The use of the ‘Law of 78’
During the Belgian transfer periods, the media regularly refers to the law of 24 February 1978 regarding the employment contract for paid sportspeople (hereinafter: law of 78). Well-known football players who used the law of 78 include Steven Defour, Andres Mendoza, Davy De Beule, Koen Casteels and recently Junior Malanda.
This law regulates a number of specific sports-related issues that deviate from the ordinary Employment Contracts Act. This law provides, among other things, for a special dismissal scheme for paid athletes. If a club does not want to cooperate with the transfer of a player to another club, the player sometimes threatens to unilaterally terminate his employment contract on the basis of this law. In return, the player must pay a cancellation fee.
Scope of application of the “Law of 78”
The Law of 78 applies to paid athletes, provided that they receive a certain minimum wage annually. This minimum wage is determined by Royal Decree and amounts to 10,612 euros for the years 2019-2020. In addition, the scope has been expanded to include trainers and referees.
A paid sportsperson is defined as a person who undertakes to prepare for or participate in a sporting competition or exhibition under the authority of another person. A well-known example of a non-footballer who used the Law of 78 is the cyclist Frank Vandenbroucke to force his transfer to Mapei in 1994.
The dismissal scheme in the “Law of 78”
The focus of the law concerns the possibility of terminating the employment contract between the employer and the paid sportsperson. If one of the parties terminates the employment contract before the end of the term, without giving an urgent reason, the injured party is entitled to termination compensation. This is equal to the wages owed for the remaining term of the employment contract.
However, the legislator has set an upper limit based on the gross annual salary of the paid sportsperson. After all, a termination compensation may not amount to more than double the amounts determined in the Royal Decree of 13 July 2004.
An illustration
Player X signs an employment contract for a period of five years with club Y. After six months, player X wants to move to another club and terminates the employment contract unilaterally, without an urgent reason. His gross salary amounts to EUR 10,833.33 per month.
The termination compensation owed by player X would in principle equal the salary due for the remaining term of the contract. However, in accordance with the Royal Decree of 13 July 2004, the severance payment amounts to a maximum of two times 18 months’ salary. In other words, the termination compensation amounts to EUR 390,000 (36 times EUR 10,833.33).
What the Law of 78 means in practice
The dismissal scheme is often described as a way out of a contract, but it works in both directions. A club that ends the contract early without an urgent reason owes the athlete the same kind of compensation, capped in the same way. The rule therefore protects the athlete against a club that wants to remove him from the payroll, just as much as it gives the athlete a priced exit.
Three points decide most files. The first is whether the person actually falls within the scope, because the minimum wage condition is measured against the reference amount for the relevant period, and an athlete below it stays under ordinary employment law. The second is whether an urgent reason exists, since an urgent reason removes the compensation entirely and is assessed strictly. The third is the exact composition of the salary, because bonuses, payments for image rights and benefits in kind are not automatically counted in the same way.
Before anyone gives notice, read the contract next to the law. A clause that promises something the law does not allow is not enforceable, and a clause that stays silent leaves the statutory scheme in place. That reading is also the moment to check what the club and the player each expect the exit to cost, because the two figures are rarely the same at the start of the discussion.