The Rules of the Game: The Supreme Court’s Decision on Football
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September 27, 2024

By Reccy Midigo, Paralegal (SQE Trainee) at Burley Law.

A person’s employment status should be one of the most important factors to consider before engaging someone to work for your business. This is because a person’s classification as an ‘employee’ entitles them to legal rights and protection that workers and self-employed individuals don’t have access to. Often businesses enter into contracts with self-employed individuals on a temporary or casual basis but over time start exercising control over their ways of working and require them to meet certain obligations. At this point, the individual may gain either worker or employment status, meaning they have certain employment law rights (such as the right to minimum wage, statutory sick pay, paid holiday etc.) and the business may also be at risk of triggering legal obligations to HMRC in relation to that individual (such as the obligation to pay them through PAYE and deduct income tax from their payments). Employment status is assessed differently for tax purposes and employment law rights, meaning that a person can have self-employed tax status but be regarded as an employee for the purpose of unfair dismissal, redundancy and other employment rights.The UK Supreme Court dealt with this issue in a recent case brought by HMRC against the Professional Game Match Officials Ltd (PGMO) in relation to employment tax status. The Supreme Court held that contracts between part-time football referees and their administrative bodies were sufficient to establish a common law contract of employment. In particular, the case focused on whether referee’s individual match contracts constituted employment contracts for the purpose of tax law, therefore requiring PGMO to deduct income tax and National Insurance contributions from payments made to the referees.

Originally the lower courts (the First-tier Tribunal (FTT) and Upper Tier Tribunal (UTT)) held that the referees were not employees. This is because the minimum requirements for a contract of employment to exist had not been met. The minimum requirements are:

  1. Mutuality of obligation: the obligation of one party to provide work and the other to perform the work in exchange for payment (known as the “wage-work bargain”).
  2. Exercise of control: the ability of one party to exercise control over the other by requiring that they meet certain obligations (for example working specific hours or at a specific location or not allowing a substitute/sub-contractor to perform their duties).

The lower courts held that these minimum requirements had not been met, as both the referees and PGMO could terminate the contract at will with no financial penalties on either party for cancelling the contract before the match took place.

However, the Court of Appeal overturned both these decisions ruling that these requirements had been met. The mutuality of obligation existed between the parties from the point the referee agreed to ref a match to the point they submitted their match report to the PGMO. And although referees could cancel contracts before a match without financial penalties, the fact that the PGMO could impose other sanctions on refs (deny them opportunities to officiate future matches or revoke their membership), meant they exercised control over the refs. Therefore the minimum requirements for employment status had been met.

The Supreme Court also pointed out that mutuality of obligation and control shouldn’t be the only requirements considered to determine whether employment status exists. Although these requirements were necessary, they were not sufficient for a contract of employment to exist. Parties should also consider all the terms of the written agreement as well as the actual dealings between the parties.

Key takeaways from this case

  1. Employment status is an important factor which should be considered when engaging individuals to carry out work as it can have significant legal and financial consequences.
  2. The test for employment status is not based solely on the minimum requirements for mutuality of obligations and control. Businesses should consider all the circumstances of the working relationship.
  3. Mutuality of obligation an exist even if either party can cancel an engagement without financial penalty. If obligations are in place when the contract begins, this requirement is met.
  4. The control requirement is met even if a business doesn’t control every aspect of the individual’s work. The ability to discipline referees in this case was enough to meet the control test.
  5. Tax and employment status are linked. Businesses which fail to realise this could be liable to HMRC for unpaid PAYE and National Insurance Contributions.
  6. Short term and event specific contracts can be employment contracts.

Have questions? You can speak with Liz Burley, our employment law specialist on how best to address issues about employment status.

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