decision 17 May 2018 no. 05181876.
[2] CAS 2016/A/1447.
[3] CAS 2016/A/4549.