The facts

PGMOL provides referees for the major professional football matches in England.

To provide such services, PGMOL engages a set of full-time referees under contracts of employment (primarily for Premier League matches), and a pool of referees who officiate matches in their spare time (most of whom have other full-time employment).

The case concerned the pool of part-time referees – PGMOL treated them as self-employed and therefore did not treat the fees paid to them as employment income. HMRC disagreed.

The referees were appointed to the pool on an annual basis. In order to be appointed to the pool, PGMOL required them to pass a fitness test and attend an introductory seminar. They were also furnished with a match-day procedures document and a code of conduct.

An event management system was used by PGMOL to offer matches to referees – much like the systems routinely used by football or other sports clubs for scheduling casual match-day staff such as stewards. Once a match had been accepted by the referee, they were effectively ‘booked’ for the match, although both the referee and PGMOL had the ability to cancel it.

The Supreme Court had to determine whether two key elements of the test for an employment relationship were met, namely:

• ‘Mutuality of obligation’ – in other words, did the referees personally have to perform the work in exchange for payment?
• Control – whether PGMOL exercised a ‘sufficient framework of control’ over the referees such that the relationship was one of employment.

As a brief summary of the decisions of the tribunals and courts below the Supreme Court:

• The First-tier Tribunal found in favour of PGMOL, asserting that the right to cancel shifts meant there was no mutuality of obligation, and there was also insufficient control over the work of the referees.
• The Upper Tribunal agreed (albeit disagreed on the control element) and dismissed the appeal.
• The Court of Appeal allowed HMRC’s appeal. They found there to be sufficient mutuality of obligation and control in respect of the contracts between the referees and PGMOL that formed in respect of each individual match.
• PGMOL appealed to the Supreme Court on the two elements of the test outlined above.

The third and final element to the test is whether the other provisions of the contract and the whole relationship between the parties as a whole are consistent with it being a contract of employment. This was not the subject of this appeal which falls to be determined by the First-tier Tribunal.

The Supreme Court’s judgment

Mutuality of obligation

It is important to note that, in arrangements of this kind, there are two possible contracts of employment: (1) the overarching annual contract between the referee and PGMOL which enabled a referee to be part of the pool of referees to which matches were offered; and (2) the contracts deemed to arise in respect of each and every match a referee chose to accept, i.e. contracts for each specific assignment.

The court was only looking at the contracts for individual matches here [1].

As such, it did not matter whether there was mutual obligations between matches. Instead, there was sufficient mutuality of obligation in the period from the acceptance of the assignment, through to officiating the match and ending once the referee provided the match report (for which they were paid).

It did not matter that either party was able to cancel the contract after a match had been accepted, which the First-tier Tribunal put undue emphasis on (although this may be one factor which is taken into consideration when looking at the third element of the test).

Control

Control is incredibly fact-specific, and manifests itself in different ways depending on the nature of the work being performed. For example, the ringmaster of a circus isn’t controlling the technique of the acrobats, and a hospital manager is likely to lack the technical expertise to tell a surgeon how to carry out an operation. However, that doesn’t mean (as a rule) that the employer lacks a sufficient degree of control in the circumstances.

In this case, it was enough that there were contractual obligations imposed on referees to meet relevant standards through the match-day procedures document and the code of conduct and, if they were not met, PGMOL had the ability to discipline them (by denying them the opportunity to officiate future matches) and to reduce their right to share in a performance payment pot at the end of the year.

The Supreme Court drew on similar examples, such as the Uber case [2], where Uber had the ability to monitor trip acceptance rates and customer ratings, each of which gave rise to consequences for the drivers if they fell below the prescribed standards.

The Supreme Court in Uber termed this a ‘form of control’.

The first two pre-conditions of an employment contract – mutuality of obligation and control – were therefore met. The case has now been remitted to the First-tier Tribunal to determine whether the third element of the test (whether the other provisions of the contract and the relationship as a whole are consistent with an employment relationship) has been met and, therefore, whether the referees are employees for each match assignment they accept.

Key takeaways from the case

While the case doesn’t tread new ground, it’s a useful and clear restatement of key principles in this area, which often leads to disputes and headaches for employers. Some key takeaways:

1. Individuals may have a ‘general engagement’ to perform work sporadically for another, and ‘specific engagements’ in relation to each piece of work actually performed. Both could be contracts of employment, but fall to be independently considered (although a lack of mutual obligation between assignments may be relevant to the categorisation of the relationship in respect of each specific engagement).
2. While mutuality of obligation and a sufficient degree of control are pre-conditions to a finding of employment status, the nature of the mutual obligation and the degree of control exercised are relevant to the overall assessment undertaken at limb 3. The First-tier Tribunal will need to consider this in this case.
3. The level of control required in a case is incredibly fact-specific. You don’t have to be giving direct instructions to the individual for there to be sufficient control. The ability to step in or sanction, for example, if a surgeon is not performing an operation to accepted standards may be enough.

Wider implications?

Employment status has long been a hotly debated topic, particularly with the shift in ways of working over recent years and the ‘gig economy’.

In this case, the question was whether the fees paid to the referees should be subject to employment taxes. However, the question of whether a contract amounts to a “contract of employment” is a key question for the purpose of determining several rights, including unfair dismissal rights, rights to redundancy payments, rights in relation to trade union membership and TUPE.

The matter is complicated further by the fact that there are only two relevant statuses when it comes to whether income should be taxed: employed and self-employed. In contrast, there are currently three different statuses for employment purposes: employed, self-employed, and the ‘intermediate’ category of worker.

Employees have significant benefits and protections over workers, such as the right not to be unfairly dismissed after two years’ service, paid family leave and redundancy payments.

The Labour government is reviewing whether the three-tier structure for employment purposes should instead reflect the two-tier tax position. It is also proposing to remove the requirement for two years’ service for ordinary unfair dismissal protection. The upshot of both proposals, if they materialise, is that people that previously fell into the traditional ‘worker’ category would have significant day 1 rights, which would significantly increase the risk profile of misclassifying someone as self-employed – that makes decisions like PGMOL all the more important.

[1] HMRC did not appeal the Court of Appeal’s decision to uphold that there was no mutuality of obligation in respect of the overarching contract as the individual had no obligation to accept work. In effect, it was nothing more than a contract intimating that matches may be offered to referees, and that the referees were open to receive such offers.

[2] Uber BV v Aslam [2021] UKSC 5