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David Moyes' Employment Terminated

It was been widely reported yesterday that David Moyes had been dismissed from his position as Manchester United Manager after less than a year in the position, having reportedly only signed a six year contract in May 2013. It has not been a great year for Manchester United, with them expected to finish the season with their lowest points total in Premier League history and not qualifying for the Champions League, for the first time in almost two decades.

Employees now need two years’ continuous employment to gain normal unfair dismissal protection, so Mr Moyes would not be able to make a claim in this regard. However, it is anticipated a severance package will be pre-determined by the terms of his contract or otherwise agreed, in order to compensate Mr Moyes for the early termination of his contract, which would have dwarfed any compensation for unfair dismissal in any event – a compensatory award for unfair dismissal being capped at £76,574.

If a fixed term contract is terminated early, an employee will normally be entitled to either compensation for breach of contract, or a contractual payment in lieu of notice.

Compensation for breach of contract is calculated by reference to the salary and benefits which the employee would have earned, had they worked their notice. The normal position is that this will be subject to an obligation on the employee to mitigate his losses by seeking alternative employment. However, in professional sport there tends to be gentleman’s agreement that the principle of mitigation will not be applied to managers or coaches, which is why they are often paid the equivalent of what they would have earned over the entire remainder of their contract, even if they find a new position in quite early course.

How a contractual payment in lieu is calculated will depend upon the specific terms of the contract. Rumours are circulating that in Mr Moyes’ case, his payment in lieu will be limited to his salary for the remainder of this season and next season, because he failed to achieve certain key performance indicators – including Champion League qualification.