Termination of a coach’s contract without just cause

Reviewing the CAS Award 2020/A/6798 Galatasaray Sportif Sinai ve Ticari Yatirimlar A.S. v. Igor Tudor, of 10 May 2020.

THE STORY

Mr. Igor Tudor (also referred to as: Coach) is a football coach currently at Olympique de Marseille. In February 2017, he signed a contract to become the Galatasaray (also referred to as: Club) first team coach for the remaining of the 2016/17 season and the following, agreeing the termination on May 31^st 2018. Both parties agreed a salary of 400,000€ for the remaining of the season and a 1,000,000€ salary for the following full season. They also agreed bonuses on completion of several objectives: winning the League or Turkish Cup; as well as flight tickets to Croatia and a Club’s car. He managed to secure a place for Galatasaray on the Europa League qualifiers at the end of the first season

In December 2017, Mr. Tudor received a notification from the Club informing that his contract had been terminated, arguing the just cause to be:

“Team has lost four of the last seven official league matches. Especially the very low performance of the team in big matches is unacceptable. As “Head Coach […]” unfortunately you could not comply with your contractual obligation of preparing and training the team and players in the best manner technically, tactically and physiologically”
(Extracted from Award).

CLAIM BEFORE FIFA’S PLAYERS’ STATUS COMMITTEE.

Mr. Tudor submitted a claim to the FIFA Players’ Status Committee claiming the total value of his contract plus interests. After the several responses to the multiple allegations from Coach and Club, including the Coach adding to the Claim that the Club had won the 2017-2018 League, season which he started as Coach, and therefore should receive the bonus fee, FIFA’s PSC issued its grounded decision on February 2020. The Single Judge ruled the following:

Mr. Tudor’s claim is partially accepted.
The Club must pay the Coach 200,000€ as outstanding remuneration.
The Club must pay the Coach 514,730€ as compensation for breach of contract.
The Club must pay FIFA 15,000€ regarding cost of proceedings.

CAS APPEAL PROCEDURE

The Club presented it’s Appeal just 19 days after the grounded decision had been sent to the Parties, and requested the arbitration with one sole arbitror. The other Party didn’t accept this, and the Deputy President of the Appeals Division decided to establish a three arbitror panel. After the submission of the Appeal Brief, FIFA rejected taking part of the procedure. After receiving the Coaches’ Answer to the Appeal Brief the Panel was named: Bernherd Welten as President; Efraim Barak and Mark Hovell.

The hearing was held in October 2020 with no witness being called. Having no amicable solution found by the parties themselves, the Panel decided to prepare the final Award.

Arguments from the Club.

The termination of the contract with just cause is in accordance with article 337 of the Swiss Code.
Team performance was poor: four defeats in seven matches, including defeats against rivals Besiktas and Basakehir; and elimination from Europa League.
“Reckless attitude” from the Coach to the fans when claiming resignation.

These are the arguments that would prove the Club to be right. Nonetheless, they also added, that in the event of considering the termination had no just clause, the Coach would be only entitled to a maximum of 5-month salaries. They also requested for the compensation the Coach earned at his time in Udinese to be deducted from the total owed amount. And finally, regarding the 200,000€ league bonus, the Club claims that it is contrary to the merits of his performance having only coached 16 of the 34 league matches.

Arguments from the Coach.

The Contract termination struck the Coach by surprise. The Club later paid overdue salaries.
The on-field performance cannot be a just cause for early termination of the contract.
The Team was performing well: only one point behind League leaders.
Attitude towards the fans must not be considered because it is not mentioned in the Contract Termination notification.
The limit on the compensation must be interpretated in favor of the Coach, citing CAS and FIFA rulings it would be invalid and inapplicable.
Swiss Law obliges the Club to pay the total residual value of the Contract including bonues and compensation.
Regarding Udinese contract, it was already considered by the PSC Single Judge.

CAS DECISION

IS THERE JUST CAUSE?

The Panel recognizes that both parties find that the contract is valid and obliges them. The agreement between Club and Coach is considered to be a fixed-term contract, because it defines an end date, and as such, according to Swiss Law “Fixed-term contracts cannot be terminated by the parties before the fixed term expires, unless there is just cause for an immediate termination or the parties reach a mutual agreement on the termination of the contract” (The Award cites SFT 4A_89/2007 of 29 June 2007). Having no mutual agreement between the parties to terminate, the unique solution for it to be valid is to have a just cause.

