Part 2: Player contract reforms and employment issues: Football Australia’s new Domestic Transfer System

Co-authored by Ross Watkins

Football Australia’s Domestic Transfer System White Paper (White Paper) is set to change the face of the Australian football market. In part two of this series considering the White Paper, we assess the player contract reforms from an employment law perspective.

Use of standard form agreements

Under the current regime, a professional player contract must be in the form of a prescribed standard player contract. The principal advantage of this is that it ensures consistency for all players, coaches and other stakeholders, while also presenting something of a minimum standard of employment. However, standard form contracts have significant limitations, both for top level and lower level talent.

Top level talent are often in a strong bargaining position when it comes to their contract. Given the high demand for their services, in an open market they could align themselves with whichever club is willing to give them the most favourable contract terms.

Contrastingly, lower level talent are often in a weaker bargaining position, and standard form contracts can exacerbate this issue as they are presented with agreements on a ‘take it or leave it’ basis, such that the terms upon which the parties agree are not truly negotiated.

Overall, provided the standard-form agreement provides a strong level of minimum standards, the advantages of maintaining consistency across all stakeholders likely outweighs the benefits to individuals of discrete negotiations.

Duty of fidelity

In Australia, employers and employees owe each other a mutual obligation of fidelity. A significant part of this is the duty not to compete with the employer.

Under the current regime, if a player wants to change clubs, they normally seek a mutual termination with their current club so they can sign with their new club. However, prior to informing their current club of their desire to move, the player invariably solicits offers from other clubs, makes and receives verbal assurances with the new club and perhaps even participates in some training and medical testing. This conduct could represent a breach of the employee’s duty of fidelity to their current club and is another example of the current system not prioritising the sanctity of contracts.

Under a Domestic Transfer System (DTS), players can use their current club as an intermediary for orchestrating a move to another team. As such, by notifying their club of the desire to move, the club can then waive any breach of the duty of fidelity and work with the player to organise a transfer.

Termination clauses

Under the current standard-form contracts, playing contracts can only be terminated for limited purposes, including mutually agreed termination and termination for just sporting cause.

Mutually agreed termination

This is commonly used to provide a mechanism for players to move clubs, but it exposes the player to significant risk. Under the current system, if a player wishes to move clubs, they must request that their current club agrees to terminate their contract. Then they are free to sign with any other club. In most cases, the player will have already negotiated a deal with another club, and the termination of their current club contract is merely a procedural step in signing their new contract. As discussed above, this approach undermines the duty of fidelity owed by the player to their current club. If negotiations have not yet commenced, then the termination provisions present a significant hurdle to a player moving clubs.

In this situation, a player would need to inform their current club of their desire to leave, have their contract terminated and then try to find a new home and negotiate a new contract. The uncertainty created by this option is a significant deterrent to any player wanting to leave a club.

Whether the next contract has been negotiated before termination of the current
club contract or not, the player is still exposed to significant risk as they will experience a period of time when they are not contracted by any club. If after the player has left their current club, the new club rescinds their offer, this leaves the player in a precarious situation. Perhaps this is why the bulk of the transfers so far in this regard have been for elite quality players (such as Neil Kilkenny’s move to the Perth Glory), who have security knowing that when they leave a club, even if their new offer falls through, another club will gratefully receive them.

Under the DTS, a player who wants to move club will have more security as they will not have the interim period where they are not employed by any club, as they will sign with the new club at the same time their current club agreement is terminated.

Just sporting cause

This is a term that is unique to football in Australian sporting contacts. It allows a club to terminate a player if the player only appears in less than 10 per cent of a club’s official matches during a season. This term presents a particular vulnerability for less experienced players who are given less opportunity to prove their ability on the field.

This vulnerability is addressed by the DTS. Under the DTS, there is more incentive for teams to give their younger players more opportunity through the training rewards and transfer fees available. Greater opportunities for younger players both accelerate player development, which can improve a players worth on the transfer market, and raise the profile of the player to attract potential suitors.

What is next for football clubs and players?

The DTS presents significant improvements to the integrity of player contracts through reducing the dependence on mutual termination of contracts as a means to move clubs. This also provides more security for players through significantly less risk when they move clubs. Additionally, the DTS improves the employment situation for younger players through stronger incentives for clubs to play and develop them. Because of the above, the DTS appears to present a safer and stronger employment market for football in Australia, but will need to be assessed on an ongoing basis to ensure its operational effectiveness.