Football manager contracts of employment – key clauses for clubs to consider – Part 1

Published 22 December 2014 By: Nick Tsatsas

Harry Redknapp

As the role of a football manager has become increasingly less stable – particularly at the highest level of the game - the terms of a football manager’s contract have assumed greater significance, given the issues that are likely to arise when club and manager part company. The purpose of this article is to analyse some of the most important of these contractual terms.

 

Introduction

As the financial rewards in top level English football have grown over the last 20 years, so the pressure to access, or continue to benefit from, those rewards has increased. Football club (Club) owners have become impatient for success (however that may be defined by each Club), and when the Club falls short of the performance expected of it (or perhaps even just looks like it might), it is usually the Club manager (Manager) who pays for that “failure” with his job. As a result, Managers in top level English football have never had less job security. Not one of the Championship’s Clubs has a Manager with more than two seasons of service, and less than half of the Clubs in the Premier League have Managers who have been in their job for two seasons or more1. Indeed, the average tenure of dismissed managers in the Premier League is now said to be just under a year and a quarter, less than half of what it was two years ago2.

Given that the termination of a Manager’s employment is something that every Club is going to have to address at some point (some more regularly than others!), Clubs will want to be well-prepared to deal with the sorts of issue that tend to arise in such circumstances. There is no better way of doing so than by ensuring that Managers are subject to a well-drafted contract of employment (Contract). Indeed, most legal disputes between Clubs and Managers centre on claims arising out of the Contract, not least because such contractual claims tend to be much more valuable than any statutory employment claims that might also be in play.

Unlike footballers’ Contracts in England, there is no prescribed form for a football Manager’s Contract. The Football League Regulations make no mention of any specific clauses that need to be included in a Manager’s Contract, whilst the Premier League’s Rules3 state only that:

The terms of a Manager’s employment must be evidenced in a written contract, a copy of which must be submitted to the Secretary within seven days of its completion.” (Rule P.7)

Contracts of employment between a Club and Manager shall:

  • include the standard clauses set out in Appendix 7;
  • clearly set out the circumstances in which the contract of employment may be determined by either party.” (Rule P.8)

Those standard clauses, in Appendix 74 of the Premier League Handbook, read as follows:

  1. The Manager shall observe and comply with the rules and regulations for the time being in force of any organisation or body the rules and regulations of which the Club is bound to observe including those of The Football Association and League and in particular he shall at all times act in accordance with the League’s Code of Conduct for Managers.
  2. The Manager shall comply with all reasonable instructions and requests which arise in the first case out of any commercial contract entered into by the League for the benefit of its members or in the second case out of any such contract entered into by the Club for its own benefit and the Manager shall not himself enter into any such contract which conflicts or competes or is reasonably likely to conflict or compete with those entered into by the League or by the Club as aforesaid. 
    a) given to Club Managers by the League or 
    b) given to the Manager by the Club
    which arise in the first case out of any commercial contract entered into by the League for the benefit of its members or in the second case out of any such contract entered into by the Club for its own benefit and the Manager shall not himself enter into any such contract which conflicts or competes or is reasonably likely to conflict or compete with those entered into by the League or by the Club as aforesaid.
  3. Any dispute or difference arising between the parties hereto as to the construction of this Agreement or the rights duties or obligations of either party hereunder or any matter arising out of or concerning the same or the Manager’s employment hereunder shall be referred to the Managers’ Arbitration Tribunal in accordance with the Rules of the League for the time being in force. Notwithstanding the foregoing provisions of this clause 3 and without prejudice thereto, the parties shall use and until the conclusion of the arbitration shall continue to use their best endeavours to attempt to reach a settlement of their dispute by mediation.

Beyond these limited requirements, a Club and Manager are free to include whatever provisions they wish in the Manager’s Contract. As a result, Managers’ Contracts rarely look the same as each other, albeit that well-drafted ones have the feel and scope of the sort of contract of employment that a senior executive in any other high-profile and highly-paid business would have. However, whilst many of the terms that are included in a Manager’s Contract are the same as or similar to those in the contracts of their business counterparts, some of those terms have proven to be (or are increasingly likely to be) of particular significance when applied in the context of the football world, especially when Clubs and Managers part company with each other. The purpose of this article is to consider some of those provisions.

