23/07/2020 Briefing

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Background

Jessica Varnish began her involvement with competitive cycling from a very young age, and from the age of 12 was selected for talent development programmes run by British Cycling.  Since then, Ms. Varnish entered into various “Athlete Agreements” with British Cycling. The most recent Athlete Agreement in 2015 set out the supports and benefits which British Cycling would provide in accordance with an individual programme, which were valued at £600,000 – £700,000 over a four year period.

In exchange for these supports and benefits, Ms. Varnish agreed to train with the British Cycling Team, to compete in specific competitions, to follow all reasonable directions of British Cycling, to maintain the highest possible levels of health and physical fitness and to conduct herself in a proper manner. The agreement expressly provided that it was not a contract of employment and did not create an employment relationship.

The 2015 Athlete Agreement was terminated in 2016 for performance related reasons, and Ms. Varnish issued proceedings against British Cycling for unfair dismissal and discrimination. In order to pursue a claim for unfair dismissal, Ms. Varnish needed to establish that she was either an employee or worker of British Cycling.

Employment Tribunal

The original employment tribunal held that there was not the ‘mutuality of obligations’ between Ms. Varnish and British Cycling that is necessary to establish an employment relationship, i.e. that Ms. Varnish’s work under the 2015 Athlete Agreement was not for the benefit of British Cycling. The tribunal also held that the benefits under the Athlete Agreement were not remuneration for work done.

Ms. Varnish appealed the decision to the EAT.

Employment Appeal Tribunal

The EAT cautioned against an overly prescriptive focus on mutuality of obligation. Instead, the EAT  took a broad view in applying Ready Mixed Concrete (South East) Ltd v List of Pensions and National Insurance in order to determine if an employment relationship existed between Ms. Varnish and British Cycling.  Ready Mix Concrete identified three factors to establish a contract of service:

  1. there is an agreement that an individual will provide his/her own work and skill for the service of the employer in exchange for a wage or other remuneration;
  2. the individual agrees that in the performance of that service he/she will be subject to the other party’s control to a sufficient degree to make the other party the employer; and
  3. whether the other provisions of the agreement are consistent with its being a contract for service.

The EAT upheld the original tribunal’s finding that Ms. Varnish did not perform any work for British Cycling under the 2015 Athlete Agreement, and that the benefits which British Cycling offered to Ms. Varnish did not amount to remuneration. The EAT concluded that the agreement was a contract for the provision of services from British Cycling to Ms. Varnish, rather than the other way round.

The EAT also held that the provisions in Ms. Varnish’s 2015 Athlete Agreement which expressly provided that there was no employment relationship, while not definitive, could help resolve ambiguity and establish the intention of the parties.

Analysis

This decision will be welcomed by professional sporting bodies both in the UK and Ireland.  Irish law takes a similarly broad view of factors which may indicate an employment relationship. The High Court recently cautioned against a ‘box ticking’ analysis of the employment relationship in a case concerning the status of restaurant delivery drivers (Karshan (Midlands) t/a Dominos Pizza -v- Revenue Commissioners).

A person’s status as an employee gives rise to wide ranging legal implications for their employers, including redundancy entitlements, health and safety obligations, rest break and annual leave entitlements, vicarious liability for negligence, and the right to take a claim to the Workplace Relations Commission under unfair dismissals and employment equality legislation. It also has implications from a tax and social insurance perspective as employers are responsible for deducting tax, PRSI and USC from employees’ wages. While the definition of an employee has generated considerable scrutiny in the context of the so-called ‘gig economy’, this case is a reminder of the wider category of persons who might seek to assert that they are, in fact, employees.

Although the EAT declined to set out hard-and-fast rules in relation to the status of funded athletes, the reiteration of the factors for consideration in Ready-Mix Concrete (which has been applied in Irish law) will be reassuring to sporting bodies. Nonetheless, parties providing sponsorship or development programmes to athletes and sportspeople should consider whether these arrangements, viewed in their full context, could give rise to an employment relationship.

The authors would like to thank Feidhlim Mac Róibín for his contribution to this briefing.