Key Elements of Coaches’ Contracts
By Donna Lopiano, President, Sports Management Resources
NOTE: It is important to preface any discussion of coaches’ contracts with a reminder that careful review by school district or university legal counsel of all employment policies and documents is essential. The purpose of this article is to give the athletics director an understanding of the most common elements of coaches’ agreements.
Types of Agreements
‘Employees At Will’. Over 2,000 colleges and universities and over 25,000 high schools employ coaches for their athletics programs. At the high school level, coaches’ salary schedules are most often addendums to full-time teacher/administrator salary schedules that list compensation for “extra duties” (i.e., band advisor, athletic team coach, etc.) with provisions that similar stipends be paid to part-time personnel hired to coach. These stipends differ by geographical location and wealth of community, and typically range from $1,000 to $10,000 per sport head coaching responsibility with lower sums for assistant coaches. These schedules are often subject to collective bargaining as part of teachers’ union agreements. Typically, high school coaches and teachers get a letter of appointment each year issued by the school district for the upcoming year or containing no mention of the duration of the appointment. The appointment with unspecified term simply continues until the school or the coach decides to make a change. The appointment letter specifies what the coach is being hired to do. Unless otherwise covered by a collective bargaining agreement, these coaches are ‘employees at will’ which means that the school can terminate the employee at any time and the employee can leave at any time. In these situations, the high school athletics director does not have to deal with coaches contracts. Coaching duties are simply part of the assignment made via letters of appointment issued by the school district.
The vast majority of colleges and universities operate similarly. Coaches are employees at will with appointment letters issued by the office of the president, chancellor or provost. However, at the college level, coaches are more likely to have full-time or part-time coaching responsibilities with no or few teaching assignments. Also, at the collegiate level, coaches’ salaries vary greatly and may be negotiated rather than part of a public schedule or teachers/faculty collective bargaining agreement. However, these practices vary from state to state with regard to public institutions and the variability is even more evident at private institutions of higher education.
Standard letters of appointment usually consist of one page with few details regarding the specific responsibilities of the position. They often contain references to official job descriptions which are normally detailed in athletics department policy manuals. It is very important that these athletics department policy manual provisions regarding coaches’ specific responsibilities and expectations for conduct and continued employment be reviewed and approved by school district or university legal counsel because they reflect contractual obligations.
Multi-year Coaching Agreements. Individually negotiated multi-year coaching agreements are generally accepted at institutions that hire full-time coaches for a single sport, have a high expectation with regard to competitive success, and/or expect the sport to produce significant revenues. These agreements are the opposite of ‘employee at will’ appointments in that they have a specified duration, limited conditions under which employment may be terminated and other terms that elevate the financial and other obligations of the institution and the employee. Such contracts are commonplace within the NCAA’s Division I member institutions but also occur in selected sports at institutions in other competitive divisions and, more infrequently, at the high school level. For example, it is not unusual for a high school football coach in some states to be paid more than teachers and have a multi-year employment agreement, courtesy car and other perquisites more commonly found among college coaches. Even a small Division II or III athletics program may have a continuing expectation to be dominant in a sport unique to the history of a school with a coach who receives higher compensation and greater contractual assurances than coaches of other sports in the program.
Thus, for athletics directors who must negotiate such agreements, it is important to understand institutional expectations for the sports program and be versed in the history of existing coaching agreements within the institution. Consultation with legal counsel or human resources administrators are required to determine and get approval for employment policies, issue employment agreements and authorize the types and limits of permissible compensation. The following information is useful for athletics administrators whose responsibilities include negotiating employment agreements with coaches.
Consistency With Policy Documents. Often, institutions have some coaches who have multi-year agreements and others who are employees at will. The athletics director must always be sure that coaches contracts and policy manual provisions are consistent or that differences are clearly acknowledged as being applicable to specific types of employees. Thus, employment policies and individual employment agreements should be carefully reviewed and approved by legal counsel or other administrative authorities before being issued.
