Some years ago, I was visiting with a retired coach who had been the head football coach at a major athletic program in the south. We were talking about the highs and lows of his career, as well as things he would do differently if he had it to do over. He mentioned that he’d never had an attorney review his employment agreements, maybe because he knew I was an attorney and represented coaches.
“I just didn’t think it was necessary,” he said with a laugh. “I just always thought the university and my friends around the program would take care of me and do the right thing.”
After he was fired, the coach realized that wasn’t the case. The coach told me that looking back, he had made a big mistake not having an attorney familiar with coaches’ contracts review his employment agreement; even if he wasn’t able to get the university to revise the agreement, he would have at least understood what obligations the university had toward him should they terminate his employment.
The university, in the coach’s mind, did not “take care of him” and “do the right thing,” and he quickly found out those “friends” around the program were more interested in developing a relationship with the new head coach than in helping him. Unfortunately, this isn’t the first time I’ve had a coach tell me a story similar to this. So, with that in mind let’s go over some things related to your employment agreement I think you should consider (whether you’re a head coach, assistant coach or administrator).
How the Off-Set Clause Can Affect Employment Agreements
Samuel Jackson is well known for his “WHAT’S IN YOUR WALLET?” Capital One credit card commercials, and when looking at specific provisions that are common in coaches’ employment agreements, attorneys will play off that and ask, “WHAT’S IN YOUR CONTRACT?”
Employment agreements can be terminated “with cause” (neglect of duties, violation of NCAA or conference rules, etc.) or “without cause” (primarily not winning enough games), and the main difference between the two is the employer doesn’t owe the coach anything when he is terminated “with cause.” But what happens in the event a coach is terminated “without cause?”
The language in the agreement dealing with termination “without cause” will vary from contract to contract, but a common provision which could come into play is the off-set clause. Here’s an example:
If the employment agreement is terminated “without cause” prior to its expiration, Employer shall be obligated to continue to pay Coach all monies due for the remaining term of the agreement. Coach shall have a duty to mitigate his contractual damages by seeking other employment and Employer’s obligation to Coach shall be reduced by any income earned by Coach between the date of termination and the end of the term of this agreement.
Note — some agreements say that if Coach takes any job (no matter how much it pays) Employer does not owe Coach anything for the remaining term of the agreement.
An Offset Clause Case Study
Let’s look at an example of how the reduction or off-set plays out in the real world.
You’re the head coach at State U, and you have a five-year contract paying you a total of $500,000 a year (and your contract includes the above-referenced “off-set” provision).
At the end of the second year of the contract, State U hires a new athletics director, and the new AD decides to make a coaching change and terminates your contract “without cause.” When that happens, State U still owes you $500,000 for the three years left on your contract.
Two weeks after you leave State U, you get a call from East College to be the offensive coordinator, and they sign you to a three-year contract paying $300,000 a year.
With the above-referenced “off-set” provision in your contract, State U gets to reduce what it owes you ($500,000/year) by what East College is paying you ($300,000/year) — so instead of having to pay you $500,000 a year for the next three years ($1,500,000), State U only owes you $200,000 a year for the next three years ($600,000). That’s a difference of $900,000!
Obviously, State U wants the “off-set” provision in your contract (or even better, the provision that says if you take another job, they don’t owe you anything), and more than likely, the term sheet or the initial draft of your employment agreement will have one of those provisions in it.
However, like anything else in a term sheet or contract, these are items you can attempt to get your employer to change. Will they? It depends – how much leverage do you have, how hard are you willing to push, or how badly do you want the job.
A real-world example is Ellis Johnson, who was a client several years ago when he was named head coach at Southern Miss. We knew the contract of the previous head coach at Southern Miss contained an “off-set” provision, and from the very beginning we told Southern Miss we would not agree to any “off-set” in relation to termination “without cause.” Southern Miss agreed to remove that provision from Coach Johnson’s contract.
Unfortunately, Ellis was terminated “without cause” after his first year. While we were disappointed with the decision made by Southern Miss, Ellis was hired as the defensive coordinator at another program at a salary higher than what Southern Miss was paying him. Without the “off-set” provision, Southern Miss remained obligated to pay Coach Johnson the total amount owed for the final three years of his Southern Miss contract ($700,000 x 3 years = $2,100,000).
Contract Agreement Best Practices
Often, only head coaches will be able to get the “off-set” provision taken out of their contract, but I have seen situations when an assistant coach (coordinator) was able to have it removed as well. As I said earlier, it all depends on how much leverage you have, how hard are you willing to push, and how badly you want the job.
This is why getting an attorney involved at the beginning is important, preferably one who is familiar with coaches’ or administrators’ employment agreements. All doctors aren’t surgeons, and all attorneys aren’t experienced with sports-related employment agreements.
Ask for a letter of understanding up front. Many times, the employment agreement (all 15-20 pages of it) may not make it to your desk until several months after you’ve started. Which is where a letter of understanding comes in: a 1-2 page document listing the “basic” terms of your employment agreement (duties, salary, bonuses, years, and termination provisions including “for cause” and “without cause”).
If you work in athletics and have questions about employment contracts, please contact me at rdavis@wallacejordan.com.