The football managerial merry-go-round: release fees & resignations: part 2
Published 23 May 2013 By: Richard Williams
Employment law specialist Richard Williams examines the legal issues surrounding the hot topic of managerial changes in football. In this second and final part of this article Richard will be explaining the legal operation of release fees and the different ways in which managers approach resignation.
Increasingly in recent years top players (or more specifically their agents) have negotiated release clauses in their contracts with their clubs. This means that should an offer be made by another club meeting this fee, the player’s current club would be forced to allow the player (if he so wished) to move to the bidding club on payment of the fee.
It is understood that one of Everton’s players, Marouanne Fellaini, has a release fee of around £24 million provided that this is made by a club who has qualified for the UEFA Champions League1. Manchester United is one of those teams to have qualified for next season’s competition. On the payment of £24 million, and assuming no gentlemen’s agreement to the contrary, Fellaini could therefore be reacquainted with Moyes at Old Trafford without Everton being able to object.
Some managers also have agreed release fees written into their contracts. This means that a club would be forced to release its manager to another club if a set compensation amount was paid. One of Everton’s rumoured targets is Michael Laudrup, Brendan Rodgers’ successor at Swansea. It is understood that he has a release fee of £10 million2, which provided Laudrup wanted to leave and this payment was made to Swansea, Laudrup could join Everton without Swansea being able to block the approach. The possibility of losing two successful managers in successive seasons may make the Swansea hierarchy think twice about the terms they agree with their next potential manager.
Breach of Contract
If Everton targeted someone currently employed by another club and wanted him to start as its new manager before his contractual notice expired, it would need permission from his club before it could speak to and make an offer of employment to that person. If Everton did not do this and assuming its target wanted to move, whilst his current club could not compel him to continue to work for it against his will, it could try to block him from moving to Everton by holding him to his contractual notice and refusing his resignation. If in the circumstances his current club then considered it was no longer appropriate for him to remain as manager, it could also keep him away from first team affairs by putting him on garden leave until his notice expired.
This tactic was taken by Crystal Palace in 2001 when the then owner Simon Jordan refused to accept Steve Bruce’s resignation so as to enable him to join Birmingham City. By continuing to pay Bruce and honour its own contractual obligations, Palace successfully applied for an interim injunction preventing Bruce making an immediate move3. This forced Birmingham to increase its compensatory offer to Palace in order to avoid a full hearing and further delays in Bruce’s appointment4.
In accordance with the contract
There ought not to be an issue if the manager’s departure is in accordance with a clause in his employment contract which allows him to terminate his employment early or not take up an option of extension, provided that any approach made to him by another club complies with the applicable Football League or Premier League rules. In such circumstances there should be no breach of contract and accordingly no inducement to breach.
A manager should however be careful when considering exercising this right. For example in 2010, after being linked with the managerial positions at Chelsea and Aston Villa, Mark Hughes activated his break clause in his manager’s contract with Fulham. Neither Chelsea nor Villa chose to appoint Hughes, Villa in part influenced by the perceived underhand manner he chose to depart from Fulham5. This left Hughes out of employment for six months before taking over as manager at Queens Park Rangers6.
As a constructive dismissal
Where there is no contractual right to leave early, a manager will hope that the clubs reach an agreement and his current club does not try to block his departure. Where a departure is however more contentious, a possible option he may have to help facilitate the move is to resign and claim he has been constructively dismissed by his current club. He will be constructively dismissed if he resigns without delay due to a fundamental breach of his contract by the club. In such situation he would not be required to honour his existing contract, allowing him to depart immediately7.
Demonstrating a constructive dismissal situation is not easy. Whilst an express contractual breach such as a failure to pay salary or bonus is likely to allow such resignation, often constructive dismissal arguments centre around a breach of the implied duty of trust and confidence between the parties. Here the manager would need to show that the club has acted in a manner which is calculated or likely to destroy the relationship of trust and confidence between himself and the club8.
In 2011 amid growing speculation that he would take the vacant manager position at Aston Villa, Alex McLeish left his post as manager of rivals, Birmingham City, citing serious issues with the Birmingham board as the reason for his resignation9. Just five days later his controversial appointment as manager of Aston Villa was completed10. McLeish subsequently brought a constructive dismissal claim against Birmingham, referencing, amongst others, the dismissal of his chief scout without his knowledge, not being consulted over player transfers, and a breach of confidence by the club’s release of information about his contract. Birmingham City cried foul play, claimed £5.4 million from Aston Villa to cover the remaining two years of McLeish’s contract and threatened to bring an injunction preventing McLeish from taking over at Villa11. McLeish’s constructive dismissal arguments would have inevitably been used to help Aston Villa negotiate Birmingham down to the final settlement figure of £3 million12, as had these been proven, there would have been no breach of contract by McLeish or inducement to breach by Villa, and thus no compensation at all due to Birmingham.
With the money involved in football ever growing, the requirement for a manger who can deliver instant success has never been more important. A combination of raised expectations and trigger-happy chairmen mean that the market for top managers is now every bit as competitive as that for top players. After all, Roberto Mancini’s second place this season in the Premier League for Manchester City13 and Rafa Benitez’s third place and Europa Cup victory for Chelsea14 were not enough for either of them to preserve their positions for next season. A second place in La Liga and a semi-final place in the Champions League similarly was not enough for Jose Mourinho at Real Madrid15.
But in demand and wanting to consider his options, David Moyes was in the rare position of being able to run down his contract at Everton before deciding whether to sign again or move to another club. Although with deep pockets and big ambitions, it is unlikely that even a sizeable compensation payment would have dissuaded Manchester United from securing its chosen new manager. It remains to be seen whether he will be joined by any Everton players or backroom staff but this should not be discounted.
Depending on who it targets for its next manager, Everton’s own search may be more complex. Unless the appointment is an internal promotion, someone already out of work or who is permitted to move on either through a break clause or the payment of a release fee, it is likely to require an agreement with another club. The majority of managerial transfers are resolved amicably but there have been notable instances which have been more contentious.
Extended notice periods, inflated release fees, post-termination restrictions and the threat of legal action may be used to protect a club from losing key staff. However if a manager or anyone else at the club wants to move, these in reality serve only as negotiating tools for the club, a bump in the road rather than an irremovable roadblock. Provided that clubs both continue to target managers already employed elsewhere and are prepared to pay large settlement sums to get their man, the managerial merry-go-round will continue to turn.
3 Crystal Palace FC (2000) Ltd v Bruce -  All ER (D) 331 (Nov)
7 Western Excavating (ECC) Ltd v Sharp  EWCA Civ 2 (14 November 1977)
8 Malik & anor v Bank Of Credit & Commerce International SA (in compulsory liquidation)  AC 20
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Richard Williams is Senior Legal Counsel at Coca-Cola Enterprises, specialising in Employment and Commercial Law. He has previously worked at Dentons and SJ Berwin, as well as in-house counsel for Virgin Atlantic. Richard has particular experience in the sports sector, working with teams, sponsors and governing bodies.