Everton face a potential points deduction as they work on replacing manager Sam Allardyce with Marco Silva.
With Allardyce set to go this week after meeting owner Farhad Moshiri on Wednesday, the club want to press on with hiring former Watford boss Silva.
But Sportsmail understands that Watford have gone to Premier League arbitration, accusing Everton of making an unwarranted approach for Silva last season.
Everton face a potential points deduction as they work on appointing Marco Silva as manager
Sam Allardyce is set to leave the club after meeting owner Farhad Moshiri on Wednesday
They blamed Everton for unsettling the 40-year-old Portuguese when they sacked him in January. Everton realise that hiring Silva would leave them open to sanctions that could even include a points deduction and hope to resolve the dispute.
Recent talks, attended by Everton chairman Bill Kenwright, failed to bring an agreement but the club want further discussions before they appoint Silva.
To complicate matters, Silva must settle his own legal dispute with Watford after being accused of an alleged breach of contract.
Everton’s failure to lure Silva last year saw them turn to Allardyce. He guided the club to eighth and will be due £2million in bonuses for keeping them in the top flight plus a slice of his £6m-a-year contract.
With Everton likely to pay Watford a seven-figure settlement fee — and after parting with managers Roberto Martinez and Ronald Koeman — it will mean Moshiri will have spent almost £20m in severance payments in just over two years.
After Ronald Koeman left last year, Everton’s failure to lure Silva saw them turn to Allardyce