“Term”

It is important that the individual is aware of the “term” or length of the agreement. Accordingly, the length of time or how long an agreement lasts is very important to be aware of. A contract’s “term” may be structured as the parties’ desire including for years, months, days, or even on a tournament or seasonal basis.

This clause also usually includes any “firm” or guaranteed terms as well as lists any potential “options” to extend and renew an existing agreement to lengthen the relationship. In this case, the player and team can negotiate how an option under the contract is exercised as it might be at the sole discretion of the team, the player, or potentially upon mutual approval of both parties.

“Compensation”

Another crucial clause in a standard esports player agreement with a team is the compensation clause. As a result, it is important that a player understands their compensation including addressing the amount and frequency of a salary or other agreed upon payment to a professional gamer. While the payment amount is important to agree on, it is also fundamental to understand when a payment is due and what the procedures are in place and the potential repercussions for delayed or outstanding payments including interest or late fees.

“Player Income”

Esports player contracts also include information related to whether or not an organization is entitled to a percentage of any of the professional esports player’s social media and livestreaming advertising and other related revenues and earnings. In many cases, the esports team will not receive any of these funds; however, in certain instances, this will not always be the case and the organization will receive a portion of the funds the player earns. As a result, it is important to understand and agree in advance upon what that amount is including potentially including income limitations or “caps” to a specific number.

“Tournament Winnings”

Most competitive esports players compete in organized events, leagues, and tournaments for prize money, sometimes, for thousands or millions of dollars. Accordingly, similar to social media and streaming income, many professional esports teams receive a portion of their competitive players’ event, league, and tournament winnings. While the percentage varies, it is crucial to be aware of and agree on the percentage that is payable to the organization as well as how the amounts might be split between other players (if on a team), and potentially with the coach and other training staff who all might receive a portion of any prize money that a gamer receives.

“Independent Sponsorships”

Many esports player agreements include language addressing a gamer’s ability and procedure for undertaking independent sponsorship and brand partnership opportunities. Consequently, these documents may permit a signed gamer to enter into separate sponsorship and endorsement agreements. However, in many cases, the agreement may include language that limits and prohibits a specific good or service and some might require prior approval by the team of a player’s independent sponsorship opportunities.

As a result, it is important for a gamer to outline which brands and product categories are prohibited as well as to ensure that they have “carved-out” or exempted any previously existing brand partnerships so that they can continue to work with those companies. Additionally, some agreements have language whereby the esports team is acting as an exclusive or non-exclusive sponsorship or marketing agent on behalf of the talent which is another point to consider and be aware of when signing this type of document.

“Team and Sponsors Obligations”

Generally, an esports player agreement also lists the player’s obligations or “duties” that the gamer must undertake on behalf of the organization. These obligations might include streaming a certain number of hours as well as utilizing the team sponsor’s equipment and products during events and on stream.

There might also be requirements that the gamer participate in a set number of promotional appearances on behalf of the team or its sponsors in addition to providing an agreed upon number of social media posts that the player must make highlighting the team and its brand partners. As a result, a gamer should ensure and be familiar with the specific number of posts, appearances, and required streaming hours are outlined in the agreement as the failure to adhere to them could lead to potential liability including a payment reduction.

“Right of First Refusal” or “Matching Right”

Many esports player contracts also contain language that addresses how a player is required to proceed as their existing agreement is coming to an end. In fact, it is common for esports player agreements with teams to incorporate a “right of first refusal” or “matching right.” This clause means that the current esports team has the right to “match” any third-party offer from a different organization for the player.

If the current team does not “match” the other team’s offer for the talent, then the player may accept and sign with the other team. However, if the initial organization “matches” the other team’s offer, then the gamer is obligated to stay with the original organization. it is important to be aware of this mechanism and to understand its effect since this clause can severely impact a professional gamer’s future career aspirations.

“Right of First Negotiation” or “Right of First Offer”

In addition to or in lieu of “matching” rights, many esports player contracts also include “right of first negotiation” also known as a “right of first offer” provisions. This clause means that a player currently signed to team is required to first exclusively right to negotiate a contract extension with the player’s current before the talent is permitted to speak with or sign with any other team. As a result, the current esports organization can decide whether to make an offer to keep the player or not.

