F.I.F.A. – Dispute Resolution Chamber / Camera di Risoluzione delle Controversie – labour disputes / controversie di lavoro (2020-2021) – fifa.com – atto non ufficiale – Decision 11 March 2021

Decision of the

Dispute Resolution Chamber

passed on 11 March 2021

regarding an employment-related dispute concerning the player Manuel Herrera Lopez

COMPOSITION:

Clifford J. Hendel (USA)/(France), Deputy Chairman Tomislav Kasalo (Croatia), member Mohamed Muzammil (Singapore), member

CLAIMANT:

Manuel Herrera Lopez, Spain

Represented by Santiago San Torcuato

RESPONDENT:

United City FC (sporting an legal successor of Ceres Negros FC), Philippines

I. FACTS

1. On 15 November 2019, the Spanish player Manuel Herrera Lopez (hereinafter: the player) and the Philippine club Ceres Negros (hereinafter: the club) concluded an employment contract, valid between 1 January 2020 and 31 December 2020. In this respect, it needs to be noted that according to the information in TMS, the account of the Philippine club Ceres-La Salle FC is non-participating and has the status inactive, whereas the account of United City Football Club (the alleged legal successor, see below) is active and participating.

2. According to the contract, the player would be entitled to receive a monthly salary of Philippine pesos (PHP) 475,000 net, payable in the 15th day of each month.

3. What is more, according to the contract, the player was entitled to receive ‘airplane flight from Spain and Philippines and back (round-trip)’.

4. Art. 12 par. 1 of the contract holds the following clause: ‘The parties hereby agree and acknowledge that the player’s participation in the club may be terminated prior to the expiry of the agreement under the occurrence of any event as provided below: […] the club ceases its operation’.

5. On 13 March 2020, the Philippine Football Federation (PFF) has suspended all official matches as a result of the COVID-19 pandemic.

6. On 15 May 2020, the club decided to unilaterally reduce the player’s salary for May 2020 ‘up to 50%’.

7. What is more, on 1 June 2020, the player received a unilateral termination of his contract from the club, based on the fact ‘that the club was ceasing its operation’.

8. On 15 June 2020, the club provided the player with a document referred to as ‘waiver, release and quitclaim’, by means of which the player was asked to agree with the earl termination of his contract and that he would waive all his rights towards the club.

9. On 8 July 2020, the club issued a statement that it was in talks for a possible investor to take over the club, and consequently, on 23 July 2020, due to the change of ownership, the club renamed itself to ‘United City Football Club’ and that the club would request for confirmation of the PFF that it could participate under said name in the AFC Cup.

10. On 1 August 2020, the player was contacted by the club’s general manager Patrick Ace B. Bright, with a request for amend of his employment contract, and was a proposal for a new contract with the club ‘United City Football Club’, which amongst others provided for a lower salary, PHP 225,000 per month and shorter duration, i.e. 3 months as of 25 July 2020.

11. On 19 August 2020, the player asked the club for an explanation about the changes in the club’s management, and requested the club to pay him the remaining 50% of the salary for May 2020, as well as the full salaries for June, July and August 2020, providing a 15 days’ deadline, however to no avail.

12. On 5 September 2020, the player unilaterally terminated the contract, due to the outstanding remuneration, based on art. 14bis of the FIFA Regulations.

13. According to the information contained in the TMS, the player was transferred as an amateur player from ‘United City Football Club’ to the Spanish club UD Lanzarote on 8 October 2020.

14. On 8 December 2020, the player lodged a claim against the club before FIFA, claiming the following amounts:

- PHP 1,662,500 as outstanding remuneration, corresponding to the outstanding part of the May 2020 salary in the amount of PHP 237,500, as well as the full salaries for June, July and August 2020 in the amount of PHP 475,000 each;

- PHP 1,900,000 as compensation for breach of contract, corresponding to the residual value of the contract in the period between September and December 2020.

- 5% interest p.a. on said amounts as from the respective due dates.

15. In his claim, the player explains that on 13 March 2020, the Philippine Football Federation has suspended all official matches as a result of the COVID-19 pandemic.

16. The player further explains that since the club did not reply to his default letter dated 19 August 2020, he could have understood that the club was not interested in fulfilling its obligations anymore.

17. Moreover, the player argues that the club’s intention was always to terminate his contract due to the cessation of the club, however that he was never informed about ‘the entering into liquidation procedure in order for the respective court to pronounce the liquidation of the club’.

18. What is more, the player argues that – after receiving the unilateral modification of the contract on 1 August 2020 – the club changed its approach again on 4 August 2020 and told the player it would not count on him anymore.

