Key Negotiating Elements of Coaching Contracts

Aug 29, 2008

By Donna A. Lopiano, President, Sports Management Resources
NOTE: This is part two of a story written by Donna A. Lopiano, President, Sports Management Resources, which looks at coaching contracts. It is important to preface any discussion of coaches’ contracts with a reminder that careful review by school district or university legal counsel of all employment policies and documents is essential. The purpose of this article is to give the athletics director an understanding of the most common elements of coaches’ agreements.
Key Negotiating Elements
Duration of the Employment. Typically, the term of the employment agreement is addressed in either of three ways: (1) a specific number of years, (2) a specific number of years with a rollover provision specifying that the agreement continues for another term or specified number of years or (3) a specific number of years with provisions for renegotiation during the term of the agreement at a time certain, time intervals or under certain conditions. Not recommended but frequently encountered in negotiations is a requirement that the institution provide advance notification of intent not to renew or non-continuation via rollover. Such advance notice provisions can result in “lame duck” coaches unless accompanied by the institution’s right to transfer or reassign the coach to a different position during the “lame duck” period. Athletics directors should take care to eliminate all ambiguities that relate to rollover clauses and the duration of agreements. It is also important to note that some universities and states have laws that prevent teachers at public education institutions or other state employees from having employments agreements in excess of one year in duration. In such cases, the institution must act to get special legislation permitting an exception.
While provisions for renegotiation during the term of an agreement appear unnecessary, they are fairly common in long-term contracts because the coach wants assurance that his or her rate of compensation will keep pace with the marketplace. There are even some high profile coaches who have difficult negotiations with athletics directors or presidents or are so comfortable working with people they like and trust, that the departure of people in these positions can trigger a renegotiation provision which may or may not be limited to certain aspects of the agreement.
Many coaches look for a minimum three-to five- year agreement, recognizing that rebuilding a sport program requires multiple recruiting classes. Longer term agreements are usually limited to coaches of proven value and performance. Shorter term agreements may reflect the willingness of an institution to take a chance on a promising but unproven coach or an institution whose alumni does not tolerate a losing program over more than a three year period. Again, speaking with athletics director colleagues at peer institutions or schools with programs of a quality level to which the institution aspires will give the athletics administrator a good idea of the duration, compensation, benefits and other considerations that represent the marketplace in which the athletics director should be recruiting.
Termination of Employment.
While it may appear disadvantageous to talk about termination clauses when a manager is trying to hire a new employee, the conditions for termination by choice of the coach or the institution are critical elements of the agreement. It is essential to think of worse case scenarios and how the manner of a coach’s exit before the end of the contract will do the least damage to the institution’s relationships with donors, the image and pocketbook of the institution and the reputation of the coach, if at all possible. A common sense approach is to envision three scenarios in which the growth or quality of the sport program is not progressing according to plan or the coach is being dysfunctional in a minor or major way and to try to include provisions in the agreement that would permit termination to be handled in all or most of these various ways:
(1) Scenario #1: The coach is a good person, well liked within the institution and among alumni, with a skill set capable of contributing to the athletics program in one or more ways other than coaching. Taking care of this person is important to donors and other who support the program and the contributions of this employee to another area of the program would be equal to or better than hiring a different employee. In this case, the institution may wish to include a provision where the coach can be reassigned to another position in the athletics department or university. Such a provision might be attractive to coaches nearing the end of their careers but not at all acceptable to coaches who wish to remain in the coaching profession.
(2) Scenario #2: Either the coach wants to leave or the institution wants the coach to leave before the end of the term of the agreement and there is otherwise no violation of the terms of the agreement. Note that this scenario would apply in cases where the institution is unhappy with a won-lost record (assuming a specific standard is not included as a performance expectation in the agreement), the pace of development of the program or the general quality of the program, all conditions that would not warrant termination ‘for cause”. In this case, there is usually a “buy out” or “liquidated damages” provision where one party pays the other a specified and reasonable amount to exit the agreement in what could be a fairly cordial manner.
(3) Scenario #3: The coach violates a performance standard contained in the contract, conduct that reflects unfavorably on the reputation of the institution (commonly referred to as a morals clause), criminal conduct, intentional violation of rules or other specifically defined unacceptable conduct. This is commonly referred to as “termination for cause”. In this case, all compensation, benefits and promises in the agreement become null and void at the date of termination.
