An important decision in the Supreme Court means that any employer who engages casual, zero-hours or freelance workers on a self-employed basis should re-examine their contracts or terms of engagement. Although this related to football referees, it has important implications for workers who fall outside the normal PAYE arrangements.
Key Elements of the Case
In Commissioners for His Majesty’s Revenue and Customs v Professional Game Match Officials Ltd (PGMO Ltd), the Court provided important clarity on the employment status of part-time football referees. The key issue was whether the referees’ individual match contracts with PGMO Ltd constituted contracts of employment, with implications for tax and National Insurance (NI) liabilities. The case delves into fundamental aspects of employment law, particularly around mutuality of obligation and control.
The legal proceedings went through various stages before reaching the Supreme Court. At each stage, the key legal tests applied to establish employment status were mutuality of obligation and control.
Mutuality of Obligation and Control
Mutuality of Obligation: This principle refers to the obligation of the employer to provide work, and the employee to perform it in return for payment. The Supreme Court confirmed that mutual obligations arose at the point a referee accepted a match appointment. From that moment until the match report was submitted, both the referee and PGMO Ltd were under contractual obligations. It did not matter that either party could cancel the engagement without penalty before the match day.
Control: For an employment contract to exist, a sufficient degree of control by the employer over the worker is required. The Supreme Court found that PGMO Ltd’s framework of control over referees during the match, combined with sanctions for non-compliance, demonstrated sufficient control. The Court emphasised that control need not be over every detail of a worker’s duties, but can be established through broader supervisory frameworks.
Impact of the Ruling
The Supreme Court ultimately remitted the case back to the First-Tier Tribunal (FTT) to decide if, considering all circumstances, the referees’ individual contracts were indeed contracts of employment. The decision highlights that while mutuality of obligation and control are necessary for an employment relationship, other factors also play a significant role. Each contract must be considered holistically, considering all relevant circumstances.
Practical Implications
For employers that engage casual workers on, e.g. a per-engagement basis this ruling underlines the importance of evaluating contractual relationships in terms of mutuality of obligation and control. Simply having the right to cancel a contract without penalty does not negate an employment relationship if the parties are otherwise bound by obligations during the term of engagement.
Action Points for Employers
- Review Contracts: Employers should review terms of engagement, especially for casual, zero hour or freelance roles, to ensure clarity regarding mutual obligations and control.
- Assess Employment Status: Regularly assess whether the nature of the working relationship meets the criteria for employment, particularly when considering tax and NI obligations.
- Consider Implications of Control: Employers should consider how much control they exert over workers, both during and after engagements, as this could influence employment status.
- Monitor Legal Developments: Keep abreast of rulings like this one to understand evolving interpretations of employment law, particularly for atypical employment arrangements.
- Seek Legal Advice: If there is uncertainty regarding the employment status of individuals, seeking professional advice is advisable to mitigate risks related to tax and employment liabilities.
The guidance provided in this article is just that – guidance. Before taking any action, make sure that you know what you are doing, or call an expert for specific advice.
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Core Skills for Managing People – 17th October 2024 – Quy Mill Hotel, Cambridge
Confidently Resolving Conflict – 21st November 2024 – Park Farm Hotel, Hethersett
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