19. Finally, the player is of the opinion that the club ‘United City Football Club’ shall be considered as the sporting successor of the original debtor ‘Ceres Negros FC’, as (a) Wikipedia confirms that the club was founded in 2012 as Ceres-La Salle, changed its name in 2017 to Ceres Negros and in 2020 to United City Football Club, (b) the club’s website refers to the same history and sporting achievements of the club, (c) both clubs use the same year of foundation and play in the same stadium, (d) the new club competes in the same division as the old club and (e) the general manager and the majority of the players from the old and the new cub are the same.

20. In conclusion, the player deems that he had a just cause to terminate the contract.

21. In its reply to the claim, the club argued that it ceased its operation as a result of the COVID-19 pandemic and therefore validly terminated the contract based on art.12 par. 1 of the contract.

22. Furthermore, the club explains that it no other choice but to cease its operations, as well as that submitted an ‘Establishment Report to the Department of Labor and Employment’.

23. Moreover, the club explains that the company ‘MMC Sportz Asia’ and the club signed a Memorandum of Understanding, on the basis of which it was amongst others agreed that the licence of Ceres Negros FC was transferred to United City Football Club, as well as that Ceres Negros FC and United City Football Club are different entities.

24. The club further confirms that United City Football Club took over most of the employees of Ceres Negros FC.

25. In conclusion, the club denies that the player had a just cause and asks for the rejection of all his claims.

II. CONSIDERATIONS OF THE DISPUTE RESOLUTION CHAMBER

1. First of all, the Dispute Resolution Chamber (hereinafter also referred to as Chamber or DRC) analysed whether it was competent to deal with the case at hand. In this respect, it took note that the present matter was submitted to FIFA on 8 December 2020. Taking into account the wording of art. 21 of the 2019 edition of the Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber (hereinafter: the Procedural Rules), the aforementioned edition of the Procedural Rules is applicable to the matter at hand.

2. Subsequently, the members of the Chamber referred to art. 3 par. 1 of the Procedural Rules and confirmed that in accordance with art. 24 par. 1 in combination with art. 22 lit. b) of the Regulations on the Status and Transfer of Players (edition August 2020), the Dispute Resolution Chamber is competent to deal with the matter at stake. The matter concerns an employment-related dispute with an international dimension between a Spanish player and a Philippine club, and the competence is not disputed by the parties.

3. In continuation, the Chamber analysed which regulations should be applicable as to the substance of the matter. In this respect, the DRC confirmed that in accordance with art. 26 par. 1 and 2 of the Regulations on the Status and Transfer of Players (October 2020 edition), and considering that the claim was lodged on 8 December 2020, the March 2020 edition of the aforementioned regulations (hereinafter: the Regulations) is applicable to the matter at hand as to the substance.

4. The competence of the Chamber and the applicable regulations having been established, the Chamber entered into the substance of the matter. In this respect, the Chamber started by acknowledging all the above-mentioned facts as well as the arguments and the documentation submitted by the parties. However, the Chamber emphasised that in the following considerations it will refer only to the facts, arguments and documentary evidence, which it considered pertinent for the assessment of the matter at hand.

5. First of all, the members of the Chamber acknowledged that, on 15 November 2019, the Claimant and the Respondent had concluded an employment contract valid as from 1 January 2020 until 31 December 2020.

6. The Chamber further observed that the Claimant lodged a claim in front of FIFA against the Respondent seeking payment of the total amount of PHP 3,562,500, asserting that the Respondent had not (fully) fulfilled its contractual obligations towards him. More specifically, the Claimant indicated that on 1 June 2020, the Respondent had terminated the employment contract based on the fact that it was ‘ceasing its operation’. However, according to the Claimant, in July 2020, a change in ownership took place, and that the Claimant was offered a new contract with the new entity, for a lower salary. After the refusal of said salary, and after not being paid his outstanding salaries as per the original contract, the Claimant confirmed on 5 September 2020 that was unilaterally terminating the contract with the Respondent.

7. In continuation, the Chamber observed that the Respondent insisted that it had validly terminated the contract on the basis of art. 12 par. 1 of the contract, since it ‘ceased its operations’. What is more, the Respondent argues that the licence of the old entity, Ceres Negros FC, was transferred to the new entity, United City FC, however insisted that these are separate entities. Finally, the Respondent asked for the rejection of all claims of the Claimant, as according to the Respondent, the Claimant did not have a just cause to terminate the contract.

