Coronavirus (COVID-19): What does it mean for player contracts?
Breaking news yesterday was that the English football season will continue to be suspended until at least 30 April 2020, as part of measures to further combat the rising spread of COVID-19. At an emergency meeting that took place between officials from all 20 Premier League clubs yesterday (19 March 2020) it was decided that the 2019/2020 Premier League season will be extended “indefinitely” (with the EFL and The FA (with The FA Cup) following suit).
As outlined in our article last week (which looked at some of the key issues being faced by English clubs in the wake of the coronavirus pandemic: one major issue that clubs will need to deal with in these unprecedented circumstances is that the majority of player contracts have a natural expiry date of 30 June. In light of yesterday afternoon’s breaking news, it is now even more likely that the current season will go beyond 30 June 2020 and clubs face a real dilemma of having players out of contract during the season.
It is rumoured that FIFA is reviewing the impact of the suspended season on player contracts and registrations following the coronavirus pandemic, however, concrete guidance is still yet to be circulated. This really is unchartered waters for Premier League and EFL clubs and although the position of football’s governing bodies is likely to continue to develop over the coming days and weeks, we aim to clarify the options available to clubs, players and agents.
The ‘potential’ issue
As alluded to above, there is now the very real possibility that COVID-19 will force the end of the football season into June and, likely, beyond (past the date that a number of players’ contracts will naturally expire).
Unsurprisingly, clubs will be anxious about their ability to maintain the strength of their squads beyond 30 June 2020, where they have a number of players out of contract on 1 July 2020 and are unable to sign any new players. Perhaps those players that had previously been identified as having no future at the club beyond 30 June, may now be looked at in a different way.
If fixtures do continue past this date then any players out of contract are in effect ‘free agents’ and they would not be under a contractual obligation to attend training or play for the club. Ultimately, an out of contract player would not receive any remuneration and he would no longer be recognised as an employee of the football club.
So what are the options available?
- The easy fixes
- Option to extend? In these uncertain times, clubs may be moving quickly to activate any unilateral extension clauses (UEC) that were inserted into a player’s contract at the time that it was entered into (often referred to as an ‘option’). UECs are contractual clauses that give one party to a contract the exclusive right to extend the employment relationship with the other party. Unlike reciprocal clauses (where both parties are required to agree to the extension) UECs do not require both parties to consent to activating the clause.
UECs are more often than not drafted in favour of football clubs in employment contracts between players and clubs. However, not every player contract contains an UEC and, therefore, clubs may not have the luxury of this option at their disposal.
- A new deal? The simplest solution, to this potentially unavoidable scenario, is for a club to agree a new contract with the relevant soon to be out of contract player. Any new contract will undoubtedly have a contractual term that will run beyond 30 June of this year and, therefore, enable the player to participate in any fixtures which take place past that date.
However, for obvious reasons, this will require a situation where the club is keen to retain the player’s services certainly for the immediate (and potentially even the long-term) future and, vice versa, the player being willing to commit his future to the club (and not already agreed terms to sign with another club on 1 July 2020 following expiry of his current contract).
- The less than easy fixes
The difficulties arise where the player does not have a long-term future at the club, but the club now needs that player as part of their squad for the remainder of the season. The player may feel aggrieved at the fact that his current club had not commenced contract negotiations with him and / or that they were willing to offer him a contract extension sooner.
- Can the contract be amended/varied? Interestingly, the standard Premier League and EFL Player Contract does not include an express amendment or variation clause that you might ordinarily expect to see in other employment or commercial contracts. However, guidance in domestic regulations provides that no variation of a player contract is valid unless it is in writing and signed by or on behalf of each of the parties (and that a copy of the amended contract is lodged with and accepted by the relevant league). However, watch out for an amendment to the player’s remuneration (as you will see below!).
- Incentivise the player? Clubs may be minded to offer soon to be out of contract players an increase in their basic wages from now until the end of the season (once a date is potentially defined), promising them that their long-term plans will be discussed and reviewed at a future date (that date being prior to the actual expiration of their contract). Clubs are reminded of the fact that Premier League and EFL regulations stipulate that a club shall be at liberty at any time to reach agreement with a player to amend the terms of his contract. However, if such an agreement increases the player’s remuneration (which is a term not defined in the regulations and therefore, arguably, not linked solely to the player’s basic wage) then (unless the agreement is made out of season – which will not be the case in these circumstances) it shall be a term thereof that the player’s current contract is extended by a minimum of one year.
