04 Apr Arbitration board helps out blundering FC Groningen
Professional football can always count on media attention, even off the pitch. The employment law peripherals are beginning to resemble a parallel league. If players’ and coaches’ contracts are broken open mid-term, everyone can learn the amount of the transfer fee from the media. But what if the club is disappointed with the purchase? We hear little about the severance payments, unless the KNVB arbitration board looks into the matter, as in the case of former FC Groningen coach Frank Wormuth (1579–arbitraal-vonnis-fc-groningen-wormuth (knvb.nl)). Wormuth was summarily dismissed after only 12 games in the current league year. He received a year’s salary. That year’s salary was provided for in the contract as severance pay: not bad pay for a 4.5-month tenure, one might think. But Wormuth returned the amount and claimed full payment of his contract, of which more than 31 months remained. FC Groningen did not accept that claim. The case was referred to the KNVB’s arbitration board.
The odd train of thought at FC Groningen was that a football coach could be equated with a director under the articles of association. A director can indeed be dismissed at any time, but a football coach cannot. The confusion is apparently due to the legislative history of the dismissal ground in Article 7:669(3)(h) of the Dutch Civil Code. That dismissal ground is also known as the ‘(h) ground’, which is intended for situations not covered by the other reasonable grounds for dismissal. The legislature realised that this was rather vague and gave some examples. One of those examples given in the parliamentary history in the context of the (h) ground is that of a football coach who was dismissed on the grounds of poor results (Parliamentary Papers II, 2013-2014, 33 818, no. 7, p. 130). The preventive dismissal test therefore applies in full when a football coach is dismissed, but the ground for dismissal is there for the taking. While the legislature had already placed the ball on the penalty mark for FC Groningen, the club nevertheless decided to summarily dismiss the coach. Summary dismissal is not intended as a means of dealing with disappointing results. Moreover, the contract between the parties was flawed. FC Groningen had provided for a generous interim termination option for itself, while a very limited premature termination option applied to the coach. There was therefore no level playing field (Article 7:667(3) of the Dutch Civil Code). The arbitration board ruled that Wormuth had rightly invoked the voidability of the premature termination provisions.
At the time of the summary dismissal, the contract should have lasted a further 31.5 months. The coach claimed payment in full. The arbitration board ultimately helped out FC Groningen by halving the wage sum owed to 15.75 months, on the grounds that dissolution based on the (h) ground would not have been inconceivable: “In light of the circumstances, the severance pay would not necessarily have been equal to the entire residual value of the contract.” In sum, FC Groningen ultimately had to pay less than four month’s salaries compared with the (unsound) contractual arrangement.
The arbitration board had the right to moderate the severance pay (Article 7:677(4) of the Dutch Civil Code). The Supreme Court found, however, that this right may be exercised only to avoid an unacceptable outcome (Kasteleijn/Penrod, 1 June 1990, NJ 1990, 715). In sum, when exercising its powers of mitigation, the court must exercise a degree of restraint consistent with this principle. FC Groningen did not argue any unacceptable consequences of paying out the contract. On the contrary, the club brought the circumstances entirely upon itself with the unjustified summary dismissal and the flawed premature termination clause. The halving of the severance pay was incomprehensibly substantiated in the arbitration award. The likelihood of the regular court applying a 50% mitigation in this situation is small, given the mitigation doctrine. In the media, the coach’s agent nevertheless said he was satisfied: “Our lawyers stated right away that the provisions in the contract were contrary to Dutch employment law. I am curious to see what impact this will have on other contracts drawn up in the same manner.” But it would nevertheless have been better for the football coach if the dispute had been settled by the regular court, which operates at a greater distance from professional football than the KNVB arbitration committee.
Please contact Michiel van Haelst (+31-6-553 944 87) if you have any questions about this article.