Legal Focus: Covid-19 – What Does It Mean For Football Agents?
The full extent of the impact of the COVID-19 crisis across football remains to be seen.
However, as circumstances develop, we have already seen, and can anticipate, a number of issues which agents should be considering in order to safeguard the interests of their clients and their businesses. In this article we take a look at some of the key issues being faced by football agents and agencies.
Many agencies aspire towards being able to offer their clients a “full service” experience. As such, many agencies now supplement their primary representation services with provision of legal, financial, accountancy and reputation management support services. In the current crisis, almost all players and managers will likely require advice on a range of new issues that will inevitably vary depending on the individual client’s circumstances.
Aside from being professional advisors and professional services ‘project managers’ there is an increased expectation on agents to support players, and their families, in their personal lives. This most likely includes their living arrangements, and that of their families, particularly for those players who are playing in foreign countries. Like everyone, players and their families are adjusting to a new way of life.
Good agents will be supporting that transition, for example:
– They should consider liaising with landlords regarding rent payment deferrals if necessary.
– Ensuring that players have the facilities they need to continue training whilst under lockdown restrictions.
– There has already been a number of reports in the press regarding players breaching government restrictions, so agents should impress upon their clients the importance of following guidelines to remain safe and to avoid penalties from their clubs and a PR backlash.
General contractual considerations
As far as legal issues are concerned, clients will require guidance on the following:
– contract extensions due to the likelihood that the season will not be completed before 30 June;
– wage deferrals and/or reductions to assist clubs with their cash flow issues during the suspension of the season (more on this below);
– furlough status and whether your client should agree, the implications on their wages, pensions and training programs;
– contract terminations as a result of competitions concluding early or in circumstances where clubs are unable to pay wages;
– players on loan will be concerned as to how any extensions to their loan agreements will be dealt with, agents should maintain open communication with all parties to the agreement in order to try and achieve an outcome that is suitable for all parties. In particular, will the loan club continue to make contributions to the parent club in respect of the player’s wages whilst no games are being played? If the loan agreement is not extended and the commencement of the 2020/21 season is delayed, the loaned player will not be eligible to play for their club and they will need to maintain their fitness and involvement with the squad whilst not being eligible to play; and
– contract disputes with clubs and commercial partners that will undoubtedly arise as either party may no longer be able to fulfil their contractual obligations, or actions/inactions of players/managers or the commercial partners themselves, whilst in lockdown, may lead to disputes (more on this below).
Many of the issues discussed above have been covered in our previous article focusing on player contracts.
In early April the Premier League and English Football League circulated copies of template letters which could be used by clubs when proposing to vary player contracts to take account of wage reductions, deferrals and furlough status. Whilst the templates have been approved by The Professional Footballers Association, there were blank spaces in the letters to be completed by the clubs which would provide the detail of the terms agreed. Since those templates were circulated we have advised on a number of draft variation letters.
Agents should be particularly conscientious when advising their clients on the negotiation of such contract variations. For example, most of the wage deferral letters we have seen allow for players to receive deferred payments in scenarios where contracts expire (currently on 30 June 2020) or if still under contract with the club at the date that the deferred payments are to be made. However, many letters have failed to address the entitlement to deferred payments of a player who is transferred before the deferred payment repayment date(s).
It is essential that players and agents review the draft contract variation letters carefully and consider taking the appropriate legal advice.
Commercial Activities during the COVID-19 Crisis
The ability for players to continue with their usual commercial activities, outside of their playing contracts, has also been altered due to the current situation. Agents will need to look carefully at their client’s commercial contracts, particularly clauses that set out each parties’ obligations and payment mechanisms.
Players may not be entitled to payments under their sponsorship agreement if they’ve not been able to comply with their obligations, for example attending certain public events, attending photoshoots or in circumstances where the brand has been unable to launch their advertising campaign as planned. Agents should be in regular dialogue with commercial partners to help manage expectations (on both sides), with commercial activities only being carried out in the appropriate circumstances. We have looked at the topic of commercial contracts and key legal issues in our previous article focused on clubs.
Agents should also be on hand to advise their clients on any new proposals put forward by potential new commercial partner, who are perhaps looking to maximise opportunities during the lockdown period. Agents should be mindful of:
– Existing commercial contractual obligations to the club and any other commercial partners
– The true practical and logistical realities of what is being asked by the potential partner
– Any potential negative PR backlash that the player may face if he/she undertakes these new commercial activities whilst in lockdown (which will also not be appreciated by the club or other commercial partners)
Practical difficulties for Agents
On a practical level, the current social distancing measures and strict travel restrictions in place, not just in the UK but globally, are making it much more difficult for agents to do their job in the way that they are used to. The renewal of representation contracts with clients (amongst other routine client management activities), are normally done face to face. However, such activities are now having to be done via post and video calls. This can cause delays and pressure on the client management activities of agents. Although agents can’t currently meet with their clients face to face there are plenty of solutions as video conferencing and virtual meetings are increasingly embraced.
The current restrictions will also have a considerable impact on the way deals are brokered during the Summer Transfer window. 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 day of the last game 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 to the decision of football’s governing bodies, see a summer window that is shorter than ever before. Alternatively, what happens if the transfer window is extended into the next season, will clubs be less likely to engage in transfer activity owing to playing commitments, or even the negative perception of spending money on the back of the crisis? This would significantly impact on agents and their ability to do their jobs.
