Third tier clubs would have been given a £2.5m ceiling for salaries and fourth tier sides £1.25m under the proposals.
But an independent arbitration panel has upheld a claim from the Professional Footballers’ Association (PFA) that the EFL was in breach of the constitution of the Professional Football Negotiating and Consultative Committee (PFNCC) by introducing ‘Squad Salary Caps’.
A statement issued by the EFL read: “In August 2020 following an extensive and comprehensive consultation process with EFL Clubs, Leagues One and Two voted to adopt new financial controls that replaced the previous Salary Cost Management Protocols (SCMP).
“The PFA argued that the PFNCC’s remit to consider matters relating to the employment of, and any associated rules and regulations to professional players employed by EFL Clubs, was not properly considered as part of the process to introduce the new rules and as a result served a notice of claim to that effect.
“The EFL and PFA then agreed to refer that matter to arbitration and after hearing submissions from both parties, an independent panel concluded that the EFL was in breach of its agreement as a member of the PFNCC.
“At the time of the adoption of the Salary Cap Rules, the EFL included a provision to ensure that any decision such as this would have the effect of reinstating the SCMP rules that were in operation during season 2019/20, which links player related expenditure to turnover.”
The decision will now be reviewed by the EFL during a number of meetings with clubs this week.