The Supreme Court’s highly anticipated judgment in Commissioners for Her Majesty’s Revenue and Customs v. Professional Game Match Officials Ltd. determined that the “irreducible minimum” of mutuality of obligation and control necessary for employment contracts were present in individual match contracts of part-time football referees officiating English domestic matches. However, the Supreme Court remitted the case to the First-tier Tribunal (FTT) to decide whether these factors are sufficient for those agreements to be classified as employment contracts.
This case serves as a helpful reminder of two fundamentals of employment contracts, namely mutuality of obligation (the so-called “wage-work bargain”) and the level of control exercised by the would-be employer, while not forgetting that these are but two aspects of many.
Case facts
Professional Game Match Officials Ltd (PGMOL) engages referees to officiate football matches. The referees in question are members of the “National Group”, who undertake their duties during their spare time, most of them doing so alongside holding full-time jobs.
FTT
HMRC argued that PGMOL’s contracts with the National Group referees constituted employment contracts and therefore PGMOL should deduct income tax and national insurance from payments made to the referees.
The FTT determined that two contracts governed the engagement between the National Group Referees and PGMOL. The first of these were overarching, season-long contracts (the Umbrella Contracts) which included pre-season documents and correspondence about match fees. The second were contracts made with the National Group referees regarding specific games (the Individual Contracts).
They considered neither to be employment contracts on the basis that there was no mutuality of obligations – noting in particular that, under the Individual Contracts, both parties had the right to cancel at any time before the referee’s arrival for a match. In addition, it was held that under the Individual Contracts PGMOL had insufficient control over the referees. It made no finding as to control under the Umbrella Contracts.
Upper Tribunal
HMRC appealed to the Upper Tribunal, which held that the FTT had erred in law in its decision that the Individual Contracts had no sufficient framework of control. However, the lack of mutuality alone was enough to determine that the contracts were not employment contracts.
Court of Appeal
HMRC appealed to the Court of Appeal (CA), arguing there was mutuality of obligations under the Umbrella Contracts and Individual Contracts. The CA allowed HMRC’s appeal regarding the Individual Contracts but dismissed the appeal regarding the Umbrella Contracts. The case was remitted to the FTT to determine whether the Individual Contracts were to be treated as employment contracts.
Supreme Court
PGMOL appealed to the Supreme Court (SC), submitting that mutuality of obligation required not just payment for personal work, but also an obligation on the engager to provide work or pay in lieu. It argued that these obligations must exist prior to the provision of personal services.
The SC dismissed the appeal, noting that many cases focused too heavily on mutuality of obligation and control, downplaying other contract terms and circumstances. It stressed the importance of considering all contractual elements and the overall relationship.
Whilst control by the employer is a necessary condition, it can take many forms and its degree and flexibility in modern employment practices must be assessed on a case-by-case basis. An employer does not need to have a contractual right to intervene in every detail of how an employee performs their duties, as control “is not confined to the right to give direct instructions to the individuals concerned“. This is even more true when the individual is carrying out a highly skilled task.
The SC also held that mutual obligations existed under the Individual Contracts from the time a referee accepted a match offer and continued until submission of the post-match report, even if either party could cancel before the match without penalty. However, this factor alone does not indicate the nature of the contract.
The SC’s decision was therefore that the contracts did contain mutual obligations and a degree of control making them capable of being employment contracts. It was for the FTT to decide if the referees are in fact employees for tax purposes. The case was remitted to the FTT to determine whether the Individual Contracts were employment contracts, taking all the other circumstances into account.
Key takeaways for employers
As the SC noted: “The days when the vast majority of the workforce attended at a particular factory, shop or office between set hours to work in highly prescriptive roles have long gone, all the more so following the Covid pandemic of 2020/21.” This case highlights the complexity of determining whether a contractor or freelancer is self-employed in the modern workforce. Unless there is an unrestricted right to send a substitute in their place, there is no single element of the contract that determines its tax treatment or the individual’s legal status. In determining whether a contract of employment exists, it is important that the contract and wider relationship are considered holistically.
As ever, employers must be wary when assessing if contractors are truly engaged on a self-employed basis. Given the Labour government’s proposals to implement a single worker status, this is an area in which we are likely to see many more developments. As the case returns to the initial tribunal for reconsideration, the decision and its implications are eagerly awaited.
