Samuel Jackson is well known for his “WHAT’S IN YOUR WALLET?” Capital One credit card commercials. Occasionally we’ll take a look at specific provisions that are common in coaches’ employment agreements and when we do, we’ll play off Samuel Jackson’s commercial and our question will be “WHAT’S IN YOUR CONTRACT?

Whats in your wallet

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”. Today we’re going to look at 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 here’s an example of a provision that could be in your employment agreement (it’s called an “off-set” clause):

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!

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 he/she terminates your contract “without cause”. When that happens, State U still owes you $500,000 a year 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 a job they don’t owe you anything) and more than likely the “term sheet” (if State U uses one) or the initial draft of your employment agreement will have one of those provisions (or something similar) in it. Like anything else in the “term sheet” or the contract, though, this is an item that 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.

Ellis Johnson is a client of ours and several years ago we worked with him when he was named the 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 … and 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). This isn’t confidential – here’s an article discussing the situation. LINK TO ARTICLE

Usually only a head coach 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 I said earlier, how much leverage do you have, how hard are you willing to push, or how badly do you want the job.

If you have any questions or comments, you can reach me on my cell (561-662-3251) or my office (205-874-0368) or you can email me at rdavis@wallacejordan.com or you can reach Jonathan Shugart on his cell (334-559-6906) or his office (205-874-0396) or you can email him at jshugart@wallacejordan.com.