Professional sports contracts: Are they worth the paper they are written on?

As a matter of principle, professional sports contracts, whether it be in the NRL, AFL, A-League or Suncorp Super Netball, are more or less the same as other employment contracts. The athlete is the employee and the club that they play for is the employer. Both types of contracts set out the terms and conditions that will govern the relationship between the contracting parties and includes terms relating to salary, KPIs, length of the contract and termination of the contract. In reality though, the practicalities surrounding sports contracts are vastly different, especially regarding their termination.

A prime example of this is the news recently that Jarryd Hayne effected the end of his contract with the Gold Coast Titans to return to Sydney to fulfil his current “lifelong dream” to play for the Parramatta Eels. This isn’t the first time, nor will it be the last, that NRL players have effectively walked out on their clubs with many in the past unable to resist the lure of a well-paid gig in overseas rugby union (I’m looking at you Sonny Bill Williams and Semi Radrara). Hayne himself is a repeat offender having previously walked out on the Eels in 2014 to pursue his then “lifelong dream” to play in the NFL. Standard NRL player contracts do not generally contain an out clause so it has become somewhat common for a player seeking to move to reach a “mutual agreement” with their club whereby the contract is terminated, and the player free to go elsewhere.

The issue isn’t just confined to rugby league either. The AFL has seen a large number of players in the recent trade period, such as Jake Lever, Charlie Cameron and Josh Schache, effectively pushing through their own trade to move back to the state in which they grew up. This so called “go-home factor” has seen players like Charlie Cameron, previously of the Adelaide Crows, requesting a “compassionate” release from his contract so he could be closer to his family and friends. Cameron got his wish, he is now back in QLD and will line up for the Brisbane Lions in 2018.

This contrasts significantly with an ordinary employment context, where an employee is rarely able to up and leave with their employer highly unlikely to reach a “mutual agreement” regarding a release. Ordinary employers certainly would not allow a mutual termination because of a “go-home factor”. If an employee was adamant on leaving, their employer would insist they provide notice under their contract of employment. For particularly skilled and highly valued employees (which would be a fair description of professional athletes), their contracts generally provide long notice periods in which their employer can place them on gardening leave as well as enforce restraints of trade that prevent them from working for competitors.

From the perspective of the clubs, I often wonder why they rarely play hard ball with their players and try to prevent them from leaving. Clubs rarely insist on the performance of the player’s contract (with the Sonny Bill situation being a notable exception) despite investing significant resources in them in the form of money, development and draft picks. Nor do clubs attempt to enforce restraint of trade provisions after they have left. Clearly, clubs would much rather cut their losses and run than have a $1.2 million a year player such as Jarryd Hayne, or a number 2 draft pick such as Josh Schache, sulking in reserve grade when they could let them go, and use that money and salary cap space to recruit someone who wants to be there.

However, it would seem the pendulum has swung too far towards player power with clubs seemingly unable to ensure that their players, many of whom are extremely well paid, honour their contracts. Professional sporting clubs need to consider whether a hard-line approach should be adopted because it is clear that if the status quo remains, professional sporting contracts will continue to be worth less than the paper than are written on.

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November 6

What should employers take from the Todd Carney Saga….

In March I blogged about Todd Carney, and his potential legal claim against the Cronulla Sharks for unlawfully terminating his contract of employment. It was of little surprise then to learn that this action has now been brought. The media are describing this action as ‘Unfair Dismissal’. Those familiar with current workplace law will know that this is not strictly correct. ‘Unfair Dismissal’ is a statutory action under the Fair Work Act, which has a jurisdictional restriction to include only employees earning under the $135,000 high income threshold. Todd Carney’s legal claim will be for ‘Unlawful Termination’ by the Cronulla Sharks. This action is based on a common law breach of contract.

The point of this update however, is not to gloat. Nor is it to split hairs about employment law terminology.

Rather, the Todd Carney situation provides a very good example of a common misconception and an error made by many employers under the current statutory environment. Just because someone is exempt from unfair dismissal does not mean that an employer is free to terminate them with no possible remedy. Employees over the threshold can still protected by Contract. Understanding the written document, as well as implied terms, are crucial before making any type of adverse decision against an employee. The liability under contract, particularly if implied terms are left to operate, can be far worse than the penalties prescribed under statute or enforced by the Fair Work Commission for Unfair Dismissal. This recent case is a great example of this.

The Cronalla Sharks may be about to find this out the hard way. And it will likely to be a lot more expensive than a quick trip to a Fair Work Commission conciliation.

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September 2

NRL contracts – what are they really worth?