Here are some examples of contract provisions that would result in termination “for cause” if breached by the coach:
• Knowingly participates in violations of athletics governance association, school district or college or university rules, policies and regulations or knowingly allows such violations by others or fails to report such violations within a reasonable time period from when he or she learns of such violations
• Failure to carry out duties and responsibilities specifically delineated in the agreement and when informed of such failure by the institution, fails to remedy such deficiencies
• Conviction of felony
• Misconduct that offends the ethics or traditions of the institution or brings discredit or harm to the reputation of the institution
• Disability or death (usually accompanied by some kind of payment to coach or spouse covered by an insurance policy paid for by the institution)
• Violation of state or institution ethics laws
• Fraud or dishonesty in the performance of duties, including falsification of records by the coach or permitting or condoning such by an employee under his or her supervision
• Failure of coach, or failure of the coach to instruct/counsel employees or student-athletes under his or her supervision, to respond fully and accurately or to appear upon request during investigations of rules violations by the institution or governance associations of which the institution is a member
• Wagering on any amateur or professional athletics contest or consorting or associating with known gamblers or bookmakers
• Use of controlled substances to such a degree that performance of duties is significantly impaired over a substantial period of time
• Failure to cooperate and enforce policies and procedures related to student-athlete drug-testing programs
• Acts of violence or personal conduct, or condoning or encouraging employees or student-athletes in such conduct which may not warrant criminal prosecution but results in public disrepute, contempt, scandal or ridicule that reflects unfavorably up the reputation or mission of the institution
• Actions taken at other institutions which violate governance association rules and which not disclosed to the institution
It is also important to anticipate conflict when termination of an employee occurs. The agreement should always include some type of due process provision where the employee is given the opportunity to present evidence refuting the reasons for termination. As a practical matter, termination of employment contract provisions should never be activated by an athletics director without prior consultation with the institution’s human resources and/or legal counsel.
Basic Coaching Duties and Responsibilities. Employment policies and agreements should cover the basic duties and responsibilities of all coaches in their respective sports such as:
• instruction of athletes
• supervision of practice and conditioning sessions
• instruction, supervision and direction of athletes in competitive events
• selection, supervision and evaluation of assistant coaches, volunteers, student coaches, graduate assistants, interns, managers or others assisting in the conduct of the sports program, including ensuring that such personnel comply with athletics association rules and regulations
• recruitment of athletes
• budgeting
• knowledge of and adherence to school/college policies and procedures
• knowledge of and adherence to athletics governance association rules and regulations
• scheduling of competitive events
• media relations
• fundraising expectations or involvement
• demonstrate policies and conduct that advances the academic success of athletes
More specific responsibilities may also be mandated by conference or national athletics association governance regulations such as inclusion of the NCAA regulation language that subjects coaches to NCAA disciplinary action for rules violations. The athletics director may also wish to emphasize the importance of selected specific rules or expectations to clarify their applicability such the NCAA Division I requirement that all coaches annually report all athletically-related compensation from all sources.
‘Non-Compete’ Requirements
Another common contract provision is a restriction on the coach taking another coaching job at a competing university for a specified period if the coach leaves prior to the end of the agreement either with or without cause. Key to such “non-compete” provisions if they are ever challenged in the courts, is they must be (1) time limited (usually in the one to two year range) and (2) competitor limited (restricted to a small group of competing institutions such as institutions within the same athletics conference). Other types of non-compete provisions might be:
• promise not to recruit any athlete identified as a prospect by the institution while he/she was employed as a coach
• no use of software, records or other materials developed in the process of coaching at the institution
Similarly, contracts will specify the return of all playbooks, recruiting files, credit cards, keys, etc.
