By: Justin C. Carlin
Those who know me even moderately well know that I am a huge Florida State football fan. So, I was obviously very pleased to learn that FSU’s contract with its preeminent coach, Jimbo Fisher, was extended for five years. Upon reading the contract extension, however, I was somewhat dismayed that the buyout for his early termination of the contract was “a mere” $5 million in 2016, $3 million between 2017 and 2018, and $1 million before 2019.
While buyouts in the low millions are properly considered “real money,” it’s conceivable that a competing university (or even an NFL team) could, at some juncture, pay the buyout money and lure Jimbo Fisher away from FSU. If Jimbo Fisher is considered so valuable to FSU, and FSU is offering Jimbo such a high salary (in terms of pay, the contract places Jimbo in the top five of all college coaches), why wouldn’t FSU require that the buyout be higher?
Rather than any inability of FSU to convince Coach Fisher to accept a higher buyout, I surmise that the buyout was mostly the result of Florida law, which prohibits so-called “penalty clauses” in contracts. Under Florida law,
parties to a contract may stipulate in advance to an amount to be paid or retained as liquidated damages in the event of a breach. The Florida Supreme Court has established a two-prong test to determine whether a liquidated damages provision will be stricken as a penalty clause. First, the damages consequent upon a breach must not be readily ascertainable. Second, the sum stipulated to be forfeited must not be so grossly disproportionate to any damages that might reasonably be expected to follow from a breach as to show that the parties could have intended only to induce full performance, rather than to liquidate their damages.
Rusniaczek v. Tableau Fine Art Group, Inc., 139 So. 3d 355 (Fla. 3d DCA 2014) [citing Lefemine v. Baron, 573 So. 2d 326, 328 (Fla. 1991)].
It seems clear that the liquidated damages provision in Jimbo Fisher’s contract with FSU is enforceable. The expected damages to the University by Coach Fisher’s early termination of his contract are not readily ascertainable, because the damages would be determined by (among other things) lost profits from ticket sales and endorsements, which cannot be determined in advance. Moreover, Jimbo Fisher has emerged as a top coach in college football, whose coaching prowess has been recognized across the country, which has resulted in him becoming (by way of his new contract extension) one of the top-five highest paid coaches in college football. Thus, it seems entirely likely that, if Jimbo Fisher breached his employment contract with FSU, FSU would not be able to retain a replacement coach who is equally (if not more) successful as Jimbo, which would likely leave FSU in a worse position than if Jimbo Fisher completed his contract. So the second prong of the two-prong test set forth in Lefemine also appears to be satisfied. If the buyout was a larger number, however, FSU would have to deal with the very real possibility of a court finding that the buyout is unenforceable, in which case Coach Fisher would pay nothing to FSU if he were to terminate the contract early.
FSU’s recent contract extension with Jimbo Fisher illustrates the need for both employers and employees to ensure that their employment contracts comply with Florida law. We are available to review your employment contracts to ensure that they comply with Florida law. To have your contract reviewed, simply call (954) 440-0901 and ask to speak with a Fort Lauderdale contract lawyer.