Marketplace v. Educational Sport. The elements of coaches’ employment agreements and/or athletics department employment policies must be considered from both a philosophical and marketplace perspective. It is not unusual for the marketplace that includes some high-powered high school programs or NCAA Division I football and basketball coaches to offer benefits and incentives that are inconsistent with educational philosophy, especially in situations where the athletics director, principal, superintendent and/or college president believes their positions are in jeopardy if the community or alumni are not provided with winning teams. How can an educator justify a coach earning thirty times more than an average full professor or three times more than the university president, especially in a tainted marketplace where wages to athletes are prohibited and most athletics programs operate at a net loss? While the athletics director may find many of the following key elements or benefits distasteful from an educational sports perspective, the fact remains that right or wrong, they represent the reality of a difficult to explain marketplace in which failure to provide such elements may very well signal the end of an athletics director or college president’s employment. Coaches agreements should never be negotiated in a vacuum. The athletics director must consult with colleagues at like institutions, preferably peer conference or other level competitors, to get a clear understanding of the ‘going rate’ for each contract element. These institutions comprise the marketplace in which the institution must compete for the employment of coaches.
Agents and Attorneys. The athletics director may need to deal with a coach’s lawyer or agent in contract negotiations. In general, as the compensation, complexity and sophistication of employment agreements increase and the negotiating process involves legal and business experts as representatives of the coach, so should the involvement of an institution’s legal counsel, human resources administrators and other senior administrative officials. Athletics directors should focus on substantive deal points – a plain language list of agreed upon compensation, benefits and responsibilities – and leave the actual drafting of the contract up to the institution’s attorney.
There is an advantage to initially meeting with the coach and his or her agents without the institution’s attorney being present. It deescalates the weight of such proceedings, allows the coach and athletics director to talk in plain language without attention to legal subtleties and allows the initial meeting to focus on the coaches’ and athletics director’s needs and expectations rather than reaching an immediate agreement. The athletics director can explain that the purpose of an initial meeting is to put all needs and expectations on the table so the athletics director can follow up with conversations with higher administrators to determine the elements and limits of compensations and benefits he or she is authorized to include any agreement. If the coach refuses to participate in such a meeting, indicating that he or she prefers an authorized representative to work with the athletics director instead, meeting with the agent does not change this approach to the initial meeting. Subsequent meetings will represent actual negotiations that examine the acceptability or possible revision of deal points in an attempt to come up with a final agreement that balances individual coach and institutional interests. Once the deal points are finalized, the relegation of those points to legal language can become a matter handled between the coach’s and institution’s attorneys.
Key Contract Elements
Duration of the Employment. Typically, the term of the employment agreement is addressed in either of three ways: (1) a specific number of years, (2) a specific number of years with a rollover provision specifying that the agreement continues for another term or specified number of years or (3) a specific number of years with provisions for renegotiation during the term of the agreement at a time certain, time intervals or under certain conditions. Not recommended but frequently encountered in negotiations is a requirement that the institution provide advance notification of intent not to renew or non-continuation via rollover. Such advance notice provisions can result in “lame duck” coaches unless accompanied by the institution’s right to transfer or reassign the coach to a different position during the “lame duck” period. Athletics directors should take care to eliminate all ambiguities that relate to rollover clauses and the duration of agreements. It is also important to note that some universities and states have laws that prevent teachers at public education institutions or other state employees from having employments agreements in excess of one year in duration. In such cases, the institution must act to get special legislation permitting an exception.
While provisions for renegotiation during the term of an agreement appear unnecessary, they are fairly common in long-term contracts because the coach wants assurance that his or her rate of compensation will keep pace with the marketplace. There are even some high profile coaches who have difficult negotiations with athletics directors or presidents or are so comfortable working with people they like and trust, that the departure of people in these positions can trigger a renegotiation provision which may or may not be limited to certain aspects of the agreement.
