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Battles Off the Pitch

With the new football season getting underway, our two-legged News Alert this week and next looks at some disputes between football clubs and their senior employees which have recently made it to Court.

The second in the series, Off the Pitch Battles can be read here.

Gibbs v Leeds United Football Club Limited

When does an employer’s conduct amount to a fundamental breach of contract?

Constructive dismissal is where an employee resigns by reason of the employer’s conduct and is treated as having been dismissed. Constructive dismissal is notoriously difficult to prove in practice. The employee will have to demonstrate that the employer’s conduct was sufficiently serious such as to amount to a fundamental (or repudiatory) breach of contract and that their resignation was in response to the employer’s breach.

In Gibbs v Leeds United Football Club Limited, the High Court held that the Club’s Assistant Manager, Nigel Gibbs, was entitled to resign and claim damages for constructive dismissal after effectively being demoted.

When the Club sacked and replaced the Manager Gibbs worked with, Gibbs expected he would soon be dismissed too, as is usual in football, but the Club initially expressed a desire for him to remain in his role. Despite this, the Club’s subsequent treatment of him suggested he was not wanted, and Gibbs later received an email telling him he would no longer have anything to do with the First Team and instead would manage the Youth Team, which he viewed as a demotion. He therefore resigned, claiming he had been constructively dismissed.

The Court observed that the email was a clear ‘loss of status’ which would be obvious to those in the industry and in changing his role in this way, the Club had fundamentally breached its contract with Gibbs. This was the case despite the fact that (i) Gibbs had previously indicated that he would be willing to leave under a settlement agreement if an appropriate sum could be agreed and, (ii) following his resignation, Gibbs was offered another senior position by the Club, which he refused due to the Club’s treatment of him.

Although the Court in Gibbs focused on the email, it noted that the Club’s treatment of him prior to this – including not inviting Gibbs to meetings and trips he would otherwise have expected to attend as Assistant Manager; not issuing him with the Club’s newest kit; and not allowing him to take part in player training and tactics – would also have amounted to a fundamental breach of Gibbs’s contract. This shows that a fundamental breach of contract by an employer need not be a single serious act but can come from a course of conduct which together amounts to a fundamental breach.

Implications for employers

Often football clubs will need to make organisational changes which impact on employees’ roles and duties, for example a management reshuffle ahead of the new season or dismissals after particularly bad club performance. Football clubs and employers generally should exercise caution in doing so, and carefully consider what the employees’ duties are under their contracts and whether any changes will be sufficiently material to constitute a fundamental breach of contract.

Careful thought is therefore needed as to how to best manage that potential risk as far as possible. This might include choosing a different or lesser course of action which may be less likely to amount to a fundamental breach; agreeing a new contractual arrangement with the employee on a mutually acceptable, voluntary basis, with an appropriate incentive for the employee to agree to this; considering whether the employment could potentially be terminated lawfully and fairly, and making an offer of re-engagement on the new terms; agreeing a reasonable severance package on a confidential basis, amongst other options (these are not exhaustive or mutually exclusive).

Careful advance assessment, planning, and consultation is needed, to minimise as far as possible the risk of potential statutory and contractual claims, to avoid jeopardising the potential enforceability of restrictive covenants, and to limit damage to employee morale and to the club’s (or business’s) reputation in the market. Simply making changes around the employee and hoping they won’t notice, rarely works.

David Fisher and Zeinab Harb specialise in employment and partnership law and have a particular interest in football club related employment issues.