Coaching Contracts

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I helped my attorney-mentor research this topic and created a slideshow for a CLE he led.

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Coaching Contracts

  1. 1. The 2009 Midwest Art, Entertainment & Sports Law Institute Radio Shows, Camps, and Non-compete Clauses—What Does it Have to do with Coaching? Can You Really Be Fired For Interviewing with the New York Jets? A Discussion of the Nuts and Bolts of Collegiate Coaching Contracts
  2. 2. Introduction <ul><li>Not long ago, coaches were teachers of the game. This has changed over time. Now, coaches are: </li></ul><ul><ul><li>Fundraisers </li></ul></ul><ul><ul><li>Recruiters </li></ul></ul><ul><ul><li>Television Personalities </li></ul></ul><ul><ul><li>Alumni Rousers </li></ul></ul><ul><ul><li>Anything else the university needs them to be </li></ul></ul>
  3. 3. Introduction <ul><li>The desire for universities to attract top notch coaches has created a system akin to the NFL’s lucrative free agency system. </li></ul><ul><ul><li>SHOW ME THE MONEY!!! </li></ul></ul>
  4. 4. Introduction <ul><li>Coaches do not have standardized contracts </li></ul><ul><ul><li>One page letter of appointment </li></ul></ul><ul><ul><li>Eight page document full of legalese and protective clauses </li></ul></ul><ul><ul><li>While the numbers may be respectable, the contract may have the following clauses: </li></ul></ul><ul><ul><ul><li>Rollover </li></ul></ul></ul><ul><ul><ul><li>Reassignment </li></ul></ul></ul><ul><ul><ul><li>Buyout </li></ul></ul></ul><ul><ul><ul><li>Termination with cause </li></ul></ul></ul><ul><ul><ul><li>Mitigation </li></ul></ul></ul>
  5. 5. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>College contracts can become a legal minefield for the coach without a clear understanding of the role the coach must play and the obligations the contract demands </li></ul>
  6. 6. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Position and Duties </li></ul><ul><ul><li>Few coaches possess the power to trump the traditional hierarchy </li></ul></ul><ul><ul><ul><li>Unlike standard employment contracts, a coach can be unilaterally demoted or reassigned during the term of the agreement </li></ul></ul></ul>
  7. 7. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Position and Duties </li></ul><ul><ul><li>All schools impose strict policies that require coaches abide by the regulations of the NCAA </li></ul></ul><ul><ul><ul><li>Serious violations may result in NCAA sanctions ranging from prohibitions on playing in post season tournaments to the “death penalty” (termination of the program) </li></ul></ul></ul><ul><ul><ul><li>This provision or one similar to it will be found in every college coaching contract </li></ul></ul></ul>
  8. 8. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Position and Duties </li></ul><ul><ul><li>Revenue generating sports have become the lifeline for university stability </li></ul></ul><ul><ul><ul><li>Coaching contracts include: </li></ul></ul></ul><ul><ul><ul><ul><li>Revenue thresholds tied to ticket sales </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Community relations </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Player personnel behavior </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Academic achievement standards </li></ul></ul></ul></ul><ul><ul><ul><li>Coaches are not judged exclusively on points attained </li></ul></ul></ul><ul><ul><ul><ul><li>Not meeting standards will result in termination </li></ul></ul></ul></ul>
  9. 9. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Term of Employment </li></ul><ul><ul><li>There is no required employment period for coaching contracts </li></ul></ul><ul><ul><ul><li>Most contracts are for a fixed number of years (typically 3-5 years) </li></ul></ul></ul><ul><ul><ul><ul><li>Reasons for length of the term </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Recruiting </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Stability of the program </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Security </li></ul></ul></ul></ul></ul>
  10. 10. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Term of Employment </li></ul><ul><ul><li>Many contracts include “rollover” or “rolling horizon” provisions. There are three forms: </li></ul></ul><ul><ul><ul><li>Automatic Rollover </li></ul></ul></ul><ul><ul><ul><li>Consensual Rollover </li></ul></ul></ul><ul><ul><ul><li>Free Agent Rollover </li></ul></ul></ul>