8. In this context, the Chamber acknowledged that it had to examine which of the parties had effectively terminated the contract, whether or not said termination was made with or without just cause and who is to be held responsible for the consequences of said termination.

9. In this respect, the Chamber was eager to emphasise that the Claimant pointed out that the Respondent failed to pay him his full salary for the month of May 2020, as it allegedly unilaterally reduced said salary with 50%, as a result of the outbreak and financial consequences of the COVID-19 pandemic. While analysing the relevant circumstances surrounding this variation of the contract, the members of the Chamber noted that the salary reduction for 50% as of the month May 2020, appears to have been made unilaterally and without an attempt to reach an amicable settlement with the Claimant. As such, the members of the Chamber concluded that the variation to the contract was not made in line with FIFA’s COVID-19 Guidelines and can therefore not be upheld.

10. What is more, as to unilateral termination of the contract, the members of the Chamber first of all noted that the Respondent already terminated the contract on 1 June 2020, based on art. 12 of the contract, informing the Claimant that the contract was terminated as a result of the cease of its operations. Given that said termination of the contract was made more than 3 months before the Claimant on 5 September 2020 indicated that he considered the contract unilaterally terminated as per that day, the members of the Chamber deemed that the contract was unilaterally terminated on 1 June 2020 by the Respondent.

11. Turning to the contents of article 12 par. 1 of the contract, the Chamber further noted that said clause cannot be considered as a valid clause to unilaterally terminate the contract. After analysing said clause, the members of the Chamber concluded that said clause gives the Respondent the full power to unilaterally terminate the contract when it ceased its operations, whereas the Claimant had no option to do so.

12. On account of the above circumstances, the Chamber decided that the Respondent had no just cause to unilaterally terminate the employment relationship on 1 June 2020 and, therefore, concluded that the Respondent had terminated the employment contract without just cause on 1 June 2020 and that, consequently, the Respondent is to be held liable for the early termination of the employment contact without just cause.

13. Bearing in mind the previous considerations, the Chamber went on to deal with the consequences of the early termination of the employment contract without just cause by the Respondent.

14. In this respect, the Chamber deemed it relevant to point out that the new entity that tried to conclude a new contract with the Claimant, i.e. United City FC, operates under a different name, but uses the same stadium, the same year of foundation the league it competes in and the majority of the employees that were also employed by the old entity, Ceres Negros FC. What is more, the Philippine Football Federation confirmed that United City FC can be considered as the sporting and legal successor of Ceres Negros FC.

15. As a result of the foregoing, the Chamber deemed that United City FC, as the sporting and legal successor of Ceres Negros FC, is to held liable for the payment of outstanding remuneration and compensation for breach of contract.

16. First of all, the members of the Chamber concurred that the Respondent must fulfill its obligations as per employment contract up until the date of termination of the contract in accordance with the general legal principle of “pacta sunt servanda”. Consequently, the Chamber decided that the Respondent is liable to pay to the Claimant the remuneration that was outstanding at the time of the termination i.e. the amount of PHP 237,500, consisting of the pro rata outstanding salary for the month of May 2020.

17. What is more, in line with its longstanding jurisprudence, the Chamber decided to award 5% interest p.a. on the amount of PHP 237.500 as from 16 May 2020.

18. In continuation, the Chamber decided that, taking into consideration art. 17 par. 1 of the Regulations, the Claimant is entitled to receive from the Respondent compensation for breach of contract in addition to any outstanding salaries on the basis of the relevant employment contract.

19. In this context, the Chamber outlined that, in accordance with said provision, the amount of compensation shall be calculated, in particular and unless otherwise provided for in the contract at the basis of the dispute, with due consideration for the law of the country concerned, the specificity of sport and further objective criteria, including, in particular, the remuneration and other benefits due to the Claimant under the existing contract and/or the new contract, the time remaining on the existing contract up to a maximum of five years, and depending on whether the contractual breach falls within the protected period.

20. In application of the relevant provision, the Chamber held that it first of all had to clarify whether the pertinent employment contract contained any clause, by means of which the parties had beforehand agreed upon a compensation payable by the contractual parties in the event of breach of contract. In this regard, the Chamber established that no such compensation clause was included in the employment contract at the basis of the matter at stake.

21. Subsequently, and in order to evaluate the compensation to be paid by the Respondent, the members of the Chamber took into account the remuneration due to the Claimant in accordance with the employment contract as well as the time remaining on the same contract, along with the professional situation of the Claimant after the early termination occurred. In this respect, the Chamber pointed out that at the time of the termination of the employment contract on 1 June 2020, the contract would run for another 7 months, i.e. until 31 December 2020. Consequently, taking into account the financial terms of the contract, the Chamber concluded that the remaining value of the contract as from its early termination by the Respondent until the regular expiry of the contract amounts to PHP 3,325,500 and that such amount shall serve as the basis for the final determination of the amount of compensation for breach of contract.