It is advisable to have all compensation agreements related to the coach’s employment at the institution come through the school district, college or university. Coaches should not be allowed to leverage their position as a school coach for private gain without the express permission of the institution. The institution owns the rights to its name and logo, display of signage in school venues or on school uniforms and numerous other properties which might be leveraged for sale of promotional or marketing rights of considerable value. Coaches do not have the right and should not be selling these school property rights. The cleanest way to comply with these legal and ethical considerations is for all agreements related to the display of commercial logos on school property, the ownership of broadcast and telecasting rights for coaches’ shows, call-in programs, post-game and pre-game, internet, or other use of other rights owned by the institution to be written between commercial sponsors and the educational institution with the educational institution receiving all funds. The institution then writes a contract with the coach that pays the coach for performing certain duties related to such initiatives. Thus, it is prudent for coaches’ agreements to address ‘total compensation’ from all sources rather than just salary. Examples of the kinds of compensation provisions typically addressed under the ‘total compensation umbrella’ are:
• base salary – indicate payment schedule and annual amount for performance of basic coaching duties and responsibilities, some of which might be designated for a deferred compensation plan that affords tax benefits to the coach
• payment of a lump sum for all or designated amounts for each for ‘personal services’ which are specified duties in addition to coaching and recruiting such as:
o coaches television and/or radio shows, internet chat rooms
o participation in athletics department or university fundraising
o making appearances or speeches upon the request of the athletics department
o participating in media interviews or other public relations activities
o endorsing products of sponsors of the athletics program at the request of the athletics director
o consulting with apparel companies that provide institutional uniforms, shoes and equipment at the request of the athletics director
o conducting summer camps or sports clinics
o rights to the coach’s name, image, autograph
o promise that the coach will not enter into outside agreements with companies that are competitors to athletics program sponsors
• pension/retirement plans – indicate annual employer contribution and when the contribution is made (i.e., end of year)
• medical, dental and other benefits normally provided to coaches
• expense allowances for gasoline, clothing, family travel, personal cell phones
• benefits of value that are paid for by the institution or its donors such as:
o provision of car(s)
o country club or private club memberships, greens fees, carts
o personal use of private planes
o low-interest home loans
o use of vacation homes
o luxury suites in institutional or professional sports facilities
o tickets for institutional, NCAA or professional sports events
o free use of institutional facilities for summer camps
o life insurance and disability insurance policies
o insurance policies for courtesy cars provided by the institution or donors to the institution
• bonuses or incentives for the accomplishment of objectives such as:
o percentage of ticket revenues
o flat amount for conference or national championships
o flat or graduated amounts for graduation rates or academic progress rates
o flat amount for winning specific contests (i.e., against arch rivals)
o flat or graduated amounts based on longevity (i.e., institution contributes a sum each year to an annuity or other financial vehicle that accumulates interest and becomes due to the coach after a specified period of time)
o contract extensions tied to winning specific games or numbers of games
o flat amount tied to achieving team behavior goals (no arrests or misbehavior damaging to institutional reputation)
o being named conference or national coach of the year
Such compensation elements of the agreement usually specify a guaranteed minimum base compensation which may be a considerable cash figure. Some contracts may have multiple types of guarantees, one amount as salary and another amount for personal services. This split in compensation for job duties and other services is often constructed in order to make the coach’s annual salary from the institution appear more reasonable.
Liquidated Damages
If the coach decides to leave before the end of the agreement or if the institution decides to terminate the coach’s employment not for cause (no fault or breach of agreement by the coach) before the end of the agreement, there is usually specified compensation that must be paid by one party to the other for damages incurred because the full term of the contract was not fulfilled. These provisions are based on the notion that the early departure causes “damage” to the party responsible for not honoring the duration of the agreement.
When the coach breaks the contract to go elsewhere, there may be provisions like the following:
• coach must inform institution of resignation in writing
• coach has no entitlement to any compensation or benefits detailed in the agreement following the termination date
• coach must pay a lump sum of a size reflective of the expenses that will be incurred by the institution in having to recruit another coach (note that this sum is often paid by the institution for which the coach is departing)
The stakes are higher if the institution terminates the coach without cause, usually:
• institution must pay total compensation amount through the end of the agreement or a fixed (usually large) sum
• continuation of health care benefits through the end of the contract term, paid by the institution or the coach, or until he/she obtains employment that provides such benefits
• a clause that relates to the personal services part of the contract that obligates the coach to seek employment as a coach on a radio or television show or in some other capacity and if the coach gets employed by another institution and starts getting paid for such personal services by them, the institution that terminated him/her would not be responsible for continuing these payments or other personal services terms of the agreement
• as a condition of the institution paying out the considerable sum representing the remainder of the agreement or a lump sum, the institution may be permitted to cease payment on and provision for life and disability insurance and the coach may be required to sign a comprehensive release that prevents the coach from making further claims on the institution.


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