Employment Law case updates - October 2018
1. Red card for HMRC over referees' employment status
2. EAT loosens causation test for disability discrimination claims
3. Written notice not effective to terminate employment in internal transfer
Red card for HMRC over referees' employment status
Professional Game Match Officials Limited v HMRC (First-tier Tribunal)
The first-tier tax tribunal has held that a large group of professional football referees should be classified as self-employed for tax purposes, rather than employees of their central organising body. This meant that significant penalty charges claimed by HMRC in respect of failures to withhold and pay employment taxes and national insurance contributions at source were rejected.
The Professional Game Match Official Limited (PGMOL) oversees the administration and appointment of officials in professional football. Whilst it employs certain elite referees on a full time basis, those who make themselves available to officiate in lower leagues – largely in their spare time – are engaged as independent contractors, responsible for their own tax affairs and reporting in respect of fees paid to them by PGMOL. HMRC disputed this classification and challenged the tax status of around 60 so called "level 1 national group" referees, seeking to claim nearly £600,000 in unpaid employment taxes.
The first-tier tax tribunal rejected HMRC's claim. Although UK tax law does not recognise an intermediate category of "worker", status for tax purposes nevertheless requires an assessment of the factual reality of a relationship against principles which are largely 'borrowed' from employment case law; including the strength of mutuality of obligation, personal service and degree of subordinate control. Here, whilst an overarching annual contract existed between the parties, the tribunal considered the arrangements to be genuinely casual in nature; there was no obligation on PGMOL to offer a level of work and no contractual requirement to accept work offered. In addition, the referees acted with complete autonomy when providing their services and regulatory issues were dealt with externally by the Football Association, meaning that PGMOL lacked the necessary framework of control over their activities. On an overarching factual assessment, the tribunal felt that these crucial features outweighed the aspects more suggestive of employment status, such as the level of integration into PGMOL, its control over remuneration and provision of certain match kit.
Questions of status are always fact-specific, so the precedent set by cases such as this are generally of limited use. However, this case does highlight the operations of an increasingly active revenue which is keen to ensure that employers are not exploiting ambiguity over tax status classification to avoid their responsibilities to account for employment tax and national insurance under PAYE arrangements. This also represents a timely reminder to approach questions of employment and tax status independently; whilst based on similar principles, employment and tax tribunals may legitimately take a different stance on whether an individual is self-employed within their sphere of competence.
EAT loosens causation test for disability discrimination claims
Sheikholeslami v University of Edinburgh (Employment Appeal Tribunal)
The EAT has confirmed that tribunals should not apply a strict causation test when considering whether an individual has suffered discrimination on the basis of unfavourable treatment because of something arising in consequence of their disability. Rather than being the sole cause of the ‘something arising’, a disability need only constitute a loose element of the chain of causation to satisfy the relevant legal test.
The Claimant, a professor in the School of Engineering at a university, felt that she had been badly treated in her department, causing her to experience stress and anxiety, and eventually leading to a mental health disability. After a period of sickness absence for stress and depression, the university required her to return to work in her existing post in accordance with the terms of her work permit. The Claimant was unable or unwilling to return to that particular department, where she perceived the mistreatment had occurred, triggering issues with her work permit. Although the university had realised that there may be possible ways to extend the permit, it omitted to explore these; rather, it dismissed the Claimant upon the expiration of the permit. The Claimant brought numerous claims, including for disability arising from her disability.
At first instance, the Tribunal dismissed the claim on the basis that the Claimant had been dismissed because she refused to return to her post in the School of Engineering, not because of her stress-related disability. Overturning this decision, the EAT emphasised that the relevant requirement prohibits unfavourable treatment “because of something arising in consequence of a disability”; the treatment does not have to be because of the disability itself. The Tribunal had applied a disproportionately strict test for causation; a disability need only be one loose link in the chain of ultimate consequences. In this case: (i) the Claimant’s refusal to return to work was the ‘something arising’; and (ii) her disability was at least a contributing factor to this consequence. This was sufficient for the claim to succeed.
Employers should heed this decision as a reminder of the need to consider the subtle effects of an employee's disability, and to be aware that their actions may constitute discrimination even if the treatment is only indirectly linked to an underlying condition. Employers should take care to formulate and document a strong business justification before taking any measures which could have an adverse effect on disabled staff; external assistance from legal and medical professionals is now advisable in most cases.
Written notice not effective to terminate employment in internal transfer
East Kent Hospitals University NHS Foundation Trust v Levy (Employment Appeal Tribunal)
The EAT has confirmed that an individual who gave her employer "one months' notice" had not resigned her employment but instead – judged objectively – had signalled her intention to initiate an internal role transfer pursuant to a conditional offer. When her employer withdrew its offer of an alternative role and failed to permit a retraction of her earlier resignation, it was found to have dismissed her.
In this case, the relevant employee had been offered a new role in a different department by her employer. After an incident involving a colleague, she had handed a note to her manager purporting to give "one month's notice". The manager immediately accepted what he claimed to have interpreted as her notice of resignation from employment in her current role and subsequently withdrew its offer of work in the new role, citing concerns about her attendance record. When she sought to retract her notice on learning of the withdrawal of the new role, her employer refused to permit such retraction and confirmed her termination date. The employee brought a claim for unfair dismissal, claiming that the "notice" she gave was intended to refer to the internal transfer, not her overarching employment relationship.
The Tribunal agreed, holding that her use of the word "notice" in these circumstances was ambiguous. The "special circumstances" of the case arising out of the potential role change meant that the correspondence needed to be interpreted objectively; the employee had been expecting the transfer and the employer's immediate actions were not consistent with the termination of employment as a whole. For example, it had failed to complete a "Staff Termination form" in accordance with standard procedures. The EAT endorsed this stance, holding that in withdrawing its conditional offer of a new role and failing to accept any retraction of the resignation, it was the employer who had terminated the relationship.
This decision was reached based on unusual factual circumstances, but emphasises the importance of employers acting reasonably and objectively when relying on an employee's notice to terminate their employment. In some cases, it would be prudent to ascertain their intentions before acting on it.