As we head towards the end of the football season, could upcoming changes to unfair dismissal law have an impact on Premier League and Football League clubs?
Currently, employees need at least two years' service in most cases to claim unfair dismissal. However, from 1 January 2027, this will reduce to six months, meaning employees will gain unfair dismissal rights much sooner. More importantly, unfair dismissal compensation is currently capped at the lower of a year's pay and £123,534. From 1 January 2027, this cap will be removed and there will be no limit on the amount that can be awarded.
The changes – being introduced under the Employment Rights Act – will affect all employers but could have a significant impact on professional football clubs. Until now, there has been little incentive for highly paid footballers, managers and coaching staff to bring unfair dismissal claims. Disputes around the early termination or non-renewal of contracts are typically resolved through arbitration or settlement agreements.
But that could change from January 2027. We may see more unfair dismissal claims being brought by those who previously did not have enough service or for whom an unfair dismissal claim was not worthwhile. Players and managers are typically engaged on fixed term contracts, but both the early termination of the contract and a decision not to renew it are treated as dismissals at law. Similarly, while compensation awards are linked to loss – and employees have a duty to mitigate – even brief periods of unemployment could generate significant liability, given pay levels in professional football.
It will be interesting to see if the changes lead to a greater use of probationary periods and more robust performance management, or simply result in greater payouts. Our Sports Practice will be keeping a close eye on developments.