Defining Employment: Mutuality of Obligation and Control in PGMOL Referee Contracts – Revenue and Customs v PGMOL ([2021] EWCA Civ 1370)

Introduction

The case of Revenue and Customs v. Professional Game Match Officials Ltd ([2021] EWCA Civ 1370) revolves around Her Majesty's Revenue and Customs ('HMRC') appealing a decision upheld by both the First-tier Tribunal (FTT) and the Upper Tribunal (UT). The central issue pertains to whether Professional Game Match Officials Limited ('PGMOL') should deduct income tax and employer's National Insurance Contributions from payments made to referees officiating football matches. This determination hinges on whether the referees' relationships with PGMOL are governed by contracts of employment or contracts for services.

PGMOL, a company established in 2001 by the Football Association Limited ('the FA'), the Premier League, and the Football League Limited ('the EFL'), is responsible for providing and managing referees for significant football matches. The referees in question are primarily part-time officials who often balance refereeing with other full-time occupations.

Summary of the Judgment

The FTT initially determined that both overarching seasonal contracts and individual match-specific contracts between PGMOL and referees lacked sufficient mutuality of obligation to constitute contracts of employment. HMRC appealed this finding to the UT, which upheld the FTT's conclusions on mutuality but identified a legal error regarding the control element in individual contracts. The Court of Appeal (Civil Division) ultimately allowed HMRC's appeal, finding that both the FTT and UT erred in their analyses of mutuality of obligation and control. The case was remitted to the FTT for reconsideration of whether the individual contracts between PGMOL and referees amounted to contracts of employment, taking into account both mutual obligations and the framework of control.

Analysis

Precedents Cited

The judgment extensively references several key cases that have shaped the understanding of employment relationships in the context of mutuality of obligation and control:

Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] - Provided the classic three-element test for a contract of employment.
Autoclenz Limited v Belcher [2011] - Highlighted the importance of the actual intentions of the parties over the written terms.
McMeechan v Secretary Of State For Employment [1997] - Addressed the distinction between overarching contracts and individual engagements.
Clark v Oxfordshire Health Authority [1998] - Examined the existence of a global contract of employment in the absence of mutual obligations during non-working periods.
Carmichael v National Power Plc [1999] - Dealt with casual work and the necessity of mutual obligations to form an employment contract.
Prater v Cornwall County Council [2006] - Focused on the concept of mutuality within individual contracts overriding lack of overarching mutuality.
Zuijs v Wirth Brothers Proprietary Limited (1955) - Emphasized that ultimate authority and the right to give directions are crucial for defining control.

These precedents collectively underscore the multifaceted nature of employment contracts, emphasizing that mutuality of obligation and a sufficient framework of control are essential in determining employment status.

Legal Reasoning

The core legal debate centers on two primary elements: mutuality of obligation and control.

Mutuality of Obligation: This refers to the reciprocal obligations between employer and employee. For a contract of employment to exist, there must be an obligation for the employer to provide work and for the employee to accept it. In this case, the FTT and UT assessed whether such mutual obligations existed both in overarching contracts and individual match contracts. The Court of Appeal found that the lower tribunals erroneously interpreted the necessity and application of mutual obligations, particularly by conflating the overarching and individual contracts.
Control: Control pertains to the degree of authority the employer has over the employee's work. The focus is on whether the employer has the ultimate authority to direct the employee, even if day-to-day control is minimal. The UT initially held that the FTT erred in assessing control, failing to adequately consider the broader framework of control embodied in the overarching contracts.

The Court of Appeal criticized the UT for overcomplicating the analysis and for misapplying precedents related to mutuality and control. It emphasized that the ability to terminate a contract does not inherently negate mutuality of obligation, provided that obligations exist during the performance of the contract.

Impact

This judgment has significant implications for employment law, particularly concerning the classification of workers within sports organizations. It clarifies that mere payment for services does not suffice to establish an employment contract; instead, mutual obligations and a framework of control are paramount. For organizations like PGMOL, this means reevaluating the nature of their contracts with officials to ensure compliance with tax and employment regulations.

Additionally, the case sets a precedent for how seasonal and part-time workers are assessed in terms of employment status, potentially influencing future cases involving similar contractual relationships.

Complex Concepts Simplified

Mutuality of Obligation

Mutuality of obligation refers to the mutual commitments between an employer and an employee. Specifically, it requires that the employer is obligated to provide work and the employee is obligated to accept and perform that work. Without this reciprocal arrangement, a contract of employment may not be established.

Framework of Control

The framework of control pertains to the extent to which an employer can direct an employee's work. It involves the employer's authority to give instructions and set expectations, ensuring that the employee's work aligns with organizational standards. This does not necessarily mean daily oversight but encompasses the strategic direction and policy enforcement by the employer.

Overarching Contract vs. Individual Contracts

An overarching contract is a long-term agreement that governs the general relationship between parties, while individual contracts are specific agreements for particular tasks or engagements within that broader relationship. In employment law, it's crucial to distinguish whether mutual obligations exist within both the overarching and individual contracts to determine employment status.

Conclusion

The Court of Appeal's decision in Revenue and Customs v. PGMOL underscores the nuanced nature of employment relationships, especially within specialized fields like sports officiating. By elucidating the critical roles of mutuality of obligation and control, the judgment provides clearer guidelines for determining employment status. Organizations must carefully structure their contracts to balance flexibility with the establishment of clear mutual obligations and control mechanisms to avoid unintended employment liabilities.

Moreover, this case highlights the ongoing evolution of employment law in adapting to diverse working relationships, reinforcing the necessity for legal clarity in contract formulations. The implications extend beyond PGMOL, offering valuable insights for similar organizations and contractual arrangements.