Many clubs undertake regular reviews of their contract templates, updating them to ensure that their documents are compliant with relevant laws and regulations, as well as adequately protecting their interests in the market at that time.
Template documents are often used for things like:
- Additional schedules to player contracts.
- Agreements with agents.
- Transfer agreements.
- Exit / settlement agreements with players and other staff.
- Contracts with managers, coaches and executives.
- Commercial agreements.
Clubs would be well advised to develop their own bank of template documents bespoke to their needs. A strong template bank will help clubs operate efficiently and with confidence during transactions. In a time pressured situation, if a party is able to negotiate using their bespoke template as the opening draft then that party is in a significantly stronger position than the other party.
However, many other clubs do not wish to create, review or regularly update a bank of template documents – others would like to but simply do not have the resource. In fact, it is not uncommon in the market to hear club representatives refer to the documents used by clubs to negotiate and document the agreed terms of transactions as ‘standard’ or ‘standardised’.
None of the documents created or used in the above list of transactions are standardised. Unlike the main body of the ‘Standard Premier League / EFL Player Contract’, none of the documents will have had full stakeholder approval nor will they have been issued by the relevant league or The FA.
Therefore, the documents that are used to negotiate and detail the terms agreed in a club’s transactions will be subject to:
- rule changes
- law changes
- market changes
- changes in a club’s circumstances
In terms of protecting your club’s commercial interests and mitigating risk, the importance of these documents cannot be underestimated.
Adopting a casual attitude to these documents could lead to the odds being heavily stacked against your club, with the other party (and more than likely its legal team) looking to exploit any such casual attitude – either by seizing the initiative and commencing the negotiations on its own bespoke template (which will be heavily weighted in its favour) or ‘rubbing their hands in excitement’ when they see a basic, poorly drafted and out of date document land on their desks.
Consequently, clubs should be wary of:
- Always allowing the other party to present the first draft of an agreement.
- In the above scenario, not taking the time to carefully review every word of the draft agreement provided by the other party – the devil is always in the detail.
- Using previous versions of an agreement.
- Using another club’s previous versions of an agreement.
- Not taking the appropriate legal advice.
Below, we highlight some common problems and errors found in the above listed documents used by clubs to negotiate and finalise agreements.
Additional Schedules to Player Contracts
Recent changes to regulations, laws, attitudes of HMRC and the need for clubs to be more commercial and prudent in the terms they agree with players have seen additional schedules become more sophisticated, complex and lengthy.
It is therefore essential that the drafting of the terms within the Additional Schedule are clear and unambiguous. It is also important that the relevant warranties, undertakings and indemnities are addressed.
For example, it is not uncommon to see clubs (and players and their representatives) fail to appropriately address things like:
- Basic wage increases and decreases.
- What event triggers the change and when, and how such changes may impact on an option year.
- Performance-related bonus payments.
- COVID-related wage decreases and reinstatements.
- Basic wage and bonus deferrals.
- Payments to agents.
Agreements with Agents
In both: i) club-agent; and ii) tripartite representation contracts, many clubs regularly fail to appropriately address:
- The terms appointing the agent.
- What exactly is the agent being appointed to do?
- What services should the agent provide to the club and / or to the player?
- What happens if the agent: i) fails to provide the services; and / or ii) otherwise breaches the contract; and / or iii) breaches the relevant rules or regulations.
- Any player vs club services split of the fee payable to the agent. New HMRC guidance suggests that HMRC will no longer accept a 50/50 split of the overall fee payable to the agent based on player vs club services.
- Who carries any responsibilities and / or liabilities in respect of any future HMRC inquiry, tax / national insurance liabilities and / or sanction.
Transfer Agreements
Transfer agreements are becoming more complex, and clubs are now more willing than ever to protect their interests and, if necessary, enforce their rights in the future. Despite the value of transfers continuing to grow, it is still not uncommon to find relatively short and basic agreements documenting the terms of the transfer between clubs.
However, with more clubs: i) being forced to be creative with payment terms; ii) making use of third party invoice financing facilities; and iii) having to be careful to manage risk in transactions, it is essential to ensure that your club’s transfer agreements are suitable for a domestic or international transaction, and appropriate to whether you are a buyer or seller or parent or loanee club.
Many transfer agreements do not appropriately address things like:
- The conditions which must be satisfied before the player’s registration is transferred and payment is released.
- Contingent payments – ambiguous drafting can lead to disputes between the clubs.
- Sell-on provisions – as above, ambiguous drafting can lead to disputes – is a club entitled to a share of a future fee relevant to the gross or a net amount received by a club?
