The English Football League (“EFL”) has been dealt a major blow in its attempts to introduce a salary cap for Leagues One and Two.

An independent arbitration panel upheld a challenge from the Professional Footballers’ Association (“PFA”) that the caps were “unlawful and unenforceable”.

Why was the EFL considering a salary cap?  

The EFL put the salary caps (which would see League Two clubs limited to spending £1.5m and League One clubs to £2.5m on wages, bonuses, image rights and agent fees) to a vote of the relevant clubs in August 2020.

Despite the massive disparity between the types of clubs in that cohort, ranging from ex-Premier League sides like Sunderland to community clubs such as Accrington Stanley, both divisions voted in favour of the new restrictions.

It was hailed as a huge success for fiscal prudence in a league system where financial calamity has been the order of the day in recent years, with Bury FC having been placed into administration after 135 years in existence and Bolton Wanderers having come close to following them.

With the prevailing view being that a large number of other clubs were not financially sustainable, there was a fear that the two clubs from northwest England represented only the tip of the iceberg.

It will be a cause of concern, then, that the arbitration panel’s decision has led to the withdrawal of the salary cap scheme, and the reinstatement of the previous Salary Cost Management Protocols - which link expenditure to turnover and on whose watch the recent financial woes were allowed to take place.

Controversy and confusion over the salary cap

The decision seems to be based on something of a technicality, the PFA having submitted that the EFL had a legal obligation to consult a body called the Professional Football Negotiating and Consultative Committee before making the changes, based on an article in the PFNCC’s own constitution, and had failed to do so. The arbitral tribunal ultimately agreed, ruling that the EFL was in breach of its agreement as a member of the PFNCC.

The decision seems to have come as a shock to the EFL, which (understandably) believed that its own rules would take precedence. It does appear that the EFL could circumvent the decision by withdrawing from the PFNCC (and therefore revoking its agreement to follow the PFNCC constitution), but the realpolitik of the situation may make that difficult.

The salary cap was already controversial, with nine clubs believed to have voted against it (including some of League One’s biggest hitters) and one withholding its vote. It is therefore not clear whether there will be sufficient will within the EFL to consult further on the salary cap idea and seek to reintroduce it, perhaps in an amended format.

Can sports authorities enforce financial regimes?

The decision is the latest reminder of the difficulties that well-meaning sporting administrators can face when trying to impose competition-wide fiscal prudence. Both the EFL and UEFA have faced challenges to, and criticism of, their financial fair play schemes.

Most high-profile of these was Manchester City’s unexpected success against UEFA in the Court of Arbitration for Sport last year. City had been banned from the Champions League for two years and fined €30m by UEFA for serious breaches of its FFP rules.

However, despite finding that City had obstructed the investigations of UEFA’s club financial control body, CAS overturned the ban and reduced the fine to €10m – a relative pittance for a club backed by the petro-dollars of Abu Dhabi.

That isn’t to say that salary caps and other financial measures in sport cannot be enforced, though, with Premiership Rugby’s enforcement action against Saracens (the league’s wealthiest and most successful club at the time) last year providing an example of salary cap rules having a real bite.

The key question for the EFL is whether it has the conviction and appetite to push through the resistance and get its salary cap back on the agenda.

The future prosperity of England’s historic lower leagues may depend on that decision.

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