What constitutes restraint of trade in football players’ and managers’ contracts?
Published 03 September 2014 By: John Mehrzad
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.1 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.2
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.3
- 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.4 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.5
Leaving to one side whether the disciplinary body has acted within its powers in the first place6, 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”.7
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.8 After all it is not realistically a situation where confidential information or business-connections are in play.9
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.10 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.11 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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- Tags: Brazil | Competition Law | Contract Law | Court of Arbitration for Sport (CAS) | FIFA | Football | Governance | Regulation | Spain | Swiss Federal Tribunal | United Kingdom (UK) | Uruguay
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