Bonus or backfire: Professional sport employment contracts & bonus awards
Bonus schemes to incentivise and reward an employee’s performance are an important part of the employment relationship.
In professional sport, contractual bonus schemes often trigger significant (multi-million pound) bonus distributions, and it is critical that the parties’ intentions are reflected accurately in the contract drafting. Bonuses are frequently awarded for: match appearances, cup round progression, win-bonuses, and also at the end of the season contingent on promotion, league table placing, cup success, or league survival. For Premier League footballers the core employment terms are set out in the standard form playing contract, collectively agreed with the Professional Footballers Association, however Schedule 2 of the contract (often accompanied with an annex) provides flexibility for the club to determine the player’s personal terms. The same approach is taken in Premiership rugby.
Elite football managers in the Premier League and Championship often have very bespoke contract terms and detailed personal bonus incentive schemes. It is very important that the contract term is set out clearly and accurately, as the Tribunal and Courts (or the applicable arbitration forum, such as the Premier Leage Tribunal, or Premier League Managers Arbitration Tribunal) will construe any ambiguity in the contract against the party seeking to rely upon it.
As professional playing contracts in football and rugby will often span a fixed term for multiple seasons the parties should consider all of the potential events that may trigger a bonus. For example, if there is a fixed term contract for 3 years, is the intention that a promotion bonus is paid multiple times if the club are promoted, relegated, and subsequently promoted again? – a potential eventuality over the 3 seasons. Are cup wins subject to an aggregate overall cap, or do they accrue at progression through each knock-out stage? Over a decade ago a professional player has even successfully argued that, under the bonus terms of his own contract, he was entitled to both a promotion bonus, and survival bonus – the club having vastly exceeded expectations: achieving promotion when it initially had concerns about even retaining a place in that division.
It is commonplace for professional clubs to also issue squad wide incentive bonus schemes, with a bonus pool available for distribution upon a trigger event (e.g. promotion to the Premier League, or for a cup win). Any discretion within a bonus scheme is not however completely unfettered – the club decision makers must not act irrationally, capriciously, or in bad faith, and they must not do anything to destroy the club’s mutual trust and confidence with the employee players, manager, or coaching staff. By illustrative example, we successfully acted for a foreign professional player who was excluded (alongside all other loan players) from a £5.15m squad bonus distribution upon the club achieving automatic promotion, even though his contribution to that campaign and club league points had been marked over the course of the season.
Speak to a specialist
The Clarke Willmott sport & employment team are ranked as a Tier 1 team in the Legal 500 2024 and are frequently instructed by Premier League footballers, Premier League football managers, and Premiership rugby players.
If you need support drafting contractual terms and bonus schemes, or if you need guidance on the interpretation of bonus provisions/encounter a dispute, please contact Tim Copplestone, partner in our Employment team.
Posted:
