Ben Cisneros, Trainee Solicitor at Morgan Sports Law discusses RFU Regulation 7 and its impact on how the community game is governed.
Since the start of the 2019/20 season, English rugby clubs whose men’s first XVs play at Level 3 and below have been subject to a ‘soft’ salary cap. The so-called “Payment Threshold” in RFU Regulation 7 has created a new governance challenge for clubs and the RFU alike and has, in its first two seasons, already caused controversy.
The Payment Thresholds decrease the lower the club’s level, and the basic premise is that clubs paying above the relevant Payment Threshold will be ineligible for RFU Benefits (i.e. funding). To enforce the system, clubs are required to submit annual declarations, and failure to do so accurately will attract disciplinary consequences.
In 2020, Rams RFC and Plymouth Albion RFC both felt the wrath of the RFU’s disciplinary process, having failed to comply with the letter of the regulations, revealing an uncomfortable tension in the community game. Both Rams and Plymouth completed their annual declaration inaccurately, failing (by mistake) to declare that they were providing their players with Material Benefits, and were hit with 20-point deductions (15 of which were suspended for two years), on top of losing all RFU Benefits for the following season.
Having introduced the Payment Threshold to curb the effects of professionalism below the RFU Championship, the RFU’s approach to enforcement ultimately seeks to hold clubs to a professional standard. These cases raise important issues of governance for clubs, the RFU and the game as a whole.
The most obvious takeaway for clubs from the cases of RFU v. Rams RFC and RFU v. Plymouth Albion RFC is the importance of complying strictly with RFU Regulation 7. Regulation 7.4.1 requires all clubs whose men’s first XVs play at Level 3 and below (who wish to be entitled to RFU Benefits) to submit an annual declaration each season in respect of “any Gross Payments of Material Benefits paid or payable between 1 June of the previous year and 31 May of the current season”.
In both the Rams RFC and Plymouth Albion cases, there was confusion over the precise meaning of the term “Material Benefits”, which both clubs’ administrators mistakenly took to mean benefits paid to players outs of wages/salary (akin to ‘benefits in kind’ one might declare to HMRC). In fact, and crucially, Regulation 7.2 defines “Material Benefit” as including money (salaries, match fees, bonuses etc.) as well as any non-monetary benefits.
Notably, clubs are required to declare all “Gross Payments” to players, meaning all Material Benefits plus “all payments payable in respect of such Material Benefit” – i.e. national insurance contributions, income tax and agents fees. Certain expenses, such as the reimbursement of travel costs to away matches, medical treatment and insurance cover, are excluded from the declaration requirement. The relevant Payment Thresholds also make allowances for payments to “Player Coaches”.
Clubs must also ensure that they submit their annual declaration during the “submission window” commencing on 1 March and closing on 30 June each season, and that they do so with great care. As made clear in Plymouth Albion, once a declaration is submitted, it cannot be withdrawn and/or amended.
The declaration must be submitted via the Game Management System (GMS) portal, and there is helpful guidance for clubs on the RFU’s website, which clubs (and/or their advisors) would be well-advised to read. Importantly, four club officers are required to sign the declaration and, if clubs are paying Material Benefits, they must file supporting documentation evidencing the payments which are made.
This inevitably places an administrative burden on clubs and, as the Appeal Panel in Plymouth Albion put it, requires “an appropriate level of governance”. Given the challenges of this process, clubs ought to nominate an individual to take responsibility for the club’s compliance with Regulation 7 and ensure that they properly understand its requirements. Clubs may also wish to take professional advice (be it from a sports lawyer or suitably qualified accountant), to avoid falling into difficulties.
As noted above, failure to submit an accurate declaration will be a breach of the regulations and attract disciplinary consequences. Clubs are not required to submit a declaration at all (they would simply be ineligible for RFU Benefits) but, if they do submit a declaration, the declaration must be accurate. For clubs facing disciplinary action, a further lesson from Rams RFC and Plymouth Albion is that, often, it is preferable to admit breaches of the regulations and to focus on mitigating the sanction than to fight the charges tooth and nail.
