F.I.F.A. – Players’ Status Committee / Commissione per lo Status dei Calciatori – coach disputes / controversie allenatori (2019-2020) – fifa.com – atto non ufficiale – Decision 5 May 2020

Decision of the Single Judge

of the Players’ Status Committee

passed on 5 May 2020,

by

Stefano La Porta (Italy)

Single Judge of the Players’ Status Committee,

on the claim presented by the coach

Dean Racunica, Croatia,

represented by Mr Juan de Dios Crespo Pérez

as “Claimant”

against the club

Al Ittihad, Saudi Arabia,

represented by Mr Jan Kleiner & Mr Luca Tarzia

as “Respondent”

regarding an employment related dispute between the parties

I. Facts of the case

1. On 27 September 2018, the Croatian coach, Dean Racunica (hereinafter: the coach or the Claimant), concluded an employment contract (hereinafter: the contract) with the Saudi Arabian club, Ittihad FC (hereinafter: the club or the Respondent) (hereinafter jointly referred to as the parties). The contract was valid as from the date of signature until 30 May 2021.

2. By means of Item 4 of the contract, the coach was entitled to the following remuneration:

i. USD 172,000 for the 2018/2019 season, as follows:

- USD 51,600 within 7 working days after the date of signature;

- 10 instalments of USD 12,040 payable as from the end of October 2018 until the end of July 2019.

ii. USD 172,000 for the 2019/2020 season;

iii. USD 172,000 for the 2020/2021 season.

3. According to Item 4.3 “[The club] herewith guarantees that all amounts to be paid to the Coach and all benefits in kind, are net amounts. In case of any claim made by tax authorities of the Saudi Arabia and/or Croatia the First Party shall indemnify the Coach for all claims arising out of any tax matter, including penalties and interest and legal costs.”

4. As per Item 10.1 of the contract, “no unilateral termination may be issued by either party during the sporting season 2018/2019”.

5. Item 10.2 stipulates that if “the club terminates the contract in the seasons 2019/2020 and 2020/2021” the club “pays the amount of the total net remuneration per one year in the amount of net USD 172,000 […]. No further damages or compensation shall apply and this total amount […] shall be the only compensation payable, determined as just and fair compensation in exchange for the early termination of contract”.

6. Item 10.3 stipulates that the coach “may terminate this contract at any time on condition that the [coach] pays the club the amount of the total net remuneration per one year in the amount of net USD 172,000 […]. No further damages or compensation shall apply and this total amount […] shall be the only compensation payable, determined as just and fair compensation in exchange for the early termination of contract”.

7. On 24 February 2019, the club inter alia announced on its official Twitter account that it has decided to “terminate the contract” of the head coach and his staff.

8. On 13 December 2019, the coach lodged a claim against the club for breach of contract requesting the following:

i. USD 14,997.10 as outstanding remuneration, corresponding to the unpaid part of the salary for January 2019 and the full salary for February 2019;

ii. USD 404,200 as compensation for breach of contract plus 5% interest p.a. as from 24 February 2019;

iii. USD 279,464.73 “representing the 40% gross-up due to the tax rate applicable in Croatia” or “to declare that any compensation granted […] shall be considered as ‘net of any taxes’ and to require the Respondent to provide the Claimant with the relevant tax certificates indemnifying the Coach for all claims of any tax authorities of the Saudi Arabia and/or Croatia”;

iv. Additional compensation to be determined by FIFA;

v. CHF 20,000 as legal fees.

9. According to the coach, the club terminated the employment contract on 24 February 2020 without just cause.

10. Moreover, the coach claimed that during months after the termination he tried to find an amicable settlement with the club, however without success.

11. In continuation, the coach claimed that up until the date of termination he had received the amount of USD 96,802.90 gross out of USD 111,800 allegedly due. Thus, he claims to be entitled to receive outstanding remuneration and compensation for the unjustified unilateral breach by the club.

12. In reply to the coach’s claim, the club acknowledge to owe the coach USD 2,957.10 as outstanding remuneration, however, the club rejected the coach’s claim for compensation.

13. Furthermore, the club explained that “the sporting situation of Ittihad was very difficult and challenging. The sporting performance of the team was clearly below expectations. Ultimately, this required a change in the sporting staff”.

14. According to the club, it has tried to settle the matter amicably, but “the financial demands were at all times simply too high”.

15. In this regard, the club referred to item 10 of the contract and held that the parties had agreed “that the contract had an initial “guaranteed” period of one sporting season, and that as from the second sporting season, the contract could be terminated at all times against payment of a pre-determined amount”.