Agents should be mindful of how the above will impact on the way they do business during the Summer Transfer Window and start thinking now about how they can conduct their business remotely. In particular agents should take advice regarding the validity of agreements signed by way of electronic signature and how they can ensure their contracts are watertight and legally binding to avoid any ambiguity that may arise as a result of not being able to thrash out the details face to face.
Agent’s Representation Contracts
Finally, where does all of this leave agents in respect of payments due to them for the services they provide?
This will depend largely on 3 things:
1. The decisions made by governing bodies regarding how, when or if rest of the season will be played;
2. The relevant wording in their representation contracts; and
3. Regardless of the above, whether the club is willing (or even able) to pay.
Generally, an agent’s position will depend entirely on the wording of the relevant representation contracts. There are typically three ways in which payments are structured:
1. Lump sum payments on set dates;
2. Percentage of player’s guaranteed income referable to a particular season/time period; or
3. A combination of the above
It is difficult to know exactly how agents’ positions will be affected until the Premier League and EFL confirm how they intend to deal with the remaining games in this season. This may mean that the season will be extended so games are played into June, July and possibly August and this will of course also have knock-on effects into next season. As set out above agents will also need to consider commissions due on player’s commercial agreements.
In order to understand your position, and seek advice if necessary, you should consider:
1. When does your player’s contract end?
If your player’s Playing Contract ends on 30 June 2020 their club may seek short term extensions that will need to be negotiated to allow them to play the remainder of the season if this extends past 30 June as we have set out above. Player contracts will not automatically rollover.
2. What is the exact wording regarding fee payments?
Are they linked to dates or events? It is unlikely that such ambiguous language would be used but if the payments are to be made “within [ X ] days following the last game of the season” (for example) this may mean a delay in your payment until all games have been played. If, in a worst case scenario, the season is declared null and void, this may give rise to potential disputes as to whether payment is still due to you.
Representation Contracts that specify lump sum payments with set payment dates are unlikely to be affected by changes to the season as long as they are not contingent on any other event. However, given that the majority of players are having to agree to wage and bonus deferrals (with some agreeing to wage reductions and even furlough status), agents should expect some resistance when trying to secure payments of fees from clubs.
A simple arrangement whereby your payments are based on a percentage of the player’s gross annual salary is unlikely to be affected if it is linked to their salary for the season. In fact, it may have a positive impact on the amount of commission given that the period of time covering a season might be extended.
As set out above agents should also be mindful when advising players regarding wage reductions and deferrals as this may have a knock on effect for their own payments.
3. Are you entitled to any other payments under the representation contract that may be affected?
Are you entitled to any extra commission if a certain event takes place – like your client’s first team debut or participation in a winning cup final? Some commentators have suggested it would be sensible to scrap all cup competitions and focus on the league. If your representation contract includes extra payments linked to your player’s appearance in a certain number of games, promotion and/or cup wins, the decision made as to how to finish this season will also have an impact on your payments.
4. What does your contract say regarding interest on late payments?
As a result of the suspension of the season a number of clubs will struggle with their cash flow and we expect agents to feel the repercussions of this as clubs may fail to make payments on time. Agents should therefore review their representation contract to determine whether they will be able to claim interest on any late payments. Unless the parties have expressly excluded it, agents will be able to recover interest of 8% above the Bank of England Base Rate on late payments from clubs under the Late Payment of Commercial Debts (Interest) Act 1998. Alternatively, the contract may include a specific provision regarding the rate of interest that will accrue on late payments.
If Agents are unable to obtain payment from clubs they may issue Rule K proceedings, the FA’s dispute resolution mechanism, whereby an Arbitrator is appointed and a timetable is set for the parties to set out their cases for determination by the Arbitrator. We explain that process in more detail in our blog “Pursuing Clubs for Unpaid Intermediary/Agency Fees.”
Although agents may be contractually entitled to issue Rule K proceedings this is likely to be damaging to their long term relationship with that club, Allowing interest to accrue on the debt and then reaching an agreement with the club at a time when their financial position has recovered somewhat may yield more positive long term benefits for agents and they should consider the impact on their relationship with the club before rushing to issue Rule K proceedings.
To summarise, what should agents be doing now?
Maintain regular contact with clients to ascertain whether they require advice from other professional advisors regarding their contractual position from a legal perspective, financial and tax positions, accommodation arrangements and image rights companies where relevant.
Carefully review wage deferral or reduction proposals and seek legal advice if necessary.
Review your clients’ commercial contracts to determine whether they are able to fulfil their obligations. If not, consider whether the player/manager can offer alternative rights or consider whether your client is excused from any breach as a result of force majeure or applicable law provisions.
Consider all new commercial proposals carefully and, regardless of the value of the potential fees for your clients, consider the potentially wider negative implications of those activities.
Consider how you will conduct Summer Transfer deals remotely and in a reduced time period. Understand the position regarding electronic signatures.
Review your own representation contracts, payment mechanisms and entitlement to interest on late payments.
Open a dialogue with clubs early and expect even further delays in payments. Clubs may even ask agents to defer contractually agreed payments. Agents and agencies should plan for disruptions to cash flow and pressures on capacity to generate fees.
This is a fast moving situation and things are changing not by the day but by the hour. Brabners is here to help you navigate the challenges posed by COVID-19 and we would be happy to discuss your concerns regarding any of the issues set out in this blog. Get in touch with Andrew McGregor, Elke Kendall or any member of our Sports’ Sector team.
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