Unless there are truly exceptional circumstances, arguing that the charges ought not to have been brought (as Plymouth Albion did) is unlikely to get very far and, as Plymouth Albion found out, failing to accept the charges can make it more difficult to seek a reduction of the eventual sanction.
Whilst Rams RFC were arguably more culpable than Plymouth Albion for their breach of Regulation 7, Rams RFC’s acceptance of the charge against them counted in their favour when it came to sanctioning.
Moreover, the sanctioning process is a highly discretionary one and, as such, clubs would be wise to instruct specialist legal counsel to represent them in any RFU disciplinary proceedings. Although Rams RFC and Plymouth Albion have arguably set a precedent, the severe sanctions imposed would, in this author’s opinion, not be beyond challenge, for the reasons discussed below.
Proportionality and Enforcement
At the conclusion of the disciplinary cases against them, Rams RFC and Plymouth Albion were both handed 20-point deductions (15 of which were suspended for two years) and lost all RFU Benefits for the following season (including, at least for Plymouth Albion, COVID-19 support).
In this author’s view, such sanctions were wholly disproportionate to the nature of the breaches. There was no intent to deceive the RFU; the clubs simply made mistakes, in the first year that they had had to comply with the new regulations in full. Nonetheless, Plymouth Albion estimated the cost of losing RFU Benefits as being approximately £20,000 and, though much of the points deduction was suspended, its potential effect on the club’s league position is significant.
Notably, and by way of contrast, under the Premiership Rugby Salary Cap Regulation 2020-21, a 15-point deduction would be the sanction for a salary cap breach of £200,000 to £400,000. The severity of the punishment under Regulation 7 far outweighs the severity of the breach and would, in this author’s view, be legally challengeable.
Furthermore, such heavy sanctions run contrary to the interests of the community game. Whilst the RFU’s aim of promoting compliance with a system designed to curb the professionalization of the game’s lower leagues is a laudable one, the financial penalty risks compromising many clubs’ already fragile balance sheets and the severe points deductions risk leaving players disillusioned. When community clubs are, struggling for both funds and players, the sanctions seem counterintuitive.
This author would advocate for reforms to be made to Regulation 7 to provide for more graduated sanctioning
dependent on the nature of the breach in question. The loss of RFU Benefits ought not to be automatic for inaccurate declarations, and administrative errors ought only to be punished with moderate financial penalties (dependent upon their severity). Points deductions should be reserved for breaches which affect sporting competition, such as deliberately or recklessly concealing payments to players (which should also result in the loss of RFU Benefits). The present system is draconian.
Regulation 7 and its enforcement by the RFU, as demonstrated by Rams RFC and Plymouth Albion, reveal an underlying and uncomfortable tension in the English community game: that between amateurism and professionalism.
On one hand, the RFU has introduced Regulation 7 to prevent the over-professionalisation of the community game whilst, on the other, creating a system which requires a degree of professionalism to administer.
Perhaps, if all clubs at Level 3 and below abstained from paying their players, these issues would fall away, and perhaps the administrative burden of Regulation 7 is simply the price the clubs must pay for not doing so. But the reality is that many of these clubs are not professional outfits and are (often) run by volunteers and/or inexperienced administrators. The amateur-professional tension is palpable, and, in this author’s view, a more balanced approach is required.
Article by Ben Cisneros. Ben is a Trainee Solicitor at Morgan Sports Law, a boutique law firm focused exclusively on resolving sports-related disputes, and is the founder of rugbyandthelaw.com.
For any rugby-legal enquiries, please contact Ben at email@example.com or on +44 (0) 7949 828031, and you can follow him on Twitter and Instagram @rugbyandthelaw.
This article appeared in the Summer 2021 issue of Rugby Blindside magazine – Read the full issue here