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Football Managers’ Contracts: Why Clubs Should Link Termination Clauses to Performance

This article was first written for and published by LawInSport. Click here to view the original.
 
Andrew Clarke QC

As usual the world of football is awash with tales of managers removed1, managers under threatand compensation payments3. Such disputes in the field of other team sports receive less attention, but raise the same problems. It is worth standing back and asking whether the world of competitive sport is approaching the formation and termination of those contracts in the most sensible way.

It is almost inevitable that a team manager will succeed, or fail, by reference to the efforts of others. That is not to say that he or she has no influence over their efforts. The reverse ought to be true; but do managerial contracts adequately reflect this in their termination provisions? Most managers’ contracts contain bonus provisions (of one kind or another) to reflect success. It would be possible to have provisions that were expressly linked to lack of success.

LIQUIDATED DAMAGES PROVISIONS

Many such contracts contain liquidated damages provisions, whereby the parties agree a pre-estimate of the financial loss that the manager will sustain if the contract is terminated early. In other words the parties recognise that the manager may have his contract summarily terminated and agree in advance a sum to reflect the period before he would be likely to get another job. The maximum he could ever get for failure to allow the contract to run its course would be the sums he would be bound to get during the unexpired term, or period of notice. Such an agreed sum will represent a proportion of that and will allow for the possibility of getting another job before what would have been the notice period had expired.

TERMINATION CLAUSES BASED ON PERFORMANCE

That approach pays no attention to the quality of performance while in post. It would be possible to devise a provision that did so. Take a typical manager’s contract that has either a rolling 1-year term, or a fixed term of 3 years. A termination clause could be incorporated which would, for example, provide one of the following:

  1. That the contract could be terminated by giving the statutory minimum period of notice4 in the event that certain milestones were either achieved, or not achieved, by certain dates. It could also provide for a payment in lieu of notice to be made, thus allowing for summary termination (albeit at a price). Such milestones might be achieving so many points (or victories) after so many matches, or conceding more than an average of so many tries, or points, or goals per match and so forth.
  2. Provided that the team’s league position was higher than (say) 10th, or the average points per game remained at or above an average of 1.5 then certain termination provisions would apply, but that if the team performance fell below that then less advantageous (to the manager) termination provisions would apply. Again a payment in lieu of notice provision could be inserted.

Of course, the existence of such provisions would not mean that they had to be utilised and the contract would need to make clear in what circumstances (if any) the termination provisions reverted to those more favourable to the manager.

BENEFITS

An advantage for all parties is that this would produce greater certainty. The manager would know in advance what level of performance would be expected and the potential consequence of not achieving it. Often we hear that managers have agreed a timetable of expected team progress, but rarely (if ever) is this built into the contract of employment with defined consequences for non-performance. It would stop arguments later as to what the true minimum expectations of the employer were, as distinct from its aspirations.

SUMMARY

Some managers (in sport as in business) have the commercial muscle to resist the introduction of such provisions and some employers are prepared to accept rather less well-defined minimum expectations. Sporting employers (at least those making the headlines) are commercial organisations and owe to shareholders the usual commercial duties to provide good corporate governance. Some are, in effect, the creatures of one or more wealthy individuals, but many have shareholders and even where a wealthy individual is involved there may be minority shareholders. Corporations outside the sporting field would be expected to tie down their most senior employees in contracts that both clearly defined the rewards for success and defined what amounts to failure and the penalties for it. 

References
  1. Charlotte Davies, ‘Malky Mackay and manager termination rights: what options does he have?’ LawInSport.com, 14 January 2014, last viewed 10 October 2014, http://www.lawinsport.com/blog/littleton-chambers/item/malky-mackay-and-manager-termination-rights-what-options-does-he-have?highlight=WyJtYWxreSIsIidtYWxreSJd
  2. ‘Newcastle: Alan Pardew admits pressure is not going to ease’, BBCSport.com, 4 October 2014, last viewed 10 October 2014, http://www.bbc.com/sport/0/football/29493704
  3. John Mehrzad, ‘Why Moyes leaks mattered for pay off negotiations’, LawInSport.com, 26 April 2014, last viewed 10 October 2014, http://www.lawinsport.com/blog/littleton-chambers/item/why-moyes-leaks-mattered-for-pay-off-negotiations
  4. UK employment statutes prescribe minimum periods of notice for employees, broadly equating to one week’s notice after the first month of employment and increasing to 2 weeks’ notice on the completion of 2 years’ service. Thereafter, an additional week is added for each complete year of employment until the employee becomes entitled to 12 weeks’ notice, after 12 years’ service.

 

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