  11. 11. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Compensation </li></ul><ul><ul><li>Compensation for collegiate coaches varies widely as there is no limit on what a coach may earn </li></ul></ul><ul><ul><ul><li>A Division III head coach may earn around $50,000 a year </li></ul></ul></ul><ul><ul><ul><li>Some of the highest paid coaches can venture into the $3,000,000 range </li></ul></ul></ul><ul><ul><ul><li>A successful program can generate millions of dollars in revenue for the University </li></ul></ul></ul>
  12. 12. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Compensation </li></ul><ul><ul><li>The annual salary is an amount generated by the school and paid to the coach from its operating budget or from outside sources </li></ul></ul><ul><ul><ul><li>The television and radio compensation is usually a fixed portion of may money received by the school for games broadcast on television or radio </li></ul></ul></ul><ul><ul><ul><li>At the larger schools coaches do not rely on their base salary as the majority of their compensation </li></ul></ul></ul>
  13. 13. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Compensation </li></ul><ul><ul><li>College coaches can and do make significant money outside of their general employment </li></ul></ul><ul><ul><ul><li>Speaking engagements </li></ul></ul></ul><ul><ul><ul><li>Camps </li></ul></ul></ul><ul><ul><ul><li>Clinics </li></ul></ul></ul><ul><ul><ul><li>Shoe and apparel sponsors </li></ul></ul></ul>
  14. 14. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Restrictive Covenants </li></ul><ul><ul><li>Non-compete clauses may be found in many coaching contracts </li></ul></ul><ul><ul><ul><li>Many prevent the coach from taking a position with another school in the same conference </li></ul></ul></ul>
  15. 15. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Termination Provisions </li></ul><ul><ul><li>As competition among teams continues to strengthen, the risk of NCAA violations by coaches poses a major threat to a program’s reputation and revenue </li></ul></ul><ul><ul><ul><li>Universities have increased their focus on termination provisions in coaching contracts </li></ul></ul></ul><ul><ul><ul><li>Termination provisions can create job security in an increasingly competitive environment </li></ul></ul></ul>
  16. 16. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Termination by the University “For Cause” </li></ul><ul><ul><li>When a contract is terminated by the university for cause, the university is generally relieved of any obligation to provide the coach further compensation or benefits under the contract </li></ul></ul>
  17. 17. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Termination by the University “For Cause” </li></ul><ul><ul><li>It is critical that counsel for both parties spend significant efforts in drafting and negotiating for cause provisions </li></ul></ul><ul><ul><li>Major issues in the negotiation of the for cause provisions include the following: </li></ul></ul><ul><ul><ul><li>How expansive is the definition of “for cause”? </li></ul></ul></ul><ul><ul><ul><li>How strong is the contract regarding NCAA violations? </li></ul></ul></ul><ul><ul><ul><li>Does the language address the issue of potential NCAA violations from previous coaching positions? </li></ul></ul></ul><ul><ul><ul><li>Does the language require a material violation or breach of the agreement? </li></ul></ul></ul><ul><ul><ul><li>How defined are the terms that can have a broad meaning? </li></ul></ul></ul><ul><ul><ul><li>Does the language contain additional provisions disguised as reasons for termination? </li></ul></ul></ul>
  18. 18. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Termination by the University “For Cause” </li></ul><ul><ul><li>Language which preserves the deferred compensation should be sought </li></ul></ul><ul><ul><ul><li>Solution: </li></ul></ul></ul><ul><ul><ul><ul><li>De-escalators regarding the vesting of deferred compensation </li></ul></ul></ul></ul>
  19. 19. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Termination by the University “Without Cause” </li></ul><ul><ul><li>In situations where termination of a coach by termination of a coach by the university is without cause, generally compensation under the contract continues to be due to the coach </li></ul></ul>
