Martin J. Greenberg

Terminating a Coach without Cause and the Obligation to Mitigate Damages Termination Without Cause

The right of the university at any time to terminate the coach’s contract without cause or reason and for the university’s own convenience prior to its normal expiration, which normally involves payment of compensation to the coach who was prematurely terminated. TYPICAL TERMINATION BY UNIVERSITY WITHOUT CAUSE / LIQUIDATED DAMAGES

This contract may be terminated by the president at any time without cause. In such event, Coach will not be reassigned to any other position within the Department of Athletics. Further, in such event, University shall pay to Coach as liquidated damages, in lieu of any and all other legal remedies or equitable relief, a sum equal to 75% of the annual guaranteed amount (base salary and recurring remaining supplemental payments) of this contract for each year or portion thereof (pro rata) remaining in this Contract. The above sums will not be reduced in the event of Coach’s subsequent employment during the period covered by this Contract. Payments shall be made in equal monthly installments over the remaining months of this Contract, beginning one month after the date of termination. The University shall not be liable to Coach for any University benefits or any collateral business opportunities or other benefits associated with Coach’s position as Head Football Coach. The parties have bargained for this liquidated damages provision, giving consideration to the following: This is a Contract for personal services. The parties recognize that a termination of this Contract by University prior to its natural expiration may cause Coach to lose certain benefits, supplemental compensation or outside compensation relating to his employment at University, which damages are difficult to determine with certainty. Accordingly, the parties agree to this liquidated damages provision. Reasons for Termination Without Cause 1. Failure to win 2. Lagging ticket sales 3. Dwindling attendance 4. Unhappiness among big money donors 5. Loss of interest in the program 6. Inability to compete in a conference or against a rival opponent 7. Changes in administration 8. Any other cause not listed in the termination for cause contractual provisions Termination Without Cause is Expensive University of Illinois Football University of Illinois Basketball • - $2.6 million for the two • Bruce Weber - $3.9 million for the years remaining on his contract three years remaining on his contract • Jolette Law - $620,000 for the two years remaining on her contract.

“The (SEC) does everything bigger in football, including how much schools are paying their former coaches not to coach.” Within the last two years, six of the SEC league’s 14 schools have made coaching changes at a potential total buyout cost of $25.6 . With the firing of Gene Chizik by Auburn, Athletic Director Jay Jacobs acknowledged Auburn’s contractual obligation to pay him $7.55 million in monthly installments over the next four years. This is in addition to $5.083 million owed fired Auburn coach in 2008. That’s a $12.28 million outlay for two fired coaches in the span of just four years. Payment Amount and Format Annual base and talent fee for the remaining term of the contract.

Lesser of base annual salary or $3 million depending upon the year of termination.

Declining percentage of salary and talent fee on a monthly basis depending on year of termination.

Percentage of amount owed under the contract for the remaining term of the contract but not 100%. Best Practices – Termination Without Cause Clauses 1. Written Notice 2. Payment Amount and Format 3. Liquidated Damages 4. Release 5. Benefits 6. Withholding 7. Interest Upon Default 8. Reassignment 9. Death or Disability 10. Collateral Benefits 11. Records Return 12. Resignation 13. Obligation to Mitigate Mitigation of Damages:

Reasonable steps undertaken by fired coach to lessen or mitigate his damages by making reasonable efforts to obtain and maintain comparable employment. Elements of a Mitigation of Damage Clause 1. An affirmative obligation to mitigate 2. Reasonable and diligent efforts to obtain comparable employment 3. Define contractually what constitutes comparable employment 4. Meaning of compensation 5. An offset provision – University’s continued liability for any differential if amounts are offset 6. Reporting function 7. Notice of employment 8. Prospective rather than retroactive application Mitigation Clause --Expert Witness Case

• Mitigation: Coach agrees to mitigate the Team’s obligation to pay liquidated damages under this Section. – The Team shall be entitled to off-set and reduce any and all amounts of compensation that may be due to Coach from the Team under this Section against any amounts earned by coach under contracts with other individuals or entities provided that this right of set-off is limited to a head coaching and/or general manager position with the NBA club or NCAA institution. – Notwithstanding the foregoing, it is the specific agreement between Coach and the Team that the operation and implementation of this set-off provision shall never result in Coach’s receipt of compensation less than would have been received for the period this Agreement was to have remained in effect. Lack of Good Faith or Reasonable Effort to Obtain Employment

1. Absence of an affirmative marketing plan. 2. Passive and inactive approach versus a pro-active approach to obtaining employment. 3. Minimal attempts to market coach – no Book, i.e. marketing material, of a substantive nature on Coach for prospective employers. 4. Coach was not positioned for potential employment openings. 5. Coach retained one of the leading representatives of coaches in the industry, but there is little evidence that that representative was involved in the placement effort at all; rather, a junior associate with little or no experience was heading up the job procurement effort. 6. Inquiries and follow-up from the junior associate indicate a lack of serious effort to place coach. 7. Communications to prospective employers indicated a lack of a serious interest, i.e. only passive inquiries were made, “If you’re interested, call me.” 8. There was a lack of follow-through with respect to any inquiries that were made. 9. The agent adopted a strategy that is commonly referred to as “slow play.” 10. There was a question as to whether Coach was really interested in working by virtue of several public statements that he wasn’t ready to work. 11. Coach was unwilling to leave a certain geographical area and only wanted to be placed within a certain conference and didn’t necessarily want to move from his home in his current location. 12. There was an absence of any kind of paper trail – little evidence of marketing materials, i.e. the Book, letters or emails to potential employers. 13. There was no notebook or diary on Coach’s mitigation efforts. 14. Coach’s agents had conflict of interest that would have lessened attempts to place Coach. 15. Agents had other coaches in client’s stable who were interested in the mitigation jobs that were available during the mitigation period and were willing to relocate. What is Comparable Employment?

• Coach maintained that it would be impossible for him to obtain another professional or collegiate job after the termination and so close to date of termination. • With respect to college jobs that became available, the Coach maintained that the positions available were not identical from the standpoint of location, compensation, job responsibility, working conditions and status. • Coach claimed he was tainted by his lack of success in the NBA. Coach maintained that it was unreasonable to expect Coach to relocate for an NCAA position. • Coach claimed that although the language in the mitigation clause defined comparable employment as any NCAA institution, it only meant employment that was comparable from a monetary and job status and location status, not any NCAA job. • It was unreasonable to expect coach to move. What jobs became available for which he might be considered were low pay compared to the pay that he had obtained as a professional coach. CONCLUSION

The better approach to an early terminated coach is simply a negotiated amount as liquidated damages, which is paid either in lump sum or tax structured pursuant to an agreement between the coach and the university without any obligation whatsoever to mitigate or find offsetting employment. The liquidated damages amount should be a number that is negotiated and defined by the present value of those damages that the coach and the university agree are to be paid for early termination. Unless a master draftsman contemplates the many issues that arise with respect to what this obligation means, a simple no obligation to mitigate whatsoever is the simplest solution to keep these matters out of the world of arbitration and the courts.