Swiss Law defines the requisites of “just cause” in Article 337 of the Code of Obligations:

Reasons must be handed in writing.
With good cause: “Any circumstance which renders the continuation of the employment relationship in good faith unconscionable for the party giving notice”.

Therefore, the Panel summarizes the following, based on Swiss Tribunals jurisprudence:

“Termination of an employment contract with just cause is an exceptional measure […]. Only a breach of a certain severity may justify the immediate termination without prior notification. […] the breach is considered to be of a certain severity when there are objectives criterions […].”
Extracted from Award

The Club did comply with the rule of notifying the Coach on the termination of the contract, but the motives alleged were not considered to be in accordance with just cause, according to the Single Judge of PSC.

In addition, the Panel recognized that Swiss Law allows to give subsequent reasons for the termination of the contract if they had not known it when the notification had been sent. Nonetheless, the alleged attitude towards the fans and the Europa League elimination was a known fact by the Club at the moment of sending the termination notification. Having not written such allegation on the notification, it can’t be used after.

In conclusion to the point, the Panel points out that, unless poor results are agreed by both parties to be a just cause for termination, they are not an argument which can be “just cause”. Even if it was written on the Contract and agreed by the Parties, they should also make a clear definition of what “poor results” really means, in order to avoid an arbitrary unilateral termination of the contract and it would be considered as a legitimate cause for contract termination.

The Panel concludes that the “poor results” argument used by the Club does not comply with the requirements from the Swiss Law for it to be considered as a reasonable motive to terminate a contract. Nor had the Club formally warned the Coach that they would terminate the contract if the team’s performances did not improve.

REGARDING THE LIMIT ON DAMAGES

To evaluate the applicability of the Contract clause which states that in the event of an early termination of the contract by the Club, the Coach shall be entitled to a limit of 5-month salary, we will also need to refer to the Swiss Code of Obligations. This situation is already evaluated as a termination of the contract without just cause, so articles on Swiss Law (Articles 337c Code of Obligations) regarding this termination are applicable. These articles state that:

When there is a termination without good cause, the employee must receive the amount he should have received by the end of it, this means, the residual value of the contract.
Damages are to be reduced in the amount that he earned performing other word. This would apply for the Coaches’ Udinese contract.
It is up to the Court to decide on compensation, but it is limited to six-month salary.

This article cannot be changed or derogated by the contract. Having the termination of the contract on 18 December 2017, and the termination on 30 May 2018, watching these legal requisites, the Coach would be entitled to the compensation of 5 months and 10 days salary. Therefore, the clause contained in the contract is considered by the Panel to be invalid, and upheld the PSC calculation of 541,935€.

OTHER FINANCIAL CONSEQUENCES

Regarding the Bonus

The Club understands that the Coach is no longer entitled to the bonus because at the time of winning the League he was employed by Udinese. The PSC decision was to award the Coach the bonus because it was the unjustified termination of the contract what prevented the Coach from achieving it.

The Panel refers once again to article 337c of the Swiss Code of Obligations by stating that the employer must give the employee “the amount he would have earned had the employment relationship ended after the expiry of the agreed duration.”. Therefore the Panel understands that had the Coach stayed he would have been entitled to the bonus.

Mitigating damages

As explained before, the Swiss Law obliges the employee to mitigate the damages by considering what he has earned as a result of performing other works. It is uncontested then that the Udinese contract with the Coach must mitigate the amount awarded in damages given that it coincides in the dates of the contract with the Club.

Additional Compensation

As it was stated before, Swiss Law states that it is up to the Court to establish at their discretion any additional compensation, with a limit on a 6-month salary amount. The PSC rejected this additional petition on their decision and the Coach didn’t submit that for the appeal case. Therefore, awarding it at this stage would make the award “ultra petita”.

CONCLUSIONS

Summing all up, these are the key and summarized takeaways of the Award:

In order for a Club to sack a Coach on the merits of “poor results” this must be specified and correctly defined in the Contract.
The rules applicable to contracts terminated without just cause are of mandatory application and provisions in contract which, in some way, limit, derogate or reduce this rule are deemed to be invalid and inapplicable.
When there is no just cause, damages must also consider as a mitigating factor all that the employee has earned by means of his work in the time that the contract would have been valid.

The Club had to pay the Coach:

Award in damages equal to the residual value of the contract reduced by the salary earned with Udinese: 514,730€ (A default interest rate of 5% is applicable).
Lost bonus remuneration: 200,000€

REFERENCES

There are no additional references other than the CAS Award used for the elaboration of this article. All the quotes cited are extracted directly from the CAS Award itself.