Sports contracts: Fixed term contracts, and the question of legitimate expectation of renewal

Luciano Castelli (BA LLB (Wits))

Sports contracts are unlike any other contract. In law, such contracts have been described as a sui generis contract of employment, which is Latin for “of its own kind”. Yet, the public tend to regard sports contracts as similar to a contract of employment. A contract of employment consists of two parties, the employer and employee, and is formally defined as “a mutual agreement in terms of which an employee, for a specific period and remuneration, places his services under the authority of an employer.” 1 Although sports contracts fall into the ambit of this definition, sports contracts are, in their own right, unique.

The duration of a sports contract is much shorter, when compared to any other contract of employment. Sports contracts are known to be fixed term contracts. Fixed term contracts, by definition, are contracts of employment that terminates on the occurrence of a specified event, the completion of a specific task or project, or a fixed date. 2

However, many athletes reasonably believe that their performances on the pitch will result in the automatic renewal, or extension of their contracts with their respective teams. In some instances, a player’s fixed term contract will be renewed, but in other instances, players are surprised to find that their performances did not result in their contract renewal or extension. This can be done for various reasons, and it may come as a surprise to many players, who unfortunately are not familiar with the law of contract.

To avoid any ambiguity after the expiry of a fixed term sports contract, and to avoid instances where players legitimately expected to have had their contract renewed, based on performance and other factors, clubs tend to insert the following clause into their contracts:

“The entering into of this Agreement between the parties confers upon the player/coach no legitimate expectation whatsoever that such option will be exercised by the Club, or

1 Phatshoane Henney Attorneys ‘Sports contracts: real deal or paper cuffs?’ available at https://www.phinc.co.za/NewsResources/NewsArticle.aspx?ArticleID=1161, accessed on 25 October 2019. 2 Section 198B (1) of the Labour Relations Amendment Act No. 6 of 2014.

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that this Agreement will be renewed or that a further Agreement for a further period will be entered into between the parties. The player/coach confirms that he fully understands the contents of this clause by virtue of his signature of this Agreement, and all consequences thereof”.

In terms of the Labour Relations Act, where an employee reasonably expected the employer to renew a fixed term contract of employment, on the same or similar terms, but the employer offered to renew it on less favourable terms, or did not renew it, same would constitute a dismissal for purposes of the Act. 3

An example of the issue of legitimate expectation with regards to fixed term contracts, and by extension, sports contracts, has been dealt by the Courts from time-to-time. In the case of SA Rugby (Pty) Ltd v CCMA & Others 4, three members of the Springbok squad, namely Victor Matfield, Richard Bands and Christo Bezuidenhout, claimed unfair dismissal after being informed that their fixed term contracts with SA Rugby would not be renewed. In this case, the arbitrator had confirmed that the existence of any reasonable expectation of renewal had to be objectively determined. The coach engaged the players in discussions regarding their future, and the players argued that they were entitled to rely on the expectation that he had created. SA Rugby argued that the contractual terms were definitive – in this case, they specifically stated that the contracts were for a fixed term and that there should be no expectation of renewal, as per the example of the above mentioned clause. 5

The Labour Court held that for an employee to establish a reasonable expectation of renewal of a contract, for the purposes of section 186 (1) (b) of the Labour Relations Act, the employee was required to establish at least the following: a subjective expectation that the employer would renew the fixed term contract on the same or similar terms; the expectation was reasonable; and, the employer did not renew the contract or offered to renew it on less favourable terms. Relevant to the reasonableness of the expectation are the following objective factors: the terms of the contract; any past practices of renewal; the nature of the employment and the reason for entering into the contract for the fixed term; any assurances that the contract

3 Section 186(1)(b) of the Labour Relations Act No. 66 of 1995.

4 SA Rugby (Pty) Ltd v Commission, for Conciliation, Mediation & Arbitration & Others (2006) 27 ILJ 1041 (LC).

5 A van Niekerk Law @work 3 ed (2015), 226. 2

would be renewed (in other words, any undertakings given by the employer); and, any failure to give reasonable notice of non-renewal of the contract. 6

The terms of the contract were held not to be decisive – the court stated that a reasonable expectation of renewal could exist, even when a written contract expressly stipulates that the employee acknowledges that there is no expectation of renewal. The Labour Appeal Court however held that due to the clear terms of the contract, the onus on the employee will be heavier to prove objective evidence that gives rise to the alleged expectation. On the facts, none of the employees could do so. 7

Another case which dealt with the issue of legitimate expectation, and in particular, employment that was previously informal and indefinite, was the case of Ackerman and Another and United Cricket Board of SA.8 In this case, the employee was a full-time cricket coach, hired initially by the SA Cricket Union, but from 1998 onwards by the UCBSA. His duties included running the Plascon Academy for cricket development for about five months of the year, and in addition training and mentoring coaches, lecturing, and taking various cricket teams on tours. The employment was informal and indefinite, but in 2000, feeling vulnerable to change, he sought and was granted a written two-year contract of employment to run from 1 September 2000 to 31 August 2002. In June 2002, as part of a restructuring exercise, the UCBSA advertised the employee's position, recommending that it be 'elevated'. The employee applied to be considered for the post, but was neither interviewed nor appointed. He referred a dispute to the CCMA alleging unfair dismissal and unfair discrimination. The board contended that the fixed term contract had replaced the original indefinite employment relationship and had expired by effluxion of time. 9

The arbitrator found that the purpose of the two-year contract was not to replace the indefinite relationship but to give the employee some further security and protection that he enjoyed on an indefinite unwritten contract. The employer was not entitled at the end of that time to treat the relationship as at an end. The employee had a legitimate expectation of remaining in employment on the same or similar terms. The termination of his employment on the basis of

6 A van Niekerk Law @work 3 ed (2015), 227.

7 A van Niekerk Law @work 3 ed (2015), 228.

8 Ackerman and Another and United Cricket Board of SA (2004) 25 ILJ 353 (CCMA).

9 Worklaw ‘Ackerman and another and United Cricket Board of SA (2004) 25 ILJ 353 (CCMA)’ available at https://www.worklaw.co.za/SearchDirectory/CaseLaw/A31.ASP, accessed on 26 October 2019.

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the expiry of the fixed term contract amounted to a dismissal in terms of Section 186 of the Labour Relations Act, and in the absence of any consultation with the employee was substantively and procedurally unfair. 10

The Court held that Ackerman was dismissed in terms of s 186(1)(b) of the Labour Relations Act and the dismissal was substantively and procedurally unfair. The employer was guilty of unfair discrimination in failing to consider his application for appointment, by reason of his age. The Court ordered the employer to pay Ackerman R480 000, being approximately two years' salary (discounting likely earnings and a thirteenth cheque), less income tax. 11

In light of the above, whether a player can be deemed to have had a legitimate expectation of renewal of their fixed term contract, will be dependent on the facts of each case. Certainly, the onus of proof would rest on the player to show the Court that they could rely on the representations made by the club, in order to claim that there was a legitimate expectation of renewal. Sports clubs may insert specific clauses in their contracts, and draw their respective players attention to same, but most importantly, consideration must be given to the provisions of section 186 of the Labour Relations Act, to avoid any potential disputes between employer and employee.?