- Warranties
- It is essential that clubs understand the warranties that they are requesting from the other club. It is even more important that clubs understand the warranties which they are being asked to provide by another club.
- See the recent EFL Arbitration Judgment in respect of a dispute between Barnsley FC and Hull City FC – Barnsley FC was found to be in breach of a warranty in which it had promised to Hull City FC that it had disclosed all information and documentation in respect of a player’s medical and fitness history.
- Indemnities – see above case. A wide indemnity meant that Barnsley FC was obliged to pay a significant amount of Hull City FC’s costs of the EFL Arbitration process.
- Provisions which may breach domestic or international regulations concerning third party interest and / or influence.
- Agreements which bring a third-party financer directly into the club-club relationship
- Loan agreements which allow a parent club undue control over the loanee club.
- Transfer agreements which restrict a buyer club from dealing with the player’s registration freely e.g. variable sell-on-fees (see FIFA’s disciplinary sanction imposed on Arsenal FC – subject to an appeal to the Court of Arbitration for Sport).
Exit / settlement agreements with players and staff
A settlement agreement is a legally binding agreement between an employee and an employer, which sets out the terms that have been agreed to resolve an employment dispute or potential dispute. For a settlement agreement to be valid, certain conditions must be satisfied under employment laws.
In a settlement agreement, a club will usually agree to make a payment to the employee in return for an effective waiver of the employee’s right to pursue any employment claims against the club.
In this way it provides a clean break for both the club and the player or member of staff and has the benefit of usually preserving the relationship between the parties and avoiding often expensive litigation.
Clubs will routinely attempt to compromise a player or member of staff’s employment contracts/claims against the club by using an agreement which will regularly:
- Not adequately address all issues under the relevant contract and claims of the player/member of staff.
- Not be compliant with employment laws and therefore unenforceable as a binding settlement agreement. This could lead to the player/member of staff receiving a settlement payment but still being able to bring a claim against the club in the future under statute, in accordance with their contract of employment and other common law rights (such as negligence).
- Incorrectly label payments as “ex gratia” and fail to take into account the latest changes to the rules regarding the tax treatment of termination payments and post-employment notice pay for income tax.
- Fail to properly deal with confidentiality. A robust settlement agreement will typically provide for the parties to keep the terms and circumstances of the settlement agreement confidential and for both parties to agree not to say anything derogatory about the other after the employment relationship has come to an end.
- Fail to deal with post-termination restrictive covenants. Thorough settlement agreements will usually contain a clause which reaffirms existing post-termination restrictive covenants in the employee’s contract of employment.
Contracts with Managers and Backroom Staff
Contracts with Managers and Backroom Staff are becoming more complicated and are significantly increasing in value. Considering that Managers and Backroom Staff are subject to an extremely high turnover, clubs can simply not afford to adopt a casual attitude to these agreements.
We regularly see clubs making use of agreements which:
- Do not stipulate that any bonus payment payable to the Manager, in respect of a particular triggering event, shall be calculated on a pro-rata basis referable to the number of games over which the Manager presided in the relevant season.
- Do not clearly explain what will happen in the event the club wishes to dismiss the Manager or the Manager wishes to leave prior to expiration of the relevant fixed term.
- In the above scenarios, do not address what will happen with any Backroom Staff.
- In the above scenarios, do not address what will happen with club property, intellectual property and confidential information in the possession of the Manager and Backroom Staff – what about scouting information and target information?
Commercial Agreements
As clubs seek to maximise their commercial income, opening up new advertising spaces to new commercial partners, it is essential that clubs protect their interests, and the interests of their other commercial partners. We have seen many commercial agreements:
- Grant rights to commercial partners which overlap with those already provided to another commercial partner, or a third party via rights already provided to the league, The FA or a broadcaster.
- Allow third party partners to use wide definitions to ‘stretch’ their entitlements. For example: we have seen energy drink providers try to gain exclusivity in other drinks categories.
- Not appropriately address what will happen if the rights granted cannot be utilised. For example: what happens if fans are not permitted to enter the stadium for a game(s)?
- Not adequately address quality control – who is responsible for the quality of production and supply of club branded products?
- What happens if the partner breaches the contract – payment entitlements or rebates are not adequately addressed?
- What happens on termination – can the club immediately re-sell the rights?
- Not comply with applicable regulations or relevant laws.
In conclusion, it is important that every club attempts to develop its own bespoke templates. It is equally important that those clubs regularly review their bank of template documents and updates them in line with any changes to regulations, laws, circumstances in the market and the clubs own commercial interests.
For more information, please do not hesitate to contact Andrew McGregor or Matthew Lavelle in our Sports Sector team.
