In a recent decision, an independent arbitration panel upheld a claim against a salary cap in League One and League Two. The salary cap, introduced by the English Football League (EFL) on 7 August 2020, prohibits the overall player salary remuneration above 2.5 million in League One and a cap of 1.5 Million in League Two1. The Professional Footballers' Association (PFA) opposed the salary caps and sought arbitrary action. Following the arbitral decision the EFL have withdrawn the salary caps2.
Background to Financial Controls
Football in the UK is not subject to a statutory salary cap. Although, the Union of European Football Association (UEFA) introduced Financial Fair Play regulations in 20103 as a requisite to enter into its competitions. UEFA set up the Club Financial Control Body (CFCB) to oversee and sanction clubs that exceed spending beyond its budget over the course of three seasons4. The Premier League (PL)5 and EFL introduced Financial Fair Play Regulations in 2013. EFL regulations subject clubs to a Salary Cost Management Protocol (SCMP); a player related expenditure prohibiting clubs from exceeding 60% of the clubs turnover.
Reason for Salary Caps
Since the global pandemic, clubs across all leagues have suffered financially6. The loss of TV and broadcasting rights, commercial revenue, gate and match day income has reduced millions of pounds worth of income. The consequences of insolvency was unfortunately seen in the fate of Bury FC's expulsion for the EFL and the PL agreed a £250 million rescue package to assist sustainability within the EFL7.
On 7 August 2020, the EFL introduced a salary cap of 2.5 million in League One and a cap of 1.5 Million in League Two. In its statement the PFL said "The decision follows extensive and comprehensive consultation with all Clubs in respect of addressing sustainability and wage inflation issues across the EFL"8.
The PFA acknowledged the need for costs control measures but set out its detailed objections to the salary cap. This included revenue disparity, the development and process of the wage control measures, consensus of stakeholders, omitted details from the principles and much more9.
Changes to the EFL Regulations are permitted pursuant to Article 13 of the Articles of Association of the Football League10, albeit requiring a vote by member clubs11. A majority voted in favour of the salary cap, whilst a minority of clubs opposed the decision, contending it could deter young talent and investors.
As a result of the decision to impose salary caps, the PFA served Notice of Arbitration on the EFL disputing the caps as unlawful and unenforceable. The PFA argued the EFL failed in its obligation to consult with the PFA and the Professional Football Negotiating and Consultative Committee (PFNCC).
Paragraph 3a. of the PFNCC's Constitution states, "The PFNCC shall be the forum in which the Members consider matters relating to the employment of, and any associated rules and regulations relating to, those professional football players (Players) employed by clubs in membership of EFL and the PL (the Leagues)..."
The decision12 places emphasis on the need to consult the representative bodies and upholds their respective standings within the EFL.
It also revert the EFL back to the SCMP rules in accordance with 9.5 of the EFL Rules and Regulations, which states "If an arbitral body makes any ruling to the effect that the EFL acted in breach of the constitution of the Professional Football Negotiating and Consultative Committee when adopting Salary Cap Rules, then these Salary Cap Rules will automatically and immediately be withdrawn from the regulation and will be replaced by Part 4 of the Appendix 5 of these Regulations (the 'Existing SCMP Rules')13.
The need for cost control measures and clear parameters appear to be appreciated amongst clubs, regulators and governing bodies, and so it is likely discussions will continue until a resolution is reached that suits all parties.
3 CFCB Procedural Rules, updated (2012, 2015, 2018) https://documents.uefa.com/v/u/tiwZWPkjhpinhlndT5sc9A
4 Article 29 of the CFCB Procedural Rules (see FN3 above)
6 Companies House Accounts
11 Shareholders of the EFL entity, Football League Limited.
12 Unpublished at the time of writing
13 (see FN8)
Originally Published by Blaser Mills, February 2021
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