This NRL season has seen it’s normal amount of controversy over players’ contracts. Notably the the Daly Cherry Evans backflip, and Chris Sandow ‘s abrupt release from the Eels. But the Wests Tigers Robbie Farah news last week takes the cake as a clear indication that the a Contract of Employment in the NRL is worth less than the paper it’s written on. Farah was instructed by the club on Tuesday that he was no longer a feature in their future plans, to look elsewhere for a new role, and that if he remained at Wests Tigers in accordance with his $900,000 per annum contract he would be playing reserve grade next year.

From a footballing perspective the madness of this decision is outside the scope of this blog – and that issue is best left for the sports journalist to discuss further, as no doubt they will.

But it’s the business and employment perspective of this decision that baffles me, and yet another occasion this year as both an employment specialist and NRL fan that I’ve observed the business practices of these clubs being far below acceptable contemporary standards.

If Farah finds a new club in this short time frame the Tigers will, in the best case scenario, be subsidising his salary in the region of $500,000 to have Farah play against them instead of for them. All of this for a ‘fresh start’ and to free up relatively insignificant $400,000 in their salary cap. In leadership terms, they will also be depriving themselves of one of their only senior players, and have no hope of recruiting anyone else at this late stage. There is also the fact that publicly breaking promises to a loyal employee, to allow you to make new promises to other employees, is more than just morally flawed. It’s strategically weak. Employees are not that stupid. If this action has led to a bad taste in the mouths of the fans and the wider community, what is it like in the locker room.

One way or another, it seems that between the 30 June cooling off period that allowed DCE to backflip, the provision for bilateral release like Sandow’s, and then this remarkable repudiation of Wests Tigers provides us with just three examples in as many months that demonstrate that NRL contracts are basically meaningless. They are aspirational documents, the only purpose of which is to create media attention around the re-signing of players. This needs to change if the NRL clubs are serious about player retention and fan satisfaction.

Within the executive world, it is standard practice to allow unilateral termination of employment at will, with often as little as one month’s notice provided. The NRL need to think about this as an option going forward, but with robust protections for players and fans. For example, termination at will of a player’s contract by either party should be allowed, provided that a deadline half way through the season for all contract alterations for the following year should be observed. This would prevent clubs from cutting players loose when there were no other opportunities, and likewise protect clubs from being stuck unable to find replacements. If the club exercises the right to terminate, a termination payment (preferably salary cap exempt) could be provided under the contract.

This bizarre eleventh hour move from the Tigers leads to an assumption that the true extent of their salary cap crisis is at the point where rational decisions are no longer possible. This begs yet another question to the administrators of this sport. How hard is it to manage the salary cap? The rest of the business community deal with a range of compliance tasks every day of the week which are far more complex. Why do NRL clubs find this so difficult to manage in advance? With the discovery of numerous breaches in recent years, it’s clearly time to insist that clubs make all player contracts publicly available. This would provide for a industry wide self regulation system. The clubs, aided by the media and other stakeholders, can regulate each other much more effectively than the hit and miss audits currently performed by the integrity commission.

Everyone else in the economy is finding creative ways to meet their business goals and maintain compliance. It’s high time that the NRL followed suit.

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August 3

Modern Leadership – where are we going, and who is taking us there?

It is irrefutable that the business community faces unique and difficult challenges, as globalisation and technological advancement continue to surge forward. The neo-liberal economic Well of everlasting growth and prosperity, dug by Thatcher and Reagan in the 80s, while perhaps not having run completely dry, is certainly showing itself to be not quite as ‘everlasting’ as they had hoped. Environmental sustainability is making an essential, and long overdue, impact on the way we conceive of and develop our economic interests. The future is dark if we don’t shape our business practices in a way that accords with these challenges. Whether in a small business or multi-national, the obvious staring point is making sure we have good leaders.

Inspirational leaders need time, and trust. A business leader needs a sense of security in their decisions before they can do work that inspires others. And this is best achieved through remuneration packages that reward long term vision rather than short term goals. Further, an element of risk taking needs to be encouraged, without the leader necessarily bearing the consequences of failure personally. Failure is often, although not always, as stepping stone in the journey to success.

An essential element of this is that leaders should be provided with enough time to achieve goals. Too often, organisations underestimate the length of time it takes for a particular vision to disseminate through an organization from the top, and then begin to get the desired results. Head Coach of NRL club Newcastle Rick Stone, having recently lost his job at the club for the second time, was this time given less than one whole season before being axed. The new coach has been told to make the finals next year, and win a premiership within 3… or else. For an organisation that are not only failing on the scoreboard, but would appear to be suffering a fundamental cultural crises, these are brave words. Saying that you want something really badly, doesn’t increase the chances of that thing actually happening. Whereas focus on broader, longer term growth objectives are surely better, even if a little more difficult to articulate.

Rick Stone, sacked last week. His second stint as coach at Newcastle lasted less than 20 games.

