The legality of fixed-term employment contracts in European professional football – The Müller case and beyond

Published 09 December 2016 By: Sven Demeulemeester, Alexander Vantyghem

The legality of fixed-term employment contracts in European professional football – The Müller case and beyond

Fixed-term employment contracts have been standard practice in professional football for decades. However, under EU labour law[1], an employment contract of indefinite duration remains the default form of employment relationship between employers and workers.

This principle was set out in and recognised by the framework agreement on fixed-term work (the “Framework Agreement”)[2] concluded by ETUC[3], Union of Industrial and Employers' Confederations of Europe (“UNICE”) and European Centre of Employers and Enterprises providing Public Services (“CEEP”) on 19 March 1999; it applies in all Member States of the European Union, following the adoption of the Council Directive 1999/70 of 28 June 1999 (the “Directive” – see the note at the end of the article for details of how EU directives bind Members States)[4].

The benefit of stable employment is viewed as a major element in workers’ protection,[5] whereas fixed-term contracts are deemed justified only if they respond to the needs of both employers and workers. Therefore, the Framework Agreement sets out the general principles and minimum requirements for fixed-term employment contracts by:

  1. improving the quality of fixed-term work through ensuring the principle of non-discrimination; and,

  2. establishing a framework to prevent abuse arising from the use of successive fixed-term employment contracts.

This article will take an in-depth look at the justification for having (consecutive) fixed-term employment contracts in professional football, by revisiting the widely-publicised case of German professional football player Heinz Müller case. Following on from this the article then analyses the impact of recent CJEU case law on the termination of fixed-term employment contracts in professional football. 

 

Müller: in search for an objective justification

When discussing fixed-term employment contracts in professional football, it should be noted that EU law is not opposed per se to fixed-term employment contracts. However, the Framework Agreement requires that any difference in the treatment of fixed-term workers has an objective justification. Whilst the Member States and social partners have a margin of appreciation in the matter, they are required to guarantee the result imposed by EU law.[6]

This requirement means that a reference to a national provision that merely authorises recourse to (consecutive) fixed-term contracts in a general and abstract manner is not sufficient. One can argue that there has to be an objective justification on the side of the employer to be “allowed” to offer an employee “only” a fixed-term agreement instead of an open-ended employment contract. It is necessary that reasons are provided on the basis of “precise and concrete circumstances characterising a given activity” to justify recourse to fixed-term contracts.[7] Such specific justification is considered necessary in the absence of which the effect of the Framework Agreement and the Directive would be made meaningless.[8]

The search for an objective justification was one of the main legal questions in a dispute between Heinz Müller, a German professional football player, and FSV Mainz 05, a Bundesliga team.

The Müller saga (Germany)

During the course of this dispute, the Mainz Labour Court (the “MLC”) shocked the German and European football community with a judgment[9] that could have had Bosman-like effects. Although the appeal ruling of the Rhineland-Palatinate Higher Labour Court (the “RPHLC”)[10] overturned this controversial judgment and put the European football community at ease, it should be noted that Müller has lodged an appeal before the Federal Labour Court (the “FLC”), where the case is currently pending.

The MLC’s and the RPHLC’s respective judgments were based on a national law implementing the Framework Agreement and the Directive but have, of course, significance for the wider discussion about whether a football activity is sufficiently specific to objectively justify recourse to (consecutive) fixed-term contracts.

Background

Heinz Müller is a (former) goalkeeper of FSV Mainz 05. He first signed a fixed-term employment contract with the club in 2009 for a three-season period. In 2012, he extended his contract for another two seasons, meaning his contract would end on 30 June 2014. The latter contract also contained a renewal option for the player and the club, which could be exercised only if Müller played a minimum of 23 Bundesliga games for the club in the 2013-2014 season. Unfortunately, Müller got injured and, hence, only played until the Bundesliga’s eleventh round of matches. Once fit to play, he was only fielded in the club’s second team and, therefore, did not reach the required mark of 23 Bundesliga matches. Subsequently, FSV Mainz 05 did not accept his request to exercise the option to extend his employment contract by one more year and the employment relationship ended on 30 June 2014.

The player, frustrated due to being fielded in the second team (allegedly in bad faith to avoid the renewal of his employment contract), then went to the MLC and demanded lost bonus payments and, more importantly, that his fixed-term employment contract be converted into a contract of an indefinite duration.

Müller claimed that his contract should be requalified as an employment contract of indefinite duration because the use of a fixed-term contract was not justified by an objective reason within the meaning of the German legislation, the club on the other hand claiming that there were sufficient reasons to argue that the fixed-term employment contract in this instance was objectively justified.

Objective grounds

According to German law, a fixed-term contract that exceeds a term of 2 years, as was the case for Müller, must have an objective justification for it not to be requalified as a contract of indefinite term.[11] Specifically, for professional footballers, the RPHLC ruled that a fixed-term employment contract could be justified on the basis of the “specific nature of the work”. 

Although the RPHLC stressed that every employment relationship had its particularities and that, hence, the specificity of the work must transcend the particularities inherent to any (normal) form of employment, it concluded that professional football was specific enough to justify recourse to (consecutive) fixed-term contracts.

First, the RPHLC referred to the uncertainty for a club regarding the timeframe that a professional football player can successfully be employed by that club (including factors such as: the possibility of injuries, a new manager bringing in a new tactical approach that makes the player less useful to the squad, player group “dynamics”, etc.).

Secondly, the RPHLC accepted the need for a football club to continually refresh the squad, by signing new players and/or introduce players from its own youth team. Indefinite term contracts would inflate the number of players, which in turn would impose an impossible financial burden on clubs.

Thirdly, the public’s need for change and variety was invoked. A reference was made to the entertainment industry and the need to accommodate the public’s craving for a new “flavour”. Fans allegedly want change and, hence, want to see different players over time.

Fourthly, the RPHLC considered that the players benefit themselves from the use of fixed-term contracts, since such contracts leave the players better protected against injuries and early contract termination. Furthermore, the RPHLC referred to the high salary that (some) professional football players are paid in return for their fixed-term contracts and the fact that the premature ending of such a contract paves the way for a transfer to another club (where the player may earn a higher salary).

Appeal of the RPHLC’s Müller ruling

The RPHLC’s judgment was met with a deep sigh of relief by the football community. Fears of a new Bosman-style judgment disappeared on the day of the ruling as the “specificity of sport” prevailed once more. This being said, Müller appealed the RPHLC’s judgment to the FLC, where, at the time of writing, the case remains pending. Given the criticism in legal doctrine on the RPHLC’s reasoning, it cannot be excluded that the ruling may be overturned.

Uncertainty at the time of hiring

The RPHLC takes into account the uncertainty for a club regarding the timeframe that a professional football player can successfully be employed by that club to justify recourse to fixed-term contracts.

Whilst seemingly attractive at first glance, the RPHLC’s reasoning may not hold. First of all, the Directive and the Framework Agreement primarily aim to protect the worker, not the employing club. In addition, unlike broadcasters, the media and artists, sports clubs do not seem to have a protected status under German law. Moreover, the fact that a worker might get injured is true for every profession where physical fitness is essential. A construction worker with a chronic back injury is equally useless to his or her employer. The example of course is fairly extreme, but the point is where the line should be drawn.

The comparison made to a professional coach’s “wear and tear” to justify fixed-term contracts, is tricky.[12] The question is whether players can simply be compared to coaches. A player is one of a significant number of players working at the club. With an important group of players at the club, some tactical flexibility always remains possible. Also, different team tactics may vary depending on the opponent. One may wonder why “as a rule” a player may fit in a club’s (tactical) plan on day one of his contract and no longer when he is at the club for a longer time.

Finally, using a player’s aging and consequent decrease in skills and fitness as a justification for the use of a fixed-term contract is tricky in the light of the prohibition on age discrimination. It should be stressed that the CJEU has proved to be rather intransigent when it comes to non-discrimination based on age, even accepting a direct horizontal effect where a directive expresses an overriding constitutional principle, considered to be an element of the EU legal order.[13]

Finally, it cannot be excluded that (some) player’s role develops into another one at the club - such as a scout, (youth) coach, etc. – once capability on the pitch declines.

Team composition renewal

The RPHLC further accepted the need for a football club to continually refresh the squad.

A contrarian argument would be that, the longer a (set of) player(s) is at the club, the likelier it is that the club will obtain positive sporting results.

Squad stability touches upon the essence of sports and competition. A stable team leads to competitiveness and to better sporting results. Clubs (must) invest time, effort and money for future success, often at the expense of immediate, short-term success.[14] It may even be argued that research has proved that the best-performing clubs have the most stable squads.[15] Players with longer term contracts perform better, ceteris paribus.[16] Also, the best-performing clubs rely relatively more on a core group of players.[17] It is often argued that it takes at least 2 to 3 years to form a homogeneous team unit out of a group of players and to make them perform to the best of their abilities, as a result of which it is considered essential for a club to be able to work throughout that whole period with the same players. Of course, some changes to the squad can never be avoided; but the ideal for sports directors is to hold on to a “skeleton” of key players and to strengthen specific positions with talented youngsters or through external hiring. It remains to be seen however whether taking this premise as a justification for an overall use of fixed-term contracts is not “a bridge too far”.

On this point, the RPHLC, however, has touched upon a sensitive issue. Adopting indefinite term contracts in football is said to hamper the influx of young talents,[18] which in turn may have an adverse effect on the investment of clubs in youth training facilities. The protection of young workers is generally accepted as an overriding imperative requirement in the general interest and, hence, probably one of the better legal lines of defence in this context.[19] However, in Germany, an indefinite duration employment contract seems difficult to terminate, which in turn triggers fears that an indefinite duration contract is de facto a permanent contract until the age of retirement.[20] This context seems very country-specific. Indeed, in (most, if not all) other European countries, an indefinite duration contract can, in principle, be ended provided a notice period is respected or compensation in lieu of notice is paid as soon as a sufficient reason can be invoked (e.g. lack of performance). In such countries, indefinite duration contracts do not really prevent clubs from offering young players a chance to enter the team.

Fans need for change

The RPHLC also referred to the public’s need for change and variety.

Some may disagree and argue that fans identify with certain players that at some stage become true “symbols” of their club. For example, think of Johan Cruijff at Ajax or Lionel Messi at Barcelona.

It is true, however, that such “symbolic” players are probably the exception as fans identify with the team rather than with its individual players.[21] Fans seem predominantly interested in a successful team. Some authors even question whether football fans, contrary to the stereotype of the Hornbyesque fan(atic) sticking to supporting one club only, are not just “glory-hunting polygamists”. According to these authors, they may not be all that loyal to their club. To put it in S. Kuper and S. Szymanski’s words, “People are fans of The Beatles, or The Cure, or The Pixies, but they generally like more than one band at the same time, and are capable of moving on when their heroes fade”. The same would go for football[22].

In that perspective, success can to some extent of course be bought through recruiting new players, which prima facie seems to plead in favour of flexible contracts and easy-to-replace players.

This being said, such sporting success may also be achieved gradually, especially since squad stability seems to have its merits as well. Also, at least in most countries, indefinite term contracts may be easier to terminate than fixed-term contracts, so the question is whether fixed-term contracts are the means to achieve this objective. Either way, even when assuming that fixed-term contracts allow for higher player mobility, which may be beneficial to sports, one may fail to see how fan expectations can trump fundamental rights players enjoy as workers.

Player’s benefit

Job security for players appears a laudable objective and one the RPHLC invokes.

However, the RPHLC’s argument that the use of fixed-term contracts is in the player’s own best interest seems rather circular, as the RPHLC stated that the ending of fixed-term contracts at clubs makes room for subsequent transfers.[23]

It is, moreover, tricky to generalise. Top players usually have good bargaining power at the “negotiating table” and most probably will be able to move to a club of their choice if they really want to. Some go even further and consider that, in professional football, the power has shifted dramatically for the benefit of players. In its 2014 Kanu ruling,[24] the Liège employment court president even went so far as to state that, where workers as a rule are the weaker party in relation to their employer, football players (and their entourage) today clearly have the upper hand with their clubs. For those players, the contractual stability rather works to the advantage of the clubs, not the players.

The reasoning in Kanu, however, is not transferable to all football players. Lesser players still compare the situation in their clubs to “David versus Goliath”, and could truly benefit from contractual stability and, hence, benefit from a fixed-term employment contract. Although some argue that in practice, clubs that really want to get rid of a player’s contract usually succeed in doing so relatively risk-free[25], others, including FIFPro, believe full reciprocity of rights and obligations in the event of a breach of contract is still lacking in practice.[26]

 

Porras: termination of fixed-term contracts

The discussion on the required nature of the employment contract between a player and a club clearly is not settled yet.

