SUPREME COURT BLOWS FINAL WHISTLE ON REFEREE EMPLOYMENT STATUS

A significant Supreme Court decision has provided clarity on the ever-developing issue of determining employment status, particularly for off-payroll and casual workers. The case, Professional Game Match Officials Ltd (PGMOL) v HMRC, examined whether football referees were employees of PGMOL for tax purposes, with the Supreme Court ruling that certain contracts between referees and PGMOL demonstrated sufficient mutual obligations and control consistent with employment.
 
The Court’s Decision
The primary issue in the case was whether the referees were employees. Using the well established "Ready Mixed Concrete" test, the Court evaluated employment status based on mutuality of obligation, control, and other relevant factors. The Court determined that once referees accepted an offer to officiate a match, mutual obligations arose, fulfilling the first criterion. This obligation existed even though both parties could cancel the contract without penalty prior to the match. This nuanced interpretation potentially lowers the threshold for what constitutes mutuality of obligation.
 
The Court also found that PGMOL exercised sufficient control over the referees, not through direct oversight of every aspect but via a broader "framework" of control. This was enough to satisfy the control test, as the referees were bound by rules governing their conduct during and after the match, including submitting reports. Further, possible sanctions and disciplinary action for failures by referees were considered relevant. The decision leaves it to the First-tier Tax Tribunal to decide whether these factors, taken together, mean that the referees were employees​.
 
Importance of Employment Status
Determining employment status correctly is critical for employers. Employment status affects tax obligations, statutory entitlements such as holiday pay, and protections under employment law, such as protection from unfair dismissal. Misclassification can result in significant penalties, as seen in this case, where the implications for tax liability are considerable. Moreover, disputes over status tend to arise in situations which are already challenging, such as terminations and periods of sickness.
 
In light of this decision, businesses that engage off-payroll and casual workers, should be constantly vigilant in their initial assessment of status and look to reassess their engagement terms to ensure compliance. HMRC’s existing guidance, such as the "Check Employment Status for Tax" (CEST) tool is a helpful guide for tax purposes but is not conclusive, and employers need to be mindful that tribunals have been clear this is not a “checklist exercise”. Only tribunal judges can conclusively determine employment status, and so a careful judgement needs to be applied, considering a wide range of factors to avoid claims.
 
Labour Government’s Proposed Reforms
The Labour Party has proposed simplifying the complex framework of employment status into a single "employee" status, merging the categories of employee and worker. This would create a simpler and more predictable system, with all workers having access to core employment rights from day one. While this could reduce disputes over employment status, it might also increase costs for employers who rely on flexible or freelance labour. The PGMOL case highlights how complex these determinations can be under the current regime, and the Labour proposals seek to avoid such complications. However, we are yet to understand Labour’s concrete plans.
 
The Supreme Court’s decision is a reminder of the importance of getting employment status right. Employers should review their workforce arrangements to ensure they meet the legal requirements and prepare for possible legislative changes under a future Labour government.