Employment

Transfers

What is the legal framework for individual transfers? What restrictions can be placed on individuals moving between clubs?

In the J.League, under the JFA's Regulations on contracts, registration and transfer of professional football players, when a player transfers within the J.League before the contract term expires, an agreement on transfer compensation with both the original club and the new club is required. If a player transfers without reaching this agreement, a prohibition on additional player registrations for a certain period may be imposed on the new club. The player may also face suspension for up to six months.

Players can only register during registration windows, which occur twice per year.

In the NPB, the ‘reserve system’ prohibits the transfer of players. As a result, players cannot negotiate contracts, or otherwise participate in practices designed to result in the transfer to other teams, regardless of whether the new team is a domestic team or one based in a foreign country. An exception to this system is the free agent (FA) system. There are domestic FAs and foreign FAs, and each can transfer to a domestic or foreign team by satisfying certain entrance conditions. If a player is transferred under the FA system, the original team may request monetary compensation or compensation in human resources from the new team. There is also a posting system based on the United States-Japanese Player Contract Agreement, agreed to by the MLB and the NPB, which is a system that allows players who do not meet the conditions of foreign FA rights to be transferred to the United States.

On 17 June 2019, the Japan Fair Trade Commission published a public report titled 'Transfer Restricting Rules in the Sports Industry from the Perspective of the Antitrust Act'. This report states that 'there are many transfer restricting rules in the sports industry and whether or not specific rules violate the Antitrust Act shall be determined on a case by case basis', while it also asserts that 'at the very least, rules that restrict transfers or occupational changes indefinitely (for example, rules that forbid transfers entirely, forbid transfers without the current team’s consent indefinitely, forbid participation in any league or competition held by the governing body even if transfers themselves are allowed)' may be considered to be violations of the Antitrust Act.

Ending contractual obligations

Can individuals buy their way out of their contractual obligations to professional sports clubs?

If an individual player becomes a party to a contract with the club, the player is bound by the contract.

Regarding transfers, there is a reserve system in the NPB, and once a contract with a team is concluded, the player cannot, in principle, negotiate a contract with another team. The only exception is the FA system, whereby a player can exercise the FA right and negotiate a contract with another team if certain requirements are met. However, in order to exercise the FA right and transfer to another team, the other team is required to pay certain FA compensation to the original team. (See 'Transfers'.)

There is no such reserve system in the J.League, and players can freely negotiate transfers with other teams from six months prior to the expiration of the contract with the original club. However, players cannot transfer in the middle of the contract term, unless an agreement on penalty is made between the original club and the new club.

Welfare obligations

What are the key athlete welfare obligations for employers?

Since professional athletes are not recognised as workers under the Labour Standards Act, clubs and teams are not obliged to subscribe to workers’ accident insurance, employment insurance, health insurance and other employment-related insurance.

However, a team or club may have certain contractual obligations regarding welfare benefits. For example, in the player contracts for the J.League and professional baseball, obligations to bear medical costs are set forth for teams and clubs for when players suffer injuries or illness. In addition, in such contract for professional baseball, the team is obliged to pay disability compensation if the player suffers a physical impairment, and in the J.League player contract, there are provisions concerning their own welfare programmes, such as ‘relief games’ for the purpose of relieving promising athletes who become unable to play because of injury or illness from economically dire conditions.

Young athletes

Are there restrictions on the employment and transfer of young athletes?

In the J.League, young athletes cannot become professional athletes until they are 16. In addition, a player who is under 20 must obtain the consent of a legal representative to enter into a contract. Furthermore, there is a cap on his or her annual salary. Regarding transfers, there are no original regulations of the J.League, and it follows the applicable FIFA regulations.

Young athletes interested in playing in the NPB cannot become professional athletes until they reach the end of compulsory education (ie, junior high school graduation). In addition, a player who is under the age of 20 must obtain the consent of a legal representative to enter into a contract.

What are the key child protection rules and safeguarding considerations?

In both the J.League and the NPB, the requirement of the consent of a legal representative is intended to ensure that players who are minors are protected from unreasonable contracts.

There are also regulations concerning the lower limit of age-related eligibility, as referenced in 'Young athletes'. These regulations are intended to protect children by preventing them from becoming professional athletes while their minds and bodies are still developing. There are also regulations that limit the amount of control an organi­sation can have over a young athlete. For example, in the J.League, players under the age of 18 can only enter into a contract for a maximum period of three years.

The length of practice and other associated activities are not restricted according to age. Activities in these areas are left to the discretion of the contracting organisations.

Club and country representation

What employment relationship issues arise when athletes represent both club and country?

With regard to compensation in cases where a national representative player becomes injured or sick in an international match, the JFA has established an accident insurance system and an income compensation system. Further, the JFA paid approximately ¥120 million to the players based on the income compensation system for about 15 years, and the clubs also received compensation until the players returned.

Selection and eligibility

How are selection and eligibility disputes dealt with by national bodies?

See 'Court enforcement'.

What are the key taxation issues for foreign athletes competing in your jurisdiction to be aware of?

If a non-resident foreign athlete participating in a competition, such as a golf or tennis tournament or boxing event, receives remuneration for participating or a supplementary prize, such as a car or a watch, from an organiser in Japan, any such compensation is considered as ‘compen­sation for the provision of personal services’ under the Income Tax Law, and is subject to separate tax withholding at the source at a rate of 20.42 per cent.

If a tax treaty exists between Japan and the country where the foreign athlete resides, tax exemptions may be available. Therefore, it is necessary to confirm the relevant tax treaty in force. For example, there is an exemption in the Convention Between Japan and the US for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income. Specifically, there is no withholding tax if the total income from his or her activities as an athlete received in the tax year is less than US$10,000. On the other hand, there is no provision for reduction or exemption of tax liability under the tax treaty between Japan and the United Kingdom, and taxes should be withheld by the organiser at a rate of 20.42 per cent.

If the supplementary prize is a product, such as an automobile or a watch, it is valued at 60 per cent of the retail price for tax purposes.

In cases where a sporting event organiser withholds income tax from remuneration, the tax liability will be limited to such withholding, and foreign athletes do not need to file a tax return.

In cases where a non-resident foreign athlete signs a contract with a Japanese club or team and the contract provides for remuneration for the player, the athlete’s remuneration is also considered as ‘compensation for the provision of personal services’ under the Income Tax Law. Therefore, the club or team will withhold income tax, and these foreign athletes do not need to file a final return as explained above.