Agents will n doubt be alive to the potential complications that clubs will find themselves in over the forthcoming weeks and they may use this to leverage the best deal possible for their player clients.
- Short term contracts? It has also been reported that FIFA and the FA have been considering a temporary ‘quick fix’ and they have been exploring the possibility of granting special dispensation for short-term rolling contracts, should this season extend beyond 30 June. This would enable clubs to sign players, that they wish to keep (and of course players that wish to stay), for as long as they are needed to complete the current season.
Notwithstanding the above, it is probable that agents would advise their players against signing temporary extensions unless those deals include lucrative security payments in the event that their clients sustain injuries that could cast doubt on any potential future transfer.
- What if the player wants to move? Subject to the relevant domestic regulations, FIFA’s Regulations on the Status and Transfer of Players provide that a player shall be free to conclude a contract with another club if his contract with his present club is due to expire within six months. With that in mind, players whose contracts are due to expire on 30 June 2020 may have already been assessing their options with their agents and negotiating with potential future clubs since January 2020. Simply put, players and their agents are in the driving seat.
Will the Summer Transfer Window be impacted?
The general position, as provided for in both the EFL and Premier League regulations, is that the Summer Transfer Window commences either at midnight on the last day of the season or at midnight on the date 12 weeks prior to the date on which it is to conclude, whichever is the later. As things stand, the closing date of the Summer Transfer Window is 1 September 2020. However, the open and closing dates of the Summer Transfer Window may now be subject to change particularly given the fact that the current season is to be extended “indefinitely”. Given the current circumstances, midnight on the last day of the season is likely to be the “later date” as far as the Transfer Window is concerned and we may, subject the decision of football’s governing bodies, see a summer window that is shorter than ever before.
What will this mean for out of contract players? It is important for players and their agents to note that if they were to reject a deal presented by their current club then the out of contract player would not be permitted to join another club until the opening of the Summer Transfer Window. Therefore, in the likely event that the dates of the transfer window are pushed back, players who reject contractual terms at their current club may find themselves in a period of unknown ‘limbo’.
Following the scenario of a player rejecting a new offer from a club (which is at least on as favourable terms as his current deal), it may crystalise (for Under 24 Players – as defined in the PL and EFL regulations) an unexpected compensation entitlement for the club.
Severance Payments? A clause contained in the standard Premier League and EFL Player Contract provides that, players who have not been offered terms of re-engagement or the terms offered are less favourable then they will be entitled to receive a severance pay. The player shall continue to receive from his Club a payment equal to his weekly basic wage for a period of one month from the expiry of his contract (subject always to a cap of double the maximum sum which an Employment Tribunal can award from time to time as a compensatory award for unfair dismissal).
What about player bonuses? Players are commonly remunerated by their clubs by way of a basic wage (usually expressed as “£x thousand per week/per annum”) and additionally with bonus payments based on the achievement of a variety of different targets. Appearance fees are commonplace and it is also usual for a contractual appearance based bonus provision to contain a clause which provides for a reduced/increased bonus amount to be payable in the event that the club is relegated or promoted. Incentives like appearance bonuses tend to be clearly specified, payable on specific dates and for a definite sum of money. Should the current season continue into June (and beyond) then it is highly likely that the specific dates for payment contained in a player’s bonus schedule will fall out of sync.
- If clubs aren’t already doing so, they should be considering the contracts of any players (that may now be viewed as important), identifying those which expire on 30 June 2020 and acting promptly to secure the player’s signature.
- Clubs should identify immediately whether a player’s contract contains a unilateral extension clause and determine whether they wish to activate this.
- Should they wish to do so, players (and their agents) should be acting fast in order to liaise with their club employers in an attempt to secure the best deal possible for the player.
- Players will want to ensure that they are paid for the bonuses that they are entitled to and they (or their agents) should liaise with the club to ensure that the true and accurate position is documented in their contracts (including considering if any formal variation is required).
- Clubs, players and agents should consider the impact of a potentially reduced Summer Transfer Window and plan accordingly. Will the window allow for enough time for the parties to conclude the deals they wish to?