David-Moyes-and-the-future-of-managers-contracts

David Moyes and the future of managers’ contracts

It’s easy to forget that football is subject to the same employment laws as any other profession. The huge salaries, the novel contract clauses and the seemingly ruthless nature of chairmen giving managers the sack before they’ve even had a chance to move into their new office certainly blurs the lines of reality. Manchester United’s decision to terminate David Moyes’ contract early has inevitably raised a number of questions over the former manager’s payout. 

Taken at face value it seems fairly simple. Moyes was 10 months into a 6 year contract so one would assume he’s entitled to the equivalent compensation of 5 years and 2 months – the time left to run on his contract. For the vast majority of contracts, even in football and sport as a whole, that would be true. The most famous case in recent years is Berg v Blackburn Rovers Football Club and Athletic plc[1] where former Blackburn Rovers manager Henning Berg was successfully awarded compensation which totalled the remainder of his contract. However it’s been widely reported by the media that Moyes will receive compensation that equates to exactly one year of his contract. The reason being is that Moyes’ contract likely had certain targets that had to have been achieved in order to receive full compensation in the event of early termination. One particular target would likely have been qualification to the Champions League, which was rendered mathematically impossible after the club’s loss to Everton over the weekend.

Such a clause is a shrewd move for clubs like Manchester United. The financial implications of not qualifying for the Champions League are typically big blows for clubs of such a stature. Income from television drops and there’s every chance that there’ll be a loss of money coming in from sponsors. The clause softens the blow considerably. Particularly in the case of Moyes who was being paid £4,000,000 a year. Without such a clause in his contract, Manchester United would have likely had to pay him over £20,000,000 in compensation. The lack of Champions League football next season would have started to add up significantly.

The details of Moyes’ contract aren’t public knowledge so there is no valid confirmation that there was a performance clause inserted but the timing of his departure and the numerous media reports from credible sources suggests one did exist. Today may not simply mark a change in manager for a football club; it may mark a day where clubs negotiating contracts with managers begin to seriously consider inserting performance clauses, similar to the likely one in Moyes’ contract, as standard. How widespread their use will be will likely depend on bargaining power. Smaller clubs that have far less to lose and don’t attract the glitz and glamour will likely find it difficult to insert such a clause in a prospective managers contract. In the vast majority of cases, smaller clubs are far less likely to be offering long term contracts to begin with due to their own financial constraints so even if a performance contract was inserted, it would only negate a small loss. Clubs would have to seriously consider whether standing their ground on such a clause would be worth an extra year or two year’s salary. Clubs in the Premiership and the Championship however will be much more inclined to use these sorts of clauses in order to protect their financial interests. This certainly won’t be the last occasion where we see this scenario.

To end on a purely speculative note; should Liverpool win the League this season it would not be surprising to see such a clause inserted into Brendan Rodgers’ new contract (should he ultimately be offered one). Liverpool’s owners have hinted at the importance of the Champions League and they will want to ensure that they’re doing everything they can to steady the financial ship.

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References

[1] Berg v Blackburn Rovers Football Club & Athletic plc [2013] EWHC 1070

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