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What constitutes restraint of trade in football players’ and managers’ contracts?

This article was first written for and published by LawInSport. Click here to view the original.
 
After
recent controversial football disciplinary sanctions such as the Suarez
ban and contractual disputes revolving around player transfers, John Mehrzad analyses the common legal issue arising in those types of case – restraint of trade.

He discusses to what extent bans can be
overturned, clubs can dictate where a player or manager can go after
they leave, and clubs are able to preclude a former player or manager
from criticising their staff after they leave.

Key legal principles

A prohibition on an employee, such as a
player or manager, from carrying out their chosen profession will
usually amount to a restraint of trade. However, it does not follow that a restraint will necessarily be legally unenforceable.

At domestic (England and Wales) level,
courts uphold restraints where they are reasonably necessary to protect a
legitimate and desirable aim.

At international level, the Swiss
Federal Tribunal has reminded FIFA and the Court of Arbitration for
Sport (CAS) that a restraint, by way of a disciplinary sanction
specifically (but the same analysis ought also to apply more generally),
must be “proportionate” to be enforceable.

Ultimately there are two stages to establish an unenforceable restraint of trade:

  • Is there a restraint in the first
    place? At this stage, the employee must prove that there is an
    obligation imposed on him which prevents him from earning or limiting
    his ability to earn a living at his chosen occupation.
  • If so, can the restraining party
    demonstrate that the restraint pursues (a) a legitimate aim in (b) a
    reasonable and proportionate manner?

Specificity of sport

Given there are a myriad of situations
in which restraint of trade arguments arise within the context of player
or manager contracts, the rest of this blog will only consider to what
extent bans can be overturned, clubs may dictate where a player or
manager can go after they leave, or a club is able to preclude a former
player or manager from criticising its staff after they leave.

Nevertheless, the legal principles
summarised above remain those under which any restraint of trade
situation will be analysed by the courts or sports-specific panels.

How far can disciplinary bans restrict the activities of a player or manager?

A disciplinary ban will usually be a
restraint of trade since, as a result, the ability to carry out the
chosen profession is restricted. There is, of course, the
legitimate aim of ensuring disciplinary standards are adhered to,
thereby protecting both sporting integrity and compliance with rules and
regulations.

Leaving to one side whether the disciplinary body has acted within its powers in the first place, typically the key issue under this question is the reasonableness or “proportionality” of the ban.

Luis Suarez recently won before CAS on that precise ground since his ban from “all football-related activities
meant that his 4-month domestic playing ban would, in practice, be
significantly longer since he would neither be sufficiently conditioned
nor integrated into his club’s team to resume his professional
activities as soon as his ban ended. In other words his 4-month ban
would inevitably have effect for longer than that restricted period. As
such CAS found it to be disproportionate.

To what extent can clubs dictate where a player or manager can go after they leave the club?

For a player whose contract has ended,
there would be a restraint since the scope of where the player can play
(and earn a living) is curtailed. Turning next to the legitimate aim, a
restriction on where the player can play would appear to be an attempt
to stifle competition. After all it is not realistically a situation where confidential information or business-connections are in play.

The situation is, however, different if
the player is still under contract since the club would only presumably
agree to a mutual termination of the player contract when the club is
content to sanction a move to a particular club. In short, a
club retains considerable control over the player (and where he moves
to) during the currency of the player contract but does not once it
comes to an end.

Post-termination restrictions are more
common in manager contracts. Clubs understandably want to prevent
ex-managers poaching ex-players and coaching staff for their new clubs.
Whilst those restrictions are arguably legitimate to ensure contractual
stability and avoid short-term, player/coaching staff departures, any
such restriction must be “proportionate” in duration, usually
of no more than 12-months (i.e. 2 transfer windows). In the author’s
view that would be a reasonable period to allow clubs to find
replacement staff or tie down existing staff to new deals.

An alternative way for clubs to protect
themselves is for the manager contract to include an express notice
period clause coupled with garden leave. As such the manager is given
notice and placed in the “garden” on full pay, so that the
contract does not end but, of course, the manager cannot join a
competitor club during his notice without being in breach of contract,
an eventuality which will usually be accounted for by way of a
considerable contractual liquidated damages clause payable by the
manager (and/or his new club) to the former club. As for a
post-termination restriction, the length of the notice/gardening leave
provision is key to enforceability. For the same reasons set out for
post-termination restrictions, 12-months would seem to the very top-end
of reasonableness.

Can a club prevent a player or manager from criticising its staff after they leave?

At first blush, it may appear fanciful
to suggest that standard non-disparagement or non-derogatory comment
clauses found in termination agreements may be restraints of trade.
After all, there can be a benefit for both, on the one hand, the player
or manager and, on the other hand, the club for the true circumstances
of often acrimonious departures never to be made public. Disruptive
players or managers would not want the market to know the negative
impact they had on other players and officials while clubs may not want
future players or managers to know how shabbily they treat its staff.

Nevertheless, as the author is aware of
from practice, an open ended restriction curtailing criticism of a club
and its players, past and present, may be too wide to be reasonably
enforceable. Nowadays players are contractually obliged to carry out
post-match interviews, many seek careers in the media once they retire, a
large number write biographies or carry out other forms of marketing,
be it after-dinner speaking or match-day hospitality. To suggest those
persons would be precluded from criticising a former club’s tactics, its
players’ performances or even bad tackles would seem to go much further
than is reasonably necessary to protect the circumstances of that
player or manager’s departure possibly some years previously. In the
circumstances, unless the restriction is narrowly drafted, it may be
unenforceable and any attempt to recoup severance payments as a result
of a breach may also be impossible.

The above examples are just a few
situations in which arguments about restraint of trade arise in
practice. There are many others. When it comes to sporting bans or
contractual restrictions it is likely to be the central legal issue in
play, as Suarez’s successful CAS appeal demonstrated. Without being
presumptuous, expect many of the legal themes discussed above to be
repeated in sporting disputes of the future.

 
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