 

Duration of the Contract and Termination Provisions

The duration of a Manager’s Contract is often a key factor in disputes that arise between Club and Manager. Unlike workers in most other walks of life, Managers have traditionally been employed on multi-year fixed-term Contracts5. (Perhaps the most extreme example of this is the eight-year Contract that Alan Pardew reputedly signed with Newcastle United in 20126.) In theory, such Contracts bind Club and Manager together for the duration of that term, and if either party wants to get out of the Contract, it will usually have to break the Contract, which will entitle the other party to compensation or damages. Clubs have traditionally valued their ability to demand significant compensation from a rival Club that wants to recruit a Manager who is under Contract. This past summer, for example, Tottenham were reported to have paid Southampton compensation of £2m to secure the release of Mauricio Pocchetino7. In contrast, if the Manager’s Contract has expired, then no damages or compensation will be due if he wants to move to another club. Thus, in the summer of 2013, when Everton lost their then manager, David Moyes, to Manchester United, no compensation was due to Everton because Moyes’ Contract had just expired8. It is important for a Club losing its Manager to a rival to get some kind of compensation for him, both because the Club is a commercial venture and it wants to get value for its assets where possible, but also because it too may have to pay compensation if the new Manager it wishes to appoint is (as is likely to be the case) himself under contract to another Club or country.

The problem is that when Clubs have wanted to dismiss “failing” Managers, they have often found themselves having to pay those Managers significant termination payments because that dismissal will also amount to a breach of the unexpired fixed term of the Manager’s Contract. By way of example, in 2009, Chelsea reportedly paid Luis Felipe Scolari £12.6m upon his dismissal, and then in 2012, another £12m to André Villas-Boas when he was dismissed9. In each case, these compensation figures would have been determined to a large degree by the unexpired period of each individual’s fixed-term contract – both Scolari and Villas-Boas were dismissed very early on in their Chelsea careers.

This practice is commercially unsustainable (particularly in an era of Financial Fair Play), and has drawn deserved criticism10, and it seems that Clubs (at least those with sufficient leverage in contractual negotiations with their Managers) are starting to include the sort of contractual provisions that help mitigate the effect of long fixed contractual terms. Such provisions include clauses that allow for the early termination of the Contract in the case of underperformance (howsoever defined), such as that which was reputed to have been included in David Moyes’ Manchester United Contract, which allowed United to lawfully terminate his six-year Contract after just a year (as a result of the Club’s failure to qualify for the Champions League), and pay him “just” one year’s salary (allegedly £5m) as opposed to in lieu of the remaining five years’ left on his Contract11. Alternatively, a Contract might provide for an agreed termination payment, as was the case in Kevin Keegan’s Contract in his second stint as Newcastle United Manager; when Keegan resigned from his post in 2008, claiming constructive dismissal, he failed in a claim for damages totalling almost £25m, because the court found that there was a clear contractual termination clause setting out an agreed sum of £2m in the event that he parted company with the Club12.

 

Release Clauses

Another form of agreed termination payment is that stipulated in a “release clause”. In circumstances where one Club is seeking to recruit another’s contracted Manager, it is not always easy to calculate and/or agree the compensation payable to secure that Manager’s release from his existing Contract. Accordingly, more and more top level Clubs are inserting release clauses in their Managers’ Contracts, which stipulate that for a Manager to be released from his Contract a specific fee needs to be paid13. Clauses of this type were once largely the preserve of foreign Clubs and players, but as more and more foreign Managers have made their way into the English game, they have increasingly become part of the landscape here. By way of example, in June 2011, Chelsea reportedly paid Porto of Portugal £13.2m to trigger the release clause in the Contract of their then Manager, Villas-Boas, in order to bring him to London14. In theory, under English law, a release clause might be held to be unenforceable if it is deemed to have the effect of a “penalty clause” (that is, if the release fee specified does not amount to a genuine pre-estimate of the loss that the enforcing Club will suffer if its Manager leaves). However, one way in which to effectively reduce the risk of this issue arising is to tie the release clause to the remaining period of the Contract, so that the release fee reduces as the Manager’s Contract approaches the expiry of its fixed term.

In part two of this article, Nick looks at more provisions in football manager contracts including those relating to garden leave, confidential information and post-termination restrictions.

 

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Author

Nick Tsatsas

Nick Tsatsas

Nick is a consultant solicitor and employment law specialist at Keystone Law. He acts for domestic and international employers, senior executives and high-profile personalities, and has particular expertise advising in relation to employment issues in the sports and media sectors. He has consistently been recognised as a leading lawyer in the employment field by Chambers Guide to the UK Legal Profession and The Legal 500.

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