On 4 December 2019, Rugby Australia (‘RA’) and Rugby NSW reached a confidential settlement with Israel Folau in relation to proceedings commenced by the 73 test cap Wallaby in the Federal Circuit Court concerning the termination of his playing contract. Whilst RA have maintained that the dispute with the three time John Eales Medallist was simply a contractual employment dispute, the case has attracted significant public attention and sparked debate with respect to the tension between freedom of speech and ensuring inclusivity and diversity both on and beyond the playing fields.

The cultural, financial and reputational implications of the Folau’s legal challenge serves as a timely reminder to sporting administrators and organisations to consider and test the robustness of their own codes of conduct, athlete contracts and awareness programs to address social media and other emerging issues.

In this note we provide an overview of the eight-month Folau saga and some of the take home points for governing bodies and sporting teams.

Dispute

Following a controversial social media post on 10 April 2019 which condemned, amongst others, "drunks" and “homosexuals", and warned that "hell awaits" them, RA and Rugby NSW issued a joint statement on 11 April 2019 stating their intention to terminate Folau’s playing contract. On 15 April 2019, RA issued a breach notice alleging that he had committed a high level breach of RA’s Code of Conduct (Code) and that they would be seeking to terminate the all-time Super Rugby top try scorer’s contract.

Folau exercised his right under the Code and sought a Code of Conduct Committee Hearing in relation to the alleged breach. Following a three day hearing, on 17 May 2019 the three person Committee delivered its decision determining that Folau had committed a high-level breaches of the Code and that termination of his players' contract was the appropriate sanction. Following the decision, Rugby NSW and RA wrote to Folau purporting to formally terminate his players’ contract.

Rather than pursue an appeal of the Committee’s decision, Folau commenced legal proceedings against RA and Rugby NSW in Fair Work Commission (Australia’s employment tribunal).  Following unsuccessful compulsory conciliation, Folau elected to pursue the matter in the Federal Circuit Court of Australia asserting that the social media posts reflected his religious beliefs and alleging breach of contract, restraint of trade and unlawful termination. Folau sought, inter alia, damages, reinstatement, an apology and penalties pursuant to Australia’s industrial relations legislation. In an amended statement of claim filed on 18 November 2019, Folau increased his damages claim from AU$10 to $14 million and particularised his claimed losses as a consequence of RA’s termination, including sums for earnings which Folau would have derived as a result of the Wallabies putting in a "superior performance" if he had been selected for the 2019 Rugby World Cup in Japan and loss of future earning stemming from the possibly him captaining "a trophy-winning Wallabies team" in the future.

On 2 and 4 December 2019, Rugby Australia (RA) and Rugby NSW attended a court ordered mediation where a confidential settlement was reached. In a joint statement issued by RA and Folau, the respective parties issued apologies for any hurt or harm; RA to the Folaus and Folau to the game of rugby.  Whilst the precise terms of the settlement reached remain confidential; Folau has agreed to withdraw the proceedings against RA and Rugby NSW.  RA have also confirmed that an undisclosed monetary sum was paid to Folau,  however RA CEO Raelene Castle has subsequently dismissed speculation in the media of an inflated settlement figure and stated that the decision to settle was a commercial one and that RA had an insurance policy in place.

Grounds for termination

Despite an earlier April 2018 comment on an Instagram post targeted at gay people, Folau’s four-year contract (purportedly worth AU$5.7 million) which he signed in late 2018 did not include a social media clause (despite speculation of a subsequent attempt by RA to include a social media clause addendum). Accordingly, RA’s purported termination of Folau’s contract was on the basis of a ‘high-level’ breach of the Code.  Folau’s players’ contract with RA and Rugby NSW contained a clause by which he agreed to be bound by the Code.  As a consequence of termination under the Code, RA and Rugby NSW were required to abide by the review process prescribed under the Code.  Notably, Folau’s amended statement of claim also made additional breach of contract claims relating to the Committee hearing phase; alleging bias, and failures to act in good faith and to afford natural justice.

In view of the confidential settlement, there will be no court decision in relation to Folau’s contentions.  As a consequence, there will be no determination whether his case involved an infringement on an employee’s rights to express his religion or personal beliefs, or was one simply involving an employee failing to comply with his employer’s lawful and reasonable directions to comply with the employer’s policies and code of conduct.

Lessons learnt 

The divisive and drawn out Folau saga has attracted significant international public attention and has been bubbling away behind an already tumultuous period for Australian Rugby following the Wallabies’ quarter final exit at last year's World Cup, the resignation of head coach Michael Cheika and chairman Cameron Clyne not standing for re-election in 2020.  Folau’s legal challenge underscores the need for sporting administrators and organisation to ensure that:

• They regularly look at codes of conduct and other forms of athlete regulation to ensure that they are fit for purpose and able to respond to instantaneous social media breaches;
• codes of conduct are properly incorporated into the athletes’ employment contracts as directions from the employer with which the athlete must comply;
• any review process under codes of conduct are properly conducted and afford athletes procedural fairness;
• employment contracts are appropriately drafted and preserve the organisations rights to terminate contracts for serious breaches of codes of conduct and employer policies, irrespective of the athletes' personal beliefs;
• they put in place appropriate education and awareness programs for athletes to make sure that they understand social media policies and the ramifications of breaches; and
• they have insurance arrangements in place that are responsive to similar claims.

 For those interested, our 12 September 2019 Podcast with Angus Bujalski (Legal and Governance Director) and Stuart Tennant (Legal Counsel) at the Rugby Football Union provides some interesting insights into the RFU’s approach to players' use of social media and ensuring that inclusive sporting values are maintained.