Although the discussion may seem academic at first glance, the debate becomes very practical when dealing with one of the main issues regarding fixed-term contracts: the rules around contract termination.[27]

In its Porras ruling of 14 September 2016, the CJEU clearly stated that the concept of equal treatment between fixed-term and permanent workers regarding employment conditions also covers the compensation that the employer must pay to a worker on account of the termination of a fixed-term contract.[28]

As a result, workers could be tempted to invoke the termination rules applying to indefinite term contracts if these would be more beneficial.

Moreover, the CJEU has referred to its settled case law, under which the principle of non-discrimination requires that comparable situations may not be treated differently, unless such treatment is objectively justified. While, ultimately, it is up to the national courts to determine whether such objective justification is present, the CJEU has repeated its case law under which “the concept of ‘objective grounds’” requires the unequal treatment to be justified by “precise, specific factors, characterising the employment condition to which it relates, in the particular context in which it occurs and on the basis of objective, transparent criteria in order to ensure that unequal treatment in fact meets a genuine need, is appropriate for achieving the objective pursued and is necessary for that purpose”.

Again, the concept of "objective grounds" within the meaning of the Framework Agreement must be understood as not permitting a difference in treatment between fixed-term workers and permanent workers to be justified on the basis that the difference is provided for by a law or collective bargaining agreement.

Furthermore, “reliance on the mere temporary nature of the employment (…) cannot constitute an objective ground”, since accepting such reasoning would make the Directive and the Framework Agreement meaningless and would be tantamount to perpetuating a situation that is disadvantageous to fixed-term workers.

The justification brought forward in the Porras ruling by the Spanish government, i.e. the “duration and expectation of stability of the employment relationship”, was cast aside.

The Porras case does not apply to the activity of football, which is of course even more specific and atypical with contractual stability being considered necessary to safeguard a competitive balance and the stability and integrity of the competition. However, in this respect, football may face the argument that is not very consistent in seeking to secure such stability as it allows transfers mid-season – during the winter transfer “window” – that, in turn, may result in significantly different squad compositions in the second half of the sporting season. Also, less restrictive rules may achieve the same goals (e.g. the breach of an indefinite contract by the player prohibits this player from playing for another in the same competition during the same season). 

 

Social dialogue

The question is whether the stakeholders in sport can do something to counter the uncertainty that is currently marking the debate.

In this respect, it should be noted that the Framework Agreement creates the opportunity for social partners to conclude agreements adapting and/or complementing the Directive’s provisions in a way that takes into account the specific needs of the social partners concerned[29]. This option was not exercised – at least not at the European level - for professional football and, hence, professional football is, in general, subject to the Framework Agreement’s provisions.

There may however be some margin for the social partners in professional football to conclude specific collective bargaining agreements, provided, again, that they succeed in duly motivating the specificity of professional football.

 

Conclusions

The debate on whether professional football presents sufficiently distinct characteristics to justify the use of fixed-term employment contracts and, more importantly, specific termination rules, will probably rage on for years to come. This “journey” has been interesting so far and seems far from over.

The argument that fixed-term employment contracts are not justifiable may in addition be invoked in the wider context of the challenge of the current transfer system in football[30].

The diametrically opposed position taken by the courts of first instance and appeal in the Müller case clearly shows that both sides have their arguments.

Finally, stakeholders in the world of football, and sport in general, may turn to the (underused) tool of social dialogue to try and save what they perceive as a necessity for the way their activity is organised. 

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Author

Sven Demeulemeester

Sven Demeulemeester

Sven Demeulemeester is partner in ALTIUS' Employment and Sports Law department. Legal 500 describes Sven Demeulemeester’s approach as ‘the perfect balance between legal insight and business acumen’. Sven is also the head of ALTIUS' Sports Law practice, advising players, clubs and governing bodies on contentious and day-to-day matters in the sports industry.Sven is also member of l'Association Internationale des Avocats du Football.

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Alexander Vantyghem

Alexander Vantyghem

Alexander is a sports law associate at ALTIUS, a Brussels based law firm. He advises both domestic and international clients on all aspects of Belgian and international sports law, and is particularly experienced in proceedings before the FIFA decision-making bodies and the Court of Arbitration for Sport in Lausanne.

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