The Coronavirus pandemic has created a myriad of problems in the Premiership. The difficulties of re-scheduling the season (discussed here) remain significant, and its ongoing economic impact has seen clubs across the league attempt to cut costs by furloughing players and reducing wages (discussed here). Indeed, Premiership Rugby has decided to lower the salary cap amid concerns about the longer-term sustainability of the English game (discussed here).

At the centre of the controversy over player wage cuts has been Leicester Tigers (the “Club”). England and Leicester prop, Ellis Genge, has spoken publicly about how he has attempted to set up a new players union to stand up for players’ interests (discussed here), while there have been various reports about conflict between the playing squad and club management on this issue. Temporary pay cuts were agreed at the outset of the pandemic, but the Club has moved recently to make those cuts permanent.

On 1 July, the Club stated that:

the players were asked to accept reduced wages and, following feedback, we created a mechanism through which a proportion of forgone earnings could be reclaimed when the Club returns to profitability. At the same time, salaries of lower-paid players beginning their professional careers were protected. In common with other Club employees, these changes resulted from detailed explanations of the Club’s financial position and the necessity of the measures being taken.

However, it soon became clear that five players had refused to accept reduced wages by 30 June, the deadline imposed by the Club. These players were immediately ‘stood down’ and, on 10 July, the Club confirmed that:

the employment of each of Greg Bateman, Kyle Eastmond, Noel Reid and Manu Tuilagi, as well as Telusa Veainu…has now ended and they will no longer be playing for the club

Telusa Veainu has already signed for Stade Francais, while Manu Tuilagi is reportedly to sign for Sale Sharks. Jordan Taufua remains in conversations with the Club and may yet be a sixth player to leave.

This article will explain the legal position of these players (the “Leicester Five”), setting out the possible claims they may have against the Club.

However, before doing so, it is worth addressing the Club’s decision to impose permanent pay cuts more generally.

1. The Propriety and Necessity of Leicester’s Permanent Pay Cuts

Though not the intended focus of this piece, the propriety and necessity of these cuts remains up for debate. The players have been asked to forgo some of their wages to help the Club return to “profitability”. In other words, the players have been asked to financially invest in the Club.

However, many of the Club’s current squad are likely to move elsewhere or retire before they will benefit personally from this investment. Professional rugby is a short career, and the risk of injury means it could be even shorter. The Club’s owners will have a stake for a much longer time to come and will be the ones who profit from the players’ sacrifice. It is farcical to think that these players will get any return on their ‘investment’. Certainly, they are not being offered any equity in the business. It is more of a donation than a true investment.

Indeed, the Club explicitly stated that the players will be able to reclaim “a proportion of forgone earnings”. In other words, players are expressly being told that they will not recover what they invested. So, not only are players being asked to invest in the Club despite the short and precarious nature of their employment, but they are doing so on the condition that they will receive no return on that investment.

That is before one considers that Leicester Tigers has been operating at a loss for four consecutive years to June 2019 (the most recently published accounts). The idea of a “return” to profitability is dubious.

The players are thus being asked to help the Club achieve something it has not achieved for itself in the four years prior to the Covid-19 pandemic. That this is the Club’s aim suggests that the cuts go beyond remedying the impact of the pandemic and that the Club is using this as an opportunity to make a profit moving forward. If that is the case, it is not clear why the burden of doing so should fall upon the players: the Club has willingly operated at a loss throughout its recent history.

What’s more, given this recent history, it must be seriously doubtful that the Club will return to profitability soon, making it more unlikely that players will benefit from their investment or be able to reclaim a proportion of their forgone wages.

On the question of necessity; match-day revenues will be down for the 2019/20 season, even if some fans are allowed to attend the remaining games, and there may be a tightening of the belt from sponsors, broadcasters and the RFU from next year, but it is not yet clear the extent to which that will hit clubs. It is hoped that the players have had the financial information provided to them by the Club independently scrutinised and (ideally) verified, to establish the purported necessity of the cuts being made.

Leicester players have effectively been asked to make a donation to the Club – and the Club has parted ways with anyone who has refused. Against the background set out above, it is not hard to see why players might feel aggrieved.

2. The Players’ Claims against the Club

When the Leicester Five were stood down after refusing to accept pay cuts – a contractual variation – they were effectively told that they were not welcome at Club training and that they were no longer a part of the Club’s plans. Being ‘stood down’ in this context is not a legal term of art, but this is what I understand it to mean. The players remained on full pay but were told that they could seek employment elsewhere.

