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WHAT ARE THE LEGAL OBLIGATIONS ON SPORTS CLUBS LOOKING TO DISMISS AN UNDERPERFORMING MANAGER?

What are the legal obligations on sports clubs looking to dismiss an underperforming manager? - Charlotte Davies writes for LawInSport. 
This article was first produced for and published by LawinSport.com.

The performance of sports managers is a constant subject of discussion both in the media and amongst fans, with many holding strong views over whether an individual is properly performing in their role.

Recently, there has been great debate over the performance of various football managers, including Jose Mourinho, after his departure from Chelsea following their run of disappointing results, and in recent weeks Louis van Gaal of Manchester United.1 Similarly, the English rugby team’s underwhelming performance in the Rugby World Cup prompted a whole host of questions about Stuart Lancaster’s future prior to his decision to step down.2

While passions run deep in these cases, poor performance by managers also raises some interesting questions about what legal obligations clubs have in respect of dismissing an underperforming manager and – perhaps more importantly – whether these can ever realistically be followed where that poor performance is having an immediate and ongoing effect on the club’s results.

CAPABILITY UNDER THE EMPLOYMENT RIGHTS ACT 1996

Managers of professional sports teams are usually employees, and are therefore entitled to various employment rights.

This includes the right not to be unfairly dismissed.3 Sections 98(1) and (2) of the Employment Rights Act 1996 (the "Act”) provide that there are five potentially fair reasons for an employer to dismiss an employee.

One of these reasons is capability, which includes a person’s competence to perform the job they have been employed to do. Therefore, if someone is unable to perform their role to the required standard this may be a fair reason for terminating their employment. For this reason, dismissals of poorly performing employees are usually by reason of capability.

However, in certain circumstances aspects of poor performance may also overlap with misconduct, for instance if a manager failed to follow reasonable instructions from the club or failed to attend training sessions. In this case, the club would consider dismissing the employee for misconduct, another potentially fair reason under the Act, rather than capability. In addition, where the manager’s poor performance is precipitated by, or has resulted in, a complete breakdown in the relationship between them and the players or the club, the club may be able to argue that this breakdown is sufficient reason to justify their dismissal independent of any poor performance.4

However, the Act provides that whether a poor performance dismissal for one of the five reasons is fair or unfair depends on the particular circumstances of the case and on whether the employer acted reasonably or unreasonably in treating it as a sufficient reason for dismissing the particular employee.

In cases relating to capability, an employer will usually only be considered to have acted reasonably if it can be shown that:

  1. the employee was aware of the standard expected of them;
  2. the employer followed various steps aimed at giving the employee the chance to improve their performance before making a decision to dismiss for that reason; and
  3. if there is not sufficient improvement, the employer held a proper disciplinary meeting and gave the employee the right of appeal.

These further considered below. As will be clear, the process a club will be required to follow in order to prove that it acted fairly and reasonably can be lengthy and onerous. For this reason, a club will inevitably want to consider whether there are alternatives ways of terminating the manager’s employment.

STEP 1: KNOWING THE STANDARD REQUIRED

Firstly, in respect of making sure the employee is aware of the standard required of them, employees in very senior roles are expected to be more aware than most of what is required of them and to be capable of judging for themselves when something falls below the required standard.

Therefore a professional sports club would probably be entitled to assume that its manager was generally aware of the level of performance expected of them. However, any particular requirements, such as specific targets for results, should be clearly set out so the manager is aware of them.

The standard required of a manager could encompass not only technical aspects of the role, but also more subjective aspects such as their attitude or ability to interact with players, colleagues or clients. Again, a club would probably not be expected to have specifically drawn this to the manager’s attention, as it should go without saying that this is an important part of their role.

STEP 2: TAKING APPROPRIATE STEPS

Secondly, where an employee is not meeting the standards required by their employer, case law has established that they would generally be expected to take the following steps (which are also often contained in a company’s own policies and procedures):

  • Make the employee aware of the problem. The employer would be expected to make the problem with their performance clear to the employee i.e. in the case of a manager, the club would need to identify the specific problem, for instance failure to win fixtures, poor interactions with players or lack of commitment, that means the manager is not meeting the standards expected of them.
    This step can give rise to difficult issues at the outset as to whether the poor performance is in fact the manager’s fault, or whether it is caused by external factors for which they are not responsible. For instance, where a club has made a failed promise to the manager to strengthen the squad, or the Board has decided to sell a star player against the manger’s wishes, the manager may argue that the team’s poor performance is not their fault and they cannot be held accountable for it.

  • Give the employee an opportunity to improve within a realistic timetable. This means that once the employee has been made aware of the problem, they should be given a defined amount of time to try and improve their performance. In other areas of employment this is often done through the implementation of a performance improvement plan.
    However, in the case of a highly paid professional sports manager, it is unlikely that many clubs would in practice be willing to take this step. Given managers’ seniority and level of remuneration, a club would be likely to reasonably expect that they are capable of managing their own performance. In addition, the time it would take to go through a formal performance improvement plan may be time which the club can ill afford to lose where further bad results will have a serious financial impact.

