Legal advice: Layoffs and salary cuts amid coronavirus

Many of us in cycling are probably wishing that we were as prepared for the novel coronavirus pandemic as Wimbledon. 

While COVID-19 has forced the biggest global sports shutdown since World War II, the All-England Lawn Tennis Club wisely bought insurance to safeguard against losses in the event of a global pandemic. It required foresight and a lot of money at a reported $2 million a year since the SARS outbreak in 2003. However the Grand Slam tennis tournament will recoup $141 million and likely recover from losses after being cancelled this July. Unfortunately the same assurances cannot be said for some of cycling’s teams, riders and events, and that could potentially include the Tour de France. 

There's also no guarantee that the postponed Tokyo Olympic Games will take place next summer. The cost of postponing the Games is estimated at between $2 billion-$6 billion and the organising committee's chief Toshiro Muto has said that he isn't sure if the event's range of insurances cover the delay due to the pandemic. He also suggested that it's too soon to know if the pandemic will be under control by then.

650 cycling race organisers have requested cancellation or postponement, so far, and others are facing that same fate due to the impacts of COVID-19. That figure represents 30 per cent of the year’s UCI International Calendar. Those effects have been felt throughout the sport's multi-tier men’s and women’s teams - WorldTour through Continental - and by hundreds of registered athletes and team staff. 

The UCI painted a grim picture of how the pandemic has torn through businesses and sponsorship causing massive funding cuts, salary reductions and job losses.

"Our federation is going through a crisis that we haven’t experienced since the Second World War," said UCI President David Lappartient regarding the organisation’s cost-cutting measures due to the effects that the pandemic and the suspension of racing has had on its finances. It has placed all 130 staff members on full or partial furlough, while senior management and elected members have taken unspecified salary cuts. 

This isn’t the first we’ve heard of job furloughs, layoffs and salary cuts within professional cycling this month. 

USA Cycling and British Cycling have announced similar measures, while a number of WorldTour teams including Astana, CCC Team, Lotto Soudal, Bahrain McLaren, and Mitchelton-Scott’s men’s and women’s teams have cut rider salaries and laid off support staff due to the economic impact of the coronavirus pandemic. 

Cyclingnews reported Friday that the CPA, the professional riders’ union, has said that it is ready to accept salary cuts during the coronavirus pandemic but only in cases where teams can prove that their budgets have been affected by the hiatus from competition. 

In women’s cycling, Ronny Lauke, president of the newly formed women’s teams association called UNIO, has suggested that with businesses and sponsors being so hard-hit, some teams will not survive. 

The UCI initiated reforms to professional women’s cycling this year with new financial requirements for top-tier Women’s WorldTeams that includes paying riders a  minimum salary of €15,000 (employed) or €24,600 (self-employed), along with social insurances and benefits such as maternity leave as part of the standard self-employed contract. However, there are only eight registered top-tier teams. There are 45 Continental Teams that are not required to pay their riders a wage, although some do.

The Cyclists’ Alliance (TCA), which is widely recognised as the women’s riders union, told Cyclingnews that it is working to educate athletes about their self-employed and employed contacts through its newly launched Contract Management Platform, an online resource designed to up-skill riders’ commercial knowledge and awareness of their contractual rights. It's also providing concerned athletes with a COVID-19 factsheet that answers the most frequently asked questions concerning job uncertainty. In addition, it is offering advice for those who have lost income by providing alternate funding strategies available through national governments.

Professional cycling is almost solely reliant on sponsorship funding, and so as businesses face significant decline during this time, so will events, teams, staff and athletes. Many might be wondering what to do if they’re faced with major salary reductions, withheld wages, temporary layoffs, or worst-case scenario, teams folding due to the economic impacts of the coronavirus.

Unpaid riders might be considering how to access their teams’ bank guarantee, which is a percentage of a team's overall budget that is put into a blocked account that can be used by the UCI to protect the riders' rights to be paid if their team does not comply with their obligations. 

A team’s bank guarantee could potentially pay for up to three months of a rider's salary. However, due to the unforeseen circumstances of the global pandemic, it is unclear if now is the right time to open those accounts. Accessing those accounts too soon could also affect the health of the teams.

Cyclingnews spoke with employment lawyer Marnix van Ark and TCA founder Iris Slappendel, who provided six tips for teams, athletes and staff, during these unprecedented and uncertain times. 

Their top legal advice included understanding the difference between being self-employed and employed; applying for coronavirus-response government funding; being proactive and acting quickly; accessing the UCI bank guarantee; and insuring your future.

1. Apply for government funding

The Self-Employed: 

Marnix van Ark: The most important thing is to determine if a rider is self-employed or an employee. For example, when you’re self-employed in the Netherlands you can go to the government and apply for funding if you’ve lost your work. These kinds of rules are different in each country. When you are self-employed you can go to the government and apply for funding yourself because the government sees a self-employed worker as their own company. 

In a lot of cases, however, self-employed cyclists are considered employees because a riders’ future depends on one client. Every country has a different definition of what an employee is, but in the European Court of Justice it depends on a rider's independence. 

How independent are you? Can you make your own choices? If you only have one client or one team that you’re working for, and all of your income depends on that one client, then you cannot make your own choices. For example, a rider must also listen to their team manager, follow a yearly schedule or live at a team base.

The Employed: 

Marnix van Ark: If you’re employed the situation depends on how much funding a team loses. In the Netherlands and Belgium, the teams that hire their riders as employees can apply for funding through the government to pay their employees’ wages. 

Each nation has different rules. In this case, if you’re an employee of your team, it’s the team’s responsibility and go to the government to request this funding to then pay the riders’ salaries. So, if you’re an employee, go to your boss or your team manager and ask them questions about how they’re handling the riders’ salaries during the coronavirus. In the Netherlands, it’s a simple process for employers to get money from the government to pay their employees’ wages. 