Many coaches look for a minimum three-to five- year agreement, recognizing that rebuilding a sport program requires multiple recruiting classes. Longer term agreements are usually limited to coaches of proven value and performance. Shorter term agreements may reflect the willingness of an institution to take a chance on a promising but unproven coach or an institution whose alumni does not tolerate a losing program over more than a three year period. Again, speaking with athletics director colleagues at peer institutions or schools with programs of a quality level to which the institution aspires will give the athletics administrator a good idea of the duration, compensation, benefits and other considerations that represent the marketplace in which the athletics director should be recruiting.
Termination of Employment. While it may appear disadvantageous to talk about termination clauses when a manager is trying to hire a new employee, the conditions for termination by choice of the coach or the institution are critical elements of the agreement. It is essential to think of worse case scenarios and how the manner of a coach’s exit before the end of the contract will do the least damage to the institution’s relationships with donors, the image and pocketbook of the institution and the reputation of the coach, if at all possible. A common sense approach is to envision three scenarios in which the growth or quality of the sport program is not progressing according to plan or the coach is being dysfunctional in a minor or major way and to try to include provisions in the agreement that would permit termination to be handled in all or most of these various ways:
- Scenario #1: The coach is a good person, well liked within the institution and among alumni, with a skill set capable of contributing to the athletics program in one or more ways other than coaching. Taking care of this person is important to donors and other who support the program and the contributions of this employee to another area of the program would be equal to or better than hiring a different employee. In this case, the institution may wish to include a provision where the coach can be reassigned to another position in the athletics department or university. Such a provision might be attractive to coaches nearing the end of their careers but not at all acceptable to coaches who wish to remain in the coaching profession.
- Scenario #2: Either the coach wants to leave or the institution wants the coach to leave before the end of the term of the agreement and there is otherwise no violation of the terms of the agreement. Note that this scenario would apply in cases where the institution is unhappy with a won-lost record (assuming a specific standard is not included as a performance expectation in the agreement), the pace of development of the program or the general quality of the program, all conditions that would not warrant termination ‘for cause”. In this case, there is usually a “buy out” or “liquidated damages” provision where one party pays the other a specified and reasonable amount to exit the agreement in what could be a fairly cordial manner.
- Scenario #3: The coach violates a performance standard contained in the contract, conduct that reflects unfavorably on the reputation of the institution (commonly referred to as a morals clause), criminal conduct, intentional violation of rules or other specifically defined unacceptable conduct. This is commonly referred to as “termination for cause”. In this case, all compensation, benefits and promises in the agreement become null and void at the date of termination.
Here are some examples of contract provisions that would result in termination “for cause” if breached by the coach:
- Knowingly participates in violations of athletics governance association, school district or college or university rules, policies and regulations or knowingly allows such violations by others or fails to report such violations within a reasonable time period from when he or she learns of such violations
- Failure to carry out duties and responsibilities specifically delineated in the agreement and when informed of such failure by the institution, fails to remedy such deficiencies
- Conviction of felony
- Misconduct that offends the ethics or traditions of the institution or brings discredit or harm to the reputation of the institution
- Disability or death (usually accompanied by some kind of payment to coach or spouse covered by an insurance policy paid for by the institution)
- Violation of state or institution ethics laws
- Fraud or dishonesty in the performance of duties, including falsification of records by the coach or permitting or condoning such by an employee under his or her supervision
- Failure of coach, or failure of the coach to instruct/counsel employees or student-athletes under his or her supervision, to respond fully and accurately or to appear upon request during investigations of rules violations by the institution or governance associations of which the institution is a member
- Wagering on any amateur or professional athletics contest or consorting or associating with known gamblers or bookmakers
- Use of controlled substances to such a degree that performance of duties is significantly impaired over a substantial period of time
- Failure to cooperate and enforce policies and procedures related to student-athlete drug-testing programs
- Acts of violence or personal conduct, or condoning or encouraging employees or student-athletes in such conduct which may not warrant criminal prosecution but results in public disrepute, contempt, scandal or ridicule that reflects unfavorably up the reputation or mission of the institution
- Actions taken at other institutions which violate governance association rules and which not disclosed to the institution
It is also important to anticipate conflict when termination of an employee occurs. The agreement should always include some type of due process provision where the employee is given the opportunity to present evidence refuting the reasons for termination. As a practical matter, termination of employment contract provisions should never be activated by an athletics director without prior consultation with the institution’s human resources and/or legal counsel.
