Louis van Gaal's red reign is over as Manchester United Football Club have dismissed the manager from his position. Van Gaal leaves after completing two years of a three-year contract. It appears that Manchester United have based their decision on Van Gaal's capability to perform in the role. The scores on the doors are as follows:

  • Manchester United achieved their lowest goals total for 26 years with only 49 Premier League goals this season, only one more than Blackburn achieved in 2012 when they were relegated;
  • they conceded 35 goals this season, which was the joint-lowest tally in the league with Tottenham; and
  • the team made the most backward passes in the league, 3,222 to be precise.

Though Van Gaal led the team to victory with an FA Cup win last weekend, it appears that the disappointing results preceding this success warrant the decision to end his contract.

If a fixed-term contract does not allow for early termination, an employer can only end the contract early if the employee has committed a repudiatory breach of contract. In the absence of such a breach, if the contract does not include notice provisions and an employer terminates it early, the employee can claim damages for loss of earnings for the remainder of the term without the need to mitigate his or her loss. It is therefore advisable for an employer to include, in a fixed-term contract, the right to terminate the agreement early such as, in this case, for poor performance.

Van Gaal is rumoured to be on a guaranteed basic salary of £3.3 million a year. The termination provisions in his contract provide for two-thirds of his salary (including image rights and a loyalty payment) to be paid until June 2017 unless he finds alternative employment, and around £5 million if the club dismisses him at the end of this season. Generally, parties involved in settlement discussions agree to have a continuing duty of confidentiality relating to the negotiations and the agreement they reach. However, due to the high profile nature of this matter, it may be difficult to keep the details of this agreement confidential.

There is speculation that Jose Mourinho will succeed Van Gaal as manager at Manchester United. Ryan Giggs, assistant manager at the club, has previously suggested that he will sever ties with Manchester United if they do not offer him the managerial position. It is reported that Mourinho is likely to bring Rui Faria with him as assistant manager, which may mean an effective demotion for Giggs if he decides to stay at the club.

In the recent case of Gibbs v. Leeds United Football Club [2016], Gibbs was an assistant manager who declined the managerial post when the manager he worked with was dismissed. He continued in his role whilst negotiating a consensual departure. However, Leeds United Football Club excluded him from many of his usual responsibilities and he was denied contact with the first team. He resigned as a result. The High Court held that the fact he was prepared to leave if suitable terms were agreed did not bar him from bringing a constructive dismissal claim. Whilst the facts differ slightly, this decision highlights that Giggs is free to negotiate a termination package with the club without hampering a future claim for constructive dismissal should he resign in response to an effective demotion following Mourinho's appointment. To succeed with a claim for constructive dismissal, Giggs would have to show that he was entitled to resign by virtue of Manchester United's conduct, namely a repudiatory breach of contract.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.