Player transfers in professional football - German employment law aspects

Player transfers in professional football - German employment law aspects

As the new Bundesliga season is about to begin, this article lays down the German employment law aspects that typically shape player transfers.

The Steps

Every transfer is different, but the general gist of a transfer consists of the following:

• Contract negotiations between the player, the potential new club and the current club

• (Oral) Agreement and concluding the following agreements:

• Old and new club sign a transfer agreement
• Old club and player sign an agreement terminating the employment
• New club and player sign an employment agreement 
• Licence Agreement between player and the German Football League (“DFL Deutsche Fußball Liga e.V. – DFL”

Additionally, the successful completion of a transfer under is subject to the submission of the required documents, such as the new employment contract and the sports fitness certificate issued after the medical check, to the DFL in due time, i.e., by no later than 6:00 p.m. on the last day of the transfer period (cf. § 4 No. 2 DFL Licensing Regulations for Players ("DFL Lizenzordnung Spieler - LOS")).

Stage 1: Player and New Club

If a player is out of contract or the - typically fixed-term - employment contract expires within the next six months (cf. § 5 no. 1 sub-section 6 LOS), the player and the new club can conclude an employment contract without the consent of the "old" club. A transfer agreement is not required in this case.

If a club is interested in transferring a player who is still under contract with his current club for more than six months, the potential new club must in principle first inform the current club and obtain its consent to approach the player and conduct contract negotiations with the player. Subsequently, the player and the potential new club enter negotiations on the modalities of the employment contract to be newly concluded in the event of a transfer.

Stage 2: Transfer agreement - term and contents

If an (oral) agreement on the transfer of the player is reached between the player and the new club as well as between the two clubs, the aforementioned employment law related agreements must be concluded. In practice, these agreements are either concluded at the same time or are subject to the effective conclusion of the other agreements. The agreements do not have to be, but usually are in German, but often dual-language.

The FIFA Regulations on the Status and Transfer of Players stipulate that a new employment contract may only be concluded if the employment contract with the old club has already expired or will expire within the next six months (cf. Art. 18 no. 3 sent. 2 FIFA RSTS). Therefore, the first formal step is to conclude the transfer agreement between the "old" and the new club to regulate the "old" club's duty to cooperate in the termination of the existing employment relationship. The term transfer in the 1st and 2nd Bundesliga refers to the transfer of the registration of the player to be transferred from the "old" to the new club.

With respect to the principal contractual duties the transfer agreement regulates the duty of the "old" club to cooperate in terminating the employment contract with the player - usually by concluding a termination agreement - and in return the duty of the new club to pay the agreed transfer fee. The transfer agreement regulates the payment modalities of the transfer fee, which often consists of a base transfer fee and additional special payments linked to the player's future individual performance and/or the success of the new club. If the employment contract of the player contains a so-called exit clause, the negotiation of the transfer fee is less complex, as the "old" club has in this respect undertaken vis-à-vis the player to give its consent to the conclusion of a termination agreement in the context of a transfer if the transfer fee agreed in advance in the exit clause is paid by the new club.  Due to the implications associated with exit clauses, they should be carefully drafted.

Stage 3: Old club and player sign an agreement terminating the employment

Since most players will already be under contract with a club in Germany or abroad and are generally fixed-term employees i.e., their contracts have a predetermined end date with little scope for either side to prematurely end it a termination agreement is agreed upon between the player and old club to terminate the current employment relationship. The old club thereby simultaneously fulfils its duty to cooperate under the transfer agreement vis-à-vis the new club.

Stage 4: New club and player sign an employment agreement

Unless all contracts are signed at the same time, the new employment contract is the last contract to be concluded.

For the conclusion of the new employment contract as a contractual obligation, the general civil law principles apply. In addition, any other special statutory provisions for the protection of employees under German law also apply, so that, for example, the written form requirement for the fixed-term agreement applies to the generally fixed-term employment contracts with professional footballers.

The regulations of the associations, inter alia the regulations of the DFL and the German Football Association (“Deutscher Fußball Bund - DFB”) should also be considered when concluding an employment contract. Clubs are therefore well advised to conclude employment contracts subject to a condition precedent, whereby the contract only becomes effective, for example, when the association licence is granted (c.f. § 2 LOS). If the player is not a national of an EU member state or an EEA state, he/she also needs a residence and work permit, whereby the employment contract should also be concluded subject to a condition precedent. Otherwise, an effective employment contract is concluded with the player without the player being entitled to perform a substantial part of his main contractual obligation by participating in the regular domestic games or, for example, in UEFA Champions League games.

Conclusion

The employment law aspects outlined above illustrate how much legal complexity can be involved in a player transfer in professional football (and other sports) and how much care is needed in negotiating and drafting the respective contractual documents. The higher the risk and value, the more advisable it is to think beyond the standard DFB template.
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