On 22 April Manchester United announced that David Moyes had been sacked as their manager after just 51 matches. Moyes had been appointed under a six year fixed term agreement, this article explores the implications of ending a contract early.
In 2013 David Moyes took over one of the biggest gigs in football when he was announced as Alex Ferguson's replacement. Although many fans criticised his appointment, he was championed for the role by Ferguson himself and given a six year fixed term contract. However, in the 10 months that followed his appointment United recorded their worst season in decades and failed to qualify for Champions League football for the first time since 1995. The board decided that enough was enough despite the six year term.
What the law says
A fixed term contract is one that ends either:
- after a set amount of time
- on the occurrence of a particular event
- on the non-occurrence of a particular event
Where a fixed term contract is ended early before the specified date or event is completed, the employee is entitled to receive his full pay and any benefits for the remaining period of the contract. A good illustration of this is the former Blackburn Rovers manager Henning Burg who left the club with the entire value of his fixed term contract (£2.25 million) after just 57 days in charge. Accordingly, Manchester United could in theory be liable to pay David Moyes' salary for the remainder of the six years. Although the precise detail of the contract is not known, it is estimated that this could be in the region of £20 million.
Importance of early termination clauses
In view of the above, it is important (especially with contacts designed to go on for many years) that there is a clear and unambiguous notice clause or agreed termination payment clause to allow the parties to end the arrangement early without disastrous financial consequences for the employer.
Luckily for Manchester United, Moyes' contract allegedly contains what is known as an "ejector seat clause". This would give United the right to terminate the contract early. Indeed, reports state that Manchester United retained the right to terminate Moyes' contract after 12 months if certain performance criteria were not met. Allegedly, qualifying for the Champions League 2015 was one of these criteria and failure to qualify would mean that Moyes' payoff is limited to just 12 months pay.
Evidently, such clauses provide vital and prudent protection on high value and long-term appointments. Whether they relate to sales targets, financial performance or quality control they can provide a much needed get out when results do not match expectations.
Other potential claims
Whilst the focus is on contractual payments employers should also remember that employees who have at least two years continuous service could bring a claim for unfair dismissal. For example, Liverpool Football Club's former Director of Football Strategy, Damian Comolli, was controversially awarded an additional sum of £72,730 as compensation for unfair dismissal in 2012 on top of his contractual termination payment.
As a result, employers who are considering terminating the contract of someone with over two year's service will need to ensure both their reason for dismissal and the dismissal process itself is fair. In addition, no period of service is required to bring a claim of discrimination or where dismissal is for an automatically unfair reason.
Football cases, although seemingly far removed from every day employment law, act as a stark reminder to employers looking to make long term, highly paid appointments. Employers should review the termination provisions in their employment contracts, particularly those that expose them to potentially high value pay outs. If there are any deal breakers or key performance indicators for a particular role employers should make sure these are specified conditions of continued employment. The message is clear; hope for the best and plan for the worst.