After the German Federal Labor Court (BAG) ruled in 2018 that the fixed-term nature of professional soccer players' employment contracts is justified due to the ‘peculiar nature of the work performance’ (Ref.: 7 AZR 312/16 - Heinz Müller), this case law does not continue for the responsible management bodies, the sports directors, for the time being.
The starting point of this development is in Hanover, Germany. At the labor court there, both the former and currently reappointed sports director Mr Zuber and the meanwhile appointed sports director Mr Schlaudraff of the local professional soccer club recently sued for, among other things, the termination of their employment contracts. In both cases, the judges considered the fixed-term contracts to be inadmissible because there was no material reason for them. In particular, the ‘fact of wear and tear’ referred to by the BAG in the case of professional goalkeeper Heinz Müller could not arise at the level of the management bodies.
Thus, a fixed-term contract can only be considered in narrowly defined cases. These include, for example, fixed-term contracts without substantive grounds pursuant to Section 14 (2) or (3) TzBfG or fixed-term contracts for trial purposes pursuant to Section 14 (1) sentence 2 no. 5 TzBfG. It follows from this: After a maximum of two years, the effective fixed term comes to an end.
There is a need for adjustment
From the point of view of the clubs and organizations in professional sports, it is therefore high time to think about how to deal with this challenge by drafting contracts with foresight. The latest ruling of the Hanover Labor Court points out possible solutions for future designs.
The fixed-term nature of the employment contracts of sports directors is based primarily on the interest of professional clubs in not tying themselves permanently to the (co-)responsible sports directors in the event of a lack of sporting success. In the case of permanent employment contracts, the requirements of the German Dismissal Protection Act (KSchG) generally stand in the way of this interest in flexible separation.
However, it would be much easier to achieve a unilateral separation if the professional clubs were to elevate their sports directors to the status of executive employees within the meaning of § 14 (2) KSchG. Accordingly, a managerial employee is anyone who is authorized to independently hire or fire employees. In respect of such a managerial employee, the employer may file a motion for termination within the meaning of Section 9 (1) sentence 2 of the German Dismissal Protection Act (KSchG) after issuing a notice of termination. This results in the employment relationship being dissolved and the employer being ordered to pay an appropriate severance payment (Section 10 KSchG). Under this provision, dismissal protection is transformed into severance pay protection.
In this way, the professional clubs would not only have a reliable contract in terms of labor law, but would also have a transparent yardstick for the amount of severance pay to be paid in the form of Section 10 KSchG.
What is the problem?
In order to qualify as a managerial employee within the meaning of Section 14 (2) KSchG, however, the sports director would have to be granted independent personnel authority. This authority must not only exist on paper, but must constitute a substantial part of the sports director's activities. In particular, hiring or firing must not be dependent on the approval of superiors.
Contractually, professional clubs are not too far away from this arrangement, as the employment contracts of sports directors already regularly formulate ‘squad planning’ as an area of competence. According to the case law of the BAG, it should in any case be harmless for § 14 (2) KSchG if the personnel authority of a sports director is limited only to the relatively small group of players and coaches of the professional team, since these are the central element in a professional club and are formative for its economic success.
However, it is understandable why professional clubs have so far shied away from giving their sports directors such far-reaching personnel competence. In the fast-moving world of soccer and the responsibility for transfer and salary sums in the millions of euros, the move away from hiring and firing while observing the four-eyes principle, which is supposed to protect against costly and serious mistakes, is particularly drastic.
To be continued
Nevertheless, the ball is now in the clubs' field; they must find answers to the court decisions mentioned at the beginning. It remains foreseeable that the temporary nature of employment contracts with sports directors can hardly be justified on the basis of the ‘specific nature of the work performance’. This is because the ‘professional soccer’ exception does not exist and, in this respect, professional clubs are completely normal commercial enterprises with sports directors as their managers (responsible for personnel). In order to avoid further actions for termination of employment and enormous severance payments, and thus to protect the budget, the already practiced upgrading of sports directors to ‘Sports Chairman’ or ‘Managing Director Sports’ and inclusion on the board of directors could also represent an alternative without relinquishing control functions in hiring and firing.