Germany: Between certainty and transparency: the legal pitfalls of relegation clauses in professional sports

With the increasing professionalization of sports, even seemingly clear contract clauses are subject to increasingly strict legal scrutiny.

This has been impressively demonstrated by recent rulings of the Solingen Labor Court and the Düsseldorf Regional Labor Court on so-called “league clauses/relegation clauses” in professional sports. What appears at first glance to be a clear provision turns out, upon closer legal examination, to be a legal minefield that poses considerable risks for clubs.

Initial situation: Resolving condition due to relegation clause

The decisions are based on unfair dismissal claims brought by a handball coach and his assistant coach who were employed by B. M. GmbH. After the club was relegated to the second division of the German handball league, the employer invoked the following contractual clause: “The contract is valid exclusively for the 1st Handball Bundesliga. In the event of relegation or loss/surrender of the license, the contract shall terminate.” This clause constitutes a condition subsequent and is found in a similar form in numerous employment contracts for coaches and players, including the DFL license player contract.

The conflict arose when the employer stopped paying wages in June 2023 and invoked the automatic termination of the employment relationships due to relegation. The coaches then asserted their continued employment and outstanding payment claims.

Judgment: Indeterminacy of the term “relegation,” requirement of transparency, no general possibility of fixed-term contracts

The Solingen Labor Court upheld the claims in their entirety and declared the league clause invalid. The Düsseldorf Regional Labor Court confirmed this decision but based the invalidity on formal defects: The employment contract forms had two separate signature fields for the two managing directors with sole power of representation, but only one was used.  According to the Regional Labor Court, this led to a violation of the written form requirement under Section 21 in conjunction with Section 14(4) TzBfG and Section 126(1) BGB.

The Solingen Labor Court found two significant substantive defects: Firstly, the clause violated the principle of specificity, as it was not clear which termination date was to apply “in the event of relegation.” There are several possible interpretations of the term “relegation”: as of June 30, at the end of the season, with the last game of the season, upon confirmation of relegation, or only with the first game in the lower league. Any ambiguities are always to the detriment of the club as the user of the clause.

Secondly, the linking of various conditions subsequent (“relegation” and “loss of license”) leads to a lack of transparency and thus to the invalidity of the entire clause pursuant to Section 307 (1) sentence 2 BGB. The condition subsequent of loss of license is also invalid because it circumvents Section 626 BGB and unilaterally imposes on the employee the employment risk that is fundamentally borne by the employer.

In addition, the court ruled out that a fixed term/condition subsequent is always justified in professional sports due to the nature of the work performed. Rather, this always requires an assessment of the specific employment relationship, the type of work owed, and also the form of the fixed term/condition subsequent agreed in the specific individual case (admissibility according to Federal Labor Court case law for licensed soccer players, Federal Labor Court, judgment of January 16, 2018 - 7 AZR 312/16 ).

Practical relevance: General labor law standards are decisive

Clubs must maintain the highest level of legal precision when drafting contracts, especially when it comes to ambiguous terms such as “relegation,” which must be clearly defined (e.g., timing, criteria, procedure). Formal defects such as incomplete signatures can lead to nullity. The decisions make it clear that general labor law standards also apply in professional sports. There is no “special labor law” for top-level sports; rather, general labor law principles such as specificity, transparency, and fairness must be strictly observed.

The club has lodged an appeal with the Federal Labor Court, which could offer more legal clarity in the future concerning the permissible scope for drafting such clauses. The problem of ambiguous terms, such as “relegation” in professional sports, is by no means an isolated case, but pervades the entire legal system.

While “family” in everyday life usually refers to parents and children, the legal interpretation leads to different definitions depending on the area of law – from the constitutional concept of family to “family members” under EU law to “community of need” under social law. The situation is similar with the term “semester”: what is commonly understood to mean a half-year of study raises complex legal questions about the distinction between lecture and semester periods, which lead to considerable legal uncertainty in procedures regarding student grants (BAföG), de-registration, and tuition fees. These examples illustrate that seemingly clear everyday terms can become complex problems of certainty in legal application if different points of reference or definitions are conceivable.

Practical tip: Exceptional admissibility of league clauses

Blanket league clauses may nevertheless be effective in exceptional cases if they have been agreed as a “preferred condition” of the employee in accordance with Sections 21, 14 (1) sentence 2 No. 6 TzBfG. However, the requirements are very high: it must be possible to determine on the basis of objective circumstances that the clause is exclusively in the interest of the employee. Relevant factors include sporting reputation, marketing potential, the level of remuneration, and the absence of unilateral termination rights. Typically, only top athletes prefer a termination clause to unconditional employment. If a league clause is to be effective as a desired condition, it is advisable to document the employee's express wish in writing before signing the contract.

(Judgments coach: Solingen Labor Court, judgment of October 1, 2024, Ref. 3 Ca 728/24; Assistant coach: Solingen Labor Court, judgment of October 30, 2024 – 4 Ca 729/24; Appeals: Düsseldorf Regional Labor Court, judgment of May 23, 2025 - 10 SLa 668/24; Düsseldorf Regional Labor Court, judgment of May 27, 2025 – 3 SLa 614/24)