There are clear sporting regulatory rules to prevent the tapping up of players, managers and staff – but have you thought about the possible claims for inducing breach of contract? The RPC Sports group summarises some practical considerations to help avoid additional allegations relating to inducing breach.
In the highly competitive world of professional sport, it is common for sports organisations to tempt players and managers to join them. Typically the draw of new and more lucrative contracts or a higher standard of competition will be particularly persuasive to those already under contract. However, these actions do carry the risk of (at the least) serious allegations of inducing a breach of contract, particularly in circumstances where loss is said to be suffered.
Such allegations are often made against individual directors responsible for the negotiations – this is a typical tactic for Claimant clubs/sports organisations that are aggrieved by what they perceive to be unfair approaches for their players/managers.
It's also important to recognise that such allegations would usually be run alongside complaints made to the relevant sports regulator (such as the Premier League or the EFL in English football).
Before we run through our practical tips, we'll do a quick recap of the building blocks for these kinds of claims.
What is inducing breach of contract?
Inducing a breach of contract occurs when a third party ('A') knowingly or recklessly and intentionally induces one of the parties to a contract ('B') to breach a contract that 'B' has with the other party ('C'). In order for 'C' to be able to bring a claim for damages against 'A', 'C' must also be able to prove that:
'A' knew (or recklessly "turned a blind eye" as to whether) 'B' would be in breach of the contract with 'C' as a result of the inducement;
'A' intended to induce 'B' to breach the contract - even if the breach was only intended as a step towards 'A' achieving its ultimate aim; and
as a result of the inducement by 'A', 'B' has actually breached the contract between 'B' and 'C', in such a way as to cause 'C' loss. This is whether or not 'A' intended to cause that loss.
It's easy to see how clubs could find themselves and their new signings in hot water when they induce managers/players under contract with another club to move to their club instead (often following an unauthorised approach).
The classic scenario might occur where Club 'A' induces player/manager 'B' to breach player/manager 'B's' existing employment contract with Club 'C', with the aim that player/manager 'B' moves to Club 'A'. This could, for example, arise through Club 'A' inducing a breach of confidence where player/manager 'B' discloses confidential terms of the existing agreement, such as the terms of any release or buy-out clause, or the amount of compensation due to Club 'C' upon early termination.
An interesting recent example (albeit in Spain) of a club allegedly inducing a breach of contract is in relation to the Antoine Griezmann transfer. Atlético Madrid recently (publically) accused FC Barcelona of inducing Griezmann to breach his employment contract. Atlético communicated the "strongest disapproval of the behaviour of both, especially FC Barcelona, for prompting the player to break his contractual relationship with Atlético de Madrid". Although a Spanish based example, the risk applicable to English based clubs is clear.
Intermediaries and their involvement in approaches by clubs (like Club 'A' in the example above) must also take care: often the intermediaries will know the detailed terms of the relevant contract. At the least, they will be aware of the likelihood that the contract will contain certain relevant terms – such as release clauses. Intermediaries must tread a careful line to comply with their confidentiality obligations, and avoid inducing any breach themselves.
Whether you're concerned that a counter-party was induced to breach the terms of its contract with you, or that allegations of inducing breach may be levelled against you, here are some practical tips:
That knowing look – this is key. Whether 'A' knows that 'B' will be in breach of contract is a subjective test (did 'A' actually know, not should 'A' have known). However, if 'A' doesn't see the contract, but deliberately or recklessly disregards the facts about it (eg 'A' knows the contract probably does contain terms preventing 'B' from taking the steps 'A' intends 'B' to take, and 'A' consciously decides not to check), then 'A' could still be liable. From each perspective:
If you are in the position of 'C' (the person who has suffered loss because of the breach) consider if 'A' must have known about the existence (or likely existence) of any contract terms it has induced 'B' to breach. Confidentiality obligations in the contract might be particularly helpful: consider whether 'A' must have obtained and used confidential information supplied in breach of contract by 'B', in response to the inducement of being approached by 'A'. As well as demonstrating that 'A' had knowledge of the relevant terms of the agreement, this could also help to establish a separate claim for misuse of confidential information.
If you are in the position of 'A' (the inducer) – do not use confidential information about an agreement which is disclosed to you in breach of contract (even if it was disclosed to you when you didn't expressly ask for it). One clear risk is where 'B' tells you the details of their buy-out/release clause, or volunteers information in response to your approach.
Playing by the rules – parties must focus on ensuring compliance with relevant governing body rules and avoiding claims. Remember, often the relevant sporting regulatory rules will require clubs to get permission from other clubs before approaching managers/players (provided the managers/players are subject to the same rules – see further re Premier League rules below). Just because you comply with that obligation does not mean you are in the clear on inducing breach of contract (and vice versa, just because you didn't induce a breach of contract, doesn't mean you've complied with the relevant rules). Take the time to focus on both – and get advice if you need it.
Ask permission not forgiveness – minimise risk of allegations of rule breaking by ensuring that approaches to players/managers are made through the respective clubs. This is often required by the relevant rules anyway (eg under the Premier League rules (J.3) clubs must not directly/indirectly approach players, managers and senior first team staff with a view to offering employment without the consent of their existing employer. This includes players, managers and staff of EFL clubs as well).