Leeds United Football Club has made a number of news headlines during the past decade but arguably nothing quite as strange as what seems to have gone on with their manager, Brian McDermott, at the end of last week.
Last Friday afternoon it was widely reported that Leeds had sacked Mr McDermott. The following day, Leeds played a match against Huddersfield, without Mr McDermott in the dugout, and then during the match issued a statement that said he was still manager. At the time of writing, Mr McDermott appears to have resumed his duties.
This slightly odd set of facts highlights some key employment law issues in relation to effective termination of employment and how employees can assert their rights under their contracts of employment.
Was Mr McDermott actually dismissed?
According to a statement released by the League Managers’ Association on Mr McDermott’s behalf, last Friday night he received a call from a solicitor informing him that Leeds were terminating his contract. The following morning, Mr McDermott then appears to have received a phone call from a director of the club, stating that the company, on whose behalf the solicitor had contacted him, were not the current owners of Leeds United. Apparently, Mr McDermott’s own advisors then recommended that he did not assume his responsibilities for the Huddersfield match until the situation was fully clarified.
The solicitor who called Mr McDermott on Friday night was apparently acting for Eleonora Sport Ltd, a company owned by Italian Massimo Cellino and his family, which is currently in advanced negotiations to buy the club.
The legal position here is relatively cut and dried. A dismissal notice issued by an individual who does not have authority from the employer is not an effective dismissal. Although Eleonora may buy Leeds United, they are not the current owners. In this case if the solicitor was not acting for the current owners, Mr McDermott was not effectively dismissed.
Could Mr McDermott have claimed constructive dismissal?
Constructive dismissal occurs when an employee resigns and can demonstrate that they were entitled to do so because the employer had acted in repudiatory or fundamental breach of contract. At first glance, it appears that Leeds has done little wrong here: a solicitor purportedly acting for a third party tried to dismiss one of its employees and the club then clarified the situation.
However, Mr McDermott might have argued that any unreasonable delay by the club in confirming his employment was a repudiatory breach, given the impact the news reports were having on his standing within the club and reputation generally. According to news reports, it took some 12 hours for Mr McDermott to be informed that he was still employed. Meanwhile, it took almost 24 hours for Leeds to issue a statement correcting the news reports that Mr McDermott had been sacked. What we do not know, however, is exactly when the club was made aware of the call to Mr McDermott on Friday evening.
Whatever the precise ins and outs, Mr McDermott has clearly been placed in an extremely difficult position: his authority as manager has been undermined by the press reports and this situation may well only be exacerbated if Eleonora completes its purchase of the club. However, it can’t really be said that it would have been in his best interests to resign and move down a constructive dismissal route, even if there were potentially grounds on which to do so (and from the facts, this really isn’t clear). We say this as constructive dismissal claims are rarely black and white. For example:
- in order for any claim to be successful, an employee needs to demonstrate that the employer’s (and importantly, for Mr McDermott’s purposes, not Eleanora’s) conduct was not just unreasonable but was so unreasonable as to amount to a repudiatory breach of contract;
- an employee must accept the employer’s breach of contract without delay (to avoid waiving the relevant breach) and resign in response to it; and
- if the employee resigns but is not then subsequently found to have been constructively dismissed, he may inadvertently himself end up being in breach of contract by resigning before the expiry of his fixed-term.
Given these difficulties, Mr McDermott would (as he may have been) be better advised not to, at least immediately, accept any possible breach and resign, but to remain in his position. He would then hope to either continue as manager or would wait for Leeds to expressly dismiss him. Were he to be dismissed, he would then at least avoid the difficulties identified at (i) to (iii) above.
At the same time he could take an additional step to protect his position by reserving his rights (particularly if he thinks matters are likely to deteriorate further (for example, in light of the arrival of Mr Cellino’s friend Gianluca Festa)). By formally reserving his rights, he would hope to keep alive his option to resign and claim constructive dismissal and delay any waiver of any relevant breach, at least for a short period of time. An employee cannot, however, reserve his rights forever and he would therefore still need to decide (in relatively short order) whether he wanted to stay and/or see whether he was going to be expressly dismissed or whether he was better advised to jump ship and argue constructive dismissal.
What is in it for Brian?
While Mr McDermott has made it clear that he wants to continue as Leeds’ manager, if he was constructively or even subsequently expressly dismissed, he would be able to claim compensation for the remaining term of his contract. Mr McDermott is less than twelve months into a three year contract so a contractual claim could bring him compensation equal to two years’ salary and benefits (subject to his duty to mitigate his loss by seeking new work and subject to any other terms of the contract).
Mr McDermott would also potentially have a further claim for unfair dismissal. However, compensation in relation to such claims is capped at £74,200 and is only likely to compensate him for losses going beyond the term of his contract. As Mr McDermott will certainly hope to find work much sooner than that, it is unlikely that any unfair dismissal angle would be worth seriously pursuing.
Finally, it is worth flagging that, in other professions, successfully claiming constructive dismissal has an added benefit because, if the employer has fundamentally breached the contract, it frees the employee of any continuing obligations going forward, for example in relation to post-termination restrictive covenants. However, this is far less relevant in the football world.
In conclusion, hopefully for both Brian McDermott and Leeds United, this incident will blow over and Mr McDermott will lead the club into a footballing renaissance. However, given that Massimo Cellino’s Italian club Cagliari have gone through 36 managers during Cellino’s 22 years of ownership, Mr McDermott could be well advised to take steps to protect his position.