There are many questions related to the economic, legal and social impact brought about by the coronavirus (COVID-19) in the world of sports. It is an unexpected pandemic with an unpredictable duration that requires us to take urgent measures in the face of an extraordinary situation.
The economic impact caused in the short term by the first of the decisions–playing behind closed doors and/or suspending competitions–, adopted by most of the Spanish and world leagues and federations, is obvious, drastically affecting and reducing the income of the sports’ stakeholders.
The first challenge falls to the sporting entities, which are seeking to protect their players and employees, forced to analyze contracts to adapt them to the exceptional situation currently in effect. One of the decisions taken by the clubs is salary optimization, either asking players for a reduction, which would reduce costs and, as a result, generate savings, or imposing it directly, as the NBA’s Philadelphia Sixers have done, reducing salaries by 20%. La Liga teams are also contemplating the same situation, as the date of the end of the state of alarm is unknown.
Meanwhile, some are considering temporary layoffs[1], which would suspend the contract. This case, caused by temporary force majeure, is outlined in Article 45.1.i) of the Workers’ Statute. This leaves the employee/player unemployed for the estimated duration of activity stoppage. If unemployed, the individual would have the right to unemployment benefits even if the minimum employment time had not been reached, collecting 70% of the contribution basis during the 180 days prior to the temporary layoff. This option is supported by La Liga and the RFEF for all those who choose it, although in practical terms it is not that easy.
One of the problems with the temporary layoff, due to the particular nature of sports, is that it depends on resuming or suspending the competition, as the unpredictability of what might happen in the future means that the effects will vary, depending on the scenario. If the competition is not resumed, it would not be considered a temporary layoff, rather a contract termination for contracts that ended during the current season (June 30th). On the other hand, if competition is resumed, the late completion could affect signing periods and even vacation periods for the players. Nonetheless, FIFA expects to regulate these exceptional situations (and others) soon, with exceptional measures – a difficult position given that not all countries will be affected by the same timeline.
Even so, there does not seem to be any perfect measure to reduce costs for the clubs. Match Day represents between 15% and 40% of the clubs’ revenue, and that is one of the areas affected most by the spread of COVID-19. Both the suspension of the league and playing behind closed doors lead to unexpected costs for the clubs. First is the compensation paid out for single and season tickets, followed by cleaning and disinfecting areas, losses due to the clubs closing their merchandising stores, sponsorships, provider costs and more. Matches can still be broadcast behind closed doors, but even reducing costs there are still losses for the clubs, even with this being one of the most rational measures, taking into account that television represents nearly 90% of the revenue for most sporting entities.
These measures have not only an economic impact, but also on sports themselves: at the most crucial point of the season, both sports-related projects and the physical fitness of the athletes are affected by the quarantine.
Another measure, in cases in which it was possible to implement it, has been the obligation to work remotely in Spain. This makes it possible to comply with Article 5 of Official Decree-Law 8/2020 of March 17th on the urgent extraordinary measures for coping with the economic and social impact of COVID-19, which establishes this working option as preferential.
But the situation is having positive effects, exemplified by the solidarity of athletes and sporting entities, such as donations, voluntary salary reductions, charity tournaments, etc.
With that, many clubs are also focusing on the social aspect to reinforce the loyalty of their fans, developing the online market through social media, contests, working from home for remote management of daily affairs, and more.
What is unknown is the legal effects, whether precedents will be set or whether it will be subject to the exceptional measures for this specific situation (given that in the NFL there are already coronavirus clauses). What seems to be certain is that the sports business will undergo a remodeling.
[1] Regulated in Art.16 et seq. of Official Decree 1483/2012, of October 29th, approving the Regulation on Procedures for Collective Termination and Contract Suspension and Workday Reduction.
Eric Jara Lliteras
Deputy Secretary General FERugby
Alumni Master’s Degree in Sports Law Real Madrid-Universidad Europea Graduate School