16. In this context, the club argued that the parties “agreed that only the first contractual year was fix and guaranteed” and therefore, the coach should only be entitled to compensation for the first contractual year.

17. Moreover, the club rejected the coach’s claim to “gross-up” the salary, as there is no legal basis for it. In this context, the club argued that the coach failed to provide any evidence of his tax residency in Croatia.

18. Furthermore, the club stressed that the “net payment” clause is not specific enough and simply means that payments made should be “without any deduction or withholding” and that in any case, the clause would not apply to the compensation.

19. Finally, the club highlighted that the coach is obligated to mitigate his damages and informed FIFA that the coach found immediately a new job opportunity at an English club and that in case his new salary is lower than the one with the club “FIFA would then have to use its discretion and apply a more substantial reduction”.

20. After being requested to do so, the coach informed FIFA that on 24 June 2019, he signed a new employment contract with the English club, West Bromwich Albion Football Club, valid as from 24 June 2019 until 30 June 2021, according to which, the coach was entitled to a yearly salary in the amount of GBP 120,000 (GBP 10,000 gross per month).

II. Considerations of the Single Judge of the Players’ Status Committee

1. First of all, the Single Judge of the Players’ Status Committee (hereinafter also referred to as: the Single Judge) analysed whether he was competent to deal with the matter at hand. In this respect, he took note that the present matter was submitted to FIFA on 13 December 2019. 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 Single Judge referred to art. 3 par. 1 and 2 of the Procedural Rules and confirmed that in accordance with art. 23 par. 1 and 4 in combination with art. 22 lit. c) of the March 2020 edition of the Regulations on the Status and Transfer of Players, he is competent to deal with the matter at stake which concerns an employment-related dispute of an international dimension between a Croatian coach and a Saudi Arabian club.

3. Furthermore, the Single Judge analysed which edition of the Regulations on the Status and Transfer of Players should be applicable to the matter. In this respect, he referred, on the one hand, to art. 26 par. 1 and 2 of the 2020 edition of the Regulations on the Status and Transfer of Players, and on the other hand, to the fact that the present claim was lodged with FIFA on 13 December 2019. In view of the foregoing, the Single Judge concluded that the October 2019 edition of the Regulations on the Status and Transfer of Players (hereinafter: the Regulations) is applicable to the case at hand (cf. art. 26 par. 1 and 2 of the Regulations).

4. His competence and the applicable regulations having been established, and entering into the substance of the matter, the Single Judge started his analysis by acknowledging the facts of the case and the arguments of the parties as well as the documents contained in the file. However, the Single Judge emphasized that in the following considerations he will refer only to the facts, arguments and documentary evidence, which he considered pertinent for the assessment of the matter at hand.

5. In this respect, the Single Judge acknowledged that, on 27 September 2018, the coach and the club had concluded an employment contract valid until 30 May 2021, pursuant to which the club undertook to pay to the coach the remuneration as established in point I.2. above.

6. In continuation, the Single Judge remarked that, in his claim to FIFA, the Claimant had accused the Respondent of having terminated their contractual relationship without just cause on 24 February 2019.

7. The Single Judge also noted that, as such, the Claimant deemed inter alia being entitled to claim from the Respondent the payment of outstanding remuneration in the amount of USD 14,997.10, together with 5% interest p.a. as from 24 February 2019, and of compensation for breach of contract in the sum of USD 686,664.73, corresponding to the residual value of the contract as well as a “40% gross-up”, together with 5% interest p.a. as from 24 February 2019.

8. In addition, the Single Judge noticed that, for its part, the Respondent, had rejected the claim of the Claimant arguing that due to a difficult sporting season, in February 2019, it had to reorganize the coaching staff and subsequently tried to amicably settle the situation with the entire coaching staff, however to no avail.

9. Moreover, the Single Judge also took note of the Respondent’s arguments as to the possible application of item 10 to the present case and, as well, that in case the Claimant’s claim should be accepted, the requested amounts for compensation should be revised downwards.

10. After having thoroughly analysed the submissions of the parties as well as the documentation at his disposal, the Single Judge deemed that the first question to be addressed in the present matter was whether the Respondent had terminated the contract with or without just cause on 24 February 2019.

11. In this regard, the Single Judge recalled that the Respondent considered having terminated the contract as it needed to reorganize the coaching staff due to the results of the club.

