Legal fallout from managerial sackings

A manager getting sacked is a common sight for football fans and for the sports industry in general, which makes the likes of Manchester United’s Sir Alex Ferguson (26 years) and Arsenal’s Arsène Wenger (20 years and counting) true exceptions.

After only 11 match-weeks of the Premier League this season, 4 teams have already sacked their managers, an impressive (dismal?) rate of almost one dismissal every three weeks. The situation across Europe isn’t much better, with 8 other managers having been sacked in Spain, Germany and Italy’s top divisions.

This morning, the chief executive of the League Managers’ Association (LMA) Richard Bevan has stated that the culture of sacking managers is “severely damaging” English football, and that “consistently dismissing managers can create an environment of instability within the club” which can cause “a series of negative consequences.

The comments by Mr Bevan are certainly noteworthy, and the instability of the profession and the personal impact it can have on managers and their families should not be underestimated. However, despite the comments by the LMA, whilst it may be difficult to believe, England’s standards are actually somewhat better than the rest of Europe – and the rest of the world too.

A recent study by UEFA illustrated exactly how delicate a manager’s job security is across the globe. Considering first division competitions only, amongst the “big 5” European leagues (The Premier League, France’s Ligue 1, Spain’s La Liga, Germany’s Bundesliga and Italy’s Serie A), the average percentage of clubs that changed head coaches during a season is an astounding 47%. Only in France and England is the national average below that number – 25% and 40% respectively. Italy heads the list with 65%, followed by Germany with 56% and Spain with 50%. Figures in other major football nations such as Portugal (72%), Mexico (83%), Brazil (a whopping 90%!) and Argentina (63%) also demonstrate how volatile the profession of a football head coach can be.

But what are the legal consequences when a manager is sacked?

Unlike players, there are no standardised contracts for managers in England. The Premier League has only a small set of minimum rules that clubs and managers have to comply with when drafting contracts, which means that parties are free to include whatever provisions they deem fit in their agreement.

Hence, when a club sacks a coach, the common situation would be such that, reverting to the contract, the club would pay the manager compensation for its early termination. Such compensation is usually calculated based on the remaining period of the contract, i.e. the earlier the termination, the higher the compensation.

In some cases, managers might not have clauses in their contracts that provide they have a duty to mitigate any loss suffered as a consequence of the termination of their employment. This can lead to a scenario where a sacked manager is paid off, say, the remaining 2 years of their contract then gets another job a short time later, meaning it adds up as something of a windfall.

However, there can be other factors to consider. Financial Fair Play regulations make it difficult for clubs to dismiss coaches at will, as the economic impact could be severe. For this reason, it in recent years it has become increasingly common to see ‘underperformance clauses’ inserted into a manager’s contract. By way of example, the agreement between David Moyes and Manchester United reportedly had a clause capping the compensation to one year of salary in the event he was dismissed for failing to finish the league season in the top four.

It is important to note, nonetheless, that termination of contracts often lead to disagreements and, consequently, disputes between the parties. In the event of a dispute, one of the required clauses to be inserted in Premier League managers’ contracts is to refer the dispute to the Managers’ Arbitration Tribunal, pursuant to Rule Y of the Premier League regulations – this is the equivalent for coaches of the famous Rule K arbitration applicable to players.

On an international level, FIFA – the worldwide governing body for football – also has regulations in place resolving disputes between clubs and national teams and coaches. Under the FIFA Regulations for the Status and Transfer of Players, the FIFA Players’ Status Committee (PSC) has jurisdiction to hear disputes “between a club or an association and a coach of an international dimension”. The exception to this rule is precisely in cases such as the Premier League’s, where an independent arbitration tribunal guaranteeing fair proceedings exists at national level.

Curiously, it is noteworthy that neither the Premier League nor FIFA have specific regulations to ensure contractual stability between managers and clubs, unlike the situation with players.

With that in mind, the careful drafting of a manager’s contract is of particular importance, because the contract will be the source – either on a national or international level – to determine the compensation due and the appropriate forum for the dispute to be resolved, in the event the manager is sacked.

Mills & Reeve specialises in advising both clubs and managers on contractual and employment matters. If you require any advice in relation to anything mentioned in this article, please contact Richard Barker or Tiran Gunawardena.

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