The decision focused on whether or not match day contracts between the referees and the PGMOL were employment contracts. The Supreme Court did not decide whether or not match day contracts were employment contracts but it did confirm that two of the tests for employment were met and sent the case back to the First Tier (tax) Tribunal ("FTT") for a ruling on the wider application of the tests for employment. While the saga is not yet over, short duration contracts will certainly be subject to more scrutiny following this decision.
What was the dispute about?
PGMOL trains and supplies referees and other match officials for football competitions such as the Premier League and the FA Cup.
PGMOL supplies two groups of referees. First, those that officiate full-time under written contracts of employment, and second, those who officiate in their spare time (known as "the National Group"). The appeal concerned the employment status of this latter group, following determinations from HMRC that PGMOL was the employer of certain football referees during three football seasons falling within tax years 2014-15 and 2015-16, and that there was an underpayment of income tax and NICs.
Referees in the National Group were appointed on an annual basis under an overarching contract, before the start of each season. They were required to pass a fitness test and attend an introductory seminar. The annual appointment documents provided National Group referees with information about match fees and expenses; however, the annual appointment created no obligation on PGMOL to offer matches and no obligation on referees to accept matches. It is now common ground that this overarching contract did not amount to a contract of employment.
Referees from the National Group were then appointed to individual matches. The acceptance of an appointment constituted a second contract between PGMOL and the National Group referee. It was this short term match day contract that was the central issue in the appeal and, in particular, whether each of these standalone contracts was a 'contract of employment', and a £584,000 tax bill (plus interest) hinged on the answer.
What did the Supreme Court decide?
The Supreme Court unanimously dismissed PGMOL's appeal, holding that the minimum requirements of mutuality of obligation and control necessary for a contract of employment were satisfied in relation to the individual appointments.
The Court made it clear that it is not necessary that an employer should have a contractual right to intervene in every aspect of the performance by an employee of his or her duties to have "control" over the worker's actions. The Court held that while as a pre-condition to a finding of employment there must be, under the contract, a sufficient degree of control, the extent of that control in any particular case remains a relevant factor in the overall determination of whether there exists an employment relationship.
However, it is not the case that once the pre-conditions of mutuality of obligation and control are satisfied, they are no longer relevant to the overall assessment of whether an employment contract exists. The Court remitted the case to the FTT to decide whether, in all the circumstances, the National Group referees were engaged for individual matches under contracts of employment.
What does this mean for sporting bodies and employers more generally?
These types of engagement are common in the sports industry and should be of particular interest to refereeing bodies for other sports in the UK that engage referees for match day contracts. The decision has wider ramifications outside of sport, and could affect a broad range of employers and agents who operate short duration service agreements with individuals. The concept of 'labour pools' was once a lucrative and attractive tool to manage market demand for services, and this decision reduces the value of such arrangements.
Determining the correct employment status of individuals has important ramifications for both tax and employment rights. The tests for both employment and tax purposes are not always straightforward, and as we have seen by the plethora of off-payroll/IR35 disputes, the analysis can be difficult, not clear-cut and highly fact-specific. Employers and individuals alike need to be satisfied they are paying the correct amount of tax. If an engagement is a contract of employment, it follows that the employer is obliged to deduct the correct amount of income tax and NICs via the PAYE system and pay employer's NICs. The consequence of not getting it right can be costly.
Employers operating short duration service agreements should review their engagements with employees following this decision and if necessary seek advice on their existing arrangements.