If the team chooses not to, then the player is free to look elsewhere but they cannot undertake contract negotiations with another organization until the first team declines its right or the exclusivity period times. Accordingly, it is crucial that an esports player includes a set limitation on the timeframe and applicability of this provision in order to provide the professional gaming talent with ample opportunity to secure alternative deals if needed.

“Buyout”

The term of an agreement may naturally extinguish upon its expiration. However, in some cases, the contract may be terminated early including through the usage of a “buyout” clause. In fact, many esports player contracts generally include “buyout” provisions which are a set fee or amount that may be paid by the player or another team to “buyout” or terminate the existing agreement.

The usage and inclusion of this provision enables a new team or the player themselves to pay the agreed upon “buyout” amount to be released from and to terminate their current contract. In these cases, and in order to incentivize a larger buy-out, a player might attempt to secure a transfer bonus or a specified percentage of the payment for any “buy-out” fee paid that is received by the team.

“Trade & Assignment”

Another common provision in professional esports player agreements are those clauses related to the trading, assignment, and loaning of a gamer. In many cases, these agreements provide the esports team with the opportunity to trade, assign, or otherwise loan an existing player to another team.

However, in an attempt to restrict a team’s unfettered ability to trade or loan a gamer to another organization, it is common for these provisions to include specific restrictions on a team’s ability to trade player such as a specific regional or country prohibitions or even a limitation against specific teams. Finally, there might even be the potential to negotiate for a full “no trade” clause which provides the gamer with the sole and absolute discretion to decide whether or not to approve a trade or assignment to another esports organization.

 Bonus – Name, Image, and Likeness” (“NIL”)

A gamer’s “right publicity” usage rights are another crucial matter addressed in these types of agreements. Generally, a signing organization may acquire a license to use a professional esports player’s “gamer-tag” or other identifiable characteristics permitting them to display the talent’s image, name, portrait, signature, or other protected elements for the listed purposes including commercial ones. In an effort to curtail or mitigate some of this power, a gamer might attempt to negotiate a restriction or right of approval over any usage of the player’s “NIL” during the term of the agreement.

Furthermore, a player might try to incorporate language limiting the organization’s rights to display or otherwise utilize a player’s protected persona after the agreement ends. In some cases, the parties may permit the team to solely utilize the player’s protected assets for “archival” or other “non-commercial” purposes as part of the team’s history and for no other purposes.

Again, these are just a few important considerations that a professional esports players must be aware of prior to entering into an agreement with a competitive esports team. Since the substance of every agreement differs, it is crucial that an esports professional obtain proper competent representation and advice, including working with a seasoned attorney or other knowledgeable professional.

© 2024, Justin Jacobson Law, P.C.

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We hope this FAQ has provided valuable insights into the complexities of esports immigration law. Remember, immigration regulations can be intricate and subject to change. For specific guidance on your unique situation, it’s always recommended to consult with a qualified esports law professional specializing in the relevant region as all the information is attorney advertising and is for educational purposes and use only and is not intended as legal advice.

© 2024 Justin Jacobson Law, P.C. and K-CASE Lawyer

Facts and Proceedings

On 13 June 2024, the Rouen Court of Appeal rendered a pivotal decision regarding the employment status and rights of esports players, particularly concerning the enforceability of fixed-term contracts (CDD) in the absence of specific club accreditation. This case involved Mr. [O] [X], known professionally as Skite, a top-ranked Fortnite player, and SP Global Productions, a company that promoted online video game activities.

Mr. [X] had signed a one-year fixed-term contract with SP Global Productions, commencing on 17 September 2020. However, on 19 August 2021, the Evreux Commercial Court ordered the liquidation of SP Global Productions, appointing SCP Mandateam as the liquidator. Subsequently, on 1 September 2021, the liquidator prematurely terminated Mr. [X]’s contract, citing the company’s financial insolvency.

