A professional sports person paid by lottery grant and sponsorship was not an employee or worker

The way an athlete was funded meant that there was no employer-employee relationship.

Employment status cases determining whether someone is a worker, employee or independent contractor are notoriously fact-specific. 

A recent decision of the Employment Appeal Tribunal considered the circumstances of a British athlete and what the implications were of their funding and pay arrangements when determining employment status. 

Case: Varnish v British Cycling [2020]

Varnish’s contract with British Cycling was not renewed in 2016, which British Cycling said was due to ‘performance reasons’.  When British Cycling failed to produce performance data to back up its stated reasons for not renewing the contract, Varnish brought claims for unfair dismissal and discrimination.

However, Varnish needed to establish an employment relationship with British Cycling to bring her claims, and an employment tribunal found that she did not meet this requirement.  Varnish appealed the decision.

The EAT conducted a wide-ranging review of case law on employment status and made several important observations, as follows:

• For an employment or worker relationship to exist there must be “mutuality of obligation” between the employer and individual, meaning an obligation on the employer to provide work and an obligation on the individual to perform work

• When seeking to distinguish between employees and the self-employed, tribunals may apply the “dominant purpose test” which considers whether the dominant purpose of the contract is to provide personal service (suggesting the person is not self-employed)

• In situations where an individual has lesser bargaining power than an employer and the lack of ability to negotiate individual terms, this will normally point to the individual being an employee

• Tribunals and courts should then consider these factors as a whole before reaching a conclusion

In particular, the EAT found that the funding arrangements for Varnish in this circumstance were inconsistent with her being an employee or worker of British Cycling.  In particular, the nature of grant funding from UK Sport and the National Lottery, and the lack of remuneration from British Cycling to Varnish, meant that there were no ‘wages’ being paid by British Cycling to Varnish, which in turn meant there was no employment relationship between them. 

Wrigleys' comments

Because of the unique position of professional athletes, the application of this case is likely to be very limited.  However, the decision is likely to be of interest to organisations where grant funding pays the wages of all or some of its staff, particularly if the grant funding is paid directly to the recipient by the funder and is not paid to the organisation to pay on to the staff member.

As in all employment status cases, employers also need to be aware that an individual who is nominally self-employed could be found to be an employee for tax or employment law purposes, which means that a tax and/or employment tribunal may come to different views when faced with the same, or very similar, scenario.