12. In this context, the Single Judge acknowledged that it had to examine whether the reason put forward by the Respondent could justify the termination of the contract in the present matter.

13. In this respect, the Single Judge referred to his well-established jurisprudence and emphasised that, as a general rule, only a breach or misconduct which is of a certain severity justifies the termination of a contract without notice. In other words, only when there are objective criteria which do not reasonably permit to expect a continuation of the employment relationship between the parties, a contract may be terminated prematurely. Hence, if there are more lenient measures which can be taken in order for an employer to ensure the employee’s fulfilment of his contractual duties, such measures must be taken before terminating an employment contract. A premature termination of an employment contract can only ever be an ultima ratio measure.

14. In addition, the Single Judge also recalled that, still in accordance to its longstanding jurisprudence, sporting results cannot be retained as a valid reason to justify an early termination of an employment contract.

15. As a consequence and considering the above, the Single Judge held that, despite the Respondent’s explanations referring to its attempts to settle the issue financially with the Claimant once the termination occurred, the reason put forward by it on 24 February 2019, i.e. the reorganization of the coaching staff, cannot be considered as a valid reason for unilateral contract termination.

16. In view of all the aforementioned, the Single Judge was of the firm opinion that the Respondent did not have just cause to prematurely terminate the employment contract with the Claimant.

17. After having established the foregoing, the Single Judge went on analysing the consequences of the termination of contract without just cause committed by the Respondent.

18. Nevertheless, before entering the analysis of the consequences of the unjust termination of contract on the part of the club, the Single Judge deemed it appropriate to first assess whether any outstanding remuneration was still due by the Respondent to the Claimant.

19. Bearing in mind the above, the Single Judge acknowledged that according to both parties, the Claimant did not receive the complete remuneration for January and February 2020 and in accordance with the general legal principle of pacta sunt servanda, the Single Judge decided that the Respondent is liable to pay to the Claimant the amount of USD 14,997.10 corresponding to USD 2,957.10 as salary for January 2020 and USD 12,040 as salary for February 2020.

20. In continuation and with regard to the Claimant’s request for interest, the Single Judge decided that the Claimant is entitled to receive interest at the rate of 5% p.a. on the amount of USD 14,997.10 as from 24 February 2019 until the date of effective payment.

21. The Single Judge then turned his attention to the compensation payable to the Claimant by the Respondent following the termination without just cause of the contract by the latter.

22. In this respect, the Single Judge held that he first 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.

23. In this sense, the Single Judge recalled the arguments of the Respondent as to the relevant provisions of the contract and observed that item 10.2 of the contract provides for a compensation clause in case the Respondent terminates the contract during the seasons 2019/2020 and 2020/2021. However, the Single Judge took note that the Respondent terminated during the season 2018/2019. Consequently, the Single Judge held that the compensation clause is not applicable to the case at hand, and, therefore, compensation can be assessed on the basis of the residual value of the contract in line with the jurisprudence of the Players’ Status Committee.

24. Bearing in mind the foregoing, the Single Judge proceeded with the calculation of the monies payable to the Claimant under the terms of the employment contract as from the date of termination without just cause by the Respondent until its natural expiration. Bearing this in mind, the Single Judge deemed that he would have received in total USD 404,200 net as remuneration for the period as from the termination of the contract until 30 May 2021, said amount consisting of 5 monthly salaries of USD 12,040 for the 2018/2019 season, USD 172,000 for the 2019/2020 season and USD 172,000 for the 2020/2021 season.

25. Regarding the Claimant’s claim to be awarded with the “gross-up” amount, the Single Judge pointed out that the Claimant failed to submit any evidence in regards to his tax residency in Croatia and therefore, the Single Judge had no other option than to reject this part of the Claimant’s claim.

26. Consequently, the Single Judge concluded that the amount of USD 404,200 net serves as the basis for the final determination of the amount of compensation for breach of contract in the case at hand.

27. In continuation, the Single Judge verified as to whether the coach had signed a new employment contract after having been dismissed by the club on 24 February 2019 by means of which he would have been enabled to reduce his loss of income. According to the constant practice, such remuneration under a new employment contract would be taken into account in the calculation of the amount of compensation for breach of contract in connection with the coach’s general obligation to mitigate his damages.

28. In this respect, the Single Judge recalled that on 24 June 2019, the coach signed an employment contract with the English club, West Bromwich Albion Football Club, valid as from 24 June 2019 until 30 June 2021, leading to a total value for the period corresponding to the time remaining on the prematurely terminated contract of GBP 144,000 net, which is approximately USD 183,418, which shall be deducted from the above-mentioned residual value.

