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UNPAID WAGES – “The Known Truth within Football”

UNPAID WAGES – “The Known Truth within Football”
GARBER SPORTS

UNPAID WAGES – “The Known Truth within Football”

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, such as Spain where around 300 players in the Primera and Segunda División were not paid by their clubs in 20121. Not all professional players are highly paid and so any delay in payment of wages can have a significant impact on their lives. Also, the more players are left unpaid and struggling financially can increase the likelihood of corrupt practices such as match fixing. FIFPro, the World Footballers’ Association, is deeply concerned by this problem and has repeatedly emphasised the need for tighter regulations relating to unpaid wages. FIFA president, Sepp Blatter, has also gone on record saying he finds it “unacceptable that footballers aren’t paid.”2

Generally, players finally receive outstanding payments after involving the players’ union or by making a formal complaint to the relevant league or national association. Occasionally, more drastic action has been taken through the use of player strikes or protests, the most notable being Racing Santander’s players refusing to play their Copa Del Rey quarter-final second-leg tie against Real Sociedad in January 20143 because they had not been paid for four months. However, such steps are not always successful, suitable or possible and sometimes a player has no option but to take legal action.

“We have the instruments in place. It’s just up to the players to use them.”4– Sepp Blatter

 

JUST CAUSE

Besides bringing a contractual claim for unpaid wages, the ultimate legal action a player can take is to argue that he is entitled 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.5

The breach of contract must, therefore, be sufficiently 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 obligation as an employer and if this obligation is breached, it can cause the employee’s confidence in the employer to perform the terms of the contract to be lost6. It is common for the parties to agree when the player is entitled to terminate his contract by stipulating this in the contract. For instance, in the standard Premier League contract7, the player is entitled to terminate his contract if the club has failed to pay any remuneration due to the player within fourteen days from the date on which the player has provided notice to terminate the contract. In the absence of such a clause, jurisprudence from the Court of Arbitration for Sport (“the CAS”), see below, confirms that a player must satisfy two conditions in order to prove that he had just cause to terminate the contract as a result of unpaid wages.

First, the outstanding payments must not be trivial or insubstantial thus they must have been in arrears for a considerable amount of time and/or add up to a considerable amount8. The RSTP commentary provides an example to illustrate when non-payment of wages is serious enough to constitute just cause to terminate the contract by referring to a situation where a player has not been paid his salary for more than three months. The RSTP commentary points out that:

The fact that the player has not received his salary for such a long period of time entitles him to terminate the contract, particularly because persistent noncompliance with the financial terms of the contract could severely endanger the position and existence of the player concerned.9

Secondly, the player must warn the club that it is in breach of contract for failing to pay his wages and that he is considering terminating his contract unless the outstanding sums are paid10. It is important for the player to warn the club in writing in order to easily prove that the warning was made11 and to not delay in making the warning otherwise he could be deemed to accept the late payment that could make the termination unreasonable12.

 

PRACTICAL EXAMPLES

The CAS has been called to determine whether a player has just cause to terminate a contract for unpaid wages on a number of occasions. The case of Galatasaray v Ribery & Olympique Marseille is the leading decision on the issue that subsequent CAS panels have followed. Frank Ribery terminated his contract with Galatasaray in June 2005 after the club failed to pay his wages for around four months, which totalled around €262.000. After terminating his contract, Frank Ribery signed for Olympique Marseille. FIFA’s Dispute Resolution Chamber (“the DRC”) initially concluded in May 2006 that Frank Ribery had just cause to terminate his contract with Galatasaray as a result of his unpaid wages and this decision was upheld by the CAS on appeal because Galatasaray had failed to comply with a major part of its payment obligation and Frank Ribery’s agent had warned the club several times about this breach.

