By Kerri Cebula, JD
In sports with a collective bargaining agreement, the rules for negotiating a player contract are clear. There is a proscribed time for negotiations and a date when contracts can be signed. The uniform player contract, negotiated as part of the agreement, is generally available to the public either through a Player’s Association or a leak. When a player signs with a team, the length of the contract and the player’s salary are generally released. This means that fans know when a player’s contract expires and when they will be a free agent, able to negotiate with another team.
It is different in motorsport. Driver contracts in all forms of motorsport tend to be confidential affairs. Typically, all that is publicly know is that a driver and a team have agreed to a contract and maybe the years involved. Occasionally comments will be made by a team about an attempt to sign a driver or by a driver discussing why he chose to sign with a particular team. Kyle Busch’s contract negotiations during the 2022 season are an example of the usual way driver contracts are publicly handled in motorsport.
But the 2022 season also gave fans a fascinating inside look at how driver contracts are actually negotiated. First, in July, Chip Ganassi Racing (CGR) announced that it had extended 2021 IndyCar Champion Alex Palou’s contract through the 2023 season; the press release included a quote from Palou (Malsher-Lopez, 2022a). A few hours later, Palou announced that he had not agreed to the contract extension, that he never gave the quote, and that he had signed a contract with Arrow McLaren SP (AMSP) to drive for their IndyCar team starting in 2023 (Malsher-Lopez, 2022b). In August, Alpine’s Formula One team announced that Oscar Piastri would be their driver for 2023 (Duncan, 2022). Again, just a couple of hours later, Piastri announced that he had not signed a contract with Alpine, but instead signed with McLaren’s Formula One team (Duncan, 2022).
While the two disputes seemed similar from the outside – a driver who was believed to be under contract for one team announcing otherwise – the two disputes had very different outcomes. Palou will drive for CGR in 2023 while Piastri will drive for McLaren. And that is down to the differences in the original contracts signed by the drivers.
Alex Palou’s Option
In July 2022, CGR announced that it had extended Alex Palou’s contract through the 2023 season. Palou disagreed with that statement and announced that he had signed a contract with AMSP to drive for them in 2023. It is believed that his contract with AMSP included an option to test a McLaren Formula One car, which is not an option available with CGR. Later that month, CGR sued Palou and his representatives for breach of contract (Brown, 2022b).
In the publicly available court records, Palou’s contract is mostly redacted. This is not unusual. Unlike sports with a collective bargaining agreement and a uniform player contract, there is no collective bargaining agreement or a uniform driver contract in motorsport. The terms and conditions of every driver contract is confidential, even to other drivers on the team. It is known, however, that CGR and Palou had a contract through the 2022 season with CGR holding an option for the 2023, and possibly the 2024, season (Chip Ganassi Racing v. Palou Montablo, 2022; Benyon, 2022). On July 11, 2022, CGR exercised their option and extended Palou’s contract through the end of 2023 (Chip Ganassi Racing v. Palou Montablo, 2022). CGR announced the extension the next day (Malsher-Lopez, 2022a). Palou disputed this release, saying he had told CGR that he was leaving at the end of the season and announced that he had signed a contract with AMSP (Malsher-Lopez, 2022b).
Palou announcing that he informed CGR of his intent to leave at the end of the 2022 season is significant. It is believed that in driver contracts, even when a team holds the option to extend the contract, the driver must agree to the extension (Benyon, 2022). This was somewhat confirmed by fellow IndyCar driver Tony Kanaan, who is also under contract with CGR. In an interview, Kanaan suggested that options to extend are usually mutual and that this is normal practice in a driver contract (Benyon, 2022). But as the contract is redacted in the court filings, the actual wording of the option is not public information.
In September, the two sides agreed to a settlement. Terms of the settlement were not disclosed, but Palou will drive for CGR in 2023. He is allowed to test McLaren’s Formula One car, which he was doing when the settlement was announced (Cleeren, 2022).
As an interesting side note, this is the second time that AMSP “stole” a driver from CGR. Felix Rosenqvist drove to the Rookie of the Year title for CGR in 2019 before announcing that he was leaving CGR for AMSP for the 2020 season (Fielding, 2022). Palou would have taken Rosenqvist’s seat at AMSP.
Oscar Piastri’s Non-Contract Contract
Oscar Piastri, the 2021 F2 Series Champion and a member of the Alpine driver training program, spent the 2022 season as a reserve driver for Alpine and rival team McLaren. Throughout the season, it was believed that the team’s 2022 drivers, Fernando Alonso and Esteban Ocon, would drive for the team in 2023; Ocon was already under contract and it was believed that Alonso was in the process of negotiating a contract extension with the team (Smith, 2022a). This would have left Piastri without a place at Alpine. Instead, Alpine had plans to loan him to Williams for the 2023 and possibly the 2024 seasons (Smith, 2022b; Noble, 2022).