29. In view of the above, the Single Judge concluded that the amount of USD 220,782 net is to be paid by the club to the coach as compensation for breach of contract.

30. Equally and with regard to the coach’s request for interest, the Single Judge, in accordance with his well-established jurisprudence, decided that the club has to pay to the coach 5% interest p.a. on the amount of USD 220,782 as from 13 December 2019 until the date of effective payment.

31. Subsequently, the Single Judge decided to reject the Claimant’s claim pertaining to legal costs in accordance with FIFA’s longstanding jurisprudence in this regard.

32. Taking into account all the above considerations, the Single Judge decided to partially accept the coach’s claim.

33. Lastly, the Single Judge referred to art. 25 par. 2 of the Regulations in combination with art. 18 par. 1 of the Procedural Rules, according to which in the proceedings before the Players’ Status Committee and the Single Judge, costs in the maximum amount of CHF 25,000 are levied. The costs are to be borne in consideration of the parties’ degree of success in the proceedings and are normally to be paid by the unsuccessful party.

34. In this respect, the Single Judge reiterated that the claim of the Claimant is partially accepted and that the Respondent is the party at fault. Therefore, the Single Judge decided that the Respondent has to bear the entire costs of the current proceedings in front of FIFA.

35. Furthermore and according to Annexe A of the Procedural Rules, the costs of the proceedings are to be levied on the basis of the amount in dispute. Consequently and taking into account that the total amount at dispute in the present matter is higher than CHF 200,001, the Single Judge concluded that the maximum amount of costs of the proceedings corresponds to CHF 25,000.

36. In conclusion, and considering that the case at hand did pose some particular factual difficulties, the Single Judge determined the costs of the current proceedings to the amount of CHF 20,000. Moreover, in line with his aforementioned considerations, the Single Judge decided that the amount of CHF 20,000 has to be paid by the Respondent

III. Decision of the Single Judge of the Players’ Status Committee

1. The claim of the Claimant, Dean Racunica, is partially accepted.

2. The Respondent, Al Ittihad, has to pay to the Claimant, within 30 days as from the date of notification of the present decision, outstanding remuneration in the amount of USD 14,997 net, plus 5% interest p.a. on said amount as from 24 February 2019 until the date of effective payment.

3. The Respondent has to pay to the Claimant, within 30 days as from the date of notification of the present decision, compensation for breach of contract in the amount of USD 220,782 net, plus 5% interest p.a. on said amount as from 13 December 2019 until the date of effective payment.

4. Any further claim lodged by the Claimant, is rejected.

5. In the event that the aforementioned sums plus interest are not paid by the Respondent within the stated time limits, the present matter shall be submitted, upon request, to the FIFA Disciplinary Committee for consideration and a formal decision.

6. The final costs of the proceedings in the amount of CHF 20,000 are to be paid by the Respondent, as follows:

6.1. The amount of CHF 5,000 has to be paid to the Claimant.

6.2. The amount of CHF 15,000 has to be paid by the Respondent to FIFA to the following bank account with reference to case nr. 19-02271:

UBS Zurich

Account number 366.677.01U (FIFA Players’ Status)

Clearing number 230

IBAN: CH27 0023 0230 3666 7701U

SWIFT: UBSWCHZH80A

7. The Claimant is directed to inform the Respondent immediately and directly of the account number to which the remittances under points 2., 3. and 6.1. above are to be made and to notify the Players’ Status Committee of every payment received.

*****

Note related to the publication:

The FIFA administration may publish decisions issued by the Players’ Status Committee or the DRC. Where such decisions contain confidential information, 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 Rules Governing the Procedures of the Players’ Status Committee and the Dispute Resolution Chamber).

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). The statement of appeal must be sent to the CAS directly within 21 days of receipt of notification of this decision and shall contain all the elements in accordance with point 2 of the directives issued by the CAS. Within another 10 days following the expiry of the time limit for filing the statement of appeal, the appellant shall file a brief stating the facts and legal arguments giving rise to the appeal with the CAS (cf. point 4 of the directives).

The full address and contact numbers of the CAS are the following:

Court of Arbitration for Sport

Avenue de Beaumont 2

1012 Lausanne

Switzerland

Tel: +41 21 613 50 00

Fax: +41 21 613 50 01

e-mail: info@tas-cas.org

For the Single Judge of

the Players’ Status Committee:

Emilio García Silvero

Chief Legal & Compliance Officer