In E v Diyarbakirspor Kulubu, a Slovenian player terminated his contract with Turkish club Diyarbakirspor as a result of an outstanding signing on fee totalling €68,000, one monthly salary totalling €12,200 and eleven match bonuses totalling €40,480. The player filed a claim with the DRC in order to recover these outstanding sums as well as the remaining wages under the contract, which together totalled €415,955. The DRC found that the sums claimed by the player were actually far less than what was being claimed. This was due to the remaining value of the contract being reduced significantly by a relegation clause in the player’s contract meaning that the contract would have come to an end at an earlier point and because the DRC found that the player was not entitled to recover the match bonuses in addition to the signing on fee and outstanding salary. As a result, the DRC found that the player did not have just cause to terminate the contract because the breach was not sufficiently serious. However, on appeal, the CAS calculated the outstanding payments due to the player at the date of termination to be €76,300 which, according to the panel, were substantial and because the player sent two warnings to the club requesting payment of the outstanding monies owed to him, he, therefore, had just cause to terminate his contract.

The abovementioned cases can be contrasted with the case of Al Nasr Sports Club v Ismael Bangoura & FC Nantes where despite the CAS finding that the club, Al Nasr Sports Club, were in breach of contract for failing to pay their player, Ismael Bangoura, an advance payment of €360,000 in full, this breach of contract was not sufficiently serious to amount to just cause because there was only one payment outstanding and so there was no repetition of the non-payment as referred to in the RSTP commentary. In addition, there was no evidence that the player provided the club with a warning regarding his intention to terminate his contract. The player, was, therefore, not justified in terminating his contract as a result of this outstanding payment.

 

COMPENSATION

Terminating a contract for just cause may also entitle the player to compensation. Article 14 of the RSTP only states that the innocent party can terminate the contract without any consequences and does not address what the consequences for the guilty party are. However, the RSTP commentary confirms that the party “who is responsible for and at the origin of the termination of the contract, is liable to pay compensation for damages suffered as a consequence of the early termination of the contract and sporting sanctions may be imposed”13

In the absence of an enforceable liquidated damages clause, compensation is calculated underArticle 17 of the RSTP by taking into account the national law applicable, the specificity of the sport and objective criteria including the remuneration and other benefits due to the player under the existing contract and/or the new contract. Essentially, the injured party should “be restored to the position in which it would have been if the contact had been properly fulfilled”14This means that the player is prima facie entitled to recover the wages he would have received if the contract had been performed up to its expiry. However, this is subject to the principles of mitigation and if the player subsequently signs a contract with a new club, his claim for lost wages will be deducted from his remuneration under the new contract. For instance, in the case of Galatasaray v Ribery & Olympique Marseilles, Frank Ribery’s wages had actually increased under his new contract with Olympique Marseilles and so the CAS held that he was not entitled to recover any compensation as a result.

 

VERDICT

A decision to terminate a contract is a drastic step, which should not be taken lightly, and players should always attempt first to resolve disputes with clubs amicably through mediation or involving the players union.

Players who intend to terminate their contracts as a result of unpaid wages should also exercise caution as there are serious consequences for terminating a contract without just cause including liability to pay the former club compensation15 and the risk of a four month playing ban (or six months in the case of an aggravated breach)16 if the breach of contract takes place during the protected period.17 A club who considers signing a player after he has terminated his contract with his former club should also exercise caution as the new club could be jointly and severally liable for any compensation payable to the former club18 and face a transfer ban for two consecutive transfer periods if it fails to rebut the presumption that it induced the player to terminate the contract within the protected period19.

The consequences for terminating a contract without just cause are illustrated in the case of Al Nasr Sports Club v Ismael Bangoura & FC Nantes where Ismael Bangoura and Nantes were jointly ordered to pay €4.5m compensation to Bangoura’s former club Al Nasr Sports Club. In addition, Bangoura received a four-month playing ban and Nantes received a transfer ban for two consecutive transfer windows as a result of the termination without just cause taking place within the protected period. Players must, therefore, be certain that they have strong grounds for terminating their contract before doing so.

 

Last Updated January 7, 2016


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