On 18 December 2025, the Employment Rights Bill was officially passed, becoming the Employment Rights Act 2025. The Government succeeded in enacting its proposal to remove the cap on statutory compensation for unfair dismissal and reduce the qualifying period for protection from two years to just six months. This significant change could revive a remedy that had largely been overlooked in the context of elite-level sport.
Implications of unfair dismissal for managers and clubs
In professional football, where managerial instability is a constant, this shift could have significant implications for both managers and clubs. Currently, the limited protection against unfair dismissal often leaves managers without any recourse in the employment tribunal. Historically, this remedy has rarely been used by managers, with Antonio Conte’s successful claim against Chelsea Football Club standing as a high-profile exception.
The removal of the cap on compensation, combined with a shorter qualifying period, could lead to significantly higher awards in cases of unfair dismissal. As a result, clubs may become more cautious in their decision-making, knowing that the non-contractual financial consequences of firing a manager could be far greater under the new regime.
Constructive dismissal: A viable legal route
One area where this change could have a major impact is in cases of constructive dismissal. This occurs when a club’s actions, such as undermining a manager’s authority or creating an intolerable working environment, force a manager to resign.
While it can be difficult to prove, constructive dismissal remains a viable route for legal recourse when there is a clear contractual breach. With the potential for higher compensation and reduced barriers to protection, managers and players alike may find this option more appealing in the future.
Defending against unfair dismissal claims
To defend against an unfair dismissal claim, clubs must demonstrate that their actions were reasonable and fair. This involves setting clear expectations for the manager’s performance, offering opportunities for improvement, conducting a fair disciplinary process, and allowing for an appeal. If these steps are not followed, the club risks exposing itself to legal challenges, with managers potentially bringing claims to an employment tribunal. If the proposed changes to statutory compensation come into effect, it will become even more crucial for clubs to ensure they meet these legal standards to avoid costly disputes.
In defending against such claims, clubs may rely on the precedent set in Alidair Ltd v Taylor (1978) ICR 445, where it was established that an employer could justify a fair dismissal if they had a reasonable and honest belief that the employee was incompetent or incapable. Losing 10 games in a row would very arguably be enough to evidence a reasonable belief that their incumbent manager was incapable!
The role of settlement agreements
In addition to statutory protection, settlement agreements are a common feature in football, offering a way for clubs and managers to part ways on mutually agreed terms. These agreements typically involve a negotiated settlement in exchange for waiving any legal claims, often including confidentiality clauses. Such agreements provide a clean break for both parties but can also lead to managers accepting less than they might be entitled to, simply to avoid prolonged legal battles.
However, with the proposed changes to statutory compensation, it is possible that settlement negotiations could become more complex, with both sides factoring in the potential for larger payouts under the new regime.
A fundamental shift in elite sport
For elite sport, where financial considerations and public reputations often intertwine, these changes signal a fundamental shift. While they are still in the early stages, the Government’s proposed reforms could provide a much-needed safety net for individuals facing unfair dismissal, while also changing the way clubs approach contracts and disputes.
Fixed term contracts
It is important to note that the vast majority of managers are employed on fixed-term contracts. As a result, their primary remedy in the event of dismissal is likely to be a breach of contract claim, seeking damages equivalent to the amount they were owed for remainder of their contract.
However, the law treats the non-renewal or expiration of a fixed-term contract as a form of “dismissal” for the purposes of unfair dismissal claims (University and College Union v University of Stirling [2015] UKSC 26). Therefore, clubs must be particularly cautious when allowing a manager’s, or indeed even a player’s contract to expire, as this could result in an uncapped unfair dismissal claim.
How Moore Barlow can help with unfair dismissal
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