Finally, an organisation’s personnel need to be structured in a way in which the balance between authority and responsibility is finely tuned. Leaders need to respect that their reports are often leaders too, and need to invest enough faith in them to let them flourish and inspire their own teams. A good leader needs enough empathy to understand exactly what everyone in their team are going through, but enough belief in themselves and their goals to not be distracted by those team members that are not on the same page.

But above all, a truly inspiring leader will make their reports feel safe to be their subordinate, and safe to be a leader themselves. Simon Sinek has a great perspective on this here.

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March 16

Todd Carney and procedural fairness – a picture does not always say 1000 words….

I am completely unsurprised at news over the weekend that Todd Carney has been found to have been wrongly dismissed by Cronulla Sharks. At the time of his dismissal, I couldn’t help but notice the incredibly short time between his ‘bubbler’ incident going viral online, and the announcement of the termination of his contract. Anyone with knowledge of workplace law will know that valid terminations are not that fast. As we have seen in recent years, both the NRL and many of its clubs have been enforcing a ‘zero tolerance’ policy across the board on player transgressions. They have leaned heavily on the player code of conduct, and the players’ essential contractual obligation not to ‘bring the game into disrepute’, in enforcing this approach.

But ‘zero tolerance’ is one thing, and procedural fairness is something else. Employers may be able to deny ‘tolerance’ from the workplace relationship, but they cannot deny natural justice from it. This is a step too far. For this reason, wherever you stand on the ‘bubbler’, Todd had a very good case from the very beginning that this termination was unlawful, primarily because the Sharks never gave him a chance to respond to the allegations of wrongdoing.

Interestingly though, in the aftermath of the announcement the Sharks and many members in the media have jumped on the ‘procedural’ issue heavily in their own defence. The Daily Telegraph quotes Cronulla chairman David Keogh as saying:

“The big oversight was that someone needed to check that the process being followed was correct. What’s important to remember here is that it’s not a question of the facts, it’s a question of the process, but the reality of the situation is, the decision would likely have been the same.”

The telegraph themselves take this one step futher, describing (in the article’s photo caption) the original decision as being flawed due to a ‘processing error’. Underlying this discourse however, is a fundamental misunderstanding of the purpose of ‘procedure’. The distinction between’substantive’ and ‘procedural’ issues in law is a deep and complicated jurisprudential issue, and I do not want to delve into it too deeply here. However too many employers still see them as completely separate, and the ‘procedure’ as a cursory or less significant issue. This leads to mistakes. While there are some complex issues, the simple one is this: without procedural fairness, you can’t actually be sure whether or not the right substantive decision has actually been made.

In the wrongful (or unfair) dismissal field, most employers acknowledge the legal requirement that employees have an entitlement to ‘answer the allegations’. But the employers’ obligation is not simply to hear the employees side of the story before terminating the employment, the obligation is actually to defer their decision on whether or not to terminate until after the employee has had an opportunity to respond. This is a mistake made by many, and clearly by the Sharks in this case. Mr Keogh’s assertion that “the reality of the situation is, the decision would likely have been the same” is not his to make. That is the purpose of procedural fairness. In this case if I had I been the decision maker, or workplace investigator, a lot more information would have been useful before making the determination. What was the context of the prank? Who took the photograph? How was the photograph first uploaded to the internet? How was it propogated? In order to assess Todd Carney’s ‘conduct’, it is important to get across all of the details of the actual conduct, not to simply assess it on the basis of the outcomes of that conduct. Without giving a genuine opportunity to respond, it is impossible to make this determination correctly. The unfair dismissal jurisdiction of the Fair Work Commission is littered with examples of employers making this same mistake.* In my experience as an employment lawyer, I have seen on many occasions an employer obtaining photographic or video evidence of wrongdoing, and subsequently abandoning all procedure. This is tempting, but a mistake.

Carney has defended himself throughout, saying among other things “I haven’t been in jail, haven’t bashed my wife, haven’t sold drugs to kids or done drugs, and those are players who seem to be allowed back in.” Without delving into the substantive fairness of this issue – I have to agree with him there.

* The Todd Carney decision was made by the NRL Appeals committee, not by the Fair Work Commission, and because Todd Carney’s income at the time is presumed to be well over the unfair dismissal threshold it is unlikely that he would receive protection under the unfair dismissal jursidiction. This factual scenario has been used broadly as an analogy for the purposes of speculative discussion only.

** Helen Carter is the Director and founding solicitor at PCC Lawyers, a team of employment practitioners based in Sydney, with many years of combined knowledge and experience in workplace law, industrial relations, workplace investigations and training. They provide a high standard of excellence and an exceptional level of personal service to a variety of clients in the Sydney metropolitan area, Central Coast, regional NSW and interstate.

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