Where winning is everything: the renewal of fixed-term contracts in professional sports

Fixed-term contracts are favoured by employers in the sports industry. As professional sport is heavily performance driven, fixed-term contracts give employers a measure of flexibility in contracting with employees. While fixed-term contracts have benefits, both employees and employers need to be aware of what creates a right to renewal.

Sports professionals should understand that continued employment – and contract renewals – are usually directly linked to their performance. Employers must therefore ensure that they do not act in a manner which unnecessarily raises expectations of renewing an employee’s fixed-term employment contract, particularly where performance is central to the decision to renew.

The law recognises that fixed-term contracts may be abused so the Labour Relations Act, 1995 (LRA) provides protection for fixed-term employees. A recent case has brought this issue to light. The decision in Klusener v KZN Cricket (Pty) Ltd [2016] 12 BALR 1334 (CCMA) highlights a situation where the Commission for Conciliation, Mediation and Arbitration (CCMA) was required to balance the employee’s right to job security on the one hand, and the employer’s business needs on the other.

Facts

Former national cricket team member, Lance Klusener, was appointed as caretaker coach of the KZN Dolphins cricket team, owned by KZN Cricket (the Company), for the remainder of the 2012 season after the team’s previous coach resigned. At the end of the season, Klusener was appointed team head coach for two years. He then entered into another two year contract with the Company, which was due to expire on 30 April 2016. However, before the final contract expired, he was informed that his services were no longer required and was paid out for the remainder of the contract.

Klusener claimed that in December 2015 the Company’s CEO had promised to ‘roll-over’ his contract for a further 12 months. He argued that the Company’s failure to do so amounted to a dismissal. The Company denied its CEO had given any undertaking regarding an extension and that even had the CEO done so, he was not authorised to bind the Company in this manner. It contended that it had decided to dispense of Klusener’s services as the team was not winning games and under these circumstances had a right to do so.

Law

For purposes of section 186(1)(b)(i) of the LRA, fixed-term employees can only claim to be dismissed, and challenge the fairness of their dismissal, if they can prove that they had some reasonable ground for expecting a renewal of their contract. The onus to prove that a reasonable expectation of renewal exists rests with the employee.

Reasoning

In coming to his decision, the Commissioner applied the principles set out by the Labour Appeal Court in SA Rugby Players Association & others v SA Rugby (Pty) Ltd & others 2008 29 ILJ 2218 (LAC). In this case, which had facts comparable to Klusener’s, national team rugby members had relied on assurances by the team’s former coach that they would be offered further contracts. SA Rugby said the coach lacked the authority to offer contracts and his assurances could not be relied on. To be successful in a claim for non-renewal of a fixed-term contract, an employee would have to present facts which, objectively considered, establish that a reasonable expectation of renewal existed. Because the test is objective, the enquiry is whether a reasonable employee in that position would have expected the employer to renew their fixed-term contract on the same or similar terms.

The Commissioner also applied the decision in Dierks v University of South Africa [1999] 4 BLLR 304 (LC). Here the Labour Court set out criteria to be considered in establishing whether a reasonable expectation of renewal exists, which included an evaluation of all the surrounding circumstances.

Apply law to facts

Applying these legal principles, the Commissioner noted that Klusener based his dismissal claim on an alleged promise by the Company’s CEO regarding a further extension, coupled with the fact that he had been actively involved in selecting the team for the following season. Despite this, the Commissioner held that, in terms of the contract, Klusener must have known that the CEO had no authority to extend his contract, but could only recommend an extension to the Company’s board. Therefore, if the CEO had indeed given him an assurance of an extension, he had to act on the board’s instructions. Therefore Klusener could not have reasonably believed that the CEO’s assurance was binding on the Company.

Decision

The Commissioner emphasised the dampening effect which the team’s non-performance ought to have had on Klusener’s contract renewal expectations. Klusener could not reasonably have believed that he was entitled to a contract extension irrespective of the team’s performance. During the arbitration, the chairperson of the Company’s board said winning is “everything” in professional sport and all else is peripheral. The Commissioner accepted that, rightly or wrongly, this captured the reality in modern professional sport. Therefore, what mattered was not the Klusener’s performance as coach, but the performance of the team as a whole.

The Commissioner considered at which point in his contract’s lifespan Klusener ought to have held a reasonable expectation of renewal, in order for the failure to renew to constitute a dismissal in terms of the LRA. If at the commencement of a contract, an employer is so impressed with an employee that it creates a reasonable expectation of renewal, this would mean that the contract should be renewed at the time of expiry, irrespective of what happens over the intervening contract period. This would not be reasonable, particularly in professional sport, where players and coaches are not given contracts of indefinite duration as the flexibility to recruit the best players and coaches is imperative.

An employee must hold a reasonable expectation of renewal at the time when that employee is informed that the contract is not going to be renewed or when the contract expires. Where current performance falls below the expectations of fans and shareholders, a professional sports coach such a Klusener cannot reasonably expect to remain in employment, irrespective of his past glories.

The Commissioner held that Klusener had failed to prove that he had been dismissed for purposes of section 186(1)(b)(i) of the LRA and his application failed on this basis.