Compensation for Termination of an Employment Agreement in Football

The termination of the agreement ‘without just cause’ gives the right to the innocent party to claim compensation. The calculation of such compensation is regulated by the FIFA Regulations on the Status and Transfer of Players (RSTP) and in particular the article 17 which governs the consequences of terminating a contract ‘Without Just cause’ either by the Club or by the Player.

In particular the art. 17. 1 of FIFA RSTP states:

«1. In all cases, the party in breach shall pay compensation. Subject to the provisions of article 20 and Annexes 4 in relation to training compensation, and unless otherwise provided for in the contract, compensation for the breach shall be calculated with due consideration for the law of the country concerned, the specificity of sport, and any other objective criteria. These criteria shall include, in particular, the remuneration and other benefits due to the player under the existing contract and/or the new contract, the time remaining on the existing contract up to a maximum of five years, the fees and expenses paid or incurred by the former club (amortised over the term of the contract) and whether the contractual breach falls within a protected period. Bearing in mind the aforementioned principles, compensation due to a player shall be calculated as follows:

i. in case the player did not sign any new contract following the termination of his previous contract, as a general rule, the compensation shall be equal to the residual value of the contract that was prematurely terminated;

ii. ii. in case the player signed a new contract by the time of the decision, the value of the new contract for the period corresponding to the time remaining on the prematurely terminated contract shall be deducted from the residual value of the contract that was terminated early (the “Mitigated Compensation”). Furthermore, and subject to the early termination of the contract being due to overdue payables, in addition to the Mitigated Compensation, the player shall be entitled to an amount corresponding to three monthly salaries (the “Additional Compensation”). In case of egregious circumstances, the Additional Compensation may be increased up to a maximum of six monthly salaries. The overall compensation may never exceed the rest value of the prematurely terminated contract. iii. Collective bargaining

agreements validly negotiated by employers’ and employees’ representatives at domestic level in accordance with national law may deviate from the principles stipulated in the points i. and ii. above. The terms of such an agreement shall prevail.»

The article17 par. 1 of the FIFA RSTP provides the key to assess the amount of compensation due by the Respondent to the Claimant. According to the said provision, the amount of compensation should be calculated, in particular and unless otherwise provided for in the contract at the basis of the dispute, with due consideration for the law of the country concerned, the specificity of sport and further objective criteria, including, in particular, the remuneration and other benefits due to the player under the existing contract and/or the new contract, the time remaining on the existing contract up to a maximum of five years, and depending on whether the contractual breach falls within the protected period.

In the CAS Bulletin 2015 in page 18, states inter allia that ‘in fact, parties to an employment contract may, pursuant to article 17 par. 1 RSTP, stipulate in the contract the amount of compensation (liquidated damages) for breach of contract. As stated in the appealed decision, where such a clause exists, the wording of such clause should leave no room for in-terpretation and must clearly reflect the true intention of the parties. In this regard, it needs to be pointed out that the clause as quoted above is drafted in vague and ambiguous terms which does not allow for the Panel to establish the true intention of the parties’.

According to the CAS decision (CAS 2008/A/1519-1520) and according to the art. 17 para. 1 of the FIFA RSTP, if the parties have not agreed on a specific amount in a way as de-scribed above, the compensation for a unilateral breach and a premature termination shall be calculated as follows: With due consideration: − For the law of the country concerned; − Of the specificity of sport; − And of any other objective criteria, including in particular: − The remuneration and other benefits due to the player under the existing and/or the new contract; − The time remaining on the existing contract up to a maximum of five years; − The fees and expenses paid or incurred by the Former Club (amortised over the term of the contract); and − Whether the contractual breach falls within the Protected Period as defined under the “Definitions” chapter in the FIFA Regulations.

Furthermore, according to the above-mentioned CAS decision ‘the calculation of the com-pensation due under art. 17 FIFA RSTP shall be diligent and there is no power for the judging authority to set the amount due in a fully arbitrary way. By asking the judging authorities, i.e. the competent FIFA bodies and, in the event of an appeal, the CAS, to duly consider a whole series of elements, including such a wide concept like “sport specificity”, and asking the judging authority to even consider “any other objective criteria”, the authors of art. 17 FIFA Regulations achieved a balanced system according to which the judging body has on one side the duty to duly consider all the circumstances of the case and all the objective criteria available, and on the other side a considerable scope of discretion, so that any party should be well advised to respect an existing contract as the financial conse-quences of a breach or a termination without just cause would be, in their size and amount, rather unpredictable. At the end, however, the calculation made by the judge’

Therefore, the first question is whether the Player has concluded a new contract valid on the period that the terminated contract would be enforce. In case the Player has concluded a new contract with a new Club then the Judicial Body shall consider the remunerations of the Player under the existing and the new agreement applying the principle for the mitiga-tion of damages:

‘One of the non-exclusive criteria mentioned in art. 17 para. 1 of the FIFA Regulations is the remuneration and other benefits due to a player under the existing and the new contract. While the information on the remuneration under the existing contract may provide a first indication on the value of the services of the player for that employing club, the remuneration under the new contract may provide an indication not only on the value that the new club/clubs is/are giving to the player, but possibly also on the market value of the services of the player and the motive behind the decision of the player to breach or terminate prematurely the agreement’ (CAS 2008/A/1519-1520)

The value of the Player is an important factor which the Judicial Body shall take into ac-count in order to calculate the compensation of the Innocent Party. In the decision CAS 2008/A/1519-1520 the CAS Committee mentioned among others that ‘the value of the ser-vices of a player at a given point of time may be lower, higher or equal to the one when the player had started to play for a club. In the event of a breach by a player, a panel has there-fore to analyze the amount necessary to acquire and keep the working force of the player. In doing so, the Panel only acknowledges economic reality in the world of football, i.e. that

services provided by a player are traded and sought after on the market, are attributed an economic value and are – according to art. 17 FIFA Regulations – worth legal protection. The Panel is eager to point out that the sole object of this approach is the services provided by a player and not the human being as such’.

Therefore, the article17 par. 1 of the FIFA RSTP provides the key to assess the amount of compensation due by the Respondent to the Claimant because of a termination of an employment agreement without just cause, however many factors are relevant taking into con-sideration from a judicial body to assess the compensation for every case.

For more information, please speak with Christoforos Florou or your usual contact at SeptemLaw in Sports.