Are fixed-term employment contracts for sports directors invalid in Germany?
As in most European jurisdictions, fixed-term employment contracts are only valid in Germany in certain situations:
- if there is an “objective reason”; or
- up to a maximum period of two years, whereby, up to that maximum period, the fixed-term contract may be extended up to three times.
A fixed-term employment contract without an “objective reason” will usually be unlawful if the employee has been previously employed by the same employer.
Footballers vs Directors
According to the case law of the German Federal Labour Court, there is usually an “objective reason” for fixed-term employment contracts for professional football players. The justification is that the professional level of performance expected of players can only be given for a certain period, since physical performance tends to decrease with increasing age. Further case law dictates that the fixed term of a sports coach's employment contract may be objectively justified if the task of coaching top athletes, including particularly talented young athletes, involves the risk that the coach's ability to motivate the athletes entrusted to him/her will diminish over time.
Recently, the sports director of Hannover 96 (a famous German professional football club, currently struggling in the second division of the Bundesliga) sued the club and the Hannover Labour Court had inter alia to decide on the validity of his fixed-term employment contract. In its January judgment, the court somewhat surprisingly held that the fixed term was not justified by an objective reason and was therefore invalid. As a consequence, the sports director’s employment contract was deemed to be indefinite and Hannover 96 ultimately reemployed him in a different role (head of sports).
In practice, this may lead to more sports directors (not only of professional football clubs), particularly those who are dismissed, challenging the validity of their fixed-term employment contracts primarily to claim a sizeable severance.
The claimant, Gerhard Zuber, was employed as the sports director by Hannover 96, a professional football club, from 1 November 2015. His role encompassed the supervision, observation and evaluation of the team, squad planning, scouting and exchange with trainers and managers. In total, the employment contract was fixed for a period of four years and eight months. In his claim brought to the Hannover Labour Court, Zuber argued that the fixed-term nature of his contract is invalid and claimed continuation of his employment contract for an indefinite period.
The Hannover Labour Court agreed with the claimant and held that the fixed-term nature of his employment contract is invalid. The court held that there was no “objective reason” for the fixed term as required by German law for employment contracts exceeding a fixed term of two years.
Contrary to the club’s arguments, the court held that the fixed term was not justified by the “nature of work” of a sports director. According to the court, the case law on fixed-term contracts with professional football players cannot be applied to the employment relationship of a sports director.
The “nature of work” as a professional football player is in principle capable of justifying the fixed-term nature of an employment contract since the player is liable to provide a professional sports performance which can only be given for a limited period. In addition, it is part of the nature of professional sports that teams are rearranged, game tactics altered, and players transferred to other clubs. For this reason, it is in the interests of both the clubs and the players themselves to conclude fixed-term employment contracts.
However, according to the court, this reasoning cannot be applied to sports directors. A sports director is not required to perform any sports but instead to supervise, observe and evaluate the team, to plan the squad, and to scout and exchange with trainers and managers. Therefore, the performance of a sports director does not decrease with age any more than it usually does in any other employment relationship. In particular, it must be noted that the activities of a sports director are not within his or her sole responsibility but are carried out in close connection with the trainers and managers. Therefore, there is no apparent reason why the tasks of a sports director cannot be fulfilled by the same person in the long term.
This judgment, the first one published on this question of law by a German employment court, may have significant relevance, since many sports clubs employ their sports directors on a fixed-term basis. The club has launched an appeal.
Professional sports clubs will need to follow the outcome of the appeal carefully. If their fixed-term contracts are going to be deemed invalid, sports directors will need to be employed on permanent contracts. This means a higher risk of dispute and litigation upon termination in a sector where management changes occur regularly. Although one would think that many sports directors would not wish to risk their reputation in a small market by suing their previous club for reinstatement, pre-agreed contractual severance packages may well become the norm to reduce the risk of sports directors who are terminated challenging such terminations.