In August, Alonso announced that he was leaving Alpine at the end of the season and would drive for Aston Martin for the 2023 season (Smith, 2022c). The next day, Alpine released a statement that Piastri would be driving for the team in 2023 (Noble, 2022a). Notably and unusually, the statement did not include quotes from Piastri and was released in the middle of the night in Australia, Piastri’s home (Noble, 2022a). Piastri announced that he had signed a contract with McLaren in July, stating after the dispute was settled that Alpine had been told several times before the August announcement that he was leaving (Duncan, 2022; Noble, 2022a).
In Formula One, all contractual disputes between drivers and teams must be decided by the Contract Review Board (CRB); this is enshrined in both the Concorde Agreement between the teams and Formula One, the commercial rights holder, and in the International Automobile Federation (FIA) Sporting Regulations (Cooper, 2022). The CRB was introduced in the 1990s following the contractual dispute between Michael Schumacher and Jordan and Roberto Moreno’s dismissal from Benetton to make room for Schumacher (Cooper, 2022). Their role is to tell the FIA which team has a valid contract with the driver and which team can hold the super license for the driver (Cooper, 2022). A super license is required by the FIA to race in Formula One and the license is held by the team, similar to the FIFA player registration held by football (soccer) teams. The driver must be under contract with the team for the team to hold the super license and the CRB must have a copy of that contract before confirming the team holds the driver’s super license (Noble, 2022b; Cooper, 2022).
While proceedings before the CRB are to be confidential, this being Formula One, details have been leaked. The dispute between Alpine and Piastri appears to have centered around a “terms sheet” agreement for 2022 and beyond, which was labeled by Alpine as “subject to contract” (Noble, 2022b). Alpine believed this was a binding contract, while Piastri did not (Noble, 2022b). Piastri and Alpine began negotiating a driver contract in November 2021, with Piastri and his team set to receive the proposed contract by the end of November 2021 (Rencken & Nichol, 2022). Alpine did not send a proposed contract for the 2022 season until March 2022, four days before the season was to begin (Noble, 2022b; Rencken & Nichol, 2022). This was the contract submitted to the CRB to secure Piastri’s super license for the 2022 season (Noble, 2022b). They waited until May 2022 to send the 2023 and beyond contract (Rencken & Nichol, 2022). However, this contract was not for Piastri to drive for Alpine as Alpine was attempting to sign a contact with Alonso to continue as their driver (Smith, 2022a; Nobel, 2022b). Instead, the contract stated that Piastri would be loaned to the Williams team for the 2023 season, with a possibility of extending the loan though the 2024 season (Nobel, 2022b). Alpine argued to the CRB that the terms sheet for the 2022 season was a valid contract for 2023 and beyond (Rencken & Nichol, 2022). The CRB disagreed, finding that Piastri had a binding reserve driver contract for the 2022 season with Alpine but that the terms sheet did not extend beyond the current season (Rencken & Nichol, 2022). They found that Piastri has a valid contract with McLaren for 2023 and beyond (Rencken & Nichol, 2022). While Alpine sent a contract for 2023 through 2026, Piastri never signed the contract (Rencken & Nichol, 2022). Therefore, McLaren had the valid contract with Piastri for 2023 and beyond.
Conclusion
The summer of 2022 was a banner time for those who always wanted to know how driver contracts work. It could also serve as a lesson to both drivers and teams – make sure you read and understand the contract.
References
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Brown, N (2022a, July 22). Alex Palou says Ganassi has limited data access as driver’s stories on contract dispute remain mixed. Indianapolis Star. https://www.indystar.com/story/sports/motor/2022/07/22/indycar-alex-palou-chip-ganass-racing-data-access-mixed-messages/65380824007/
Brown, N (2022b, July 27). Chip Ganassi Racing sues Alex Palou in Marion County Superior Count amid contract dispute. Indianapolis Star. https://www.indystar.com/story/sports/motor/2022/07/27/indycar-chip-ganassi-racing-sues-alex-palou-amid-contract-dispute/65383813007/
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Kerri Cebula, J.D., is an Associate Professor of Sport Management at Kutztown University of Pennsylvania. She holds a Juris Doctor from Marquette University Law School, where she also earned the Certificate in Sports Law from the National Sports Law Institute of Marquette University Law School. While at MULS, she was a member of the Marquette Sports Law Review and served as a research assistant to Professor Paul Anderson, Director of the NSLI. Professor Cebula has presented at the Sport and Recreation Law Association, and the European Association of Sport Management conferences and at various events for the National Sports Law Institute of Marquette University Law School. She has been published in the Journal of Brand Strategy, Journal of NCAA Compliance and Concussion Litigation Alert. Her work also appears in the Handbook of International Sport Business and Sports Leadership: A Concise Reference Guide. Professor Cebula is co-author of Governance in Sport: Analysis and Application, available from Human Kinetics.
Professor Cebula’s research interest focuses on the intersection of motorsports and the law with a special interest in intellectual property protection in the motorsports industry.