  20. 20. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Termination by the University “Without Cause” </li></ul><ul><ul><li>Generally, a lack of on-field success is not a for cause factor </li></ul></ul><ul><ul><li>In many cases, the contract provides that the compensation is set off by any income received by the coach after termination. Issues include: </li></ul></ul><ul><ul><ul><li>Types of income used to set off compensation </li></ul></ul></ul><ul><ul><ul><li>Types of employment covered by the set off </li></ul></ul></ul><ul><ul><ul><li>Mechanism for determining the set off </li></ul></ul></ul><ul><ul><ul><ul><li>Income reporting requirements </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Tax returns </li></ul></ul></ul></ul><ul><ul><ul><li>Efforts needed to secure employment </li></ul></ul></ul><ul><ul><ul><ul><li>Sports employment </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Non-sports employment </li></ul></ul></ul></ul>
  21. 21. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Deterring the Big Move: Termination by the Coach “Without Cause” </li></ul><ul><ul><li>Termination by coach is usually for the pursuit of a better coaching position at another institution </li></ul></ul><ul><ul><li>Increase in importance of quality head coaches has given greater leverage to coaches to pursue advancement and higher compensation </li></ul></ul>
  22. 22. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Deterring the Big Move: Termination by the Coach “Without Cause” </li></ul><ul><ul><li>Universities have responded to the coaches’ greater leverage by incorporating backend buyout or liquidated damage clauses for coaches who leave early for better opportunities </li></ul></ul><ul><ul><ul><li>Liquidated damages provisions afford greater deterrence to coaches than injunctive relief alone </li></ul></ul></ul>
  23. 23. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Deterring the Big Move: Termination by Coach “Without Cause” </li></ul><ul><ul><li>Issues in liquidated damages and buyouts provisions: </li></ul></ul><ul><ul><ul><li>Exact circumstance under which the liquidated damages provisions are triggered </li></ul></ul></ul><ul><ul><ul><li>Actual recital of the basis behind the liquidated damages and confirmation that it does not represent a penalty </li></ul></ul></ul><ul><ul><ul><li>Amount of liquidated damages and how paid </li></ul></ul></ul><ul><ul><ul><li>Whether the liquidated damages are the sole and exclusive remedy available to the university </li></ul></ul></ul>
  24. 24. The Nuts and Bolts of the Collegiate Coaching Contract <ul><li>Deterring the Big Move: Termination by Coach “Without Cause” </li></ul><ul><ul><li>Other provisions to deter the coach from moving: </li></ul></ul><ul><ul><ul><li>Restrictions on communications with other universities </li></ul></ul></ul><ul><ul><ul><li>Prohibitions against termination during season </li></ul></ul></ul><ul><ul><ul><li>Prohibitions against future recruiting of players that are being recruited at the university </li></ul></ul></ul><ul><ul><ul><li>Requirements that tools of the trade must be returned to the university upon termination </li></ul></ul></ul>
  25. 25. Conclusion <ul><li>Coaching contracts are becoming more complex </li></ul><ul><ul><li>Coaches must consider how to maximize their input before output </li></ul></ul><ul><ul><li>Know how much leverage each party has going into the contract negotiation </li></ul></ul><ul><li>In coaching, you are only as good as your last contract </li></ul>
  26. 26. PRESENTERS <ul><li>Ed Hitchcock—Hitchcock Law Firm, PLLP </li></ul><ul><ul><li>Mr. Hitchcock has spent more than 18 years representing players, coaches and team executives. Although professional football has been a passion for Mr. Hitchcock, he has represented Olympiads, NASCAR athletes, pro-wrestlers and sportscasters. </li></ul></ul><ul><li>Lee A. Hutton III—Lommen, Abdo, Cole, King & Stageberg, PA </li></ul><ul><ul><li>Mr. Hutton practices in many litigation areas including sports and entertainment law. Mr. Hutton represents coaches and athletes in player and entertainment contract negotiations, as well as organizing instructional camps for his sports clientele. He attended the University of Minnesota where he lettered for the Golden Gophers in football and track & field. </li></ul></ul>

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