Blackburn Rovers manager Steve Kean may benefit financially from resigning rather than being sacked
Steve Kean’s turbulent reign as manager of Blackburn Rovers FC ended with his resignation on 28 September, when he indicated that he would be claiming constructive wrongful dismissal.
Since then there has been speculation that, if successful, he could get far more in damages than if he had waited and been dismissed. How can that be?
Normally, under senior employment contracts, there is little to be gained by resigning and claiming constructive dismissal rather than waiting to be fired. Contractual damages on a wrongful dismissal claim are measured by calculating the salary and benefits the executive would have received from the date of termination to the date when the employer could have lawfully terminated the contract. A typical agreement would be an indefinite contract subject to termination on a period of notice by either party.
If the individual is successful in a claim, the court will assume that, had the employee not been constructively dismissed, the employer would have given the relevant notice period immediately. The damages would therefore be the same as if the employee had been dismissed.
However, football manager employment contracts often do not follow this model. It is common for them to have a fixed term, but -include a liquidated damages clause applying if the football club terminates employment prior to the expiry date.
Although Kean’s contract is not public it has been suggested he was on this sort of contract fixed until June 2013 and a clause providing for a pay-out if terminated by the club in breach before then.
If that is right, it raises an interesting argument on which Kean’s lawyers may be relying. They may argue that, in applying the test of loss of income from the termination date to the date on which it could be terminated by the club, that latter date should be the expiry of the fixed term and the liquidated damages provision -ignored.
On that basis, he could receive far more in damages for constructive wrongful dismissal (reported to be up to £1.2m in salary alone) than the liquidated damages clause provided for (reported to be about £300,000).
A smart move? Perhaps. Yet Kean and his lawyers would do well to remember Kevin Keegan’s case against Newcastle United FC. He had a contract on terms similar to those reported to apply to Kean. Factually, his constructive dismissal allegation was upheld, but the Premier League Managers Arbitration Tribunal dismissed his claim for damages representing the remainder of the fixed term ignoring the liquidated damages provision, stating that the parties must have intended that the provision should apply in circumstances of constructive dismissal.
Remember, drafting termination provisions is not hard, but make sure they cover all circumstances.