(Reuters) - Salary caps for League One and League Two clubs, representing the third and fourth tiers of English football, have been withdrawn following a decision by an independent arbitration panel, the players' union (PFA) said on Tuesday.
In August, League One and League Two clubs had voted in favour of introducing salary caps for their squads.
League One clubs had agreed to cap total expenditure on player salaries at 2.5 million pounds ($3.45 million) while those in League Two agreed to an upper limit of 1.5 million pounds ($2.07 million).
The move was criticised by the players' union, which had served the EFL with a notice of arbitration and called for the new rules not to come into effect until that process was completed.
"An independent arbitration panel has upheld a claim from the PFA that the EFL was in breach of the constitution of the Professional Football Negotiating and Consultative Committee (PFNCC) by introducing squad salary caps," the EFL said in a statement.
A number of EFL clubs have faced financial difficulties which have been accentuated by the COVID-19 pandemic and EFL chairman Rick Parry had called for a "complete rethink" of the financial model for clubs below the Premier League.
"The PFA welcomes the fact that the salary cap rules are automatically withdrawn and hopes to open constructive dialogue to agree reasonable cost control measures for the future," the players' union said in a statement.
"Like everyone involved in football, the PFA wants to see sustainable clubs at all levels.
"The PFA believes it is now in the best interest of the leagues, the clubs, and the players to work together and agree on rules that promote financial stability."
($1 = 0.7253 pounds)
(Reporting by Arvind Sriram in Bengaluru; Editing by Christian Radnedge)