In the initial ruling on 6 September 2022, the Evreux Labor Court found in favor of Mr. [X], affirming that SP Global Productions had failed to meet its salary obligations and that the early termination of the contract was unjustified. The court awarded Mr. [X] unpaid wages, an early termination indemnity, and an end-of-contract indemnity. Furthermore, the liquidator was instructed to provide corrected wage statements and other necessary employment documents.

The AGS (Association for the Management of Employee Claims), which had taken over the responsibility for the unpaid wages, appealed the decision. The AGS contended that Mr. [X] was an independent contractor and not an employee, and that his fixed-term contract should be reclassified as a permanent contract (CDI) due to the lack of specific esports accreditation for SP Global Productions.

The Court of Appeal upheld the initial ruling, emphasizing several key points. It confirmed Mr. [X]’s status as an employee, citing the existence of a signed CDD and the AGS’s failure to prove the contract’s fictitious nature. The court noted that the CDD met all formal requirements and was justified by a temporary increase in activity, thus negating the need for reclassification as a CDI. Importantly, the court ruled that the absence of esports-specific accreditation did not invalidate the CDD or affect its enforceability against the AGS, which remained obligated to guarantee the amounts due by the employer to the employee.

The court confirmed Mr. [X]’s entitlement to unpaid wages amounting to EUR 32,532.85 , an early termination indemnity of EUR 3,603.56 , and an end-of-contract indemnity of EUR 7,337.415 (specified as gross). Additionally, the liquidator was reaffirmed to provide the corrected wage statements and other employment documents as previously ordered.

Legal Analysis and Future Perspectives

The recent ruling by the Rouen Court of Appeal has significant legal implications for the esports industry, particularly regarding the employment of players under a CDD without the necessity of specific club accreditation. This decision brings to light several crucial aspects of labor law as it applies to the esports sector.

Legitimacy of Fixed-Term Contracts

One of the primary outcomes of this ruling is the affirmation that esports players can be legitimately employed under fixed-term contracts, regardless of whether the esports club has specific accreditation. This aspect of the decision is particularly important because it provides legal certainty to players and clubs operating in a relatively new and rapidly growing industry. The court’s decision ensures that players are afforded the same rights and protections under labor law as athletes in traditional sports. This includes the right to claim unpaid wages and other entitlements, which is a significant step towards standardizing employment practices in esports.

Burden of Proof on Employment Contract Validity

The court placed a considerable emphasis on the burden of proof resting with entities like AGS to demonstrate the fictitious nature of employment contracts. This aspect of the ruling underscores the necessity for esports organizations to maintain thorough and accurate documentation of their contractual agreements. Proper documentation is therefore critical for defending the legitimacy of these contracts in legal disputes. This requirement aligns with broader labor law principles that seek to protect workers from exploitative practices and ensure that employment relationships are genuine and not merely a facade to circumvent legal obligations.

Implications for Esports Organizations

For esports organizations, this ruling serves as a stern reminder of the importance of compliance with labor laws. It highlights the need for these organizations to establish robust contractual frameworks and maintain comprehensive records to substantiate the authenticity of their employment relationships. Failure to do so could result in legal challenges and potential liabilities.

Conclusion

The Rouen Court of Appeal’s decision is a landmark in esports law, validating the use of fixed-term contracts without the need for club accreditation and reinforcing the protection of players’ employment rights. This ruling is expected to have a lasting impact on the esports industry, influencing future contractual practices and elevating legal standards. As the esports sector continues to evolve, this decision will likely serve as a foundational precedent, guiding the development of fair and legally sound employment practices. Esports organizations must now prioritize compliance with labor laws to safeguard their operations and protect the rights of their players, ensuring the sustainable growth of the industry.

Case No. RG 22/03196 – Portalis No. DBV2-V-B7G-JF5R

Appellant:

• AGS CGEA (Location 7), represented by Guillaume des Acres de l’Aigle, SCP Boniface Dakin & Associates, Rouen Bar.

Respondents:

• Mr. [O] [X], represented by Frédéric Caulier, SELARL Caulier Vallet, Rouen Bar.
• SCP Mandateam, liquidator of SP Global Productions.

Via Victoire Avocats