Whilst not amounting to an express dismissal, it is strongly arguable that the players would be entitled to treat this as a constructive dismissal.

When the Club ‘stood down’ the players, it is strongly arguable that it committed a repudiatory breach of contract. The implied term of mutual trust and confidence is a term implied by law into all employment contracts (Malik v BCCI). It means that both employees and employers are obliged to maintain the relationship of trust and confidence between them and cannot destroy that relationship without reasonable and proper cause.

Standing down a player would, in my view, breach that term, as such action undermines all trust and confidence between the player (the employee) and the Club (the employer). The club cannot be said to have acted properly or reasonably in so acting, as it only stood them down in a failed attempt to force a unilateral variation upon them.

A breach of the implied term of mutual trust and confidence will be viewed by the courts as a fundamental, repudiatory breach of contract (Morrow v Safeway Stores plc [2002] IRLR 9). Such a breach gives the employee the right to terminate the contract of employment. In other words, the players were entitled to resign in response to being stood down. They were free to walk away from the Club, and to consider themselves as having been constructively dismissed.

This constructive dismissal may give rise to legal claims for wrongful and unfair dismissal.

When, on 10 July, the Club announced that the employment of the Leicester Five had ended, it is not clear if that was because the Club expressly sacked the players after they didn’t agree to pay cuts having been stood down, or because each of the players resigned. It might also be because the Club had reached settlement agreements with the players in respect of any legal claims.

It is truly extraordinary that the Club has been willing to let five (and possibly six) front-line players leave in this manner, particularly Manu Tuilagi. Tuilagi is one of the best players in the world in his position and is one of England’s most recognisable stars. He has been one of the Club’s biggest names for the best part of a decade. That they have been willing to let him leave on a ‘free transfer’ is remarkable. In footballing terms, it would be like Manchester City letting Raheem Sterling leave for free.

Of course, rugby’s transfer market is far less developed than football’s, such that it would not have been easy to offload players to another club for a fee, but it is striking that the Club has willingly released a number of its key assets. Whether this is because the Club genuinely could not afford them, because it was careless in its attempt to aggressively negotiate wage reductions, or because it was untenable to have any squad members who had not taken pay cuts from a morale perspective remains to be seen.

a) Wrongful Dismissal

A claim for wrongful dismissal will arise where a player on a fixed-term contract is dismissed prior to the expiry of the fixed term, and the employer does not comply with any termination clause.

As this is a case of constructive dismissal, there is no question of the players being given notice of their dismissal. It is thus a ‘summary dismissal’ scenario. The RFU’s Standard Premiership Player Contract, at Clause 11, lists a limited number of grounds upon which a club may terminate a contract summarily – none of which appear to be relevant here.

Thus, the Leicester Five will all have been (constructively) wrongfully dismissed.

The primary remedy for wrongful dismissal is damages (for breach of contract). Thus, the players will be able to claim damages in respect of the salary they were owed under the remainder of their contracts with the Club.

For example, if Manu Tuilagi had two years of his contract left to run and would earn £400,000 in each of those years, he would prima facie be able to claim £800,000 in damages.

They will also be able to claim in respect of any other contractual benefits and for any costs they incur in finding a new club.

However, as this is a common law damages claim, the players will be subject to the duty to mitigate their losses (Addis v Gramophone). This means that they must act reasonably to minimise their losses. This includes taking reasonable steps to find a new job (Secretary of State v Wilson [1978] ICR 200).

If the players are able to find a new job (presumably a new club), their earnings in that new job for the period that they would have been earning at Leicester will be deducted from any damages award. In other words, their damages claim will be limited to the difference in value between the Leicester contract and any new contract over the same period (Rigby v Ferodo [1988] ICR 29).

Continuing the example from above, if Manu Tuilagi immediately signs a two-year deal with Sale Sharks for £200,000 a year, his damages claim against Leicester will be reduced to £400,000 in total (i.e. he can claim the £200,000 per year difference in salary).

Given the market, particularly in the Premiership, it is likely that any contract that the Leicester Five sign will be for less than they were earning at the Club. Therefore, it is likely that Leicester will owe the players some compensation for their wrongful dismissal. Conversely, this means that other clubs could pick up these players for a lower salary, knowing that Leicester would have to pay the difference.

b) Unfair Dismissal

In addition to a wrongful dismissal claim, the Leicester Five might also consider bringing a statutory claim for unfair dismissal under the Employment Rights Act 1996 (the “ERA”), though this will be much more difficult to establish.