22. In continuation, the Chamber remarked that following the early termination of the employment contract at the basis of the present dispute the Claimant – in the relevant period until 31 December 2020 - had found new employment with the Spanish club UD Lanzarote, albeit on an amateur basis without receiving any remuneration and therefore not being able to mitigate his damages. As a result, the Chamber deemed that no further mitigation should be applied to the residual value of the contract.

23. In view of all of the above, the Chamber decided that the Respondent must pay the amount of PHP 3,325,500 to the Claimant as compensation for breach of contract without just case, which is considered by the Chamber to be a reasonable and justified amount as compensation.

24. Finally, in line with its longstanding jurisprudence, the Chamber decided to award 5% interest p.a. on the amount of PHP 3,325,500 as from the date of claim, i.e. 8 December 2020.

25. Furthermore, taking into account the consideration under number II./3. above, the Chamber referred to par. 1 and 2 of art. 24bis of the Regulations, which stipulate that, with its decision, the pertinent FIFA deciding body shall also rule on the consequences deriving from the failure of the concerned party to pay the relevant amounts of outstanding remuneration and/or compensation in due time.

26. In this regard, the Chamber pointed out that, against clubs, the consequence of the failure to pay the relevant amounts in due time shall consist of a ban from registering any new players, either nationally or internationally, up until the due amounts are paid and for the maximum duration of three entire and consecutive registration periods.

27. Therefore, bearing in mind the above, the DRC decided that, in the event that the Respondent does not pay the amounts due to the Claimant within 45 days as from the moment in which the Claimant, following the notification of the present decision, communicates the relevant bank details to the Respondent, a ban from registering any new players, either nationally or internationally, for the maximum duration of three entire and consecutive registration periods shall become effective on the Respondent in accordance with art. 24bis par. 2 and 4 of the Regulations.

28. Finally, the Chamber recalled that the above-mentioned ban will be lifted immediately and prior to its complete serving upon payment of the due amounts, in accordance with art. 24bis par. 3 of the Regulations.

III. DECISION OF THE DISPUTE RESOLUTION CHAMBER

1. The claim of the Claimant, Manuel Herrera Lopez, is accepted.

2. The Respondent, United City FC (sporting an legal successor of Ceres Negros FC), has to pay to the Claimant, the following amount:

- Philippine Peso (PHP) 237,500 as outstanding remuneration, plus 5% interest p.a. as from 16 May 2020;

- PHP 3,325,500 as compensation for breach of contract without just cause, plus 5% interest p.a. as from 8 December 2020.

3. The Claimant is directed to immediately and directly inform the Respondent of the relevant bank account to which the Respondent must pay the due amount mentioned under point 2.

4. The Respondent shall provide evidence of payment of the due amount in accordance with this decision to psdfifa@fifa.org, duly translated, if applicable, into one of the official FIFA languages (English, French, German, Spanish).

5. In the event that the amount due, plus interest as established above is not paid by the Respondent within 45 days, as from the notification by the Claimant of the relevant bank details to the Respondent, the following consequences shall arise:

 1.

The Respondent shall be banned from registering any new players, either nationally or internationally, up until the due amount is paid and for the maximum duration of three entire and consecutive registration periods. The aforementioned ban mentioned will be lifted immediately and prior to its complete serving, once the due amount is paid.

(cf. art. 24bis of the Regulations on the Status and Transfer of Players). 2.

In the event that the payable amount as per in this decision is still not paid by the end of the ban of three entire and consecutive registration periods, the present matter shall be submitted, upon request, to the FIFA Disciplinary Committee.

For the Dispute Resolution Chamber:

Emilio García Silvero

Chief Legal & Compliance Officer

NOTE RELATED TO THE APPEAL PROCEDURE:

According to article 58 par. 1 of the FIFA Statutes, this decision may be appealed against before the Court of Arbitration for Sport (CAS) within 21 days of receipt of the notification of this decision.

NOTE RELATED TO THE PUBLICATION:

FIFA may publish this decision. For reasons of confidentiality, FIFA may decide, at the request of a party within five days of the notification of the motivated decision, to publish an anonymised or a redacted version (cf. article 20 of the Procedural Rules).

CONTACT INFORMATION:

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FIFA-Strasse 20 P.O. Box 8044 Zurich Switzerland

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