Basic Coaching Duties and Responsibilities. Employment policies and agreements should cover the basic duties and responsibilities of all coaches in their respective sports such as:
- instruction of athletes
- supervision of practice and conditioning sessions
- instruction, supervision and direction of athletes in competitive events
- selection, supervision and evaluation of assistant coaches, volunteers, student coaches, graduate assistants, interns, managers or others assisting in the conduct of the sports program, including ensuring that such personnel comply with athletics association rules and regulations
- recruitment of athletes
- knowledge of and adherence to school/college policies and procedures
- knowledge of and adherence to athletics governance association rules and regulations
- scheduling of competitive events
- media relations
- fundraising expectations or involvement
- demonstrate policies and conduct that advances the academic success of athletes
More specific responsibilities may also be mandated by conference or national athletics association governance regulations such as inclusion of the NCAA regulation language that subjects coaches to NCAA disciplinary action for rules violations. The athletics director may also wish to emphasize the importance of selected specific rules or expectations to clarify their applicability such the NCAA Division I requirement that all coaches annually report all athletically-related compensation from all sources.
‘Non-Compete’ Requirements. Another common contract provision is a restriction on the coach taking another coaching job at a competing university for a specified period if the coach leaves prior to the end of the agreement either with or without cause. Key to such “non-compete” provisions if they are ever challenged in the courts, is they must be (1) time limited (usually in the one to two year range) and (2) competitor limited (restricted to a small group of competing institutions such as institutions within the same athletics conference). Other types of non-compete provisions might be:
- promise not to recruit any athlete identified as a prospect by the institution while he/she was employed as a coach
- no use of software, records or other materials developed in the process of coaching at the institution
Similarly, contracts will specify the return of all playbooks, recruiting files, credit cards, keys, etc.
Compensation. It is advisable to have all compensation agreements related to the coach’s employment at the institution come through the school district, college or university. Coaches should not be allowed to leverage their position as a school coach for private gain without the express permission of the institution. The institution owns the rights to its name and logo, display of signage in school venues or on school uniforms and numerous other properties which might be leveraged for sale of promotional or marketing rights of considerable value. Coaches do not have the right and should not be selling these school property rights. The cleanest way to comply with these legal and ethical considerations is for all agreements related to the display of commercial logos on school property, the ownership of broadcast and telecasting rights for coaches’ shows, call-in programs, post-game and pre-game, internet, or other use of other rights owned by the institution to be written between commercial sponsors and the educational institution with the educational institution receiving all funds. The institution then writes a contract with the coach that pays the coach for performing certain duties related to such initiatives. Thus, it is prudent for coaches’ agreements to address ‘total compensation’ from all sources rather than just salary. Examples of the kinds of compensation provisions typically addressed under the ‘total compensation umbrella’ are:
- base salary – indicate payment schedule and annual amount for performance of basic coaching duties and responsibilities, some of which might be designated for a deferred compensation plan that affords tax benefits to the coach
- payment of a lump sum for all or designated amounts for each for ‘personal services’ which are specified duties in addition to coaching and recruiting such as:
- coaches television and/or radio shows, internet chat rooms
- participation in athletics department or university fundraising
- making appearances or speeches upon the request of the athletics department
- participating in media interviews or other public relations activities
- endorsing products of sponsors of the athletics program at the request of the athletics director
- consulting with apparel companies that provide institutional uniforms, shoes and equipment at the request of the athletics director
- conducting summer camps or sports clinics
- rights to the coach’s name, image, autograph
- promise that the coach will not enter into outside agreements with companies that are competitors to athletics program sponsors
- pension/retirement plans – indicate annual employer contribution and when the contribution is made (i.e., end of year)
- medical, dental and other benefits normally provided to coaches