Firstly, players could only bring this claim if they have been employed by the club for two years or more (s.108(1) ERA) and must act quickly by bringing the claim within three months of their constructive dismissal (s.111(2) ERA).

The Club would argue that it had a potentially fair reason to dismiss the players (albeit constructively) due to the economic pressures it is under. This would likely be classed as “some other substantial reason” (s.98(1)(b)), as it does not necessarily amount to a redundancy, though is economically motivated. The players could try to argue that it was unfair to (constructively) dismiss them in the circumstances, perhaps by arguing that it was not necessary to make the cuts, but this would be very difficult to establish – particularly given the wide margin of discretion given to employers by the range of reasonable responses test (s.98(4) ERA, Iceland Frozen Foods v Jones).

The players might have a greater chance of arguing that the procedure followed by the Club was unfair (Polkey v Dayton Services). Employers again are given a margin of discretion but if there was any unfairness in the procedure used by the club to procure pay cuts – for example, if the information provided to convince the players to accept the cuts was misleading – the players might have a case. However, there is insufficient information available publicly to properly comment on the chances of such a claim.

If the players were to succeed in claiming unfair dismissal, they would be able to obtain further compensation from the Club, though their chances of doing so appear slim in the absence of some gross procedural unfairness.

(c) Other Claims

The Leicester Five may also have other related claims against the Club.

(i) Unlawful Deductions from Wages

First, if there were any unlawful deductions from wages at the start of the Coronavirus crisis when clubs first tried to impose temporary pay cuts, the players may now seek to bring a legal claim given that they are no longer wishing to maintain a relationship with the Club. Of course, any such claim would depend upon the players not having agreed, expressly or implicitly, to any deduction (as discussed in greater detail here).

The claim would probably need to be brought as a claim for breach of contract, as the three-month time limit for ‘unlawful deductions from wages’ under the ERA may have expired.

(ii) Breach of Confidentiality

Second, they may have a claim against the Club for a breach of confidentiality. The Club’s CEO spoke publicly about the players’ refusal to agree to pay cuts and about the decision to stand them down (see here), prior to the termination of their employment. Indeed, the players’ names were mentioned extensively in media reporting about the situation whilst the negotiations were ongoing, having been leaked from the Club (see here).

Clause 5.12 of the RFU’s Standard Premiership Player Contract states that the club is obliged not to disclose any of the player’s “confidential information”, defined as “information however recorded relating to the affairs and finances of the Player for the time being confidential to the Player”. It is strongly arguable that the arrangements in relation to pay cuts fall within that definition and that the information should thus not have been disclosed to the media without the player’s consent.

The claim could be framed as a claim for breach of confidence (Coco v Clark), the tort of misuse of private information (Campbell v MGN), or for breach of contract (a breach of Clause 5.12). The contractual route would be the most straightforward. The players could argue that they ought to be compensated for the breach of confidentiality, though it is unlikely that the damages would be hugely significant.

(iii) Competition Law

Finally, the players might be able to make a claim against the Premiership clubs (and/or Premiership Rugby) in respect of their alleged agreement not to sign each other’s players throughout the contract re-negotiation process (see here and here). Such an agreement is anti-competitive and would almost certainly be in breach of UK Competition law (Competition Act 1998).

If any of the Leicester Five are refused talks with another Premiership club on this basis, they may be able to bring a claim for damages in the tort of breach of statutory duty, owing to the Competition law infringement (Crehan v Inntrepreneur Pub Company).

Indeed, as I have previously argued (here), the collective reduction in player wages may itself infringe UK Competition law. This in itself could give rise to such a claim, if a player can prove that it has caused them to suffer loss – i.e. that they could have earned more but for the anti-competitive conduct.

3. Conclusion

To summarise, it is likely that the Leicester Five will have strong claims against the Club for wrongful dismissal and that they will be able to obtain damages. They may also be able to claim further compensation by way of unfair dismissal, breach of confidence, unlawful deductions and breach of statutory duty (competition law).

Whether these claims will ever be brought, or whether they have already been settled, remains to be seen. What is clear, however, is that this has been an ugly episode for English rugby, and Leicester Tigers in particular.

It is remarkable that the Club negotiated so aggressively with its playing squad with the result that one of the world’s best players, Manu Tuilagi, has been able to walk away, and all eyes will be on the team that is now able to secure his services at a lesser rate.