  • Provide the employee with adequate support and resources to assist them in improving their performance. What level of support and resources is required will vary from case to case, depending on the particular role and performance issues.
    Again, it is easy to see how this aspect could give rise to difficulties in the case of a high level sports manager. The club and the manager may well disagree as to what resources can and should be allocated to improve results, e.g. whether new players should be acquired. Relevant factors would include the cost of the resources the manager is asking for, how quickly they could be put in place and the likelihood that providing those resources would in fact improve performance and results.

PROPER DISCIPLINARY PROCEDURE

Finally, if an employer has taken the appropriate steps but the employee’s performance has still not improved to the required standard, then it would need to follow a proper disciplinary process prior to terminating their employment. The standard process is set out in the ACAS Code of Practice on Disciplinary and Grievance Procedures,5 and requires:

  • An investigation into the issue, although in a capability case this is likely to have been covered by following the steps set out above.
  • Informing the employee in writing of the problem, asking them to attend a disciplinary meeting and making clear that dismissal is a possible outcome of the meeting. The employee is entitled to be accompanied at the meeting by a colleague or trade union representative, and should usually be sent copies of any evidence that will be relied on by the employer, e.g. the performance improvement plan (if applicable) and any evidence of the employee’s performance.
  • Holding a disciplinary meeting, at which the employee is given the chance to put their side of events and make representations.
  • Deciding on an appropriate outcome and communicating this in writing to the employee.
  • Giving the employee a right of appeal.

PROCESS VS. PRAGMATISM

As will be evident from the above, following the appropriate procedures in respect of underperformance can be a time-consuming process. This may be time that a professional club can ill afford to spend, given the detrimental impact that an underperforming manager can have on the success of the club as a whole.

This means that inevitably clubs faced with underperforming managers will want to consider whether there is another potentially fair reason for which they could dismiss the manager (e.g. misconduct or "some other substantial reason”, as referred to above).

Dismissals for these alternative reasons have the advantage that the only procedural steps the club would be required to go through are those set out in the ACAS Code of Practice on Disciplinary and Grievance Procedures (as above), rather than the lengthier process of performance management required in capability dismissals. However a club would need to be able to show some substance to dismissals for these reasons, which cannot simply be used as labels to avoid a performance management process. Thus if an employment tribunal thought misconduct was being used by a club as a smokescreen and was not the real reason the manager was dismissed, this may make the dismissal unfair.

Alternatively a club may consider that the most commercial solution is to simply dismiss the manager and negotiate an exit settlement. This is likely to be the most commonly used route in practice, given the bureaucracy involved in following proper procedures and the relatively low level of damages that the manager would be able to recover in a claim for unfair dismissal.

The maximum compensation an employee can receive for unfair dismissal is currently the lesser of 52 weeks’ gross pay6 or £78,335.7 Where a manager’s poor performance is having a detrimental financial impact on a club, the compensation the manager would get for unfair dismissal will probably be insignificant in comparison to this sum. However, the club would also have to consider the provisions of the manager’s contract in relation to notice, which could make their dismissal more expensive, especially where the dismissal comes early in the manager’s employment and there is a significant period left to run on their contract.

SUMMARY

As set out above, an underperforming manager can raise a number of difficult issues for a club, not least how to balance their legal obligations to treat that manager fairly against the commercial impact that poor performance may be having. When faced with this situation a club should consider its options including:

  • Whether the manager is to blame for poor performance, and whether there is any realistic chance that with support they will improve to the standard required;
  • If so whether the club is able to devote the time and resources to going through a performance management process;
  • Whether there are any other grounds for dismissal, such as conduct or an irreparable breakdown in relationships which could provide an alternative and quicker route to a lawful dismissal;
  • How much it is likely to cost to simply terminate the manager’s contract and negotiate an exit, having regard to how long their contract is due to last and any notice provisions;
  • The position of other backroom staff and whether they came as a package with the manager and would leave the club if the manager was dismissed.

REFERENCES

  1. For example, see: Jack Lang, ‘Thierry Henry: Louis van Gaal is not cutting it – Manchester United must go for Jose Mourinho’, mirror.co.uk, 31 Jan 2016, last viewed 2 March 2016, http://www.mirror.co.uk/sport/football/news/thierry-henry-louis-van-gaal-7280250, and Paul Wilson, ‘Louis van Gaal still has time to rediscover the old Manchester United’ theguardian.com, 30 January 2016, last viewed 2 March 2016, http://www.theguardian.com/football/blog/2016/jan/30/louis-van-gaal-manchester-united
  2. For example, see: Jack de Menezes, ‘Stuart Lancaster resigns: England head coach quits after Rugby World Cup failure’, independent.co.uk, published on 11 November 2015, last viewed 2 March 2016,
  3. Section 94 Employment Rights Act 1996, http://www.legislation.gov.uk/ukpga/1996/18/contents
  4. Dismissals of this nature can fall within the definition of "some other substantial reason” for dismissal as provided by s.98(1)(b) of the Act, for example see Perkin v St George’s Healthcare NHS Trust [2005] EWCA Civ 1174and Ezias v North Glamorgan NHS Trust [2011] IRLR 550.
  5. Discipline and grievance - Acas Code of Practice, http://www.acas.org.uk/index.aspx?articleid=2174
  6. Section 124(1ZA) Employment Rights Act 1996
  7. For dismissals after 6 April 2015.
Posted: 04.03.2016 at 10:31
Tags:  Comments  Sports Law
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