Getting Sacked: the Contract Buyout Clause Cost of College Athletics

SIERRA EPKE—At its heart, college athletics is a business. The National Collegiate Athletic Association (“NCAA”) raked in over $1.15 billion in revenue in 2021. With such a considerable amount of money on the line, college coaches who do not meet expectations can expect to get sacked––just like their quarterbacks. Yet, many coaches, especially those in Football Bowl Subdivision (“FBS”) programs, do not leave their positions empty-handed. This may be true for former University of Nebraska head football coach, Scott Frost, and former Arizona State University head coach, Herman Edwards, who were relieved of their duties at the end of September 2022. Whether they take the long walk out of the stadium or an Ed Orgeron “what door do you want me out of, brother” approach, many fired FBS coaches pocket millions of dollars on their way out. These payouts are called “dead money”––the buyout clause cost of educational institutions’ quest for athletic glory. As the pressure to win increases, so does the dollar amount in buyout clauses. With millions of dollars at stake, contract interpretation and subsequent conduct become important in deciding whether these clauses must be paid. 

Coaching contract buyout provisions contemplate the risks of an inherently cutthroat industry. Universities and coaches recognize that coaching contracts will likely end with termination, forced resignation, or voluntary departures. When a university terminates a coach “without cause,” the coach will likely receive the total compensation agreed upon in the contract as part of a buyout provision.  When a university terminates a coach “for cause,” the buyout costs are usually eliminated. If, however, a coach voluntarily leaves for other coaching opportunities, the university implements a different version of a buyout. This buyout works similar to a fine, requiring the coach or their new employer to pay their previous university upon leaving their position. 

Between January 1, 2010, and January 31, 2021, FBS athletic programs spent more than $533.6 million in severance pay on college football and basketball coaches. Power 5 conference football coaches are by far the largest recipients of dead money. As of January 2021, Auburn University, the University of Nebraska, and the University of Texas paid the highest amount of dead money. The University of Nebraska owed $25.8 million in severance pay to college coaches. Arizona State University was sixth with a severance payout total of $18.7 million. Both Frost and Edwards may receive multimillion-dollar payouts from their previous employers. 

Frost was fired without cause on September 11, 2022, following the University of Nebraska’s loss to Georgia Southern University. Because Nebraska terminated Frost before October 1, Nebraska owes Frost almost $15 million in liquidated damages as part of Frost’s buyout clause. Interestingly, had Nebraska waited until October 1, the university would only have owed Frost about $7.5 million in liquidated damages.

Edwards’ termination and subsequent buyout took a different route: Edwards and Arizona State University “agreed to the neutral relinquishment of duties” on September 18, 2022, after a loss to Eastern Washington University. The projected cost of Edward’s buyout is almost $9.4 million. However, Edwards’ buyout position is more precarious, as Arizona State’s football program is under NCAA investigation for violating COVID recruiting protocols

Universities attempting to avoid multimillion-dollar buyout clauses are not unusual. The University of Tennessee fired head football coach Jeremy Pruitt “for cause” in January 2021 while the program was under NCAA recruiting violation investigations. As the termination was for cause, Tennessee avoided a $12.6 million buyout. Despite Pruitt threatening to sue Tennessee for failing to pay the buyout, he has yet to file suit. In January 2018, former University of Arkansas head football coach Bret Bielema and the University of Arkansas agreed to an $11.9 million buyout, so long as Bielema made a “good-faith effort to obtain new employment.” Further, the buyout clause stated that if Bielema took a position paying more than $150,000 a year, Arkansas would be relieved of its financial obligations. Bielema sued the Razorback Foundation for a remaining $7 million after the Foundation alleged Bielema took a lower salary with the New England Patriots so he could continue to receive buyout payments from Arkansas. In April 2021, the Razorback Foundation and Bielema settled for almost $8.1 million, releasing the Foundation from paying the original $11.9 million buyout amount

While the University of Nebraska seemingly will not challenge Frost’s contract buyout based on  Athletic Director Trev Albert’s statements, Arizona State University could avoid a multimillion-dollar dead money situation. Edwards’ contract included the following termination for cause provisions:

vi. Significant or repetitive violation of NCAA or Conference Legislation . . . 
vii. . . .or repetitive violation of NCAA or Conference Legislation . . . relating to the Program by an assistant coach, other Program personnel or a Program student-athlete, and either (i) the violation occurs or continues to occur after Coach knew or should have known that it was about to occur or was occurring, or (ii) the Coach failed to establish and maintain reasonable policies and procedures for the Program to prevent violations of NCAA or Conference Legislation . . .

Whether Arizona State will have to abide by the buyout clause depends on the NCAA’s findings as to whether Edwards knew of the COVID recruiting violations. If the NCAA finds that he was aware of the violations, Edwards would owe the university $75,000. 

College athletics is ultimately a business, and college football coaching contracts reflect the aggressive pursuit for institutional greatness. The cost of hiring and firing coaches has increased along with the high stakes of college athletics. The University of Nebraska’s firing of Frost is demonstrative of this point: the university was willing to lose an additional $7.5 million to regain its footing as a college football blueblood. As the pressure to win and coach assurances in buyout clauses increase, so will the fight over contractual interpretations and conduct to determine how much money, if any, coaches are entitled to.