Many governments have special funding in place just for income lost due to the coronavirus. It depends on each nation’s government and how they’re handling their coronavirus response. So, for right now, teams need to take this process step-by-step, and the first action to take is for the teams to go to the government and claim their money so that they can pay their employees. 

Unemployment insurance benefits (for employed athletes only):

Marnix van Ark: After that step, when the teams cannot pay their riders any longer, they will come to a point where they need to layoff riders. At that point the riders move into the unemployment system and then they can claim their government’s unemployment insurance benefits. This only applies to employed athletes, and so self-employed athletes don't have this benefit. That’s the main problem with being self-employed. Hiring self-employed riders lowers the costs for the teams and so it’s a bit of a benefit for the team. If a rider is employed a team needs to pay a lot of extra benefits for their employees, which they don’t have to do if their riders are self-employed. The team also pays a lot of taxes so that the employees can use the unemployment system.  

2. Act Quickly

Marnix van Ark: Take your own responsibility and act quickly. If you’re an employee, ask your team manager, how they’re going to handle this situation. People aren’t going to think for you, you need to do these things for yourself. Once you know how your team is handling the finances, you could then go to the government to claim your unemployment insurance benefits. When you’re self-employed, you need to go immediately to the government and find out what kind of solutions they have for you. You cannot wait at this moment, act as quickly as possible.

3. Be informed. Knowledge is power.

Iris Slappendel: Athletes should speak to their Olympic Federations and inform themselves about the employment regulations in their country. Athletes can also come to the TCA to ask questions. We’re connected with the a network of player associations from all over the world and it’s quite easy for us to see what the support measures are for athletes in other countries. 

Be proactive. The situation isn't black and white because in most cases the teams have not folded. In some cases, the teams have asked the riders to stay and take a voluntary pay cut, but athletes also need to be aware of their rights. It's difficult for riders to demand payment because they also know that next year they want another contract with a team. But even if they depend on their team, in some way, they have to be aware of their own rights. 

There are many riders who don’t understand the difference between being self-employed and employed. They look at the pay level and think that being self-employed pays more. What they may not understand is that in cases like this pandemic, which is an exceptional circumstance, but it could also happen due to sickness, an accident, a pregnancy, there are benefits and insurances built into being a contracted employee.

We really try to educate riders, with our Contract Management Platform, but it's up to riders to start asking these questions and understand their contracts and all the regulations before signing.

4. Consult an agent or contract lawyer before signing

Iris Slappendel: We provide a contract health check and athletes can either send a contract to our agent to check if it’s healthy or they can do it themselves through a checklist on the website. Most of the problems with contracts that we see are with the Continental teams, which aren't required to pay riders a salary. For example, there are fines in the contracts, a lot of duties, and sometimes we see contracts that are only for 10 months. Sometimes we see two contracts where one is for the side business of the team owner and the other is for the rider, or a rider has signed four contracts with one team. Sometimes riders are aware of the problems within their contracts but are too afraid to say something about it to the team, and so they sign a crappy contract. They’re willing to take the risk, sign it, and then cross their fingers that there won’t be problems in the future.

Marnix van Ark: Oftentimes, in cases like this, the riders are acting in very good faith. A lot of times, riders are just so happy to have a contract and sign without reading or understanding what’s in it. They just feel it must be okay because they believe and trust that a team would only put good things in a contract. 

It’s always a good idea to consult a contract lawyer before signing a contract. But riders need to have the money for this kind of consultation, and it can be expensive for riders who are not even earning a minimum salary on the WorldTour. 

If we see problems with contracts we would advise the riders to request changes to articles or clauses. The important thing in consulting with a lawyer before signing the contract is that the rider feel that they have someone who is helping them. In most cases, they feel a bit stronger and more confident. They know that what they’re requesting [in a contract] during negotiations with a team is right because they've consulted with a lawyer.

5. UCI Bank Guarantee - the last resort!

Marnix van Ark:  This is a very hard action to do. Sometimes, there are rules in place called a force majeure - like an act of God - an unforeseen circumstance like the coronavirus. 

The important thing about the bank guarantee is that there is an understanding between the teams and the riders. Perhaps the teams ask the riders not to access the bank guarantee right now and wait. However, the riders need to know that they can access the bank guarantee in the future, if necessary. It is best that the riders first take their own action through the government funding available. Going straight for the bank guarantee could also be felt like an attack on the team. This isn’t the right moment because teams and riders need to try to work together. 

Likewise, the teams should not request that the UCI freeze the bank guarantees. It’s not a good solution either because then the teams are not working together with the riders. The teams and riders need to trust each other that they will work it out. The riders are within their rights to ask for these funds, and so I don't think it’s a good idea to enforce [a freeze on the bank guarantee].

Iris Slappendel: I hope that the stakeholders will find a way to at least make sure this money will be used either for the riders or the survival of the teams. These are two scenarios that would be in the advantage of the riders. It’s also only a percentage of a riders income. The money in the bank guarantee won't be enough to pay every rider for the rest of the year. If the bank guarantees are used to pay the riders it will be a small bandage on a wound, and not really a permanent solution.

6. Get insured

Marnix van Ark: Not many riders or teams, or even events, insured themselves for a crisis like this coronavirus - except Wimbledon. It was insured for some of the costs of its event, which is something to think about in the sports world because we can insure ourselves for a crisis like this in the future. There are no riders, teams and probably not many cycling events that are insured for something like this. Although this is an exceptional circumstance, we can certainly think more toward protecting ourselves in the future.