- expense allowances for gasoline, clothing, family travel, personal cell phones
- benefits of value that are paid for by the institution or its donors such as:
- provision of car(s)
- country club or private club memberships, greens fees, carts
- personal use of private planes
- low-interest home loans
- use of vacation homes
- luxury suites in institutional or professional sports facilities
- tickets for institutional, NCAA or professional sports events
- free use of institutional facilities for summer camps
- life insurance and disability insurance policies
- insurance policies for courtesy cars provided by the institution or donors to the institution
- bonuses or incentives for the accomplishment of objectives such as:
- percentage of ticket revenues
- flat amount for conference or national championships
- flat or graduated amounts for graduation rates or academic progress rates
- flat amount for winning specific contests (i.e., against arch rivals)
- flat or graduated amounts based on longevity (i.e., institution contributes a sum each year to an annuity or other financial vehicle that accumulates interest and becomes due to the coach after a specified period of time)
- contract extensions tied to winning specific games or numbers of games
- flat amount tied to achieving team behavior goals (no arrests or misbehavior damaging to institutional reputation)
- being named conference or national coach of the year
Such compensation elements of the agreement usually specify a guaranteed minimum base compensation which may be a considerable cash figure. Some contracts may have multiple types of guarantees, one amount as salary and another amount for personal services. This split in compensation for job duties and other services is often constructed in order to make the coach’s annual salary from the institution appear more reasonable.
Liquidated Damages. If the coach decides to leave before the end of the agreement or if the institution decides to terminate the coach’s employment not for cause (no fault or breach of agreement by the coach) before the end of the agreement, there is usually specified compensation that must be paid by one party to the other for damages incurred because the full term of the contract was not fulfilled. These provisions are based on the notion that the early departure causes “damage” to the party responsible for not honoring the duration of the agreement.
When the coach breaks the contract to go elsewhere, there may be provisions like the following:
- coach must inform institution of resignation in writing
- coach has no entitlement to any compensation or benefits detailed in the agreement following the termination date
- coach must pay a lump sum of a size reflective of the expenses that will be incurred by the institution in having to recruit another coach (note that this sum is often paid by the institution for which the coach is departing)
The stakes are higher if the institution terminates the coach without cause, usually:
- institution must pay total compensation amount through the end of the agreement or a fixed (usually large) sum
- continuation of health care benefits through the end of the contract term, paid by the institution or the coach, or until he/she obtains employment that provides such benefits
- a clause that relates to the personal services part of the contract that obligates the coach to seek employment as a coach on a radio or television show or in some other capacity and if the coach gets employed by another institution and starts getting paid for such personal services by them, the institution that terminated him/her would not be responsible for continuing these payments or other personal services terms of the agreement
- as a condition of the institution paying out the considerable sum representing the remainder of the agreement or a lump sum, the institution may be permitted to cease payment on and provision for life and disability insurance and the coach may be required to sign a comprehensive release that prevents the coach from making further claims on the institution.
As you can see from the previous discussion, the development of multiyear employment agreements can be extremely complex. The inter-institutional nature of athletics places inordinate pressures on the athletics director to meet escalating marketplace standards. It is difficult for one institution to ‘hold the line’ on compensation and benefits when the institutions against which they compete are continually upping the stakes.
It is often helpful to actually examine contracts negotiated by other institutions. USA Today did a series on Division I football and basketball coaches contracts which included a database of copies of their actual agreements that were obtained via open records act requests. Searching the database for contracts used by peer institutions is essential marketplace research. Click here for links to the USA Today football coach contract database and the USA Today basketball coach contract database.
Sharp, L.A., A.M. Moorman and C.L. Claussen. (2007) Sport Law: A Managerial Approach. Holcomb Hathaway, Scottsdale, AZ. See pp.175-194 for an excellent discussion of coaches contract provisions.