Planning the breakup: the relationship between clubs and managers
Published 27 August 2014 By: Julian Springer
The sack race garners significant attention at the start of each season unsurprisingly as in the 2013/14 season, 12 Premier League managers were dismissed or left their jobs3 . What used to be an infrequent occurrence is now almost a certainty for many teams in the Premier League.
In the past, clubs have been left in an unenviable position of paying significant sums to dismiss an unsuccessful manager on a fixed term contract, as well as his preferred support staff following his departure.
Since the appointment of Arsene Wenger in 1996, nearly half a billion pounds has been spent on dismissing over 800 managers in the top 4 divisions. Over a tenth of that total figure has been spent by one club4 . It appears as if the halcyon days of managers remaining at one club for decades are over.
Advisers are well placed to ensure football clubs are able to keep the cost of dismissing managers to a minimum. This article analyses how employment law and contractual considerations may assist in reducing the costs associated with firing managers.
Unfair dismissalA manager’s success or failure is evident to all and sundry every weekend. In that respect football is a unique industry but it is not exempt from the statutory requirement of employment law5 .
Football managers though akin to any other employees on a fixed term contract operate in an industry where the ‘normal’ principles governing unfair dismissal are of secondary importance and the reality of the industry is that they are rarely followed.
In order to dismiss an employee under a fixed term contract fairly, a club would need to have one of the five potentially fair reasons for dismissal and have followed a fair procedure. In addition, the club would need to have acted within a range of reasonable responses in dismissing the manager for that reason6 . Any manager will need to have completed the minimum two year period of continuous employment to receive ordinary unfair dismissal protection. At present, only handful of top flight managers have the right not to be unfairly dismissed.
Nuanced considerations as to whether the manager has ‘lost the dressing room’ do not fit neatly into one of the five potentially fair reasons for dismissal. All it takes is for senior players to inform the owner they are not behind the manager, and thereafter a swift dismissal usually follows7 .
When a manager is dismissed for doing a bad job (i.e. a conduct dismissal) poor performance meetings are not undertaken nor improvement targets set. When a manager is dismissed for losing the dressing room (i.e. losing the trust and confidence of his subordinates or employers) trust and confidence interviews rarely take place.
Top flight football is worth over a £60m a season to the bottom placed club in the Premier League 2013/148 , so it is no surprise that the pressure on managers to succeed is immense. The fact that compensation for unfair dismissal is capped at £76,574 renders any material consideration of the unfair dismissal regime almost obsolete.
Damien Comolli, the former Director of Football Strategy at Liverpool FC, left a mark on English football, not only for bringing Luis Suarez to the Premier League, but he successfully received an additional payment of the £72,370 when he was unfairly dismissed9 . As a result advisers need to ensure clubs are aware of the likelihood of a statutory top for unfairly dismissed staff with a minimum of two years continuous service. As we explore below, the reality is that the value of any unfair dismissal claim is often dwarfed by what is recoverable for a breach of contract action.
Despite being uncommon, football clubs remain employers and in circumstances where an employee commits an act of gross misconduct, a club may still suspend, investigate and dismiss an employee for gross misconduct.
Aston Villa FC this summer parted company with assistant manager Ian Culverhouse. He was suspended pending an investigation and subsequently dismissed. Little has been said in public about the reasons for his dismissal10 .
Letting an employee’s contract simply run down may not be the money saving option clubs hope for. What must not be overlooked is the expiry of a fixed term contract is tantamount to a dismissal, so managers, coaches and other back room staff on fixed term contracts with the necessary continuous period of employment will attract unfair dismissal protection.
A manager who is dismissed before the end of his fixed term contract will be in position to recover damages for the full amount of the remainder of his contract, unless the contract contains a provision for early termination. There is no cap on the amount which can be recovered in the civil courts.
Henning Berg received the full amount of £2.25m, the remainder of his contract after he was dismissed in breach of contract after less than two months as Blackburn Rovers F.C manager11 .
Increasingly manager’s contracts of employment include some form of agreed termination provision or clause to limit a club’s liability for any dismissal before the expiry of the term. There had been a suggestion that a termination notice clause may be void as a penalty clause, however this risk was dismissed as “immaterial”12 .
A termination provision need not bear resemblance to the losses likely to be suffered by a manager; therefore clubs can negotiate robustly to ensure their financial position is protected. Notwithstanding that ambitious managers may insist on reciprocity and follow in the footsteps of Mark Hughes, who had a reciprocal right of termination whilst manager at Fulham FC14 .
Liquidated Damages Clauses
Liquidated damages clauses allow parties to pre estimate the value of their loss and agree the appropriate figure for the ending of the employment relationship at the outset.
Even when managers are wrongfully dismissed they have a duty to mitigate. A manager must take reasonable steps to minimise their losses and failure to do so will prevent a dismissed employee recovering damages which could have been reasonably avoided (i.e. by getting another job).
Liquidated damage clauses attempt to remove the uncertainty around mitigation and the likelihood of a dismissed manager finding new employment. They anticipate the period a manager will be out of work and try to cap any pay off accordingly.
Despite having a liquidated damage clause in his contract, Kevin Keegan sought to assert his losses were not in fact a genuine pre estimate of loss and his damages would be much more significant due to the stigma attached with being dismissed16 . His arguments were dismissed and the liquidated damage clause upheld.
Despite managerial appointments being met with a renewed sense of optimism at a football clubs, reality dictates that the average tenure of a top flight manager is now 1.22 years17 . It would be irresponsible of advisers to not carefully work with clubs to plan the break up prior to any new managerial appointment.
Ejector seat clauses
Despite some insipid performances earlier in his tenure, Manchester United terminated David Moyes’ contract only after it was impossible for the club to qualify for the Champions League. David Moyes signed a six year contract and absent of any termination provisions his pay-out would have been much closer to the £20m received by Jose Mourinho when he was dismissed by Chelsea FC20 .
Ed Woodward, Executive Vice Chairman of Manchester United confirmed to investors in relation to the pay-off to David Moyes and his backroom staff (who also left) that the figure was expected "to be single-digit million pounds"21 .
I expect ejector seat clauses will become popular as they allow both parties to clearly define failure and agree a level of payment at the outset.
Jump before getting pushing?
Malky Mackay endured torrid treatment by Cardiff FC owner Vincent Tan but chose to ride out the storm before an inevitable parting of ways. Malky had a strong case for a constructive unfair dismissal after months of tension and public criticism23 .
Where managers do resign, clubs can refuse to accept their resignation and do a “Crystal Palace”24 . By refusing to accept the resignation and placing a manager on garden leave (where permitted to do so), clubs will arguably be in a stronger position to negotiate the terms of release; Whereas a manager will be keen to remain active or otherwise risk losing their profile and standing in the game.
Planning the break up from the start is now a necessity.
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Julian Springer is an employment lawyer in Clarke Willmott’s Sport sector. Julian has advise a wide range of commercial employers including professional sports clubs and sports agents.
As a member of the business immigration team Julian have provided assistance to agents and clubs on player visa eligibility and broader immigration advice.