Employment status is a crucial aspect for employers to get right. Misclassification can lead to significant financial and legal consequences, especially regarding Income Tax and National Insurance contributions. However, determining employment status is no easy task, as demonstrated by a recent Supreme Court case involving Professional Game Match Officials Ltd (PGMOL), a company that provides referees for top-tier football matches.
Defining Employment
Unlike other legal terms, ‘employment’ lacks a statutory definition, making case law the primary reference point. The core question in the PGMOL case was whether the referees engaged by the company should be classified as employees. If so, PGMOL would be responsible for their tax and National Insurance obligations.
The Three-Stage Test for Employment
Case law has established a three-stage test to determine the presence of a contract of employment:
- Mutuality of Obligation – The hirer must be obliged to offer work, and the worker must be obliged to accept and complete it in person.
- Control – The extent to which the employer dictates how the work is carried out.
- Additional Factors – Any other aspects consistent with an employment relationship.
Applying these tests in practice is complex. In the case of PGMOL referees, they were appointed annually to a ‘National Group’ and were offered matches through a software system. While they could decline assignments or withdraw before match day, PGMOL also retained the right to make changes after a match was accepted. Each accepted match created a distinct contract.
The Supreme Court’s Findings
The Supreme Court’s decision focused on two key factors: mutuality of obligation and control, specifically regarding individual match contracts rather than the season-long engagement. The Court concluded that the minimum requirements for an employment contract were met. Notably, it set a lower threshold than expected, particularly concerning control. The ruling emphasized that control in an employment relationship could take various forms and was not limited to direct instructions.
What This Means for Employers
While this case is not yet fully resolved, it highlights the evolving nature of employment law. Employers must stay vigilant and ensure they assess employment status correctly to avoid potential liabilities. Given the complexity of these decisions, seeking expert guidance is recommended.
For further assistance in navigating employment status issues, don’t hesitate to contact our team on 01905 777600 or email hello@ormerodrutter.co.uk.
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